100th Congress [ S PRT

2d Session COMMITTEE PRINT | 100-165

DRUGS, LAW ENFORCEMENT AND FOREIGN POLICY

A R E P O R T

PREPARED BY .THE

. SUBCOMMITTEE ON

TEKROKISM, NAECQTICS AMD l N T E M A i a O N A T i :

. . OPERATIONS' ;

COMMITTEE ON EOREIGrN RELATIONS -

ITNI TED STATES SENATE
r .

DECEMBER 1988

Printed for the use of the Committee on Foreign Relations

U.S. GOVERNMENT PRINTING OFFICE

96-845 WASHINGTON : 1989

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, DC 20402
 COMMITTEE ON FOREIGN RELATIONS

CLAIBORNE PELL; Rhode Island, Chairman

JOSEPH R. BIDEN. JR., Delaware ' ' JESSE HELMS, North Carolina
PAUL SARBANES, Maryland ' RICHARD G...LUGAR, Indiana
ALAN CRANSTON, California NANCY L; KASSEBAUM, Kansas
CHRISTOPHER J. DODD, Connecticut ^RUDY BOSCHWTTZ, Minnesota
vJOHN F: KERRY, Massachusetts LARRY PRESSLER, South Dakota
PAUL SIMON, Illinois FRANK H. MURKOWSKI, Alaska
TERRY SANFORD, North Carolina . PAUL S. TREBLE, JR., Virginia
BROCK ADAMS, Washington DANIEL J, EVANS, Washington
DANIEL P. MOYNIHAN, New York ' MITCH McCONNELL, Kentucky
GEEYLD B. CHBISTIANSON,- Staff Director
JAMES. P. LUCXER, Minority Staff Director

SUBCOMMITTEE ON TERRORISM, NARCOTICS A N D INTERNATIONAL OPERATIONS

JOHN F. KERRY, Massachusetts, Chairman

BROCK ADAMS, Washington MITCH McCONNELL, Kentucky
DANIEL P.. MOYNIHAN, New York FRANK H. MURKOWSKI, Alaska
 LETTER OF TRANSMITTAL

U . S . SENATE,
COMMITTEE ON FOREIGN RELATIONS,
Washington, DC\ April IS, 1989.
H o n . CLAIBORNE PELL,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.
DEAR M R . CHAIRMAN: TWO years ^go, you directed the Subcom-
mittee on Narcotics, Terrorism and International Operations to
conduct an investigation regarding the links between foreign
policy, narcotics and law enforcement in connection with drug traf-
ficking from the Caribbean and Central and South America to the
United States. This Report is the final written product of that in-
vestigation in the 100th Congress.
Pursuant to your direction, the Subcommittee conducted four-
teen days of open hearings, nine executive sessions, and received
testimony from 27 witnesses. In addition, the staff deposed an addi-
tional 20 witnesses. Thirty subpoenas were issued, many calling for
the production of extensive documentation.
The Subcommittee's investigations resulted in a wide-ranging
review of past policies and practices in handling foreign policy and
the war on drugs. It is our privilege to transmit the report contain-
ing findings and conclusions based on the investigation, a country-
by-country analysis of the drug problem as it has affected U.S. for-
eign policy in Latin America, a review of drug links to the Contra
movement and the Nicaraguan war, of money laundering, and of
issues involving conflicts between law enforcement and national se-
curity. Appendices to the report detail allegations of how the Com-
mittee's initial investigation in 1986 may have been interfered
with.
We very much appreciate the support and assistance you have
given us throughout the course of this investigation. I would like to
note our personal appreciation for the efforts of the personnel who
handled this investigation: Special Counsel Jack A. Blum, Kathleen
Smith, and Jonathan Litchman of the Committee Staff; and Rich-
ard McCall, Jonathan Winer, and David McKean of Senator
Kerry's personal staff, along with Senator Kerry's former adminis-
trative assistant, Ron Rosenblith. This report would not have been
possible without their dedicated work.
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 IV

The Subcommittee believes that this investigation has demon-

strated that the drug cartels pose a continuing threat to national
security at home and abroad, and that the United States has too
often in the past allowed other foreign policy objectives to interfere
with the war on drugs. The Subcommittee hopes that this Report
will contribute to better understanding by tlje Congress of this
problem, and to constructive legislative proposals which may allow
us to avoid repeating the mistakes of the past.
Sincerely yours,
JOHN KERRY, Chairman.
BROCK ADAMS.
DANIEL P . MOYNIHAN.
 CONTENTS

Page
Letter of Transmittal ni
1. EXECUTIVE S U M M A R Y A N D CONCLUSIONS 1

Past Failures 2
Policy and Priorities 3
Administrative Recommendations - 3
Specific legislative Recommendations 4
2 . INTRODUCTION 5

Origins and Methodology 5

The Scope of the Threat.,- 7
Domestic Effects of International Drug Trafficking 8
Effects on Foreign Countries , 9
The National Security Implications of the Drug Trade 10
Synopsis of the Report 12
Open Issues and Subjects Requiring Further Investigation 12
3. THE BAHAMAS 14

Introduction : 14
Growth of Official Corruption with Vesco and Bannister 15
Use of Norman's Cay For Smuggling 16
Response by U.S. to Lehder Problem - 17
Extent of Bahamian. Corruption Today - 19
Bahamas Seeks To Influence U.S. Policymakers 20
Bahamian "Cooperation" 21
Conclusions — 21
Appendix: State Declassified Material. 23
4 . COLOMBIA ; 25

Introduction 25
Origins of Narcotics Trafficking in Colombia 26
Origin of the Cartels 27
Organization and Wealth 28
The Cartel's War Against the Colombian Government, 30
Adequacy of Legal and Law Enforcement Measures 30
Conclusions ~ 33
5. NABCOTICS TRAFFICKERS A N D THE CONT&AS...~ 36

. Introduction - .. . - 36
Executive Branch Response to Contra Drug Allegations 37
The Guns and Drug Smuggling Infrastructure Develops 39
Drug Trafficking and the Covert War — 41
The Pilots 42
U.S. Government Funds and Companies with Drug Connections 42
A. SETCO/HONDU CARIB 44
B. FRIGORIFICOS DE PUNTERENNAS 45
C. DIACSA 47
D. VORTEX : 48
The case of George Morales and FRS/ARDE - 49
John Hull - 53
San Francisco' Frogman Case, UDN-FARN and PCNE 58
The Cuban-American Connection ; 59
Ramon-Milian Rodriguez and Felix Rodriguez 61

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Page
6. CUBA AND NICARAGUA 62
Introduction,— 62
Historical Background - 63
Cuba As a Way-Station for Smugglers 63
Case History: George Morales 64
Ideological Use of Drugs 65
Cuba, Panama and the Cartel 66
Castro Denies Involvement . . 66
Allegations Concerning Nicaragua 67
Summary and Contusions .. 69
7. HAITI ...... 69
Introduction >• 69
The Colombians Move In 70
The Miami Connection - 71
DEA's Operations in Miami and in Haiti 72
Conclusions 72
8. HONDURAS 73
Introduction — - 73
History of Narcotics Trafficking in Honduras..!; 73
' Bueso-Rosa, Latchinian and Narco-Terrorism 76
Ramon Matta Ballesteros -— «— 77
Rigoberto Regalado Lara ^ 78
Policy Issues. — —. 78
9. PANAMA 79
Introduction 79
Origins of Corruption in Money Laundering .... - 80
Early Panamanian Involvement in Narcotic .'. 82
Noriega's Corruption of Panamanian Institutions ....,,..,.. 83
Noriega's Involvement in the Arms Business 84
Noriega: and the Cartel. ^ - 85
Noriega's Rift with the Cartel 86
Noriega's U.S. Partners . 87
U.S. Knowledge of Noriega's Activities 88
Why Did the U.S. Fail To Respond to Noriega Allegation^?. 91
Mixed Messages -
Conclusion.. . 97
Appendix: GAD-NSC Correspondence 97
10. MONEY 112
Introduction. „ 112
Defining the Problem of Money Laundering : 112
The Bank Secrecy Act Restricts Money Launderinjg .V. 113
The International Loophole 113
Case Histories . ? *
Cayman Islands : .. ^ ! 114"
Bahamas ...:......... 115
Panama .'. •......•• : 115
One Money Launderer's Experience— .,.' — 117
U.S. Response to the Problem ...:....... .............. .••.-• 118
Effectiveness of Current Reporting Requirements :: 119
Summary and Conclusions..;-..... ........— -. 120
11. L A W ENFORCEMENT VS. NATIONAL SECURITY; CONFUSED PRIORITIES 120
Introduction «: — 120
Barry Seal and the Cartel.. 121
Bueso-Rosa and the Contras 121
Intelligence vs. Law Enforcement...... 122
Misguided Priorities : —I ........... 123
Consequences of Privatizing U.S. Foreign Policy... - 124
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Case Studies . : 126
Michael Palmer -v 126
Frank Camper 128
Richard Brennecke 130
Conclusion 132
12. CONCLUSIONS - 133
National Security Issues 133
Federal Priorities 135
Covert Activity Issues ; 136
Law Enforcement Issues - —. 137
Money Laundering Issues 142
Personnel Issues 143
Neutrality Act— - 144
APPENDIXES
A . NARCOTICS AND THE NOETH NOTEBOOKS 145
Summary 145
Committee Action - 146
Selected Drug Related Entries 146
B . ALLEGATIONS OF INTERFERENCE WRRA THE COMMITTEE INVESTIGATION 147
Allegations of Interference 147
Chronology 150
C . WITNESS LIST : 167
Witnesses ; 167
Writs — 169
Subpoenas * r - 169
Depositions — 169
APPENDIX

The Exhibits consist of documents referred to in footnotes.

ABA Report, 1988, "Criminal Justice in Crisis" - 171
State Department International Narcotics Control Strategy Report (INCSR),
March 1988, Paraguay - 172
State Department INCSR, 1989, Mexico 174
London Sunday Times Magazine, September 29,1985: Paradise Lost ; 175
State Department INCSR, 1988, Bahamas.. ; 199
NBC Nightly News, April 30,1987 200
State Department INCSR, 1988, Bahamas 204
State Department INCSR, 1989, Bahamas 205
Black, Manafort and Stone, Proposal for the Government of the Bahamas 206
Bruce Bagley, "Colombia and the War on Drugs," Foreign Affairs .>. 226
State Department INCSR, 1987, Colombia- 249
The Miami Herald, November 29,1987, "The Medellin Cartel" 252
The Miami Herald, December 2,1987, "Little Man Led to Big Drug Bust" 256
The Miami Herald, December 3, 1987, "Cartel's Killers Stalked Heroic Cop
For a Year" 259
State Department INCSR, 1988, Colombia 262
State Dept. Doc. No. 3079c "Allegations of Misconduct of the Nicaraguan
Resistance," March, 1986...... .. 263
State Dept. Doc. No. 5186c "Allegations of Drug Trafficking and the Nicara-
guan Democratic Resistance," July 26,1986 266
North Notebooks, "Pastora Revealed as Drug Dealer" 271
Memo, Robert Owen to Oliver North, April 1,1985 272
Letter, Eden Pastora to Elliot Abrams and David Sullivan, April 10,1986 275
Customs Report, Guy Penilton Owen, May 9,1983 278
Shippers Export Declaration, R/M Equipment, Inc., for Hondu Carib Cargo to
Armed Forces of Honduras February 28,1985 296
Notebook found aboard Hondu Carib plane, "Rob Owens" - 297
Statements, Carlos Soto, in re: .Luis Rodriguez, April 3,1987 298
Statements, Carlos Soto, in re: Luis Rodriguez, May 8,1987 303
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Statements, Carlos Soto, in re: Luis Rodriguez, June 17,1987 .........v. 307
Florida Dept. of Law Enforcement Investigative Report, Eugenio Garcia, April
4,1987 .> 310
Testimony of Carlos Soto, September 29,1987 323
Indictment, US. v. Floyd. Carlton-Caceres et al ; 342
Affidavit of DEA Agent Moritz, U.S. v. Carlton 351
U.S. v. Caballero Motion for Permission to Travel 361
Indictment, U.S. v. Luis Rodriguez .. 362
Frigorificos Account, NHAO, GAO Summary . 364
NHAO Signature Cards, FrigOrificos de Punterennas 365
NHAO Records, Frigorificos 366
Ocean Hunter, Inc. corporate records s....... 368
Mr. Shrimp; NCP Trading Florida corp. records ._..., 369
Aquarius Seafood, Florida corp. riecords.. . J — 370
FBI Investigative Report of George Kiszynski, from DC Diaz re Continental
Bank Bombing 371
Letter from John C. Lawn to Senator Kerry re: Morales Polygraph, January
13,1989 382
North notebook entries re "John Hull" 383
Newsweek, "The CIA Blows An Asset" ........ . 394
San Francisco Examiner, letter to the Editor from U.S. Attorney Joseph
Russoniello 396
Teletype to FBI Director re Zavala/Cabezas 400
CBS Evening News, June 12,1986 410
State Department documents, NHAO, back up documents to Frigorificos de
Punterenpas notarized by "Francisco AvilesSaenz"...., : 411
FBI 3G2's of George Kiszynski, including statements of Rafael Tores Jimenez,
, Rene Corvo, Joseph Marcos, Francisco Hernandez 413
San Francisco Examiner, "Big Bay Area Cocaine Ring Tied to Contras,"
March 16, 1986 432
•Letter from John Bolton to Senator Claiborne Pell and Senator Richard G.
Lugar, August 11, 1986.. 434
AH Things Considered, May 5,1986 .....,: 436
Shippers Export Declaration, Florida Air Leasing Corp., March 6, 1985, for
"medical supplies" for "Salvadoran Refugees" 442
Florida Aircraft Leasing Corp, Invoice to "American Flyers," for Fort Lauder-
dale-San Salvador-Fort Lauderdale 443
Florida Aircraft.Leasing. Declaration, March 3,198& ............. 444
Business Cards, Moises Nunez, Frank Chanes1,- from FBI Investigative; Files -
released in U.S. v. Corbo — ,. 446
Customs Report, interview with Ramon Milian Rodriguez, May 6, 1983.: .....I 447
FBI 302, interview with Frank Castro: t; '.
August 10,1987 - ........ <458
. August 20,1987 : ; : .i--: 459
- March 8, 1985 ;...„,....., J 460
Customs Report, interview with Ramon Milian Rodriguez, May 4, 1983.. 462
Redacted copy of DEA interview of "Miami Attorney 470
State Department INCSR, 1988: J '
Cuba : .-.. 483
Haiti "484
Honduras... ;.. 485
New York Times, "Military Officers in Honduras Linked to Drug Trade," -
February 12,1988, James LeMoyne 487
Washington Post, December 7, 1987, "U.S. Looks at Honduras as Drug Trans-
fer Point". :...-. ...£.:... 489
Memorandum from Jose Blandon to Subcommittee, February 1988:...-. 492
Panama A Haven For Traffickers, Knut Royce, June 1985,...;. .-. 495
The Times Union, June 10, 1985, "Panama military officers deemed drug,
traffickers," Knut Royce : 505
New York Times, "Panamanian Strongman Said to Trade -in Drugs,- Arms
and Illicit Money," June 12,1986, Seymour Hersh ...:.:.. 508
NBC Nightly News, February 22,1'989 Lxus 511
Reuters, February 25,1987, reBueso-Rosa...... .......... 514
AP, February 25, 1987, "North Erred in Defending Convicted Honduran,"
George Gedda i.:.; ....n '515
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AP, April 14, 1987, "North Got FBI Report on Contra-Supply Probe, Officials
Say* 517
Report, Pegasus/Camper, December 12, 1984 519
MemCom, Jeffrey Feldman, November 18, 1987, Internal Security Section,
Criminal Division, Justice Department - 527
Christian Science Monitor, "Justice Officials Find No Crime Link to Contra
Leaders," May 6,1986, Warren Richey 530
U.S. Department of Justice, Memo from Ken Bergquist to Steve Trott, re
Upcoming "Contra" Hearings in the Senate Foreign Relations Committee,
May 13, 1986 531
Attendees at May 6, 1986 Meeting between Foreign Relations Committee and
government agencies i 533
Messick MemCom, May 6,1986 meeting 535
Deposition off. L'eon B. Kellner, Esq., November 8, 1989 540
Narcotics Investigation, October 5,1988 (with attachments) . 608
Drugs, Law Enforcement and Foreign Policy, Central America, September 28,
1987 (with attachments) 889
Deposition of Thomas E. Marum, October 25, 1988 : 991
Deposition of Mark N. Richard, November 7,1988 1067
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 EXECUTIVE SUMMARY AND CONCLUSIONS
"The American people must understand much better than they ever have
in the past how (our) safety and that of our children is threatened by Latin
drug conspiracies (which are) dramatically more successful at subversion in
the United States than any that are centered in Moscow." 1
That warning was delivered in Subcommittee testimony by Gen-
eral Paul C. Gorman, now retired and formerly head of U.S. South-
ern Command in Panama. Such a characterization, coming from an
individual who served with such distinction in the United States
Army, should not be taken lightly.
There should not be any doubt in anyone's mind that the United
States is engaged in a war directed at our citizens—the old, the
young, the rich, the poor. Each day, with what has become a numb-
ing regularity, the American people are besieged with the news of
the latest casualties in the drug war.
The Colombian drug cartels which control the cocaine industry
constitute an unprecedented threat, in a non-traditional sense, to
the national security of the United States. Well-armed and operat-
ing from secure foreign havens, the cartels are responsible for
thousands of murders and drug-related deaths in the United States
each year. They exact enormous costs in terms of violence, lower
economic productivity, and misery across the nation.
The American criminal justice system has been overwhelmed by
the drug war. To date, most of the U.S. law enforcement efforts
have been directed at the domestic drug distribution network. The
result is a criminal justice system swamped with cases which
cannot be processed fast enough, jails that are overflowing with
prisoners, a greater influx of cocaine than when the war on drugs
was declared 4XL1983, and a cheaper, higher quality product.
As a recent study sponsored by the Criminal Justice Section of
the American Bar Association noted:
A major problem reported by all criminal justice partici-
pants is the inability of the criminal justice system to con-
trol the drug problem . . . through the enforcement of the
criminal law. Police, prosecutors and judges told the Com-
mittee that they have been unsuccessful in making a sig-
nificant impact on the importation, sale and use of illegal
drugs, despite devoting much of their resources to the
arrest, prosecution and trial of drug offenders.2
Attempts to interdict the flow of drugs at the border, while im-
portant, has experienced only marginal success. According to U.S.
officials in the vanguard of the war on drugs, at best, interdiction

1 Subcommittee testimony of General Paul Gorman, Part 2, February 8,1988, p. 27.

2 Criminal Justice in Crisis, A Report to the American People and the American Bar on Crimi-
nal Justice in the United States, American' Bar Association, Criminal Justice Section, Washing-
ton, DC, November 1988, p. 5.
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 2

results in the seizures of only 15 percent of the illegal narcotics

coming into the country. For the drug cartels, whose production ca-
pabilities stagger the imagination, a 15 percent loss rate is more
than acceptable.
Demand reduction through education and rehabilitation are criti-
cal elements in the war on drugs. But most experts acknowledge
that even this strategy will require a considerable period of time
before major inroads are made into significantly reducing cocaine
usage in this country. . . .
The narcotics problem is a national security and foreign policy
issue of significant proportions. The-drug cartels are so large and
powerful that they hiave undermined some governments and taken
over others in bur hemisphere. They work with revolutionaries and
terrorists>They have demonstrated the power to corrupt military
and civilian institutions alike. Their objectives seriously jeopardize
U.S. foreign policy interests and objectives throughout Latin Amer-
ica and the Caribbean.
The Subcommittee investigation has led to the following conclu-
sions and recommendations.
PAST FAILURES

—In the past, the United States government has either failed to
acknowledge, or underestimated, the seriousness of the emerg-
ing threat to national security posed by the drug cartels. The
reasons for this failure should be examined by the Senate
Select Committee on Intelligence, in concert with the Senate
Committee on Foreign Relations, to determine what corrective
steps should be taken.
—In some instances, foreign policy considerations interfered with
the U.S.'s ability to fight the war on drugs. Foreign policy pri-
orities towards the Bahamas, Honduras, Nicaragua, and
Panama at times delayed, halted, or interfered with U.S. law
enforcement's efforts to keep narcotics out of the United
States: In a few cases within the United States, drug traffick-
ers sought to manipulate the U.S. judicial system by providing
services in support of U.S. foreign policy, with varying results.
—U.S. officials involved in Central America failed to address the
drug issue for fear of jeopardizing the war efforts against Nica-
ragua.
—The war against Nicaragua contributed to weakening an al-
ready inadequate law enforcement capability in the region
which was exploited easily by a variety of mercenaries, pilots,
and others involved in drug smuggling. The Subcommittee did
not find that the Contra leaders personally were involved in
drug trafficking. There was substantial evidence of drug smug-
gling through the war zones on the part of individual Contras,
Contra suppliers, Contra pilots, mercenaries who worked with
the Contras, and Contra supporters throughout the region.
—The saga of Panama's General Manuel Aritonio Noriega repre-
sents one of the most serious foreign policy failures for the
United States. Throughout the 1970's and 1980's, Noriega was
able to manipulate U.S. policy toward his country, while skill-
fully accumulating near-absolute power in Panama. It is clear
 3

that each U.S. government agency which had a relationship

with Noriega turned a blind eye to his corruption and drug
dealing, even as he was emerging as a key player on behalf of
the Medellin cartel.
POLICY AND PRIORITIES

-International drug trafficking organizations are a threat to

U.S. national security. Our government must first acknowledge
that the activities of the drug cartels constitute a threat of
such magnitude and then establish a more coherent and con-
sistent strategy for dealing with the problem.
-The threat posed by the drug cartels should be given a major
priority in the bilateral agenda of/the U.S. with a number of
countries, including the Bahamas, Haiti, Colombia, Bolivia and
Paraguay. It should be among the most important issues with
a number of other icountries, including Mexico and Honduras.
-In order to signal to. other countries the seriousness with which
the United States regards the drug issue, the President should
convene a summit meeting of Latin American leaders to begin
developing-a strategy to deal with this issue and related eco-
nomic problems.
-Narcotics law enforcement has often taken a back seat to other
diplomatic and national security priorities. The war on drugs
must not in the future be sacrificed to other foreign policy con-
siderations.
ADMINISTRATIVE RECOMMENDATIONS

-The Treasury Department should begin negotiations on gather-

ing information on large foreign U.S. dollar deposits, as au-
thorised by the 1988 Omnibus Drug Bill.
-The State Department should make a special effort to control
multiple entry visas from countries which are major drug tran-
sit countries or which harbor major drug organizations.
-The Federal Aviation Administration should undertake a
major effort to inspect hundreds of substandard aircraft, many
of which are used for smuggling illegal narcotics. These air-
craft are located throughout the United States, and those
which do not meet FAA specifications should be grounded im-
mediately.
-Individuals who represent themselves as working for the CIA
or other national security agencies of the United States Gov-
ernment, and who in fact do not, should be prosecuted prompt-
ly to the full extent of the law.
-AH U.S. law enforcement agencies should devote significantly
greater attention to counter-intelligence in order to prevent
drug traffickers from penetrating their operations.
-The existing distrust among law enforcement agencies working
on the drug problem and national security agencies must be re-
solved. Ways must be found to make it possible for law enforce-
ment agencies to have access to national security intelligence
information related to the drug threat.
-Federal salaries of senior prosecutors and investigators must
be raised and special Senior Executive Service positions ere-
 ated in order to encourage the most talented and experienced
personnel to remain on the job. •
SPECIFIC LEGISLATIVE RECOMMENDATIONS

-The President should be. given a series of optional sanctions to

apply to major drug producing and drug-transit countries
which have not fully cooperated with the U.S. in drug enforce-
ment efforts. This would allow the President to certify a: nation
under the National security provision of 481(h)(2)(a)(i)(ED, and
thus avoid the mandatory sanctions contained in current law,
while still giving him Other'optional' sanctions. The proposed
sanctions would include: prohibiting ships that have-stopped at
such a nation within 60 days from discharging passengers of
cargo in the U.S.; denying landing rights iii the U.S. to the na-
tional airlines Of such' a nation; subjecting goods and contain-
ers from any such nation tOv special inspections, quarantines, or
other additional regulations to prevent them from being used
to transport prohibited substances to the United States; deny-
ing Or limiting non-immigrant visas to nationals of any such
nation; eliminating Customs pre-clearance agreements with
any such nation.
-No government employee or official With responsibility for nar-
cotics issues in either the Executive or Legislative branches of
government should be permitted to Represent a foreign govern-
ment on narcotics matters for a period Of three years after
they leave. The penalties for violating such a prohibition
should be the same as for violations of the Federal Regulation
of.Lobbying Act of 1946. .. .. . •
-The-department of State should be required to notify the Con-
gress within 10 days; .whenever it denies a-request from law en-
forcement for reasons' of national security or' foreign policy.
The notification should include a full description of the reasons
for the refusal. Past decisions by the Department of State to
end law enforcement operations on such- grounds should have
been subject to Congressional review; this provision would
ensure that Congress remain in a position to exercise oversight
over such decisions: ': . r
-The Department of State should be prohibited from entering
into contracts with any individual or company under indict-
ment or convicted of any narcotics-related offenses* including
money laundering. The Department should be required to in-
stitute procedures by which it -would routinely check with the
FBI, Customs and DEA to determine whether a company or in-
dividual is under investigation before the Department enters
into any contract with the company or individual,
-No U.S. intelligence agency should be permitted to make any
payments to any person convicted of narcotics related offenses,
except as authorized in writing by the Attorney General in
connection with the investigation or prosecution of criminal ac-
tivity.
-The Neutrality Act should be amended to apply only to actions
which are not specifically authorized by the State Department.
Each such authorization would require prompt notification by
 5

the State Department to the House and Senate Foreign Affairs

and Foreign Relations Committees, and Select Committees on
Intelligence.
—The annual drug certification report should be required to
review links between international narcotics trafficking,
money laundering and international terrorism (including guer-
rilla groups on the right and the left with regard to ideology.)
—The National Director of Narcotics Policy should be required
to report to the Congress on current U.S. federal personnel
practices affecting all persons engaged in the war on drugs to
determine whether adequate resources are being devoted to
hiring, training, promotion, and retention of federal employees
responsible for narcotics matters.
INTRODUCTION

ORIGINS AND METHODOLOGY

In early 1986, Senator John Kerry began a staff investigation of

allegations that elements of the supply network supporting the
Nicaraguan contras were linked, with drug traffickers. In April,
1986, Senator Kerry took information he .had developed to the
Chairman of the Foreign Relations Committee, Richard Lugar, who
agreed to conduct a staff inquiry into those allegations.
In response to a request by Senator Kerry, Senator Lugar sched-
uled a closed session of the Committee on Foreign Relations on
Jurie 25, 1986, to discuss these allegations and to determine wheth-
er or not adequate attention and priority was being given to inter-
national narcotics law enforcement efforts generally. Senator
Kerry-was concerned that because of the preoccupation with other
foreign policy priorities relating to several nations, .the United
States was not dealing adequately with the growing global drug
problem.
At that meeting, Senator Kerry raised questions as to the will-
ingness of the Administration to investigate allegations of drug
trafficking involving the Contra supply network and the apparent
reluctance to deal-with Bahamian drug corruption for reasons of
national security. Senator Kerry noted that witnesses who had
brought this information to his attention had also allegations of
drug-related corruption concerning Nicaraguan officials.
In response, the Committee, at the direction of the then-Chair-
man Senator Richard Lugar, decided that an investigation of drug
allegations relating to the war in Nicaragua should be undertaken.
In February 1987, at the direction of Chairman Claiborne Pell,
the Committee continued its investigative efforts^ expanding the
focus to include the impact of .drug traffi.cking.from the Caribbean,
and Central and South America on U.S. foreign policy interests. In
April, the responsibility for the investigation was given to the Sub-
committee, on Terrorism, Narcotics and International Operations
chaired by Senator Kerry, with Senator McConnell serving as the
rankingmember.
The Subcommittee conducted fourteen days of open hearings,
nine executive sessions, and received testimony from 27 witnesses.
In addition, the staff deposed an additional 20 witnesses. Thirty
 6

subpoenas were issued, many calling for the production of exten-

sive documentation.
The Committee sought, and received, documents from a large
number of government agencies, including the Drug Enforcement
Administration, the Federal Bureau of Investigation, the Depart-
ment of Defense, the Department of the Army, the Central Intelli-
gence Agency, the Defense Intelligence Agency, the U.S. .Customs
Service, the Department of State, the Department of the Treasury,
the Overseas Private Investment Corporation and the National Se-
curity Council.
In addition, the full Foreign Relation, Committee conducted ex-
tensive questioning of officials on the global narcotics problem in
1987 and 1988 in response to the annual International Narcotics
Control Strategy Report. That report is an annual submission to
the Congress mandated by the Anti-Drug Abuse Act of 1986. The
law requires the President to certify that major illicit drug produc-
ing country or a major drug-transit country cooperated fully with
the United States in the previous year, or took adequate steps on
its own, with respect to illicit drug production* trafficking and
money laundering.
One hearing was conducted jointly by the Subcommittee on Ter-
rorism, "Narcotics .and International Operations and the Subcom-
mittee on International Economic Policy.
In perparaMon for the hearings the staff interviewed dozens of
people in- and out of government. Many of these interviews were
kept confidential to ensure' candid discussions. The Subcommittee
traveled to Costa Rica where' depositions were taken and interviews
conducted with present ajoid former government officials.
By a^reein^nt with Chairman Daniel;Inouye of the Senate Select
Committee on Secret Military Assistance to Iran and the Nicarai-
guan Opposition, th6 staff assigned to the investigation <vere
cleared to review the documents provided to the Select Committee
in the course of its investigation. The Committee staff reviewed
thousands of Select Committees documents, including the classified
version of notebooks maintained by Oliver North during the period
hie was at the National Security Council, the1'North Diaries." - lV
A number of witnesses and prospective witnesses were convicted
felons, having been imprisoned forriardotics'-relatedoffensesvThe
Subcommittee made use of these witnesses in- Accordance with the
practice of Federal and State prosecutors, who routinely rely on
convicts as witnesses in criminal - trials because they are the ones
"with the most intimate knowledge of the criminal activity.-
All witnesses who appeared before the Subcommittee, did so
under oath and the threat of prosecution for perjury. The Subcom-
mittee did not and could not offer reduced sentences in exchange
for testimony. Before using- the testimony of convicted felons^ in a
public session, the Subcommittee staff attempted to corroborate the
witnesses' stories. Many of the witnesses were considered suffi-
ciently credible to have been used by prosecutors in grand jury in-
vestigations and trials, including the major federal narcotics pros-
ecutions of General Noriega, Medellin cartel leader-Carlos Lehder,
and officials in Haiti and the Bahamas.
Gaming access to convicted felons and making arrangements to
have them testify required the cooperation of the Department of
 7

Justice and numerous U.S. Attorneys. In some cases the coopera-

tion was excellent; while in others the Subcommittee confronted
one difficulty after another which delayed the investigation and
complicated the presentation of testimony in public hearings.
As this report is read, it should be kept in mind that the purpose
of the investigation was to identify the nature of the threat posed
by international drug trafficking and the adequacy of the U.S. gov-
ernment response to the threat. The Subcommittee was interested
in the larger policy questions and was not seeking to develop spe-
cific cases against individuals.
T H E SCOPE OF THE THREAT

When the Senate Committee on Foreign Relations began its in-

vestigation two years ago into drug trafficking, law enforcement
andforeignpolicy, this issue was widely viewed as being primarily
a law enforcement problem. While public debate over the drug
problem focused on improving international and domestic law en-
forcement efforts, the size, capability and activities of the cartels
were rapidly expanding.
There are probably few issues which have caused greater strains
in our relations with other nations, particularly with our Latin
American neighbors, than that of international drug trafficking.
The problem has given rise to a growing frustration in the Con-
gress over the seeming inability of many nations in the hemisphere
to eliminate or curtail the production or transshipment of cocaine
and marijuana destined for marketing in the United States. On the
other hand, there are valid concerns on the part of our Latin
American allies that were it not for the. demand problem in the
United States, the drug issue would'be of more manageable propor-
tions.
After two years of investigation carried out under the auspices of
the Subcommittee on Narcotics, Terrorism and International Oper-
ations, it is apparent that the United States is facing a significant
national .security problem. It is a problem serious enough for us to
re-examine our perception as to what constitutes national security
threats to ourselves and our friends around the world.
In the post-World War II era, the national security focus of the
United States was framed by our predominant concern with East-
West competition around the globe. This concern with Marxist ex-
pansionism in general, and Soviet expansionism hi particular, led
us to take a series of extraordinary steps to respond to the threat.
These steps ranged from implementing the Marshall Plan for West-
ern Europe, to establishing NATO and other military alliances
around the world, tofightingconventional wars in both Korea and
Vietnam.
As the United States enters the decade of the 1990's, it is clear
that the operations of the international drug organizations also
constitute a threat of serious national security dimensions. In Latin
America, these organizations, known as cartels, have become a
powerful supra-national political force with economic resources of a
-magnitude to shape developments in Central and South America,
and throughout the Caribbean.
 8

The most powerful ^of the Latin American drug cartels are locatr
ed in Colombia. The Colombian cartels constitute an international
underworld so extensive, so . wealthy, and so. powerful, that today
they operate virtually unchallenged. They have organized them-
selves into elaborate conglomerates for the purposes of growing,
harvesting, processing, transporting, selling and repatriating their
profits from cocaine and marijuana. Men".like Pablo Escobar, Jorge
Ochoa, Jaime Guillot-Lara, and Carlos Lehder,, formed ocean-span-
ning, mafia-like organizations capable, of very large and very com-
plex undertakings.
They have built coca processing centers in the nearly impenetra-
ble rain forests of the AmazOn River Basin in Colombia—factory
complexes capable, in a week's time, of converting tons of coca
paste flown in from Peru and Bolivia into crystalline cocaine. The
finished product is then flown across the Caribbean and Central
America to the United States. It is estimated that there are five
dollars of profit for each dollar the cartels invest in the farm-to-
market process.
The magnitude of the profits associated with the international
drug trade is staggering. The June 20, 1988 edition of Fortune Mag-
azine reported that the .global drug trade may run up to. $500 bil-
lion a year, more than twice the value of all UJS. currency in circu-
lation.
As witness after witness stressed to the Subcommittee, the car-
tels are driven by financial rather than ideological motives. They
are willing to do business with anyone as long as it helps further
their narcotics interests. Their power threatens - to undermine ,re-
gional stability, and they have already demonstrated the capacity
to .destabilize democratic governments. These developments are
deeply inimical to the national security interests of the United
States. •
DOMESTIC EFFECTS OF INTEENATIONAL DRUG TRAFFICKING

To appreciate the degree to which the international drug traf-

fickers have affected the lives of the American people, one needs
only to analyze the statistics. Polls show that about 50% of all
Americans say they have had a relative or close friend who has
had a problem with illegal drugs and, one out of every three says
that illicit drugs can be purchasedwithin a mile of their home.
In addition:
—Sixty percent of all illegal drugs produced in the; world are con-
. sumed here in the United States;
—some twenty million Americans smoke marijuana, nearly six
million regularly use cocaine, and half a million are addicted
to heroin;
—the National Institute for ©rug Abuse reports that cocaine re-
lated hospital emergencies have risen nearly 600 percent be-
tween 1983 and 1987. Cocaine-related deaths have risen from
under 400 in 1983, to nearly:1,400* in 1987, the last.year for
which such statistics are available;
—it is estimated-that 70 percent of all violent crime, in the
United States is drug-related;
 9

—the street price for a kilo of cocaine in the United States has
plummeted from $60,000 in 1980, to approximately $9,000 a
kilo today. This has put cocaine within the means of the vast
majority of Americans, and shows how ineffective interdiction
efforts have been;
—between 1982 and 1985, the amount of cocaine seized coming
into the United States more than doubled from 31 metric tons
to 72.3 metric tons. The problem has reached such crisis pro-
portions that various federal agencies involved in the war on
drugs cannot come up with a reasonable estimate as to how
much cocaine reaches the streets of our country today;
—it is estimated that cocaine usage among the work force costs
the United States $100 billion a year in lost productivity;
—the American market for drugs produces annual revenues of
well over $100 billion at retail prices- This is twice what U.S.
consumers spend for oil each year.
- EFFECTS ON FOREIGN COUNTRIES

It is not only the people of the United States who are victimized
by the operations of the cartels. The cartels, utilizing corruption
and violence,; have literally bought governments and destabilized
others. ..
In Colombia, the cocaiine lords have coopted an entire nation and
its government. Beginning in 1984, efforts by the Colombian gov-
ernment to crack down and dismantle the cartels since 1984 have
led to unprecedented violence. In the past two years, 57 judges, in-
cluding half of the Supreme Court, and two cabinet officials have
been assassinated. A year ago, Colombia's attorney general was
murdered by cartel assassins. - . '
While Colombia's democracy has been threatened, Panama's has
been , stolen. The relationship established in the 1970's between
drug traffickers and a little-known officer in the Panamanian intel-
ligence—Manuel Antonio Noriega—has grown as- Noriega's power
has increased. As a result, Panama has become a safe haven and
critical base of operations for the cartels, particularly as a money-
laundering center., The trend toward democratization was reversed
in Panama, and Noriega now presides over the -hemisphere's first
"narcokleptocracy."1 •
The corrupting influence of the ciartels has now been felt
throughout Latin America and the Caribbean. The Subcommittee
received testimony /that remote islands in the Bahamas chain could
be rented for use as transit sites for cocaine and marijuana des-
tined for the United States. Despite the expenditure of significant
sums of mbney devoted to joint-interdiction efforts with the Gov-
ernment of the Bahamas, the International Narcotics Control
Strategy Report of March 1988 estimated that 60 percent of the co-
caine aiid 50- percent of the marijuana coming into the United
States continued to transit that country. U.S. officials attribute the
problem to the continuation of drug-related corruption at all levels
of government.

1 See Subcommittee testimony of Ramon Milian Rodriguez, Part 2, p. 255.

 10

In 1987, the Colombian cartels established a major, and secure

base of operations in Haiti, turning that county into another sig-
nificant transit point for cocaine coming into the United States.
The cartels bought protection from the upper ranks of the Haitian
military which, in turn established a distribution network in the
United States. This network is characterized by a high level of vio-
lence associated with its operations.
The cartels now pose a serious threat to Costa Rica, having es-
tablished themselves; in the northern war zones used by the Nicara-
guan insurgents. Costa Rica, the most free, stable and. longest-
standing democracy in the region, continues to be ill-equipped to
deal with this threat despite the fact that it has the toughest drug
laws in all of Latin America.
In Peru, there are reports that drug money funds the Sendero
Luminoso's efforts to topple the democratically-elected government
of that country.
In Bolivia, democratically-elected governments face an almost in-
surmountable task in destroying coca production and cocaine labs
operating with near impunity in that nation.
They have corrupted local officials, including police and military,
in Mexico, and there are allegations that the corruption has spread
to higher-level officials. This development may be making an al-
ready serious situation worse, as Mexico continues to remain a
major producer of opium poppy and cannabis and continues to be a
primary source of heroin and marijuana entering the United
States.
Elements of the military in Honduras are involved in .drug-relat-
ed corruption, undermining,the fledgling attempts to establish .a
truly democratic, civilian-based government in that country; Be-
cause of the pervasive influenced the Honduran military on -every
aspect of life' in that country, there is concern that the experience
in Panama could be replicated in Honduras.
In Paraguay, drug corruption within the military also has been a
serious problem for some time. Despite the fact that Latin Ameri-
ca's longest-standing dictator, General Alfredo Stroessner, was
ousted recently in a military coup, U:S. drug enforcement officials
are concerned that the narcotics trade through Paraguay will con-
tinue unabated. As the State Department has acknowledged, there
are "frequent allegations that Paraguayan Officials are involved in
narcotics trafficking" a General" Andreas Rodriguez, the master-
mind of the coup, has been linked-in press reports as a major
figure in the drug trade. •
THE NATIONAL SECURITY IMPLICATIONS OP THE DRUG TRADE

The cartels want stable governments in Latin America, but week

institutions which they can control. They want a climate in which
they can do business freely, without government interference. In
many countries of Latin America and the Caribbean, they have
succeeded in accomplishing this goal.

2 International Narcotics Control Strategy Report, US Department of State, Bureau of Inter-

national Narcotics Matters, March 1988, p. 100.
 11

In many instances, the cartels have allied themselves with orga-

nizations which are engaged in illicit movements of arms and am-
munition, for whatever purpose or whatever ideology—on the right
or the left. General Paul Gorman, in his testimony before the Sub-
committee, described the problem very succinctly when he ob-
served:
"If you want to move arms or munitions in Latin America, the
established networks are owned by the cartels. It has lent itself to
the .purposes of terrorists, of saboteurs, of spies, of insurgents, and
of subversives."
Such, alliances have been established with left-wing insurgent
groups such as M-19 in Colombia, and the Seridero Lumihoso in
Peru. General Noriega in Panama has been a major figure in the
clandestine, arms trade, sailing weapons to anyone or group who
would buy them, including the FMLN in El Salvador.
As the Subcommittee found, even the Nicaraguan Contras fight-
ing to overthrow the Sandinistas were not immune from exploita-
tion by narcotics traffickers.
If allowed to continue unchallenged, the operations of the cartels
will have even more serious implications for U.S. foreign policy in-
terests thoughout the hemisphere. If there has been one area of
foreign policy in which the Congress and the Reagan Administra-
tion found agreement during the last "eight years, it was the desir-
ability of promoting and reinforcing the democratization process
which has swept Latin America over the course of the last decade.
This consensus was achieved despite the fractious debate over aid
to the contras.
Other than the. international debt issue, the operations of the
drug cartels pose the most serious threat to the consolidation of de-
mocracy throughout Latin America.—The basic foundation upon
which democracy rests is respect for the rule of law and the guar-
antees it provides for individual rights and liberties. The cartels re-
spect neither law, nor the rights of individuals, nor the institutions
created to uphold the former and guarantee the latter. They have
demonstrated the ruthless capability to undermine and destroy any
institution or individual standing in their way.
Unfortunately, the international narcotics trade, historically, has
been relegated to the backwaters of U.S. foreign policy concerns. It
was not until recent years, when domestic cocaine usage reached
epidemic proportions and drug-related violence on the streets of the
United States reached crisis levels, that serious attention has been
paid to this problem. However, the issue is still riot given attention
commensurate with the seriousness of the problem within most
agencies of the federal government. To date, the U.S. has been
unable to achieve effective coordination regarding the problem.
The Congress mandated the creation of a new position, the "Na-
tional Director of Narcotics Policy," informally known as the "drug
czar," in response to this concern. The drug czar will need to focus
attention on ensuring that the U.S. develops a strategy and allo-
cates the resources necessary to wage effectively a war on drugs.
 12

- SYNOPSIS OF THE REPORT

In preparing this report, the Subcommittee ..has attempted to

define the nature of the problems associated with the Operations of
the cocaine cartels. There are individual chapters devoted to Co-
lombia," Panama, the Bahamas, Haiti, Honduras, and Cuba and
Nicaragua. The, Subcommittee had neither the time nor the re-
sources to, address other major problem countries such , as Mexico,
Paraguay, Peru, and Bolivia, or the emerging problems in frazil.
Nevertheless, the problems and the patterns of corruption are simi-
lar in these countries as to those addressed by the Subcommittee.
'A separate chapter is devoted to" the allegations of involvement
of drug traffickers with the Contra movement and their supply op-
erations. ~
There is also a separate chapter devoted to the issue of. money
laundering, which is the key to' the effective Operations of the car-
tels. The phenomenal profit associated with the narcotics trade is
the foundation upon which the cartels' power is based. The Sub-
committee members believe that a, concerted attack on the cartels'
money-laundering operations may be one of the most effective
means to strike at their most vulnerable point.
A separate chapter is devoted to an'examination: of the conflicts
between law enforcement agencies and the foreign policy and intel-
ligence agencies of the U.S. government. For example, the DEA
still maintains that it is receiving cooperation from Panama in
U.S. drug enforcement efforts. Yet William Von Rabb, the Commis-
sioner for U.S. Customs, has testified before the Committee that by
1983, U.S. agencies had more than enough evidence of General
Noriega's involvement in the narcotics trade. This, according to
Von Rabb, rendered any cooperation Panama was giving the U.S.
in drug seizures and arrests virtually meaningless. -
The Report also includes appendices concerning the notebooks
maintained by Lt. Col. Oliver North, and their relation to the Sub-
committee investigation, and on allegations concerning1 interfer-
ence by government officials in the initial stages of the Subcommit-
tee investigation.
The members of the Subcommittee are hopeful that, if nothing
else, this report will stimulate significant debate and reflection
botli within and outside our government. The stakes are very high
for us and for our friends throughout the hemisphere. This entails
understanding all the dimensions of the problem and the events
and circumstances that contributed to the development of the car-
tels. After ally violence and corruption associated with the narcotics
trade is not just a problem from Latin America and the Caribbean.
Both seriously affect the quality of life in the United States as well.
OPEN ISSUES AND SUBJECTS REQUIRING FURTHER INVESTIGATION

This report should be considered a first step toward a fuller un-

derstanding of the international scope of the narcotics problem.
Many issues arose during the course of the investigation which
could not be pursued in the 100th Congress because of the time and
staff limitations. There are open issues and questions which call for
further study.
 13

1. The Subcommitte investigations of money launderirig allega-

tions involving the Bank of Credit and Commerce International
should be completed. Developing an effective strategy against
money laundering will require a more complete understanding of
the way drug traffickers move, hide, and invest the profits from
the profits from their illicit activities.
, The Subcommittee's work thus far suggests that ifthe banking
system can be ; closed to drug money and if assets owned by the
drug cartels can be seized, large scale trafficking can be more
easily controlled.. • ; '
2. Serious questions abut tlje adequacy of the Neutrality Act in
controlling the activities of mercenaries and soldiers of fortune
arose during the hearings. The Subcommittee should examine the
problems the Department Justice has had using the Act and con-
sider it? revision. .
3. The Subcommittee has received allegations that various fac-
tions in the Lebanese civil war are supporting their efforts with
drug money and that they have started to work with the Colombi-
an cartels. These allegations require, thorough examination. -
"4: The Subcommittee has received allegations that heroin dealers
used the w^r in Afghanistan as cover for their operations. There
are reports; gf guns for drugs exchanges and significant drug relat-
ed corruption. The 1988 International Drug Control Strategy
Report, prepared ;by the State Department, obliquely acknowledged
the problem, stating "individual resistance elements- reportedly
engage in £opium production and trafficking as a source of income
to provide-staples for populations under their control and to fund
weapons,purchases." 3 Further it has been alleged that weapons for
the resistance were diverted to the international arms market.
5. The March, 1989 International Narcotics . Control Strategy
Report again raised concern that drug-related corruption lias con-
tinued to undermine narcotics law enforcement in Mexico. The
Report described the emergence in 1988 of "an increasing number
of Colombian traffickers, within Mexico, involved primarily with
facilitating the transshipment of cocaine to the United States." 4
The level of drug related corruption in Mexico continues to be a
priority concern of the Subcommittee. While there was neither the
time nor the resources to investigate thoroughly the.situation in
Mexico, t}iis will be a continuing focus of the Subcommittee's work
in the future. , •
Other pending business includes the effort by the Foreign Rela-
tions Committee to obtain access to an unexpurgated version of
Oliver North's notebooks. The notebooks contain numerous refer-
ences to the drug issue but could hot be deciphered because key
sections had been deleted by North and his attorneys. On April 6,
1989, those notebooks were turned over by North to the Independ-
ent Counsel in connection with his trial, when North waived his
Fifth Amendment rights, and choose to testify. The Subcommittee
will continue to seek to obtain those notebooks. A detailed discus-

3 International Narcotics Control Strategy Report, U.S. Department of State, Bureau of later-
national Narcotics-Matters, March, 1988 p. 178.
4 International Narcotics Control Strategy Report, U.S. Department of State, Bureau of Inter-
national Narcotics Matters, March 1989, p. 108.
 14

siori of the North notebook problem has been included as an appen-

dix to- this report. ' -•
THE BAHAMAS
INTRODUCTION

(Because of:
its geography, smuggling has been part of the Baha-
mian economy throughout its history. -The Bahamas is a chain of
70Grcoral islands of which jvist 29 are inhabited; THe Bahamian ar-
chipelago stretches 750 miles, from Cuba and Hispariiola to just 40
miles off the southed coast of Florida. « • " *v
: Ih:the' years after World War II, the development- of the Baha-
mian economy focused on toiirism, while -a group of British busi-
nessmen Imown locally as'"the "Bay Street Boys" controlled most
aspects of the local economy. The Bay.Street Boys represented
gambling^ interests, as well as the merchant class. In 1967, a more
broadly-based Bahamian Party/ the Progressive1 Liberals Party
(PLP), led by Lynden Pindling,tookpower.
Within a-year of its 1973 independence from Britain, Bahamian
law enforcement authorities were -warning* that drug trafficking
was a "serious problem," and by 1979, that problem was a crisis.1
IN the late 1970's, both the narcotics smuggling and government
corruption in the Bahamas grew at an extraordinary rate. Initially,
marijuana was the principal narcotic smuggled through the Baha-
mas, but cocaine became an increasingly significant factor in the
early 1980's.; As of 1988, the' Bahamas remained a major transit
country for both-drugs, with 50 to 60 percent of all the cocaine and
marijuana entering the U.S. transiting through Bahamian terri-
tory.2 f • " ' ' 1
Witness after witntess appearmg before the Subcommittee testi-
:
fied to using one or another Bahamian island to drop drugs for
"transfer to fast boats-or small planes;3'
Luis "KOjak" Garcia, a former smuggler who gave up this Voca-
tion voluntarily to become a DEA informant, testified that by di-
viding a load Of drugs among ten fast Boats coming from the Baha-
mas he could limit the risk of interdiction to a fraction of the total
load. Customs, he said, would be forced to choose which of the ten
boats to intercepts They simply lacked the men and equipment to
stop all ten.4 The witnesses agreed that the U.S. Customs Service
and the Coast Guard could not possibly check the thousands of
boats and planes traveling regularly between the Bahamas and" the
Uijited^States.-5:- ; : ^ • "
While the geography of the Bahamas is ideal for smuggling^ and
inadequate law enforcement resources . assure traffickers of being
-able to m'Ove significant ^quantities'of drugs to the United" States,
cooperation from Bahamian officials to 'protect their operations

1 "Paradise Lost," The London Sunday Times Magazine, Sejpfc. 29, 1985, p. 34,
s International Narcotics Control Strategy Report, U.S. Department of State, March 1988, p.
150.
3 Subcommittee testimony of Gart Betzner, Part 3, April 7, 1988, p. 252 and Subcommittee
testimony of George Morales, Part 1, July 15, 1987, p. 60 and Part 3, April 7, 1988, p. 306; also
see generally subcommittee testimony of Luis Garcia, Part 1, May 27,1987 pp. 5-21.
4 May 26,1987,- prehearing interview with Luis Garcia.
6 Subcommittee testimony of Luis Garcia, Part 1, May 27,1987, p. 12.
 15

from interference has been essential. Typically, traffickers have

bribed local Bahamian Customs officials and police, and have hired
locals to unload and reload drug cargoes. When their operations
grew in size, the payoffs demanded from Bahamian officials grew
larger, and involved higher-ranking members of government.6 .
Luis Garcia, a major smuggler of marijuana who became a DEA
informant in 1988, testified:
• I was heavily involved in smuggling drugs into the
United States for almost 4 years beginning in early 1979.
At that time, I supervised an operation which smuggled
tons of drugs mainly from Colombia and Jamaica by way
of the Bahamas with complete impunity. That was accom-
plished by paying for protection to the Bahamian authori-
ties from the lowest ranking officer to the highest politi-
cians and officers. It is believed that if it was not for this
fact, my smuggling activities and those of many others like
me would not have been so successful.7
Garcia said payoffs were essential. Corruption, he said, began
with airport and Customs inspectors, but continued to higher-level
appointed Bahamian officials. Gaircda said he had never paid bribes
to Bahamian elected officials.8
According to Garcia, a typical shipment of 6,000 to 8,000 pounds
of marijuana cost: $130-150,000 in bribes to Bahamian officials.
Most of that went to police, immigration and custom- officials.
Among those bribed were the chief of the Bahamian drug task
force, whom Garcia said he had on his payroll, and a former chair-
man of the PLP, the ruling party in the Bahamas. Official payoffs,
Garcia estimated Were about 15 percent of the total cost of a mari-
juana shipment.9
In tHe early 1980's, the bribes ensured the smujgglers a sanctuary
from U.S, patrols. As Garcia testified:
. .. . if somebody is chasing you up there 30 miles out in
the .ocean and you see them coming, you can turn around
and head back into .the islands, and of course, you are
paying for protection. They are going to protect you . . . if
you;pay, you won't get arrested.10
GROWTH OF OFFICIAL CORRUPTION WITH VESCO AND BANNISTER

In 1972, Robert Vesco fled the United States having been accused
by law enforcement authorities of looting $240 million from the
Overseas Investors Services mutual fund. Upon leaving the U.S.,
Vesco established operations in the Bahamas, developing a rela-.
tionship with a political "fixer" named Everett Bannister who was
close to Prime Minister Pindling; In time, Vesco gave Bannister
"carte blanche" at the Bahamas Commonwealth Bank. Bannister
and Pindling in return provided Vesco protection from extradition.
In part, as a result of his dual relationship with Vesco and Pin-

6 Betzner testimony, Part 2, pp. 252-253; Morales testimony, Part 3, p. 293, Part 1, p. 61 and
Garcia testimony, Part 1, p. 10.
7 Garcia testimony, Part 1, p. 5.
«Ibid, pp. 6-11.
9 Ibid, pp. 7-10.
10 Ibid, pp. 1S-14.
 16

dling, Bannister became increasingly influential in the Bahamas,

and became known to many narcotics traffickers as a man who
'could provide protection to them "from the top." 11
Bannister had left the Bahamas in the 1940's and lived for a
number of years in New York, before returning as a consultant
when the Pindling government came to power in 1967. Bannister
then devoted his attention to providing assistance to clients as di-
verse as Resorts International, one of the Bahamas' principal gam-
bling operations, and to Anastasio Somoza when he was a fugitive
from Nicaragua. In the latter case, Bannister reportedly received
$320,000 in cash from Somoza to buy him a safe haven. According
to his son, Gorman Bannister, his father said most of the money
was paid to "the man." Gorman understood that to mean the
money went to Prime Minister Pindling.12 ,
Everett Bannister assisted drug traffickers in a number of ways.
He had them removed from the official "stop" lists, making it pos-
sible for traffickers to enter and leave the country without official
interference, and warned them of impending drug raids.13
U S E OF NORMAN'S C A Y FOR SMUGGLING

Beyond his influence with high government officials through the

involvement in the Bahamas Commonwealth Bank, a second conse-
quence of Robert Vesco's activities in the Bahamas was the arrival
of Colombian cocaine traffickers. Vesco had left the Bahamas in
1972, after the bank failed and U.S. pressure to extradite hihi grew.
But he returned in 1978, after establishing a relationship with the
Colombian drug dealer Carlos Lehder. Lehder-and Vesco became
regular companions on the islands, and Lehder decided to use the
Bahamas as his base for smuggling, cocaine ^to the United States.14
In 1978, Lehder bought most of NormianVCay, one of the Equina
Islands, fifty miles,from Nassau. By the end of the year, Norman's
Cay was home to a group of some lortry Lehder employees who
drove the other residents and itinerant visitors away from the
island at gunpoint. Lehder built a large hangar which had cocaine
storage facilities inside and was* using the island as a transship-
ment and distribution point for cocaine coming into the United
States.15
Lehder's behavior led a number of U.S. property owners on the
island to protest the confiscation of their property to the U.S. Em-
bassy in Nassau. In July 1979, one of the Americans, Professor
Richard Novak, delivered records of the. drug flights—supported by
photographs and movies—to the then American Charge d'Affaires,
Andrew Antippas. After meeting with Antippas and the DEA offi-
cers stationed in Nassau, Novak returned to the island by small
plane, accompanied by his son, to collect his belongings. Without
Novak's knowledge* Lehder had learned of his visit to the Embassy
and his complaints about the cocaine operation. Lehder's associates
surrounded the plane when it returned, smashed the radios,

11 Subcommittee testimony of Gorman Bannister, Part 1„ May 27,1987, p. 25.

12 Bannisteriestimony, pp. .26-28.
13 Garcia testimony, p. 15; Bannister testimony, pp. 34, 36.
14 "Cocaine Island^" NBC Nightly News, April 30,1987.
15 "Bahamas; Smugglers' Paradise," NBC Nightly NewB, March 18,1987.
 17

drained most of the fuel and then forced Novak and his son to re-
board and take off at night. Novak and his son survived the result-
ing crash.1®
At the end of August 1979, under intense pressure from the U.S.
Embassy, a police raid on Norman's Cay was scheduled. For rea-
sons never fully explained by the Bahamians, it was postponed for
fifteen days. When the raidfinallytook place, it was apparent that
during the intervening fifteen days Lehder had been warned and
the island had been cleaned up. As the police raid began, Lehder
managed to destroy what little cocaine; was left on the island and
although he was arrested, he was released immediately. The major
victims of the raid was a competitor of Lehder's, a smujggler named
Ward, who was also using Norman's Cay. As a result of the raid,
Ward Was arrested, put on the Bahamian Government stop list and
forced to move his smuggling operation to Haiti.17
Despite two more "raids" on the island, about which Lehder also
received advance warning, the smuggling operation on Norman's
Cay continued without interference and'in fact became even more
outrageous. Lehder then began a public campaign against "police
harassment" and "U.S. imperialism." During the 1982 celebration
of Bahamian independence, Lehder flew his. light plane over the
Nassau park Where the festivities were taking place and dropped
leaflets saying "DEA Go Honie." Mariy of the leaflets had $100
bills stapled to them. These leaflets showered on the heads of the
Prime Minister and U.S. Charge d'Affaires Antippas.18
The Subcommittee received, testimony from Gorman Bannister
that his father Everett Bannister was the person who had tipped
Lehder off to the impending drug raids. As Bannister testified:
Senator KERRY. Did your father warn Carlos Lehder of
the police raid on Norman's Cay?
M r . BANNISTER. Y e s .
Senator KERRY. D O you want to describe that?
. Mr. BANNISTER. Well, as I recall, he just made a phone
call to Carlos letting him know, well, police are going
to
Senator KERRY. YOU heard the phone call?
Mr. BANNISTER. Oh, yes, yes, yes yes . . . I know my
father did call him one time and told him, "Listen, the
police are going to raid Norman's Cay on a certain day,
clean it up." And when they went there, they didn't
find . . . anything." 19
When an opposition member of the Bahamian parliament, -
Norman Soloman, began to complain to Bahamian and U.S. au-
thorities about the situation involving Lehder's use of Norman's
Cay for narcotics trafficking, his house and car were blown up. Ac-
cording to Gorman Bannister, Lehder boasted to him and to his
father that he was behind the bombing because he didn't like Solo-
man depicting Lehder's Colombian employees in the drug trade as

16 "Paradise Lost," The London Sunday Times Magazine\ September 29,1985, p. 37.
17 Ibid.
18 Ibid.
19 Bannister testimony, p. 34.
 18

"animals." Bannister testified that his father viewed Lehder's deci-

sion to bomb Soloman as appropriate.20
Everett Bannister was indicted in the Southern District of Flori-
da in March, 1989, on narcotics charges, following testimony before
the Grand Jury by his son Gorman.
RESPONSE BY UNITED STATES TO LEHDER PROBLEM

A Subcommittee staff review of the pertinent cable traffic from

the Embassy during the relevant period shows that the U.S. Em-
bassy continuously protested to the Bahamian government about
the Norman's Cay problem and routinely cabled Washington about
the scope Of the problem in the early 1980's.
These cables led to a 1982 meeting between Vice President Bush,
Admiral Daniel Murphy and Bahamian Prime Minister Pindling,
at which the Norman's Cay problem was raised. The Vice Presi-
dent chastised the Prime Minister for what was taking place.
During the meeting, Prime Minister Pindling was shown a comput-
er printout of C5A surveillance of Norman's Cay and was told that
the island resembled O'Harie Airport because of its activity.21
Despite this confrontation, there was no follow-up by the United
States. Instead, with the appointment of a new Ambassador,
United States-Bahamian relations focused on base rights negotia-
tions, and the drug issue was relegated to a much lower priority.
The new Ambassador, Lev Dobnahsky, stated publicly that in his
view the most important issue in United States-Bahamian relations
was the negotiation of base rights for the United States.22
Law enforcement agencies and prosecutors in south Florida
noted the policy shift. These officials were attempting to obtain
State Department cooperation for sting operations aimed at Baha-
mian officials, and for their efforts to extradite traffickers from the
Bahamas. These actions were met with indifference and in some
cases hostility from the Ambassador.23
On September 5, 1983, NBC "Nightly News" exposed the Nor-
man's Cay scandal and directly accused the Bahamian government
of complicity in allowing Lehder's operations to continue. The NBC
broadcast and the resulting outcry iri the Bahamas led to the estab-
lishment of a Royal Commission of Inquiry to probe drug traffick-
ing and drug-related corruption in the Bahamas. The Inquiry
report led to the resignation of two cabinet officials and the pros-
ecution, but later acquittal, of some police officiate. The operation
on Norman's Cay came to an end and Lehder returned to Colom-
bia. None of these events changed the role of the Bahamas as a
major transit point for cocaine traffickers or diminished the cor-
ruption within the Bahamian government.
Subcommittee hearings on the issue and a debate on decertifica-
tion of the Bahamas for failure fully to cooperate with the United
States on drug enforcement issues generated renewed concern, and
narcotics again became a major priority of the Embassy.

20 Ibid, p. 36.
21 Subcommittee testimony of Admiral Daniel Murphy, July 14,1988, Part 4, pp. 259-260.
22 NBC, Broadcast, March 18,1987.
23 Subcommittee testimony of Richard Gregorie, July 12,1988, Part 4, pp. 160-161.
 19

EXTENT OF B A H A M I A N CORRUPTION TODAY

The State Department's annual report on international narcotics

control details the degree to which corruption remains today an es-
sential element of the Bahamas' status as a major drug transit
country.
According to the 1988 report, the Bahamas still is experiencing
"systematic corruption, which continues to make the Bahamas at-
tractive to drug traffickers." 2 4 The report notes that investigations
into official corruption appear to be limited to low-level enforce-
ment officers and fail to deal at all with higher-level corruption.
Even when corruption is found, suspected law enforcement or mili-
tary personnel are not normally charged or tried in court for their
offenses. Instead, they are merely forced to retire.25
Other evidence of the continuing problem with official corruption
in the Bahamas is the re-nomination of George Smith and Kendall
Nottage for parliamentary seats by the Progressive Liberal Party.
Both won their seats despite the fact that they were identified in
the 1984 Commission of Inquiry Report as being involved in narcot-
ics-related corruption.ae Nottage was indicted March 29, 1989 by a
Boston federal grand jury on narcotics money laundering charges.
Although the Bahamian government passed a comprehensive
drug law in January 1987,^ which includes a provision for the "ret-
roactive confiscation of narcotics derived assets," no arrests or
prosecutions under the new act took place in the year following its
enactment.27 In 1988, only one person, a Bahamian policeman, was
convicted under this provision.^8 The March 1989 report stated
that "narcotics related corruption continues to be a problem,
making the country attractive to drug traffickers." 29
Similarly, extradition of drug traffickers remains a serious prob-
lem. The United States has for more than three years sought extra-
dition of Nigel Bowe, a Bahamian lawyer with strong ties to the
PLP and the Bahamian government. To date, the Bahamians con-
tinue to stall his extradition.30
.The Bahamian response to the U.S. on the Bowe extradition
issue has been, inadequate at best. Bahamian officials argue that
Bowe is a rich man and using the best legal talent in the country
to delay extradition. What that explanation fails to address is the
question of why the Bahamians themselves have not investigated
Bowe's activities. U.S. law enforcement authorities believe Bowe
has played a key role in organizing smuggling throughout .the Car-
ibbean—a matter which should be of some interest to the Baha-
mian authorities if they are indeed concerned. with cooperating
with the'U.S. in the war on drugs.
Nevertheless, the United States has continued to certify the. Ba-
hamas as providing "full cooperation" infightingthe war on drugs.
The United States has done so on the ground that the Bahamas

84 International Narcotics Control Strategy Report.

25 Department of State, March 1988 p. 151.
26 Ibid.
27 Ibid.
28 Ibid.
2 0 Ibid, pp. 154-155.
3 0 INCSR, Department of State, March 1989, p. 123.
 20

has taken adequate steps on its own to control drug production,

trafficking and money laundering.
Assistant Secretary of State for Narcotics Matters Barbara Ann
Wrbbleski testified that the "baseline issue" in determining wheth-
er to certify a country was whether there is "corruption "to such an
extent that it has gotten in the way of cooperation." 31
The record developed by the Subcomittee, as well as the State
Department's own International Narcotics Control Strategy Report,
document that corruption in the Bahamas continues to be the
major obstacle to cooperation.
BAHAMAS SEEKS TO INFLUENCE U . S . POLICYMAKERS

In 1985, the increased public attention to the role of the Baha-

mas as a base for drug smuggling, led that government to seek the
advice of a U.S. public relations firm. The firm, Black, Manafort,
and Stone, submitted a memorandum to the Bahamian officials
suggesting that it could sell the United States government on the
importance of the Bahamas to U.S. security. In that memorandum,
Black, Manafort suggested that public attention be focused on the
demand side of- the drug issue, thus diverting attention from the
narcotics-related problems on the islands. - The Black-Manafort
principal -assigned to the matter- Matthew Freedman, was a former
senior State Department official who had handled narcotics
issues.32 " '-<
Shortly after the 1984 U.S. election, Black-Manafort advised the
Bahamian government that "perception by 'Official' Washington
will frequently drive the realities which will affect . . . policy deci-
sions. In this regard,' the Government of the Bahamas is operating
in a negatively charged atmosphere." 38
According to Black-Manafort, the Department of State and the
Department of Defense wished to maintain a "solid relationship"
with the Pindling Administration, but the DEA and the Depart-
ment of the Treasury were "active critics." According to the memo-
randum^ political critics of the Pindling government had been
"sowing the seeds that the Government of the Bahamas is a nation
for sale, inviting drug czars to use the banking system, that govern-
ment officials are participating in the drug trafficking, that the
Pindling Administration Is about to Collapse and much more." 3 *
Black-Manafort advised the' Bahamian government that it
needed to lobby both the Executive and Congressional branches of
the United States government, beginning with the National Securi-
ty Council to mobilize political support for the Bahamas and to
focus the Departments of Defense and State so as to "affect Treas-
ury and Justice policy." The memo went on to suggest that the per-
sonal relationships between then Secretary of Defense Weinberger
aiid then Attorney General Meese could be used to redefine the pri-
orities of the U.S. in its dealings with the Bahamas.35 Black-Mana-

31 Ibid, p. 122.
32 Security and Development Assistance, S. Hrg. 100-361, Part 2, March 16,1987, p. 48.
33 Ibid, p. 44.
34 Memorandum, Black, Manafort & Stone to Government of Bahamas, November, 1984.
36 Ibid.
 21

fort ^as to charge the Bahamas $800,000 per year for representing
them on these matters, and the firm was ultimately retained by
the Bahamian government.36
In addition, a former coordinator of the South Florida Drug Task
Force, Admiral Daniel Murphy, who participated in the previously
mentioned 1982 meeting with Prime Minister Pindling, testified
that he solicited the Bahamas as a client for . his consulting firm,
Gray and Company. He was unsuccessful.37
. The role of the U.S. consultants raises troubling questions about
conflict of interest. Narcotics issues are indeed "national security
issues." The Subcommittee believes it is not in the interest of the
United States to have former government officials, whether from
the Congress or the Executive Branch, who held policy positions
dealing with narcotics law enforcement, to use the knowledge they
have obtained to work for a foreign government whose officials are
implicated, either-directly, or indirectly, in the drug trade.
B A H A M I A N "COOPERATION"

Shortly after the Bahamian government retained U.S. public re-

lations consultants, it suddenly began cooperating on some drug
issues on the advice of its consultants. For instance, the govern-
ment allowed the installation of an aerostat radar, set up joint air
and naval operations and allowed U.S. authorities to enter Baha-
mian territory in hot pursuit of drug traffickers. Yet the coopera-
tion remained far from complete. For example, the government
continued to allow foreign nationals arrested for drug smuggling
leave the country after posting bail, and continued to make it diffi-
cult for rU.S. authorities to participate in the: destruction of seized
drugs.38 ••
- The Bahamian willingness to cooperate with interdiction efforts
has created a pro-Bahamian constituency^ in interdiction-related
agencies such as the Customs Service. But the increased level of
interdiction, cooperation has neither cut the amount of cocaine
coming into the United States from the Bahamas, nor has it led to
the destruction of the major smuggling organizations. Indeed, as
Deputy Assistant Secretary of State for Inter-U.S. Affairs Richard
Holwill noted, / ' . . . notwithstanding the cooperation, there has
been an increase in trafficking." 3 9 The Assistant Secretary of
State for International Narcotics Matters and the Administrator of
the DjEA acknowledged that the Bahamas remains a significant
transshipment point.40
CONCLUSIONS

The case of the Bahamas illustrates many of the failings of

United States foreign policy as it relates to narcotics:
1. Policy was made at the Embassy level with little apparent
interagency coordination. When ambassadors changed; and U.S.
antidrug efforts in connection with the Bahamas diminished, the

36 Ibid
37 Ibid.
38 Foreign Agent Registrations maintained by Secretary of the Senate, 1985-1988.
39 Murphy testimony, pp. 263-264.
40 Subcommittee testimony of Richard Holwill, July 11,1988, Part 4, .p. 61.
 22

decreased attention to the problem went largely unnoticed in

Washington. -
2. There was not any coordinated follow-up to strong initiatives.
The Vice President's meeting with Prime, Minister Pindling was
followed by a four-year hiatus before , significant pressure was ex-
erted on the Bahamian Government relative to the drug issue.
3. The Administration did not regaid the Embassy in the "Baha-
mas as an important post because of the country's location, size
and political system. Mr. George Ahtippas remained as the Charge
for mOre than two years before a new. Ambassador was appointed.
IBs replacement had little experience'in Caribbean affairs arid did
not exhibit any'-feeling for the importance Of the*drug issue. The
current Ambassador has demonstrated an understanding of the
drug issue, and has elevated this issue to the top of the U.S.-Baha-
mian bilateral agenda.
4. There was little or no direct coordination between the U.S. At-
torneys in Florida and the Embassy in Nassau. The lack of coordi-
nation led law enforcement officials to believe that there was little
point in pursuing cases against Bahamian citizens or government
officials because they would get little -support from the State De-
partment on extradition or operational matters.
Today, some of these5 factors have changed. The U.S. government
appears to have recognized the significance of the threat posed by
the continued use of the Bahamas as the most significant transit
point for illegal drugs coming into the United States. There are
some areas,, such as in the arrest and deportation of drug traffick-
ers found smuggling through pre-clearance procedures, in which
the Bahamian government is noW cooperating with the U.S.
Yet the Bahamas continues to be the major transit point for co-
caine and marijuana coming into the UiS; Even though laws3 have
been enacted to allow seizure Of drug-related assets, no such sei-
zures have taken place. Few; if any, drug traffickers arrested in the
Bahamas are Convicted arid jailed. The r esult ^suggests to many
that the Government of the Bahamas is "not sincere* but engaged in
a rather cynical exercise to placate the United States.
For'this reason, one of the^ most important issues" in United
States-Bahamian drug cooperation is extradition, especially of per-
sons indicted in the United States ~who have alleged ties to Baha-
mian government officials. ' }
In the past, the U.S. Customs Service has expressed some con-
cern over the granting of pre-clearance privileges io other coun-
tries. Customs' officials have argued that the United States stands
to lose control over the disposition of individuals charged with
"crimes and arrested in a foreign country .with which we have such
agreements, particularly if there-have been historical problems as-
sociated with extradition. Customs: has'expressed the-concern that
some individuals who otherwise would have been arrested-upon
reaching the U.S. may escape punishment following ah arrest in
such a country.
The State Department has argued, however, that pre-clearance
can serve the useful purpose of alerting U.S. law enforcement au-
thorities that an individual charged with crimes will be entering
the U.S. on a specific date, time and place. This advance intelli-
genee can be used to ensure that arrests are made once the individ-
ual reaches his or her destination in the United States.
The pre^clearance agreement with the United States is very im-
portant to the Bahamian tourist industry. The Subcommittee be-
lieves that a thorough review needs to be undertaken regarding
this agreement, to determine whether on the whole it has reduced
the flow of narcotics to the United States from the Bahamas, or
has allowed narcotics traffickers to escape punishment. If the bene-
fits do not outweigh the costs, the U.S. should announce our intent
to terminate this agreement within one year unless substantial
progress is made in resolving these problems. In addition, the Sub-
committee, believes the President should retain, as an optional
sanction, the ability to terminate any nation that has customs pre-
clearance if it is determined the nation does not fully cooperate
with the U.S. in the war on drugs.
A P P E N D I X : D E N I A L OF R E Q U E S T F O R D E C L A S S I F I C A T I O N

In this Chapter, there are five references to news media reports

on the Bahamas which are used to document the role of the Baha-
mas in the narcotics trade. On December 1, 1988, Senator Clai-
borne Pell, Chairman of the Committee on Foreign Relations,
wrote .the Department of State requesting the declassification of 11
U.S. Government documents which corroborate these news ac-
counts. On December 27 j 1988, Chairman Pell was notified in writ-
ing by the Department of State that the,, declassification request
had been denied. The one document which the State Department
did not obejct to declassifying was a September 5, 1983, transcript
found in their files of an NBC Nightly News program entitled "The
Navy and the Bahamas." The Subcommittee believes strongly that
disclosure of all 11 documents is in the public interest to facilitate
public understanding of official responses to the war on drugs. The
State Department response of December 27,' 1988, and the Septem-
ber 5, 1983, NBC transcript are included as appendixes at the end
of this section.
U . S . DEPARTMENT OP STATE,
Washington, DC, December 27, 1988.
H o n . CLAIBORNE PELL,
Chairman, Committee on Foreign. Relations, _
U.S. Senate, Washington, DC.
DEAR M R . CHAIRMAN: I am replying to the request to the Department of Decem-
ber I, 1988, that it review for declassification 11 documents which were transmitted
at that time. Concurrently, the Department was requested to retrieve on additional
document from its files and to review it also for declassification.
After careful review and consideration, we find that we have no objection to~the
declassification and release of document No. 1.
We have no objection tcr the release in part of documents Nos. 7,10 and 11. Those
portions that must be withheld are bracketed in ink. In all cases where material has
been excised, the relevant subsections of Executive Order 12356, Section 1.3(a)(3) and
(5) are noted in the margin. We believe that despite the passage of time, the prema-
ture disclosure of this material would have an adverse effect on sensitive issues in
United States relations with The Bahamas. It contains foreign government informa-
tion provided in confidence and confidential US Government assessment and recom-
mendations.
Documents Nos. 2, 3, 4, 5, 6 and 8 must be withheld in full. Documents Nos, 2, 4,
5, 6, and 8 are essentially comprised of sensitive material, the disclosure of which
could adversely affect our bilateral relations with the Government of the Bahamas.
These documents contain foreign government information provided in confidence as
 24

well as confidential US assessment and recommendations. In addition, document

No. 3 wholly and documents. Nos. 5 and 6 concurrently, are comprised of delibera-
tive material which must be withheld under Section (b)(5) of the Freedom of Infor-
mation Act (Title 5 USC Section 552) as comprising inter-agency or intra-agency
communications exempt from disclosure under the deliberative process or similar
privilege.
We believe that the Department of Justice has significant equities in two docu-
ments, Nos. 9 and 12, which we Believe contain sensitive material, the disclosure of
which could be injurious to our relations with the Bahamas. As above, these docu-
ments contain foreign government information provided in confidence as well as
confidential US government assessment. Therefore, the Department of Justice
should be asked to review this material.. We have written the relevant subsections of
E.O. 12356, Section 1.3(a)(3) and (5) in the margin adjacent to the sensitive material.
I understand that officers of the Department are in direct contact with your staff
concerning this review. Alternatively, if you have any further questions, please con-
tact Mr. Frederick Smith, Jr. of our Bureau of Administration on 647-2207.
With best wishes,
Sincerely,
J. EDWARD FOX,
Assistant Secretary Legislative Affairs.
Enclosures: Documents Nos. 1 through 12
[Memorandum]
To: Department of Defense: Attention: Ms. Helen Young.
Program: NBC Nightly News, WRC-TVNBC Network.
Date: September 5,1983, 7 p.m., Washington, DC.
Subject: The Navy and Bahamas. '
T O M B R O K A W . Robert Vesco is American's most notorious fugitive. For years law
enforcement officials have been trying to nail him on a variety of charges, most of
them related to the disappearance of millions of dollars from, a company that Vesco
controlled.
Tonight in this Special Segment, Brian Ross describes how Vesco continues to live
his life on the lam in luxury, now in the Bahamas, where the Vesco connection -is
powerful and illegal. •' ,,
B R I A N ROSS. For more than four years now, this beautiful, seldom visited island in
the.Bahamas, just 200 miles from the Florida coast has been the base for one of the
biggest drug smuggling operations in the world.
The island is<called Norman's Gay, and here,;in the middle of nowherej a smug-
gler's dream. Refrigerated hangars store tons and tons of cocaine and/ a million
dollar paved runway long enough to handle jet planes,
This is the man who dreamed the smuggler s dream, the man at the top of the
Norman's Cay smuggling operation.' Robert Vesco, the accused Wall Street master
swindler who fled the United States ten years ago and is now said to have made
millions of, dollars in the drug business in the Bahamas since the late seventies,
when these pictures were taken.
MAN. He roams the streets freely, usually with not more than two bodyguards.
Ross. This Florida drug agent worked undercover in the Bahamas.
MAN. Mr. Vesco was involved very heavily in the cocaine traffic, he was a major
financier, he provided some of the muscle, protection for different groups of smug-
glers and that his—the majority of his empire was being held together by money
that he was making from narcotics smuggling.
Ross. Federal agents have been following the Vesco drug business for at least two
years. This seized freighter is just one of dozens of boats and airplanes that agents
say Vesco has used to smuggle cocaine and marijuana .into the United States.
Authorities say Vesco's Colombian cocaine supplier is this man, Carlos Lehder,
like Vesco a fugitive from American justice.
But Federal authorities say that even with all they know about Vesco's drug busi-
ness, the ships, his Colombian connection, his island drug bust; even knowing all
that, they haven't been able to stop him.
SECOND M A N . Law abiding Christians
[Crowd reaction.]
Ross. American authorities say Vesco is just too well protected in the Bahamas by
some of the leaders of the ruling party, the PLP, the Progressive Liberal Party.
A Justice Department intelligence report says a Vesco associate has been, "alleg-
edly paying approximately $100,000 per month in Bahamian officials, including
Prime Minister.
Mr. Prime Minister, can we talk to you?
 25

Prime Minister Lynden Pindling declined to be interviewed by NBC News about

allegations of corruption in has government.
In public, as at this rally last week, some of the very Bahamian officials suspected
of being involved in drug corruption with Vesco and others, speak boldly against
drugs. .
THIRD MAN. I say crime and drugs is frustrating our positive image in the coun-
try.
Ross. This is Kendal Nottage a member of the Bahamian parliament and a cabi-
net minister. NBC News has learned that this summer, the FBI was actually
making plans to try to arrested Nottage as part of a big Federal effort to crack
down on the drug business.
The plan was like ABSCAM. To get Nottage on a private yacht just outside Baha-
mian waters; to get him to take a bribe with hidden cameras rolling. But the plan
was blocked at the American embassy in Nassau.
Ambassador LEV E. BOBRIANSKY. I've stopped it.
Ross, United States Ambassador Lev Dobriansky says one of the reasons he
stopped the FBI investigation was that it might upset delicate negotiations with the
Bahamians over a US Navy submarine testing base in the Bahamas.
Ambassador DOBRIANSKY. This could be very embarrassing—it could—naturally
would be—and it could be very destabilizing. When you look at the total picture: I
mean our relations with the Bahamas is not solely in the drug area, there are many
other things which, over the long pull will be more important than the drug.
Ross. Federal authorities say 70 percent of the cocaine and marijuana coming into
this country is coming through the Bahamas.
FOUETH MAN. South Florida is not rid of all of it yet, not as long as we have the
Bahamas over there.
Ross. Police in Florida are making dozens of drug arrests every day but the
supply of cocaine hasn't gone down, it's gone up. And it's gone up because of the
wide open operation of drug bases like this one on Norman's Cay, run by American
fugitiye Robert Vesco, said to be protected by-Bahamian officials and tolerated by
American .diplomats more concerned with "the Navy bases in the Bahamas than
drug bases in. the Bahama^.
Brian Ross, NBC News, in the Bahamas.

COLOMBIA

W INTRODUCTION

Colombia is the oldest democracy in Latin America and, until re-

cently, has enjoyed one of the continent's most buoyant economies.
However, as previously noted,^Colombia's economic and political
future is being threatened by narcotics trafficking organizations
known as cartels.
General Gorman aptly characterized the state of affairs in Co-
lombia today when in testimony before the Subcommittee he
stated, "the narcotrafficking organizations . . . through bribery, ex-
tortion, and intimidation, . . . became better informed and more
politically powerful. . . than the government." 1
While there are dozens of drug trafficking organizations in Co-
lombia, two cartels, the Medellin and the Cali, dominate the illegal
narcotics trade- They have transformed the cultivation, processing
and distribution of cocaine from a small business into a powerful,"
vertically integrated, multinational industry. Their political and
economic influence is felt not only in Colombia, but throughout
Latin America. What they cannot'buy, they take, often using vio-
lent means to achieve their goals.
The Subcommittee received testimony from several witnesses^
who stated that the cartels are not driven by any ideology, but
view themselves as nothing more than businessmen. They favor po-

1 Subcommittee testimony of General Paul Gorman, Part 2 Feb. 8,1988, p. 31.

 26

litical stability, but ih the context of a government over which they

exercise control. In Colombia, democracy still exists, but many of
its institutions have been reduced to near impotency.The Colombi-
an judicial system, for instance, has been effectively neutralized as
the government has proven incapable of arresting or prosecuting
the major traffickers, much less extraditing them to the United
States.
In many respects, Colombia is the country that holds a key to the
future of cocaine trafficking in this hemisphere. As Colombian nar-
cotics trafficking has increased, and the violence and corruption in
that country have worsened, there have -been differences in the
U.S. government as to the appropriate strategy to pursue.'These
differences have undermined ahti-riarcotics policy in that country.
Testifying before the Subcommittee, General Paul Gorman, .the
former head of the U.S. Southern Command, detailed shortcomings
in U.S. narcotics policy as it related-to Colombia. Gorman made
four points:
First, we have been promising the Colombians material
help since 1988. We have simply not delivered. Whether
that help is radars or modern helicopters or actionable in- *
telligence, the rhetoric of the United States hais consistent-
ly outrun! its performance.
Second, we have reached .for short-term measures, in
effect, apply Band-Aids to what is a massive social trauma.
We have not sought to devise with the Colombians a long-
term comprehensive strategy for dealing with the harco-
traffickers, one which would draw upon the respective
strengths of both countries.
Third, we have failed to bring American technology to
: bear, either for short-term tactical advantage or for longer
range developments which might promise a decisive strate-
gic defeat for the narcotraficantes.
And four, the U.S: has failed to engage the capabilities
of the Colombian Armed Forces.2
Gorman characterized U.S. efforts in dealing with the Colombi-
ans on this problem as having been "half-hearted." 3
ORIGINS OF NARCOTICS TRAFFICKING IN COLOMBIA

During this decade Colombia has gained the infamous reputation

as the preeminent country in Latin America associated with co-
caine trafficking. Ironically, however, Colombia became a center
for global drug trafficking as a result of the trade in marijuana.
The cultivation of marijuana was introduced to Colombia by Pan-
amanian growers around the turn of the century. However, it was
not grown in any significant quantities until demand in the United
States mushroomed during the 1960's. By the middle of the 1970's
Colombia had emerged as a major marijuana supplier to the
United States and by the end of the decade had actually supplant-
ed Mexico as the chief source for marijuana worldwide.4

2 Subcommittee testimony of General Paul Gorman, Part 2, Feb. 8,1988, pp. 33-34.
s Ibid p. 33.
4 Bagley, Foreign Affairs, Vol. 67, No. 1, p. 73.
 27

With the marijuana trade came two important developments: the

Colombian narcotics trade became a multimillion dollar industry
and a criminal narcotics infrastructure was established in both Co-
lombia and the United States. The Subcommittee received testimo-
ny from convicted marijuana smuggler Leigh Ritch that clearly il-
lustrated both of these developments.5
Leigh Ritch began his criminal career in 1969 by unloading bales
of marijuana from Colombian drug boats that docked in west Flori-
da. He was nineteen years old and making between "five and ten
thousand dollars, only"—a night. By the late 1970's Ritch employed
dozens of people and was using his own sailboat to smuggle mari-
juana valued at some $40 million a shipment. At the time he was
arrested in 1986, Ritch had a barge ready to leave Colombia that
was loaded with more than one million pounds of marijuana and
valued at between "$300 and $400 million." 6 Ritch had profited
enormously from the marijuana trade, but his profits never ap-
proached those made by major Colombian criminals in the cocaine
industry.
Coca, the base for cocaine, traditionally was grown and used by
Colombian natives for generations, but was not produced for export
until the. late 1960's when a small Cuban-American criminal orga-
nization in Miami began to smuggle the drug into the United
States. The cocaine was transported from Colombia to Florida by
individuals known as "mules" who'carried a few kilograms at a
time with their personal belongings on commercial airlines.
This small scale smuggling of cocaine into the United States
became a major enterprise in the 1970's when a group of Colombi-
ans including, Pablo Escobar, Jorge Luis Ochoa Vasquez and Carlos
Lehder, seized control of the existing cocaine distribution networks
during a period of violent confrontation known as the "Cocaine
Wars." 7 The Colombians organized their own distribution system
and began to ship cocaine in bulk to the United States. By the late
1970's they had established criminal organisations in both Colom-
bia and the United States. However, it was not until 1982, when
faced with a threat from Colombia's most powerful terrorist organi-
zation, the M-19, that the various Colombian cocaine organizations
banded together to from the world's most powerful drug trafficking
organization, the Medellin Cartel.
ORIGIN OF THE CARTELS

In 1980, the M-19, which began as afiercelyMarxist revolution-

ary and terrorist movement inside Colombia, undertook a series of
kidnappings of wealthy individuals who were them held for
ransom. TVo years later M-19 kidnapped a member of the Ochoa
family, one of the leading criminal families in Colombia.8
In response to the kidnapping, Jorge Ochoa, the family leader,
called a meeting of the drug kingpins at his restaurant on the out-
skirts of Medellin, Colombia. Each drug kingpin who attended the

6 Ritch is serving a SO year sentence without parole in a Federal prison for directing a crimi-
nal enterprise.
6 Leigh Ritch testimony, Feb. 8,1988, p. 63.
7 Foreign Affairs, Vol. 67, No. 1, p. 74.
8 Subcommittee testimony of Ramon Millian Rodriguez, Part 2, Feb. 11,1988 p. 248.
 28

meeting reportedly contributed $7 million to create an organization

called "Death to Kidnappers" or MAS, which - was dedicated to
ending left-wing kidnappings and extortion. As described by Milian
Rodriguez, the cartel wanted to "get rid of a threat both politically
and economically. You must remember M-19 is Marxist Leninist in
ideology and the cartel is a capitalist enterprise." 9
The newly formed drug trafficking organization, which came to
be called the Medellin Cartel, raised a 2,000 man army and
equipped it with automatic weapons. This army subsequently en-
gaged the revolutionaries in a bloody war, and won a decisive victo-
ry.10 Milian Rodriguez testified that "not only were the M-19
killed brutally, but the brutality was made public . . . the victims
were hung lip from trees, they were disembowled, With signs on
them to discourage the population from cooperating with them." 11
When the violence subsided, the victorious cartel forged an alli-
ance with the defeated remnants of the M-19. As a result, the M-
19 had become an enforcement mechanism for the Cartel, using its
soldiers to protect narcotics shipments and intimidate the Colombi-
an government. In return for providing these services, the M-19 re-
ceives money and weapons from the Cartel.12
The war with M-19 also resulted in a loose alliance of the key
leaders of the drug trade in Colombia. After the war, when prob-
lems arose for the drug industry, the individual traffickers met to
work out solutions. For example, one witness described a meeting
of the trafficking Organizations to discuss the problem of extradi-
tion to the United States. According to the witness, the leaders of
the drug trade discussed the possibility of approaching officials in
the U.S. Government to' negotiate .the issue.13
Cooperation among the trafficking organizations has even been
extended to risk-sharing associated-with drug shipments sent to the
United States. As the International Narcotics Control' Strategy
Report says, "shipments appear to belong to several organizations.
This avoids sending half empty planes or boats, and, more, impor-
tantly, immunizes individuals in the event of seizure. It is reported-
ly now possible to insure a load against seizure."14
As cooperation among the Colombian drug organizations in-
creased, so did the production of cocaine. For example, in Florida,
in the spring of 1982, Customs officials at Miami International Air-
port discovered 3,906 pounds of cocaine—more than four times the
previous record seizure. That seizure, despite its size, did not drive
up the price of cocaine on the streets, suggesting that the flow had
not been ihterrupted in any meaningful way.
ORGANIZATION AND WEALTH

The cartels became in essence, vertically integrated businesses,

controlling anywhere from 60% to 80% of all the cocaine coming
into the United States. The Medellin Cartel, in particular, perfect-
0 Ibid, p. 248.
10 Foreign Affairs, Vol. 67, No. 1, p. 76.
11 Subcommittee testimony of Ramon Milian-Rodriguez, Part'2, Feb. 11,1988 p. 249.
12 Subcommittee testimony of Richard Gregorie, July 12,1988, pg. 130.
13 Closed Subcommittee testimony of Miami Lawyer, April 6,1988, p. 34.
14 International Narcotics Control Strategy Report, U.S. Department of State, March 1987, p.
 29

ed the cocaine smuggling business into a high-tech trade based on

specialization, cooperation and mass-production. Escobar was re-
sponsible for the production side of the business, the Ochoas han-
dled processing and transportation, and Lehder, prior to his arrest,
handled the distribution end. General Gorman characterized the
organizations as "mafia-like rings capable of very large, very com-
plex undertakings demanding significant discipline and very tight
management." 15
One witness described how the Cartel leaders are served by an
array of "underbosses" who handle specific contract assignments.16
Many of. the underbosses made arrangements with North Ameri-
can "transportation organizations" which flew Cartel drugs to the
U.S. where the cocaine was then turned over to the Colombian dis-
tribution network in this country. Altogether, law enforcement
sources estimate that the organizations have more than 8,000 mem-
bers.17 ..
This complex and elaborate organization earns an estimated $8
billion for the cartels each year. Forbes Magazine has listed Ochoa
and Escobar as among the richest men in the world.18
The cartels have invested these profits in vast real estate hold-
ings in both Colombia and the United States. The Miami Herald
described Hacienda Veracruz, the Ochoa family ranch in northwest
Colombia, as "so huge it encompasses several towns inside its bor-
der's between Barranquilla and Cartagena.19
In testimony before the subcommittee, a Miami lawyer who met
cartel members in Colombia described an enormous ranch with
many thousand head of cattle, a palatial farm house and swimming
pool.20
Ramon Milian Rodriguez, who claimed to have been to the homes
and ranches of all the major cartel members, described the ranches
as "effectively pretty self-sufficient entities . . . that generate their
own electricity, . . . the only thing they need is a source of fuel.
Everything else is either grown or there are substantial supplies."
Rodriguez testified that he had been tasked with buying animals
for a private zoo on one of the ranches. He said, "I've imported rhi-
noceros and other weird animals that you wouldn't believe." 2 1
Rather than being perceived as outlaws and outsiders in Colom-
bian society, the drug lords increasingly are acknowledged as the
single most powerful economic entity in Colombia. They own news-
papers and broadcasting companies, and one-third of their income
is invested in Colombian industry, real estate, and agriculture.
There is' cartel involvement in over one-half of the Colombian
soccer league. CarteL leaders have passed out money to poor farm-
ers and supported Colombian charities. Where they have not been
able to buy political influence, the cartels have resorted to violence.

15 Gorman, Part 2, p. 30.

16 Closed deposition of Carlton, December 4,1987, pp. 146-147.
17 "America's Cocaine Connection," The Miami Herald, November 29,1987, p. 28A
18 Forbes Magazine, July 25,1988, p. 64.
19 "America's Cocaine Connection," The Miami Herald, December 2,1987, p. 6A.
20 Testimony of Miami Attorney, ibid, pp. 27-28.
21 Milian Rodriguez, Part 2, p. 183.
 30

THE CARTEL'S W A R AGAINST THE COLOMBIAN GOVERNMENT

In 1983, the. cartels established large scale processing facilities , in

the Amazon region of Colombia at a location called Tranquilandia.
The facilities, which were discovered and dismantled by the Colom-
bian authorities in early .1984, were producing between two and
three tons Of cocaine a week. Astonishingly, the destruction Of the
Tranquilandia labs did little to disrupt the Cocaine trade.
The 1984 Tranquilandia raid was a direct Colombian government
challenge to the cartels' power. In the months that followed the
raid, the government tried to shut down' the cartels with an agres-
sive search arid seizure cacipaign. ••'
Instead of retrenching, the cartels launched an open war against
the Colombian government. The cartels- employed the tactics they
had used in their war against the M-19; a highly visible campaign
of violence was directed at prominent Colombian officials r and crit-
ics. For example, on April 30, 1984, 50 days after the Tranquilandia
raid, assassins killed Colombian Justice Minister Rodriguez Lara
Bonilla in Bogota. Drug pilot Floyd Carlton described in detail how
the Ochoa brothers contracted for Bonilla's death: • . before they
killed this Minister of Justice in . Colombia, there was, like, a kind
of blackboard, where, there was a photograph of Minister Bonilla,
and. everyone talked about the fact that the son-of-bitch, that guy
have to be killed, that son-of-a bitch." 22 * ,
The Minister of Justice is not the only Colombian to have been
brutally killed by the cartels. In 1986 Colonel Jaime Ramierez
Gomez, head of the Colombian National Police's Anti-NarcOtics
Command and the man responsible for the seizure of some 27
metric toils Of cocaine during a three year period, was assassinated.
He was shot twenty-eight times in front of his wife and children.
On December 17, 1986 Guillermo Canu Isaaca, the crusading anti-
narcotics editor of the Bogota daily newspaper, El Espertador, was
assassinated on his way home ifrom work.
The killings were "carried out by hired organizations -from the
Medellin slums. Yet, none of the leading cartel members have ever
been directly implicated in any of the murders, and as one U.S.
Drug Enforcement Administration Official bemoaned: "There isn't
a cop that will arrest them; there isn't a judge that will try them;
there isn't a jail that will hold them." 2 3
ADEQUACY OF LEGAL A N D L A W ENFORCEMENT MEASURES

The power the cartels have exhibited and their ability to operate
safely iri Colombia raises the question of whether the Colombian
government has the capacity to challenge seriously the drug trade:
On the one hand, the casualties among Colombian law enforcement
officials, judges and government officials speak eloquently about
the sincerity of the Colombian effort. John Lawn told the Commit-
tee that he felt the Colombian police and military authorities had
been "active in the interdiction of cocaine and marijuana, as well
as cocaine essential chemical shipments." 2 4

22Carlton, Part 2, p. 147.

23INC&R, Department of State, 19S7 p. 93 and "America's Cocaine Connection," The Miami
Herald, December 3,1987 p. 20A.
24 Lawn, p, 6.
 31

At the same time, the fact that the cocaine trade has grown
steadily in size and scope, and that the cocaine organizations con-
tinue to operate with impunity, suggest that the campaign of cor-
ruption and violence has taken their toll on the Colombian govern-
ment.
The U.S. Department of State in its 1988 International Narcotics
Control Strategy report concluded that Colombia "does not yet
have a coordinated strategy to combat the traffickers, and the judi-
ciary, in particular, is virtually paralyzed." 25 That paralysis is ex-
emplified by the problems associated with extradition of Colombian
narcotics traffickers to the United States.
What the members of the cartels fear most is extradition to the
United States. When the extradition treaty between the United
States and Colombia entered into force in 1982, the cartels reacted
swiftly. First, they launched a public campaign to have its constitu-
tionality tested in the courts. Second, a terrorist unit broke into
the Colombian Supreme Court building and murdered eleven sit-
ting judges. The attack, which occurred on November 6,1985 at the
Palace of Justice in Bogota, resulted in more than 100 fatalities.
Although the attack was attributed to M-19, it was clearly related
to narcotics trafficking since those involved in the assault burned
all of the files relating to pending extradition cases.
The United States has nevertheless twice tried to extradite Jorge
Ochoa from Colombia to the United States. Ochoa was indicted for
narcotics smuggling in 1984. U.S. Drug Enforcement Administra-
tion officials estimate that Ochoa has moved nearly sixty tons of
cocaine into the U.S. between 1982 and 1987.
The first extradition effort .was undertaken when Ochoa was ar-
rested in Spain in 1985 on drug trafficking charges. The United
States requested extradition from Spain, but Ochoa's lawyers per-
suaded the Colombian goyernment to file for his extradition to his
home country on the same charges. The Spanish judge decided to
send Ochoa to Colombia where a judge released him on short order.
However, the extradition request was not pursued very aggres-
sively by the U.S. government. Assistant U.S. Attorney Richard
Gregorie complained about the Department of State's attitude re-
garding the extradition of Ochoa from Spain. He described his
meeting with U.S. embassy officials in Madrid, noting that, "I dealt
with a very nice secretary, but she was the most knowledgeable
person in the embassy as. to what was going on with the extradi-
tion. . . . here is the most significant dope dealer in history, and
they've got this nice little old secretary who is the only one who
knows everything there is to know about this guy getting extradit-
ed." 26 : > -
Gregorie went on to say that when Attorney General Meese
became involved in the case he (the Attorney General) did not re-
quest a briefing by the federal prosecutors directly involved in the
case. In addition, Meese did not debrief federal prosecutors han-
dling the case on his discussions with Spanish government offi-
cials.2,7

2SINCRS, 1928, p. 86.

26 Subcommittee testimony of Richard Gregorie. Part 4, pp. 144-145.
27 Ibid.
 32

In November 1987, Ochoa was arrested by the Colombia police

and held in custody in Colombia on a charge of illegally importing
bulls into the country. The U.S. then sought to have Ochoa extra-
dited without relying on the extradition treaty between the two
countries which had been declared unconstitutional by the Colom-
bian Supreme Court. The Colombians repeatedly assured U.S. offi-
cials that they wanted to extradite Ochoa to the United States but
had to find a legally and politically acceptable way to do it.
After weeks of frustrating discussions in which one legal techni-
cally after another was raised> a Colombian judge released Ochoa,
saying that he had served enough time in jail on the charges for
which he was arrested. The United States protested the release and
the Colombian government began an investigation of the judge re-,
sponsible for Ochoa's release. However, the damage was done and
Ochoa was free again.
On the U.S. side, the second attempt to extradite Ochoa from Co-
lombia , was handled at the desk and regional officer level of the
State Department for the first several weeks. The only indication
of high level interest in the matter was ai letter from Attorney
General Meese to the Colombians. It was only after Ochoa was re-
leased from prison that President Reagan raised the issue directly
;with the President of Colombia.
The only major trafficker to have been extradited, from Colombia
is Carlos Lehder, who was expelled in February, 1987. He was con-
victed on federal racketeering charges in August of l988 and is cur-
rently serving a life sentence in federal prison. This State Depart- *
ment attributed the Lehder extradition to the fact that all legal
proceedings in the case were completed before the Colombian Su-
preme Court ruled the extradition treaty was unconstitutional.
Throughout the drug world, however, it is widely believed that
Lehder was extradited because his fellow drug dealers viewed him
as a liability, and wanted him out of the business. Lehder's col-
leagues felt he was talking too much, using cocaine heavily, and
that his actions were attracting too much public attention.28 Ac-
cording to these sources, the cartels let the Colombian government
know they would not object to his extradition.
The extradition problems in Colombia have pointed up the signif-
icant and more generic problems of government corruption in that
country. John Lawn, DEA Administrator, testified that "individ-
uals who cannot be corrupted are given the option of silver or lead
and judges in Colombia are given that particular option—that is,
take the money or be killed—even those good individuals in today's
environment find themselvescorrupted." 29
Indeed, the Subcommittee was told that many Colombian offi-
cials had sold out to the cartels: For example, Leigh Ritch found
the Colombian law enforcement non-existent. . . you could load
right at the dock in certain cities where the loading would take
place, you know a city, or pay terminal...
Floyd Carlton described how the murder of Justice Minister Bo-
nilla was actually coordinated with individuals inside the ministry:
28 Closed session testimony of Roman Miliar) Rodriguez, June 25,1987, p. 84.
2fi Lawn, Part 4, p. 42.
30 Ritch, Part 2, p. 63. -
 33

"I'm there with Jorge, Fabio [Ochoa brothers], both of them. . . .

and suddenly, I heard a conversation in which right—apparently
right from the ministry, offices of these people, information was
being given to them. Apparently, they knew that this gentleman
was going to leave the position of ambassador, and he was going to
go somewhere else." 3X
CONCLUSIONS

The Colombian drug cartels have succeeded, at least for the time
being, in securing their havens of operations against government
attempts to crush their activities. Using violence and bribery, they
have made it all but impossible for the Colombian government to
arrest and prosecute them.
The United States has not devoted the necessary resources to law
enforcement intelligence gathering. The cartel, as General Gorman
has pointed out, has better equipment than the U.S. Air Force.
General Gorman testified that "they use satellite radios. They have
encryption devices and voice privacy mechanisms." 3 2
Perhaps the most effective weapon that the United States had
against the cartel was the extradition treaty with Colombia. Extra-
dition to the United States might cause serious damage to the co-
caine trade, but the cartels have been most effective in preventing
serious consideration of that solution-within Colombia.
Moreover, extraditing major narcotics traffickers from Colombia
and most other countries may well have become further complicat-
ed by the death penalty provision in 'the 1988 omnibus drug bill.
According to Assistant United States Attorney Richard Gregorie,
most countries, including Colombia, will not extradite one of their
citizens if that individual might face the death penalty in the re-
questing country. Gregorie testified before the Subcommittee that
for this reason he thought the death penalty was "counterproduc-
tive" to bringing the drug lords to justice.83
There is contradictory evidence over the amount of narcotics as-
sistance that the United States has provided to Colombia. The
State Department claims to have given Colombia substantial assist-
ance with which to wage the war on drugs.
However, according to General Gorman: "We have been promis-
ing the Colombians material help since 1983. We simply have not
delivered. Whether that help is radars or modern helicopters or ac-
tionable intelligence^ the rhetoric of the United States has consist-
ently outrun its performance." 34
Based on testimony, there are areas in which the United States
can-frelpColombia fight against the cartels. These include an in-
crease in specialized assistance in communications and training for
anti-narcotics police. General Gorman suggested that the United
States should strengthen efforts to work with the elements of the
Colombian military and the police who have shown that they are
willing to take on the drug traffickers.

31 Carlton Deposition, ibid., p. 147.

32 Gorman, Part 2, p. SI,
33 Gregorie, Part 4, p. 169.
34 Gorman, Part 2, p. 33.
 34

Finally, economic conditions, in Colombia demand U.S. govern-

ment attention. The cartels' stature ah£-power has been strength-
ened by their, offer to pay off the government's $10 billion external
debt, and by pumping billions of dollars .into the depressed Colom-
bian economy. U.S. efforts could offset the carters position by-
working with members of the Colombian government oh debt relief
solutions and long term economic development schemes. As in so
many Central and South American nations, deteriorating economic
conditions foster opportunities for subversion of democratic institu-
tions and policies.
PAGE LEFT INTENTIONALLY BLANK

(35)
 36

NARCOTICS TRAFFICKERS A N D THE CONTRAS

I . INTRODUCTION

The initial Committee investigation into the international drug

trade, which began in April, 1986, focused on allegations that Sena-
tor John F. Kerry had received of illegal gun-running and narcotics
trafficking associated with the Contra war against Nicaragua.
As the Committee proceeded with its investigation, significant in-
formation began surfacing concerning the operations of interna-
tional narcotics traffickers, particularly relating to the Colombian-
based cocaine cartels. As a result, the decision was made to incor-
porate the Contra-related allegations into a broader investigation
concerning the relationship between foreign policy, narcotics traf-
ficking and law enforcement.
While the contra/drug question was not the primary focus of the
investigation, the Subcommittee uncovered considerable evidence
relating to the Contra network which substantiated many of the
initial allegations laid out before the Committee in the Spring of
1986. On the basis of this evidence, it is clear that individuals who
provided support for the Contras were involved in drug trafficking,
the supply network of the Contras was used by drug trafficking or-
ganizations, and elements of the Contras themselves knowingly re-
ceived financial and material assistance from drug traffickers. In
each case, one or another agency of the U.S. government had infor-
mation regarding the involvement either while it was occurring, or
immediately thereafter.
The Subcommittee found that the Contra drug links included:
—Involvement in narcotics trafficking by individuals associated
with the Contra movement.
—Participation of narcotics traffickers in Contra supply oper-
ations through business relationships with Contra organiza-
tions.
—Provision of assistance to the Contras by narcotics traffickers,
including cash, weapons, planes, pilots, air supply services and
other materials, on a voluntary basis by the traffickers.
—Payments to drug traffickers by the U.S. State Department of
funds authorized by the Congress for humanitarian assistance
to the Contras, in some cases after the traffickers had been in-
dicted by federal law enforcement agencies on drug charges, in
others while traffickers were under active investigation by
these same agencies.
These activities were carried out in connection with Contra ac-
tivities in both Costa Rica and Honduras.
The Subcommittee found that the links that were forged between
the Contras and the drug traffickers were primarily pragmatic,
rather than ideological. The drug traffickers, who had significant
financial and material resources, needed the cover of legitimate ac-
tivity for their criminal enterprises. A trafficker like George Mo-
rales hoped to have his drug indictment dropped in return for his
financial and material support of the Contras. Others, in the words
of Marcos Aguado, Eden Pastora's air force chief:
 37

. . . took advantage Of the anti-communist sentiment

which existed in Central America . . . and they undoubt-
edly used it for drug trafficking.1
While for some Contras, it was a matter of survival, for the traf-
fickers it was just another business deal to promote and protect
their own operations.
N . THE EXECUTIVE BRANCH RESPONSE TO C O N T R A / D R U G CHARGES

In the wake of press accounts concerning links between the Con-

tras and drug traffickers, beginning December, 1985 with a story
by the Associated Press, both Houses of the Congress began to raise
questions about the drug-related allegations associated with the
Contras, causing a review in the spring of 1986 of the allegations
by the State Department, in conjunction with the Justice Depart-
ment and relevant U.S. intelligence agencies.
Following that review, the State Department told the Congress
in April, 1986 that it had at that , time "evidence of a limited
number of incidents in which known "drug traffickers tried to estab-
lish connections with Nicaraguan resistance groups."
According to the Department, . . these attempts for the most
part took place during the period when the resistance was receiv-
ing no U.S. funding and was particularly hard pressed for financial
support." The report acknowledged that, ". . . drug traffickers
were attempting to exploit the desperate conditions," in which the
Contras found themselves.2 The Department had suggested that
while "individual members" of the Contra movement might have
been involved, their drug trafficking was ". . . without the authori-
zation of resistance leaders." 3
Following further press reports linking contra supply operations
to narcotics, and inquiries from the Foreign Relations Committee
to the State Department concerning these links, the State Depart-
ment issued a second statement to the Congress concerning the al-
legations on July 24, 1986.
In this report, the State Department said, ". . . the available evi-
dence points to involvement with drug traffickers by a limited
number of persons having various kinds of affiliations with, or po-
litical sympathies for, the resistance groups." 4
A year later, in August 1987, the CIA's Central American Task
Force Chief became the first U.S. official to revise that assessment
to sjAggest instead that the links between Contras on the Southern
Front in Costa Rica to narcotics trafficking was in fact far broader
than that acknowledged by the State Department in 1986.
Appearings before the Iran-Contra Committees, the CIA Central
American Task Force chief testified:

1 Subcommittee deposition of Marcos Aguado, Part 3, p. 285.

2 "Allegations of Misconduct by the Nicaraguan Democratic Resistance," State Department
document #3079c, April 16,1986.
3 State Department document 3079c.
4' Allegations of Drug trafficking and the Nicaraguan Democratic Resistance, State Depart-
ment document # 5136c, July 26,1986."
 38

With respect to (drug trafficking by) the Resistance

Forces . . . it is not a couple of people. It is a lot of
people.5
The CIA's Chief of the Central American Task Force went on to
say:
We knew that everybody around Pastora was involved in
cocaine . . . His staff and friends (redacted) they were
drug smugglers or involved in drug smuggling.6
.The Justice Department was slow to respond to ,the; allegations
regarding links between drug traffickers and the Contras.. Iri the
spring of 1986, even after the State Department was^acknowledging
there were problems with drug trafficking in association with
Contra activities on the Southern Front, the JusticeDepartihent
was adamantly denying that there' was any substance to the nar-
cotics allegations. At the time, the FBI had significant information
" regarding the involvement of narcotics traffickers in Contra oper-
atiohs and Neutrality Act violations.7
The failure of U.S. law enforcement and intelligence agencies to
respond properly to allegations concerning criminal activity relat-
ing" to the Contras was demonstrated: by the handling of the Com-
mittee's own investigation by the Justice Department and the CIA •
in the spring of 1986.
On May 6, 1986, a bipartisan group of Committee staff met with
representatives of the Justice Department, FBI, DEA, CIA and
State Department to discuss the allegations that Senator Kerry
had received information of Neutrality Act Violations, gun running
and drug trafficking in association with Contra organizations baised
on the Southern Front in Costa Rica. - -
In the days leading up to the meeting,. Justice Department
spokesmen'were stating publicly that "the FTBI had conducted an
inquiry into all of these charges and none of them have any sub-
stance.8 At that meeting, Justice Department officials privately
contradicted the numerous public statement from the Department
that these allegations had been investigated thoroughly and were
determined to be without foundation. The Justice Department offi-
cials at the meeting said the public statements by Justice were "in-
accurate." 9 The Justice officials confirmed there were ongoing
Neutrality. Act investigations in connection with the allegations
raised by Senator Kerry.
At the same meeting, representatives of the CIA . categorically
denied that the Neutrality Act violations raised by the Committee
staff had in fact taken place, cittng classified documents which the
CIA did not make available to the. Committee. In fact, at the time,
the FBI had already assembled substantial information confirming

5 Iran-Contra testimony of Central American Task Force Chief, August 5, 1987, 100-11, pp.
182-183.
6 Iran-Contra deposition of Central American Task Force Chief, Appendix B, Vol. 3 pp. 1121,
1230. Also North Diary page Q1704, March 26, 1984, "Pastora revealed as drug dealer."
7 See extensive FBI investigative materials released, in discovery, in U.S. v. Corbo and US. v.
Calero, SD Florida, 1988; documenting information the FBI had collected regarding these mat-
ters from 1984-1986.
"National Public Radio, All Things Considered, May 5,1986, Bill Buzenberg; New York Times,
May 6,1986, p. A-6.
3 Memcoms of May 6,1986 meeting, Subcommittee files.
 39

the Neutrality Act violations, including admissions by Some of the

persons involved indicating that crimes had taken place.10
In August 1986, Senator Richard Lugar, then-Chairman of the
Committee and the ranking member, Senator Claiborne Pell, wrote
the Justice Department requesting information on 27 individuals
and organizations associated with the contras concerning, allega-
tions of their involvement in narcotics trafficking and illegal gun-
running. The Justice Department refused to provide any informa-
tion iri response to this, request, on the grounds that, the informa-
tion remained under active investigation, and that the Committee's
"rambling through open investigations gravely risks compromising
those efforts."11
On October 5, 1988, the Subcommittee received sworn testimony
from the Miami prosecutor handling the Neutrality and gun-run-
ning cases that he had been advised that some officials in the Jus-
tice Department had met in 1986 to discuss how "to undermine"
Senator Kerry's attempts to have hearings regarding the allega-
tions.12
. The Subcommittee took a number of depositions of Justice De-
partment personnel involved in responding to the Committee inves-
tigation or in prosecuting allegations stemming from the Commits
tee's investigation. Each denied participating in any agreement to
obstruct or interfere with a Congressional investigation. In order to
place in their proper perspective the attempts to interfere with, or
undermine, the Committee investigation, a lengthy "chronology has
been prepared which appears at appendix A of this, report.
III. THE G U N S AND D R U G SMUGGLING INFRASTRUCTURE DEVELOPS

Covert war, insurgency and drug trafficking frequently go hand-

in-hand without regard to ideology or sponsorship. General Paul
Gorman, testified that the use of narcotics profits by armed resist-
ance groups was comminonplace. Gorman stated further that: "If
you want to move arms or munitions in Latin America, the estab-
lished networks are owned by the cartels. It has lent itself to the
purposes of terrorists*-of saboteurs, of spies, of insurgents and sub-
versions." 1 3
DEA Assistant Administrator David Westrate said of the Nicara-
guan war:
It is true that people on both sides of the equation (in
the Nicaraguan war) were drug traffickers, and a couple of
them were pretty signficant.14
Drug trafficking associated with revolution in Nicaragua began
during the late 1970's with the Sandinistas attempt to overthrow
the regime of Anastasio Somoza Dehayle. At the time, the Sandi-
nistas were supported by most governments in the region. Those
10 Winer MemCom, 5/6/86; Messick MemCom, 5/6/86; Marum Memcom; 5/6/36, Committee
Files; see Iran/Contra Deposition of FBI Agent Kevin Currier, Appendix B, VoL 8 pp. 205-206.
11 Foreign Relations Committee-Justice Department correspondence, August 10,1985.
12 Subcommittee testimony of Jeffery B. Feldman, October 5, 1988, p. 24; Feldman MemCom,
November 17,1987.
13 Subcommittee testimony of General Paul Gorman, Part 2, February 8,1988 p. 44.
14 Subcommittee testimony of David Westratem, Part 4, July 12,1988, p. 144.
 40

governments helped provide the FSLN with the money, weapons,,

and the sanctuary they needed to overthrow Somoza.15
Costa Rica, which has dozens of unsupervised airstrips hear the
Nicaraguan border, became an important supply and staging area
for the Sandinistas. These air strips were used by Noriega and
others for shipments of weapons to the Sandinistas.16
Former senior Costa Ricah Law enforcement officials told the
Subcommittee they were instructed to. keep their narcotics investi-
gators away from the Nicaraguan border during the Sandinista
revolution. Even when they had received hard information about
drugs on the aircraft delivering weapons, the officials, in effort to
avoid controvery regarding the. war, ignored the tips and let tiie
flights go.17
A number of Costa, Ricans became suppliers for the Sandinistas.
These included Jaime "Pillique" Guerra, who owned a crop dusting
service, and a related aircraft support business in northern Costa
Rica. Guerra refueled and repaired the planes which came from
Panama loaded with Cuban weapons for the Sandinistas.18 Guer-
ra's crop dusting business was excellent cover for the movement of
aviation- fuel to the dozens of remote airstrips they used without
arousing the suspicions of Costa Rican authorities.
When the Sandinista insurgency succeeded in 1979, smuggling
activity in northern Costa Rica did not stop. Surplus weapons origi-
nally stored in Costa Rica for use by the Sandinistas were sold on
the black market in the region.19 some of these weapons were
shipped to the Salvadoran rebels from the same airstrips in the
same planes, flown by the same pilots who had: previously worked
for the Sandinistas.20
Costa Rican law enforcement authorizes said that the drug traf-
ficking through northern Costa Rica continued as well. They said
that their police units lacked the men,' the communications equip-
ment and the transport to close down the airstrips and seize weap-
ons and drugs. 2 1
Werner Lotz, a Costa Rican pilot serving sentence for drug smug-
gling, testified that there was little the Costa, Rican government
could do to deal with the continuing drug trafficking:
"Costa Rica has got only civil guards, underpaid and
easily bought . . . To be very clear . . . our guard down
there is barefoot, and you're talking about 50 men to cover
400 kilometers maybe."-22

1 5 Interviews conducted by Senator John F-. Kerry With current and former Costa Rican law
enforcement officials, San Jose, Costa Rica, October 31,1987-
16 Subcommittee testimony of Jose Blandbn, Part 2, February 9,1988 pp. 138-139.
1 7 Kerry interviews in Costa Rica, op. cit.
18 Subcommittee closed session with Werner Lotz, Part 4, April 8, 1988, p. 673; Blandon testi-
mony, Part 2, p. 86; see also Carlton, Part 2, p. 196.
19 Lotz; testimony, Part "4,-p. 674 and Subcommittee testimony of Frances J. McNeil, Part 3,
April 4,1988, p. 5S.
2 0 Blandon testimony, Part:2, 'p. 86 and McNeil, Part 3, p. 55, and Subcommittee testimony of
Floyd Carlton, Part 2, February 10, p. 196.
2 1 Kerry interviews in Costa Rica, ibid.
32 Lotz testimony, op.'cit., p. 690. '
 41

I V . D R U G TRAFFICKING AND THE COVERT W A R

When the Southern Front against the Sandinista Government in

Nicaragua was established in 1983, Costa Rica remained ill-
equipped to deal with the threat posed by the Colombian drug car-
tels. Then, as now, the country does not have a military, its law
enforcement resources remain limited, and its radar system still so
poor that Contra supply planes could fly in and out of the clandes-
tine strips without heing detected.23 "
Following their work on behalf of the Sandinistas and the Salva-
doran rebels, the Colombian and Panamanian drug operatives were
well positioned to exploit the infrastructure now serving and sup-
plying the Contra Southern Front. This infrastructure was increas-
ingly important to the drug traffickers, as this was the very period
in which the cocaine trade to the U.S. from Latin America was
growing exponentially.
In the words of Karol Prado, an officer of the ARDE Contra orga-
nization of Eden Pastora on the Southern Front, "drug traffickers
. . . approaches political groups like ARDE trying to make deals
that would somehow camouflage or cover up their activities/'
The head of the Costa Rican "air force" and personal pilot to two
Costa Rican presidents, Werner Lotz, explained the involvement of
drug traffickers with the Contras in the early days of the establish-
ment of the Southern Front as a consequence of the Contras lack of
resources:,
"There was no money. There were too many leaders and too few
people to follow them, and everybody was trying to make money as
best they could/' 24
The logic of having drug money pay for the pressing needs of the
Contras appealed to a number of people who became involved in
the covert war. Indeed, senior U.S. policy makers were not immune
to the idea that drug money was a perfect solution to the Contra's
funding problems.
As DEA officials testified last July before the House Judiciary
Subcommittee on Crime, Lt. Col. Oliver North suggested to the
DEA in June 1985 that $1.5 million in drug money carried aboard
a plane piloted by DEA informant Barry Seal and generated in a
sting of the Medellin Cartel and Sandinista officials, be provided to
the Contras.25 While the suggestion was rejected by the DEA, the
fact that it was made highlights the potential appeal of drug prof-
its for persons engaged in covert activity.
Lotz said that Contra operations on the Southern Front Were in -
fact funded by drug operations. He testified that weapons for the
Contras came from Panama on. small planes carrying mixed loads
which included drugs. The pilots unloaded the weapons, refueled,
and headed north toward the U.S. with drugs.26 The pilots includ-
ed Americans, Panamanians, and Colombians, and occasionally,
uniformed members of the Panamanian Defense Forces.27 Drug

23 Lotz, Part 4, p. 690.

24 Lotz, Part 4, p. 678.
26 DEA Testimony before House Subcommittee on Crime, July 28,1988.
2 6 Ibid., pp. 683-684.
2 7 Ibid., pp. 680, 682.
 42

pilots soon began to use the Contra airstrips to refuel even when
there were no weapons to unload. They knew that the authorities
would not check.the airstrips because the war was "protected".28
The problem of, drug traffickers using the airstrips also used to
supply the Contras persisted through . 1985 and 1986. By the
summer of 1986, it became of significant concern to the U.S. Gov-
ernment officials .who were involved in the covert Contra supply
operations undertaken during the Boland Amendment period. As
then-CIA Station Chief, "Thomas Castillo" testified to the Iran/
Contra Committees, U.S. Ambassador to Costa Rica Lewis Tambs
wanted to place guards on the secret Contra sup>ply airstrip at
Santa Elena in Costa Rica, to avoid:
having drug traffickers use that site, and this was a con-
tinuing concern during the period of June, July and
August.29
The concern highlights the degree to which the infrastructure
used by the Contras and that used by drug traffickers was poten-
tially interchangable, even in a situation in which the U.S. govern-
ment had itself established and maintained the airstrip involved.
V . T H E PILOTS

Pilots who made combined Contra weapons/drug flights through

the Southern Front included:
—Gerardo Duran, a' Costa Rican pilot in the airplane parts
supply business. Duran flew for a variety of Contra organiza-
tions on the Southern Front, including those affiliated with Al-
fonso Robelo, Fernando "El Negro" ChamOrro, and Eden Pas-
tora, before U.S. officials insisted that the Contras sever their
ties from Duran because of his involvement with drugs.30
Duran was convicted of narcotics trafficking in Costa Rica in
1987 and jailed.
:—Gary Wayne Betzner, drug pilot who worked for convicted
smuggler George Morales. Betzner testified that twice in 1984
he flew weapons for the Contras from the U.S. to northern
Costa Rica and returned to the United States with loads of co-
caine. Betzner is presently serving a lengthy prison term for
drug smuggling.31
—Jose "Chepon" Robelo, the head of UDN-FARN air force on
the Southern front. Robelo turned to narcotics trafficking and
reselling goods provided to the Contras by the U.S.82
V T . U . S . GOVERNMENT FUNDS AND COMPANIES WITH D R U G
CONNECTIONS

The State Department selected four companies owned and oper-

ated by narcotics traffickers to supply humanitarian assistance to
the Contras. The companies were:
28 Kerry interviews in Costa Rica, ibid.
20 Castillo deposition, ibid., p. 483.
30 Lotz, Part 4, p. 681; Letter of Eden Pastora to David Sullivan and Assistant Secretary of
State Elliot Abrams, April 10, 1986-
si Subcommittee testimony of Gary Betzner, Part 3, April 7,1988, pp. 262-265.
3 2 Robert W. Owen, Iran-Contra testimony, May 14, 1987, p. 7; see also memo from Owen to
Oliver North, April 1, 1985, pp. 1, 3.
 43

—SETCO Air, a company established by Honduran drug traffick-

er Ramon Matta Ballesteros;
—DIACSA, , a Miami-based air company operated as the head-
quarters of a drug trafficker enterprise for convicted drug traf-
fickers Floyd Carlton and Alfredo Caballerd;
—Frigorificos de Puntaremas, a firm owned and operated by
Cuban-American drug traffickers;
—Vortex, an air service and supply company partly owned by ad-
mitted drug trafficker Michael Palmer.
In each case* prior to the time that the State Department en-
tered into contracts with the company, federal1 law enforcement
had received information that the individuals controlling these
companies were involved in narcotics.
Officials at NHAO told GAO investigators that all the supply
contractors were to have been' screened by U.S. intelligence and
law enforcement agencies prior to their receiving funds from State
Department on behalf , of the Contras to insure that they were not
involved with criminal activity.33 Neither the GAO nor the NHAO
were certain whether or not that had actually been done.34
The payments made by the' State Department to these four com-
panies between January and August 1986., were as follows:
SETCO, for air transport services'.....;....:...;. $185,924.25
DIACSA, for airplane engine parts * 41,120.90
Frigorificos De Punatarenas, as a broker/supplier for various serv-
ices to Contras on the Southern Front 261,932.00
VORTEX, for air transport services 317,425.17
Total 35 806,401.20
. A number of questions* arise as. a result of the selection of these
four companies by the State Department for the provision of hu-
manitarian assistance to the contras, to which the Subcommittee
has been unable to obtain clear answers:
—Who selected these firms to provide services to the Contras,
: paid for with public funds, and what criteria were used for se-
lecting them? - !
—Were any U.S. officials in the CIA, NSC, or State Department
aware of the narcotics allegations associated with any of these
companies? If so, why were these firms permitted to receive
public funds on behalf of the Contras?
—Why were Contra suppliers not checked against federal law en-
forcement records that would have shown them to be either
under active investigation as drug traffickers, or in the case of
DIASCA, actually under indictment?
Ambassador Robert Duemling, Director of the Nicaraguan-Hu-
manitarian Assistance Organization (NHAO), who was responsible
for the operation of the program, was unable to recall how these
companies were selected, when questioned by Senator Kerry in
April, 1988-36 Ambassador Duemling also could not recall whether

33 Subcommittee interviews with GAO analysts, September 28,1988.

- 3 4 Subcommittee interviews with GAO analysts, ibid.; interviews with Ambassador Duemling,
April 6,1988.
3 5 Source for Payments to Suppliers: GAO Analysis of NHAO Accounts;finalfiguresprovided
by Department of State to the Subcommittee on Narcotics, Terrorism and International Oper-
ations, January 4.1989.
3 6 Duemling statement to Senator Kerry, April 6,1988.
 44

or not the contractors had in fact been checked against law en-
forcement records prior to receiving funds from the State Depart-
ment. In previous testimony before the Irian/Contra. Committees,
Ambassador Duemling had recaUed. that JNfHAO had been directed
by Lt. Col. Oliver North to continue "the existing arrangements of
the resistance.movement" in choosing contractors.®7
At best, these incidents represent negligence on the part of U.S.
government officials responsible for providing support to the Con-
tras. At worst it was a matter of turning a blind eye, to the, activi-
ties of companies who use legitimate activities as a cover for their,
narcotics trafficking. . .•••:<.
A. SETCO/HONDU CARIB

, Before being chosen by the State Department to transport goods

on behalf of the Contras from late 1985 thrOugh mid-1986, SETCO
had a long-standing relationship with, the largest of the Contra
groups, the Honduras-based FDN. -Beginning in 1984, SETCO was
the principal company used by the Contras in Honduras to trans-
port supplies and personnel for the FDN, carrying at least a mil-
lion rounds of ammunition, food, uniforms and other military sup-
plies for the Contras from 1983 through 1985. According to testimo-
ny before the Iran/Contra Committees by FDN leader Adolfo
Calero, SETCO received funds for Contra supply operations from
the contra accounts established by Oliver'North.38
U.S. law enforcement records state that SETCO was established
by Honduran cocaine trafficker Juan Matta Ballesteros, whose
April 1988 extradition from Honduras to the United States in con-
nection with drug trafficking charges caused riots outside the U.S.
Embassy in Tegucigalpa. ..
For example, a 1983 Customs Investigative Report states that
"SETCO stands for Services Ejectutivos Turistas Commander and
is headed by Juan Ramon Mata Ballestros, a class I DEA violator."
The same report states that according to the Drug Enforcement
Agency, "SETCO aviation;is a corporation formed by American
businessmen who are dealing with Matta and are smuggling nar-
cotics into the United States." 39
One of the pilots . selected to fly Contra supply missions for the
FDN for SETCO was Frank Moss* who has been under investiga-
tion as an alleged drug trafficker since 1979. Moss has been investi-
gated, although never indicted, for narcotics offenses by ten differ-
ent law enforcement agencies.40
In addition to flying Contra supply missions through SETCO,
Moss formed his bwn company in 1985, Hondu Carib, which also
flew supplies to the Contras, including weapons and ammunition
purchased from R.M. Equipment, an arms company controlled by
Ronald Martin and James McCoy.41

37 Iran-Contra deposition of Robert Duemling, Appendix B, Volume 9, pp. 47-78.

38 See Iran-Contra testimony of Adolfo Calero, Appendix B, Volume 3, p. 176.
39 U.S. Customs Service investigative report, Guy Penilton Owen, et al„ N90201," file
# NOGGBD030036, New Orleans, May 18,1983, pp. 6-8.
4 0 Subcommittee interview with Sheriff of Port Charlotte County, Florida, May 1987.
See Commerce Department's Shipper's. Export Declaration for R/M Equipment, lac., file
# 0003688, Miami, Florida, February 28, 1985, re shipments for "Armed Forces of Honduras."
 45 .
\

The FDN's arrangement with Moss and Hondu Carib was pursu-
ant to a commercial agreement between the FDN's chief supply of-
ficer, Mario Calero, and Moss, under which Calero was to receive
an ownership interest in Moss' company. The Subcommittee re-
ceived documentation that one Moss plane, a DC-4, N90201, -was
used to move Contra goods from the United States to Honduras.42
On the basis of information alleging that the plane was being used
for drug smuggling, the Customs Service obtained a court order to
place a concealed transponder on the plane.43
A second DC-4 controlled by Moss was chased off the west coast
of Florida by the Customs Service while it was dumping what ap-
peared to be a load of. drugs, according to law enforcement person-
nel. When the plane landed at Port Charlotte no drugs were found
on board, but the plane's registration was not in order and its last
known owners were drug traffickers. Law enforcement personnel
also found ,an address book aboard the plane, containing among
other references the telephone numbers of some Contra officials
and the Virginia telephone number of Robert Owen, Oliver North's
courier.44 A law enforcement inspection of the plane revealed the
presence of significant marijuana residue.45. DEA seized the air-
craft on March 16, 1987. • •
B. FRIGORIFICOS DE PUNTERENNAS

Frigorificos de Punterennas is a Costa Rican seiafood company

which was created as a cover for the laundering of drug money, ac-
cording to grand jury testimony by -one of its partners, and testimo-
ny by Ramon Milian Rodriguez, the convicted money launderer
who established the company.46
From its creation, it was operated and owned by Luis Rodriguez
of Miami, Florida, and Carlos Soto and Ubaldo Fernandez, two con-
victed drug traffickers, to launder drug money.47 Luis Rodriguez,
who according to Massachusetts law enforcement officials directed
the largest marijuana smuggling ring in the history of the state,
was indicted on drug trafficking charges by the federal government
on September 80, 1987 and on tax evasion in connection with the
laundering of money through Ocean Hunter on April 5, 1988.48
Luis Rodriguez controlled the bank account held in the name of
Frigorificos which received $261,937 in humanitarian assistance
funds from the State Department in 1986. Rodriguez signed most of
the orders to transfer the funds for the Contras out of that ac-

4 2 Commerce Department's Shipper's Export Declaration for R/M Equipment, Inc., file
# 0003688, Miami, Florida, February 28, 1985.
4 3 Customs report, NOGGGGGBD0300036, ibid., p. 13.
4 4 Address book siezed by Customs, Port "Charlotte, Florida, N2551, March 16,1987.
4 5 Subcommittee staff interview with Sheriffs investigators, Port Charlotte County, Florida,
May, 1987.
4 6 Grand jury statements of Carlos Soto on file in U.S. v. Rodriguez, 99-0222, USDC, Northern
District of Florida, September 29, 1987, and Subcommittee testimony of Ramon Milian-Rodri-
guez, Part 2, February 11, 1988, pp. 260-261; documents seized in US. v. Milian Rodriguez, SD
Florida 1983.
4 7 Ibid.
48 U.S. v. Luis Rodriguez, 87-01044, US District Court for the Northern District of Florida;
U.S. v. Luis Rodriguez, 88-0222 CR-King, U.S. District Court for the Southern District of Flori-
da.
56

count.49 Rodriguez was siso .president of Ocean Hunter, an Ameri-

can seafood company created for. him by Ramon Milian Rodri-
guez.50 Ocean Hunter imported seafood it bought from Frigorificos
and used the intercompany transactions to launder drug money.51
In statements before a Florida federal grand jury in connection
with a narcotics trafficking prosecution Of Luis Rodriguez, Soto tes-
tified that he knew Luis Rodriguez as a narcotics trafficker who
had been smuggling drugs into the U.S., since 1979. Soto also testi-
fied that they were partners in the shipment Of 35,000 pounds of
marijuana to Massachusetts in 1982.52
Milian-Rodriguez told Federal authorities about Luis Rodriguez'
narcotics trafficking prior to Milian-Rodriguez' arrest in May 1983.
In March and April 1984, IRS agents interviewed Luis Rodriguez
regarding Ocean Hunter, drug trafficking and money laundering,
and he took the Fifth Amendment in response to every question.53
In September, 1984, Miami police officials advised the FBI of infor-
mation they had received that Ocean Hunter was funding contra
activities through "narcotics transactions,": and nothing that Luis
Rodriguez was its president. This information confirmed previous
accounts the FBI had received concerning the involvement of
Ocean Hunter and: its officers in. Contra supply operations involv-
ing the Cuban American community.54
Despite the information possessed by the FBI, Customs and other
law enforcement agencies documenting Luis Rodriguez' involve-
ment, in narcotics trafficking and money laundering, the State De-
partment used Frigorificos,-which he owned and operated, to deliv-.
er humanitarian assistance funds to the Contras in late 1985. Offi-
cial funds for the Contras from the United States began to be de-
posited into the Frigorificos account in early 1986, and continued
until mid-1986.55
In May. 1986, Senator Kerry..advised the Justice Department,.
Drug Enforcement Agency, State Department, NHAO and CIA of
allegations hie had received involving Luis Rodriguez and his com-
panies in drug trafficking and money laundering^ In August 1986,
the Foreign Relations . Committee asked Justice whether the allega-
tions about Luis Rodriguez were true, and requested documents to
determine whether the State Department might have in fact pro-
vided funds to a company controlled by'drug traffickers. Justice re-
fused to answer the inquiry.
The indictment of Luis RodrigUez on drug charges 18 months
later demonstrated that the concerns raised by Senator Kerry to
the Justice Department and other agencies in May 1986 concerning
his companies were well founded, as the State Department had in

40 Banking records of Frigorificos de Puntarenas subpoenaed by House Foreign Affairs Sub-

committee on the Western Hemisphere, May 1986; GAO Analysis' NHAO Expenditures, May
1986.
5 0 Corporate Records, Florida Secretary of State, Ocean Hunter, Inc.
51 Grand jury statements of Soto, ibid., Ramon Milian-Rodriguez, ibid.
Documents on file in U.S. v. Rodriguez, 99-0222, USDC, Northern District of Florida, 1988,
from grand jury statements of Carlos Soto.
5 3 Documents on file in U.S. v. JLuis Rodriguez. ibid., Northern District of Florida.
" F B I 302, Continental Bank Bombing, FBI Agent George Kiszynski, MM174A-1298, released
in U.S. ,u. Corbo, Southern District of Florida, 1988.
6 5 GAO Analysis .of. NHAO Payment, Western Hemisphere Subcommittee of House Foreign
Affairs Committee, May 1986; banking records subpoenaed by Western Hemisphere Subcommit-
tee.
 47

fact chosen companies operated by drug traffickers to supply the

Contras.56
C. DIACSA

DIACSA was an aircraft dealership and parts supply company

partly owned by the Guerra family of Costa Rica. DIACSA's presi-
dent, Alfredo Caballero, was under DEA investigation for cocaine
trafficking and money laundering when the State Department
chose the company to be an NHAO supplier. Caballero was at that
time a business associate of Floyd Carlton—the pilot who flew co-
caine for Panama's General Noriega.
In an affidavit filed in federal court in January, 1985, DEA Spe-
cial Agent Daniel E. Moritz described working as an undercover
money launderer "for the purpose of introducing myself into a
criminal organization involved in importing substantial quantities
of cocaine into the United States from South America.57 That orga-
nization. was the Carlton/Caballaro partnership. According to
Agent Moritz, the cocaine traffickers used DIACSA offices "as a lo-
cation for planning smuggling ventures, for assembling and distrib-
uting large cash proceeds of narcotics transactions, and for placing
telephone calls in furtherance of the smuggling ventures." s s
From March 1985 until January 1986, Moritz received approxi-
mately $3.8 million in U.S. currency from members of this organi-
zation "to be distributed, primarily in the form of wire transfers
around the world." Most of the $3.8 million was delivered in DIAC-
SA's offices.
Moritz met both. Alfredo Caballero and Floyd Carlton in March
of 1985. Moritz had previously learned from a confidential inform-
ant that Carlton was a "major cocaine trafficker from Panama who
frequented DIACSA and was a close associate of Alfredo Caballe-
ro." The informant added that "Caballero provided aircraft for
Floyd Carlton Caceres' cocaine smuggling ventures" and that Ca-
ballero allowed Carlton and "members of his organization to use
DIACSA offices as a location for planning smuggling ventures, for
assembling and distributing large cash proceeds of narcotics trans-
actions and for placing telephone calls in furtherance of the smug-
gling ventures." Alfredo Caballero was described by the informant
"as the man ih charge of operations for Floyd Carlton Caceres' co-
caine transportation organization." 5 9
Other members of the group were Miguel Alemany-Soto, who re-
cruited pilots and selected aircraft and landing strips, and Cecilia
Saenz-Barria;. The confidential informant said that Saenz was a
Panamanian "in charge of supervising the landing and refueling" of '
the organization's aircraft at airstrips on the Panama/Costa Rica
border" and that he "arranges for bribe payments for certain Costa
Rican officials to ensure ~the protection of these aircraft as they
head north loaded with cocaine." 6 0

66 U.S. v, Luis Rodriguez, ibid., Northern District of Florida; GAO analysis of NHAO pay-
ments.
5 7 Affidavit of Daniel E. Moritz, Special Agent for the DEA January 1985, U.S. v. Carleton et
al, SD Florida, 85-70.
"Ibid.
Sfi Moritz Affidavit, pp. 3-4, ibid.
6 0 Ibid.
 48

During 1984 and 1985, the principal Contra organization, the

FDN, chose DIACSA for "intra-account transfers/' The laundering
of money through DIACSA concealed the fact that some funds for
the Contras were through deposits arranged by Lt. Col. Oliver
North.61
The indictments of Carlton, Caballero and five other defendants,
including Alfred Caballero's son Luis, were handed down on Janu-
ary 23, 1985. The indictment charged the defendants with bringing
into the United States on or about September 23, 1985, 900 pounds,
of cocaine. In addition, the indictment charged the defendants with
laundering $2.6 million between March 25, 1985 and January 13,
1986.6 2
Despite the indictments, the State Department made payments
on May 14, 1986 and September 3, 1986, totaling $41,120.90 to
DIACSA to provide services to the Contras.63
In addition, the State Department was still doing business with
DIACSA on its own behalf six months after the company's princi-
pals had been indicted. Court papers filed in the case in July 1986,
show that the U.S. Embassies of Panama and Costa Rica were cli-
ents of DIACSA. While DIACSA and its principals were engaged in
plea bargaining negotiations with the Justice Department regard-
ing the cocaine trafficking and money laundering charges, U.S.
Embassy personnel in Panama and Costa Rica were meeting with
one of the defendants to discuss purchasing Cessna planes from the
company.64
Each of the defendants in the DIACSA case was ultimately con-
victed on charges of importing' cocaine into the-United States.-The
sentences they received ranged from ten years for one non-cooper-
ating defendant, to nine years for Floyd Carlton, to three years pro-
bation for Luis Caballero and five years probation for bos father,
DIACSA's owner, Alfredo Caballero, as a consequence of their coop-
eration with the government.5
D. VORTEX

When the State Department signed a contract with Vortex to

handle Contra supplies, Michael B. Palmer, then the company's Ex-
ecutive Vice-President signed for Vortex. At the time, Palmer was
under active investigation by the FBf in three jurisdictions in con-
nection with his decade-long activity as a drug smuggler, and a fed-
eral grand jury was preparing to indict him in Detroit.6 6
- The contract required Vortex to receive fgbods for the, Contras,
store, pack, and inventory them- At the time the contract was
signed, Vortex's principal assets were two airplanes which Palmer1
previously used for drug juggling. 6 7

See Iran-Contra testimony of Adolfo Calero, Appendix B, Volume 3, p. 176.

62 U.S. v. Carlton, et al«, U.S. District Court, Southern District of Florida, January 23, 1986.
63 GAO Analysis, NHAO Accounts, provided to Subcommittee, September, 1988.-
B* Motion For Permission to Travel, U.S. v. Caballero, SD Florida, 86-70-CR,' July 16, 1986.
65 Court record, U.S. v. Carlton-Caceres, et al. SD Florida 86-070.
66 Indictment, U.S. v. Palmer, Detroit U.S. Attorney's Office, 1986;. Subcommittee testimony of
Michael B. Palmer, Part S, April 6,1988, pp. 208-213.
07 Palmer, Part 2, p. 205 and Palmer Subcommittee Deposition, April 5, 1988, pp. 75-79, see
generally Palmer indictment by Detroit UJS. Attorney in June 1986, and documents released as
discovery in U.S. v. Vogel et al.
 49

Vortex was selected by NHAO assistant director Philip Buechler,

following calls among Buechler, Palmer, and Pat Foley, the presi-
dent of Summit Aviation.68
V T L THE CASE OF GEOEGE MORALES AND F R S / A R D E

In 1984, the Contra forces under Eden Pastora were in an in-

creasingly hopeless situation. On May 30,1984, Pastora was wound-
ed by a bomb at his base camp at La Penca, Nicaragua, close to the
Costa Rica border. That same day, according to ARDE officer Karol
Prado, aid to ARDE .from the United States was cut off.69
Despite continued pressure from the United States, Pastora re-
fused to place his ARDE forces under a unified command with the
largest of the Contra organizations—the Honduras-based FDN. The
CIA considered Pastora to be "disruptive and unpredictable." 7 0 By
the time the Boland Amendment cut off legal military aid to the
Contras, the CIA had seen to it that Pastora did not receive any
assistance, and his forces were experiencing "desperate condi-
tions."71
Although there are discrepancies among the parties as to when
the initial meeting took place, Pastora s organization was ap-
proached by George Morales, a'Colombian drug trafficker living in
Miami who had been indicted on narcotics trafficking charges.
According to the State Department report to the Congress of
July 26,1986:
• Information developed by the intelligence community in-
dicates that a senior member of Eden Pastora's Sandino
Revolutionary Front (FRS) agreed in late 1984 with (Mo-
rales) that FRS pilots would aid in transporting narcotics
in exchange for financial assistance . . . the FRS official
agreed to use FRS operational facilities in Costa Rica and
Nicaragua to facilitate transportation of narcotics. (Mo-
rales) agreed to provide financial support to the FRS, iti
addition to aircraft and training for FRS pilots. After un-
dergoing flight training, the FRS pilots were to continue to
work for the FRS/ but would also fly narcotics shipments
from South America to sites in Costa Rica and Nicaragua
for later transport to the United States. Shortly thereafter
(Morales) reportedly provided the FRS one C-47 aircraft
and two crated helicopters. He is reported to have paid the
sum of $100,000 to the FRS, but there was no information
available on who actually received the money.72
The State Department said it was aware of only one incident of
drug trafficking resulting from this agreement between the Con-
tras and Morales and that was the case of Contra pilot Gerardo
Duran. Duran was arrested in January 1986, in Costa Rica for his
involvement in transporting cocaine to the United States.73 Duran
6a Palmer testimony, House Judiciary Subcommittee on Crime, September 23, 1988.
8a Subcommittee deposition of Karol Prado, Part 3, p. 278, see also Iran/Contra Testimony of
CIA Central American Task Force Chief, August 5, ,1987,100-11, pp. 192-183.
7 0 Castillo executive session, Iran/Contra Committees, ibid., pp. 9-10.
71 Subcommittee deposition of Octaviano Cesar, San Jose, Costa Rica, October SI, 1987, Part 3,
pp. 278-281.
7 2 State Department document #5136c, p. 5.
7 3 Ibid.
 50

was an FRS pilot from 1982 to 1985 and operated an air taxi serv-
ice in Costa Rica. According to Marco Aguado and Karol, Prado,
Duran would fly supplies to the Contras on the Southern Front arid
he would charge for each flight.74
Robert Owen, courier for Lt. Col. Oliver North, testified to the
Iran/Contra Committees that he told North he thought Karol
Prado was involved in trafficking drugs out Of Panama, and that
Pastora's pilot, Marco Aguado, was also involved.75 The Subcom-
mittee was unable to validate. Owen's claims. Prado vehemently
denied these allegations stating that he believed the drug: traffick-
ing allegations against Pastora were the result of a CIA effort to
discredit him.76
Morales testified that his involvement with the Contras sta.rted
in 1984 at the urging of Marta Healey, the widow of one of his drug
pilots, Richard Healey.77 Marta Healey's first husband was Adolfo
"Popo" ChamorrO, the second in command, to Eden Pastora in the
FRS. She came from a prominent Nicaraguan family.
At the time of his first contract, Morales was under indictment
for marijuana smuggling. He testified that he thought by assisting
the Contra cause his indictment would be dropped. Marta Healey
introduced Morales to Popo Chamorro, Marco Aguado and Octa-
viano Cesar at - a meeting in Miami. According to Morales, he
wanted to make a deal: He would help the Contras with their
needs, and "they in exchange would help me with my objective,
which was solving my indictment." Morales believed the Contra
leaders would help him solve his legal problems because of their
contacts with the CIA.78
On October 31, 1987 in San Jose, Costa Rica, the Subcommittee
videotaped the depositions of three Contra leaders with intimate
knowledge of the Morales relationship with Pastora's organization
in video depositions. The three were Karol Prado, Pastora's head of
communications; Marco Aguado, Pastora's air force chief; and Octa-
viano Cesar who^ along, with his brother Alfredo, were political
allies of Pastora's at the time. A fourth, Adolfo "Popo" Chamorro,
who was Pastora's second in command in ARDE, testified in closed
session of the Subcommittee in April 1988. Chamorro's testimony
was taken in closed session by the consent of the Subcommittee at
his request. Dick McCall, of Senator Kerry's personal staff, in an
arrangement worked out with Chamorro and his attorneys, subse-
quently interviewed him in Miami.
Each denied knowing that Morales was under indictment for
drug trafficking when they first met him at Marta Healey's house
in Miami. Popo Chamorro said that as far as he knew Morales was
just another rich Miami resident with strong anti-Communist feel-
ings.79
In addition, all three denied receiving more than $10,000 in cash"
from Morales. The Subcommittee found that $10,000 was given to
Popo Chamorro to cover the cost of transporting a C-47 owned by
74 Subcommittee testimony of Marco Aguado and Karol Prado, Part 3, p. 285.
75 Iran-Contratestimonyof Robert Owen, Appendix B, Volume 20, pp. 849-850.
76 Deposition of Karol Prado, ibid., p. 285.
™ Subcommittee testimony of George Morales, Part 3, April 7,1988, p. 297.
Ibid., p. 300.
7 6 Closed session testimony of Adolfo "Popo" Chamorro, April 6,1988, p. 13.
 51

Morales, which he donated to ARDE, from Haiti to Ilopango Air

Force Base in El Salvador.80
While denying receiving funds personally, Prado, Aguado and
Cesar each confirmed elements of Morales' story.
According to Prado, Octaviano Cesar and his brother Adolfo
allied themselves politically with Pastora in the Summer of 1984. A
decision was then made to send Popo Chamorro and Octaviano
Cesar to the United States to look for funds.81 In September, Popo
Chamorro returned to Costa Rica with photographs of a DC-4 and
a Howard plane, and told Pastora that they would get six more
planes, including a Navajo Panther from George Morales.82
Pastora told Chamorro* that the C~47 was the most practical
plane for the Contras at the time and Popo returned to Miami to
arrange for its transfer. Chamorro provided the Subcommittee with
an aircraft purchase order, dated October 1, 1984. The notarized
purchase .order provided that for the sum of one dollar, a McDon-
nell-Douglas DC-3, the civilian designation for a C-47, would be
transferred to Marco Aguado. The order was signed by George Mo-
redes, as the seller, and by Marco Aguado, as the purchaser.
In addition, Chamorro. gave the Subcommittee a list of flights
made by that C-47 to ferry arms from Ilopango to Costa Rica and
La Penca. Between October .18, 1984 and February 12, 1986, some
156,000 pounds of material were moved from Ilopango to air fields
in Costa Rita. Of the 24 flights during this period, eleven were to
La Penca oh the Nicaraguan side of the Rip San Juan.83
The Subcommittee substantiated key elements of the Morales
story, although it did not find evidence that Cesar, Chamorro, or
Prado were personally involved in drug trafficking. First, all wit-
nesses agreed that Morales .gave ARDE a C-47. Evidence of an as-
sociation between them is jalso provided by a Customs document.
This document, provided the Committee by the U.S. Customs Serv-
ice, sho^s that Morales entered the United States from the Baha-
mas oh October 13, 1984, with Marco Aguado, Octaviano Cesar and
Popo Chamorro^ They carried $400,000 in cash and checks which
were declared by Aguado, Chamorro and Cesar. They claimed that
the checks and money were returned to Morales after clearing Cus-
toms.84
Aguado summarized the relationship between the Southern
Front Contras and the drug traffickers in terms of the exploitation
of the Contra movement by individuals involved in narcotics smug-
gling. According to Aguado, the trafficking organizations, "took ad-
vantage of the anti-communist sentiment which existed in Central
America . . . and they undoubtedly used it for drug trafficking."
Referring to the Contra resupply operations, Aguado said the traf-
fickers used "the same connections, the same air strips, the same
people. And maybe they said that it was weapons for Eden Pastora,
and it was actually drugs that would later on go to the
U.S. . . . They fooled people . . . Unfortunately, this kind of ac-

80 Ibid., p. 15.
81 Testimony of Karol Prado, Part 3, p. 278.
8 2 Ibid., pp. 278-279.
sa Chamorro, ibid., pp. 11-12.
8 4 Depositions of Aguado, Prado and Cesar, Part 3, pp. 277-286 and Chamorro, ibid., pp. 16, 20.
 52

tivity,which is for the freeing of a people, is quite similar to the

activities of the drug traffickers."85 i
Octaviano Cesar testified that when he dealt with Morales he
was:
Thinking in terms of the security of my country. It just
didn't enter my mind that I would become involved iii
such a messj because it never entered into my mind to get
in that [drug] business . . .
I went a couple of times inside in Nicaragua and I saw
people there. Young kids 15,16 yiears old, they were Carry-
ing SG, 40 rounds- of ammunition against the
Sandinistas . . . And that's why I did it. I'm not proud of
it, but I just didn't have any choice. I mean, the U.S. Con-
gress didn't give us any choice. They got these people into .
a war. The people went inside of Nicaragua, 80 miles
inside. They had thousands Of supporters, campesinos
there helping them . . . Now, when those people retreat,
those campesinos were murdered by the Sandinistas. I
don't want that, but that's the reality of life.86
Ih addition, Cesar told the Subcommittee that he told a CIA offi-
cer about Morales and his offer to help the Contras.
Senator KERRY. Did you have occasion to say to someone
in the CIA that you were getting money from him and you
were concerned he was a drug dealer? Did yOu pass that
information on to somebody?
Mr. CESAR. Yes, I passed the information on about the—
not the relations—well, it was the relations and the air-
planes; yes. And the CIA people at the American military
attache's office that Were [sic] based at Ilopango also, and
, any person or any plane landed there, they had to go-—-
Senator KERRY. And they basically said to you/that it
was all right as long as you don't deal in the powder; is
that correct? Is that a fair quote? ,
Mr. CESAR. Yes.87 ,
After the La Penca bombing of May 30, 1984, all assistance was
cut off by the CIA to ARDE, while other Contra groups on both
fronts continued to receive support from .the U.S. government
through ^ variety of channels. The United States stated that the
cut-off of XRDE was related to the involvement of its personnel in
drug trafficking. Yet many of the same drug traffickers who had
assisted ARDE were also assisting other Contra groups that, contin-
ued to" receive funding. Morales; for example, used Geraldo Duran
as one of his drug pilots, and Duran worked for Alfonso Robello '
and. Fernando "el Negro" Chamorro, who were associated with
other Contra groups, as Well as for ARDE.88
In a sworn deposition which was taken in San Jose Costa Rica by
the Subcommittee on October 31, 1987, Karol Prado, Pastora's
treasurer and procurement officer, vehemently denied allegations

85 Aguado, Part 3, p. 285.

sa Cesar, Part 3, p. 286.
67 Ibid., p. 282.
38 See e.g. Letter from Eden Pastora to David Sullivan and Elliott Abrams, Ibid.
 "53

concerning the personal involvement of ARDE leadership in drug

trafficking. Prado said that because of Pastora's problems with the
U.S. government, it was his belief that the CIA was attempting to
discredit the former Sandinista Commandante and his supporters
in ARDE with allegations that they were involved in drug, traffick-
ing.89
Thomas Castillo, the former CIA station chief in Costa Rica, who
was indicted in connection with the Iran/Contra affair, testified
before the Iran/Contra Committees that when the CIA became
aware of narcotics trafficking by Pastorals supporters arid lieuten-
ants, those individuals' activities were reported to law enforcement
officials.90 However, Morales continued to work with the Contras
until January 1986. He was indicted for a second time in the
Southern District of Florida for a January 1986 cocaine flight to
Bahamas and was arrested on June 12, 1986.
Morales testified that he offered to cooperate with the govern-
ment soon after he was arrested, and that he was willing to take a
lie detector test. He said his attorneys repeated the offer on his
behalf several times, but on each occasion the U.S. Attorney, Leon
Kellner, refused.91
Leon Kellner and Richard Gregorie, then the head of the crimi-
nal ^division of the Miami U.S. Attorney's office, met with the staff
of the Committee in November 1986. They said that Morales7 story
was not credible and that Morales was trying to get his sentence
reduced by cooperating with a Senate committee. As Morales had
not yet been sentenced, both Kellner and Gregorie discouraged the
staff from meeting with Morales at that time, and the staff respect-
ed their request. Kellner and Gregorie said that Morales was like
the many Miami cocaine traffickers who use the "I was working
for the CIA" defense.?2
Following his testimony before the Subcommittee, Morales re-
newed his offer to work with the government. This time, federal
law enforcement officials decided to accept the offer. Morales pro-
vided the government with leads that were used by law enforce-
ment authorities in connection with matters remaining under in-
vestigation. In November 1988, the DEA gave Morales a lengthy
polygraph examination on his testimony before the Subcommittee
and he was considered truthful.93
V I I . JOHN H U L L

John Hull was a central figure in Contra operations on the

Southern Front when they were managed by Oliver North, from
1984 through late 1986.94 Before that, according to former Costa"

8 9 Subcommittee testimony of Karol Prado, Part p. 385. See North Diary p. Q0450,- July 24,
1984. The entry reads: "get Alfredo Cesar on Drugs," see also Iran-Contra declassified executive
session testimony of Thomas Castillo, May 29, 1987, pp. 83-85 and Iran-Contra deposition of
Thomas Castillo, Apendix B, Volume E, pp. 250-252.
0 0 Iran-Contra declassified executive session of Thomas Castillo, p. 84.
9 1 Subcommittee testimony of George Morales, Part 1, July 16,1987, p. 98.
0 2 David Keany and Andy Semmel of the Senate Foreign Relations Committee staff and Dick
McCall of Senator Kerry's staff, attended the meeting.
9 3 See correspondence from DEA Administrator to John C. Lawn to Senator John F. Kerry,
January 13,1989.
9 4 North notebook pages Q 0344, 0414, 0415, 0426, 0431, 0543, 0550, 0932, 0955, 0977, 1156,
1159; Iran-Contra Deposition, of Robert W. Owen, May 4,1987, pp. 6-15 and October 1, 1987, pp.
3-34; RWO Exhibit 12, 2/27/86; Iran-Contra testimony, May 14,1987, p. 818-
 "54

Rican CIA station chief Thomas Castillo's public testimony, Hull

had helped the CIA with military supply and other operations' on
behalf of the Contras.95 In addition, during the same period, Hull
received $10,000 a month from Adolfo Calero of the FDN—at
North's direction.96
Hull is an Indiana farmer who lives in northern Costa Rica. He
came to Costa Rica in mid-1970's and persuaded a number of North
Americans to invest in ranch land in the northern part of the
country.97 Using their money and adding some of his own, he pur-
chased thousands of acres of Costa Rican farm land. Properties
under his ownership, management or control ultimately included
at least six airstrips. To the . many pilots and revolutionaries who
passed through the region, this collection of properties and air-
strips became known as John Hull's ranch.
On March 23, 1984, seven men aboard a U.S. government owned
DC-3 were killed when the cargo plane crashed near Hull's ranch,
revealing ,publicly that Hull was allowing his property to be used
for airdrops of supplies to the Contras.98 But even before this
public revelation of Hull's role in supporting the Contras, officials
in a variety of Latin American countries were aware of Hull's ac-
tivities as a liaison between the Contras and the United States gov-
ernment. Jose Blandon testified, for example, that former Costa
Rican Vice President Daniel Oduber suggested he (Blandon) meet
with Hull in 1983, to discuss the formation of a unified southern
Contra command under Eden Pastora."
Five witnesses testified that Hull was involved in cocaine traf-
ficking: Floyd Carlton, Werner Lotz, Jose Blandon, George Morales,
and Gary Betzner. Betzner was the only witness who testified that
he was actually present to witness cocaine being loaded onto planes
headed for the United States in Hull's presence.
Lotz said that drugs were flown into Hull's ranch, but ^ that he
did not personally witness the flights. He said he heard about thfe
drug flights from the Colombian and Panamanian pilots who alleg;-
edly flew drugs to Hull's airstrips. Lotz described the strips as "a
stop for refuel basically. The aircraft would land, there would be
fuel waiting for them, and then would depart. They would come in
with weapons and drugs." Lotz said that Hull was paid for allowing
his airstrips to be used as a refueling stop.100
Two witnesses, Blandon and Carlton recounted an incident in-
volving the disappearance of a shipment of 588 kilos of cocaine
owned by the Pereira or Cali cocaine cartel. Teofilo Watson, a
member of Carlton's smuggling operation, was flying the plane to
Costa Rica for the Cartel. The plane crashed and Watson was,
killed. The witnesses believed that the crash occurred at Hull's
ranch and that Hull took the shipment and bulldozed the plane, a
Cesna 310, into the river.

06 Castillo executive session, ibid., p. 59.

66 Iran-Contra deposition of Robert W. Owen, Appendix B, Vol. 20, pp. 650, 802.
97 Testimony of Louell Hood and. Douglas. Siple, Subcommittee on International Economic
Policy, Trade, Oceans and Environment .and Subcommittee on Terrorism, Narcotics and Interna-
tional Operations, October 30,1987, pp. 160-161.
9 8 "The CIA Blows an Asset," Newsweek, September 3,1984, pp. 48-49.
0 9 Subcommittee testimony of Jose Blandon, Part 2, p. 129.
1 0 0 Subcommittee deposition of Werner Lotz, Part 4, April 8,1988, pp. 681-682, 691-696.
 "55
* / , . j

Carlton testified that the Colombians were furious when "they dis-
covered the-cocaine missing. He said they sent gunmen after Hull
arid in fact kidnapped a member of Hull's: family- to force the
return of the .cocaine. When that failed they became convinced-that
Carlton himself stole the cofcaine and they sent gunmen after him,'
The gunmendug up Carlton's property in Panama with a backhoe
looking for the lost cocaine, and Carlton fled for his life- to
Miami.101 -'-
Gary Betzner started flying for Morales' drug smuggling network
in 1981. Betzner testified that his first delivery of arms to the Con-
tras was in 1983, when he flew a DC-3 carrying grenades and
mines to Ilopango Air Force Base .in El Salvador. IBs co-pilot on
the trip was Riehard Healey, who had ...flown drugs, for Morales.102
Betzner said the weapons were unloaded at Hopango by Salvador-
an military personnel and an American whom he assumed worked
for the U.S. Department of Defense. Better testified that he and
Healey flew the plane on to Colombia where they picked up a load
of marijuana and returned to their base at. .Great Harbor Cay in
the Bahamas.103 . - 1

. According ,to betzner, the .next. Contra weapons and .drugs flight
took plac£ inJfuly 1984. Morales asked him to fly a load of weapons
to bull's ranch and to pick up "a load'of drugs. Betzner flew a
Cessna 402-B to John Hull's ranch. .According to Betzner, he was
met at the, airstrip by Hull and they watched the cargo pf weapons
being unloaded, and cocaine, packed"in 17 duffel bags, and five.or
six two-foot square boxes being loaded into the now-empty Cessna.
Betzner then" flew the plane to a field at Lakeland, Florida.104
Yet another guns for drugs flight was made two weeks later. On
this trip, Betzner said* he flew a Pantner to an airstrip "called "Los
Llanos/' about ten imles from Hull's properties and not far from
the Voice of America transmitter in northern Costa Rica. Betzner
testified that Hull met him again and the two watched while the
weapons were unloaded and approximately 500 kilos of cocaine in
17 duffel bags were loadectfor the return flight to -Florida.105
" Hull became the subject of an investigation by the U.S. Attorney
for the Southern District' of Florida in the spring of 1985. In late
March 1985, Assistant U:S. Attorney Jeffrey Feldman and two FBI
agents went to Costa Rica to investigate. Neutrality Act violations
by participants in the Contra resupply: network that' were also
under investigation at the time by Senator Kerry. Both the Feld-
man and Kerry inquiries had been prompted in part by statements
made to reporters; .fey soldiers of fortune imprisoned in Costa Rica
who alleged John Hull was providing; support for the Contras. with -
the help of the National Security Council.106
: Zeldman and the FBI agents met .with U.S. Ambassador to Costa
Rica, Lewis Tambs, and the ,CIA iChief of Station, Thomas Castillo,

1 0 1 Subcommittee testimony of Floyd Carlton, Part 2, pp. 205-507; Subcommittee testimony of

Jose Blandon, Part 2, pp. 115-116.

" 2 Betzner, Part 3, pp. 253-254, 256.
Ibid., pp. 257-258.
1 0 4 Ibid,, pp. 262-267; see also Morales testimony, Part 3, pp. 301-304 and DEA polygraph of
Morales.
1 0 5 Ibid., pp. 262-267.
1 0 8 Iran-Contea deposition of Jeffrey Feldman, Appendix B, Volume 10, April SO, 1987, pp. 77-
78; Statements of Steven Carr and Peter Glibbery to Senate staff, March 8,1986.
 "56

who told him John .Hull knew Rob Owen and Oliver North and
gave the, impression that Hull had been wo^^g for-lTA interests
prior .to, March of 1984. In addition, one of the embassy security of-
ficers^* J ^ Nagel, told one. of the FBI agents accompanying Feld-
man, that, regarding Feldman's inquiries, % . these were'agencies
with other ^operational requirements and we-shouldn't interfere'
with the work of these agencies'.''107 When Feldman~ attempted • to
interview Hull, Feldman learned that Hull was told by the embas-
sy staff not to. "talk-to him without an attorney present.10® • ••-.;
- Feldman concluded that: U.S.: Embassy' officials in Costa Rica
were taking activeimeastires 'to protect Hull. After Feldman inter-
viewed two of the mercenaries, Peter Glibbery and Steven Carr, re-
garding their allegations of Hull's involvement in criminal activity;
Feldman learned that Kirk Kotula; Consul in San Jose, was
"trying to get Carr and Athe rest of these "people to recant their
statements regarding Hull's involvement with the CIA and with
any other American agency.109 Feldman added . V it was appar-
ent we were stirring up some problem with our inquiries concern-
ing John Hull." 1 1 0 Feldman concluded that because Hull was re-
ceiving protection from some US officials; ^ha^itwould. 'no! bepos-
sible toihterview him. Feldman - therefor^' to6k no further steps'' to
do S O . 1 1 r ^ " " ; r. • • • - ^ v ' - '" ;
In an effort to "stop the • investigation. against him and to cause
the Justice Department to instead investigate those urging ah in-
vestigation of \gull, Hull prepared falsified. affidavits from jailed
mercenaries in . Costa Rica to U.S. Attorney Kellner. In the affida-
vits the mercenaries accused Congressional staff of paying wit-
nesses. to .invent storiesv ^b4ui;illegal acitmties associated with theL
clandestine 4Contras supply^ network. The Jus^ce?Peparianent .ulifc
mately concluded that ,the affidavifaliad been, forged, Eelln^r testi-
fied that he "had concerns about them; and Vfi . didn't rbelieve
them." 1 * 2 .: " .. "." .
To this day, the Justice Department has taken no action against
John Hull for obstruction of justice or any related charge in con-
nection with his filing false afiidavits' with ihe U.S. Justice Depart-
ment regarding the Congressional investigations.
In the period in, which he was providing support to the Contras,
Hull obtained a loan from theOverseas Private Investment Corpo^
ration for $375,000 which' ultimately proved to have been obtained
wittefalse^documentation. ^ - • r : - ^ .
In 1980, Hull-and two associates, Mr.-William Crone and -Mr.
AlVaro Arroyo approachedOPIC for a loan to1 finance, a joint veh- 1
ture wood products factory that would make wheelbarrow and ax
handles for the, U.S. market; In fact; Recording to testimony from
Crone and OPIC officials, no" contributions1 -from' Hull, Arroyo or
himself were made to the joint venture. On the basis of the applica-

10T Feldman, ibid., pp. 79-85. • .

108 Ibid., p. 86.
109 Ibid., pp.'86-88.' ' "
110 Ibid., p. 84.
111 Ibid., pp. 86-88, .. ..
112 Iran-Contra testimony of Leon Kellner,"Appendix B, Vol. 10, April SO,. 1987, pp. 1094-1095.
 "57

tion, some supporting documentation and a site .visit, on March 30,

1984, OPIC advanced $375,000.118
By the end of 1985, after ope interest payment, the loan lapsed
into default, and OPIC officials" began to recognize that the project
was a fraud, and that Hull had made false representations in
making the application toOPIC. 114 OPIC officials found that the
money which was disbursed by their Agency was deposited in
Hull's Indiana bank account and the funds were withdrawn by
Hull in cash; When OPIC inquired in 1986 as where the funds were
going, Hull told OPIC officials that he would be - using the cash to
buy Costa Rican money on the black market to get a mcire favor-
able exchange rate.115
In fact, Costa Rica has a favorable exchange rate for foreign in-
vestment and the^ excuse Hull offered does not make sense. What
appears to' have happened is that Hull simply took the money, in-
asmuch as no equipment was purchased for the factory, no prod-
ucts were shipped from IV and Hull's partner, Crone, testified that
he never saw the money. Indeed, prospective purchasers com-
plained that they paid Hull for products in advance but never re-
ceived deliVeiy.116
On the basis of the subsequent OPIC investigation of the loan to
Hull's company, in April 1987, the case was referred to the Justice
Department for a criminal fraud investigation.117 Wlnle nothing
has yet happened for almost two years, the Justice Department
maintains the investigation is still ongoing.118
OPIC foreclosed on the properties which Hull had put up as col-
lateral for the loan. Following the foreclosure to recover their
monies, OPIC sold the property at auction. . However, in order to
prevent a sale far below the market price, OPIC bid.at the auction
and wound up purchasing its own property for $187,500.
OPIC then attempted to sell the property directly. An advertise-
ment was placed in. The Wall Street Journal which attracted a
single offer from aii investment banker in Philadelphia. ATL agree-
ment was negotiated whereby the company purchasing the proper-
ty from. OPIC was required to make no down payment, and only to
repay OPIC its $187,500 from the future proceeds of the sale of
timber cut on the iand. The corporation which purchased the prop-
erty has .no other assets other than the land. If the agreement is
fulfilled by the purchasers of the land, OPIC will realize repayment
of $187,500, half of the original $375,000 loaned to Hull.119
The Subcommittee also heard testimony investors who had al-
lowed Hull to purchase . property for them and then to manage the^
property, who testified that he did not deliver on his promises, he
failed to purchase the properties he said he would, and in one case,

1 1 3 Testimony of Eric Garfinkel, Vice President and General Counsel-, Overseas Private In-
vestment Corporation, Subcommittee on International Economic Policy, Trade, Oceans- and En-
vironment and Subcommittee on Terrorism, Narcotics and International Operations, Part 1, Oc-
tober 30,1987, pp. 106-107.
1 1 4 Ibid., p. 107.
»*Ibid.,p. 127-
1 1 6 Subcommittee interviews with prospective purchasers.
1 1 7 OPIC testimony, ibid., p. 107.
1 1 8 Subcommittee interviews with OPIC and Justice staff, January 1989.
1 1 0 OPIC documents provided the Subcommittee.
 "58

took farm equipment off a farm he was. paid to manage and con-
verted it for his own use.120
In mid-January1989, Hull was arrested hy Costa Rican law en-
forcement authorities and charged with drug trafficking and violat-
ing.Costa Rica's neutrality.
I X . T H E S&ST FRANCISCO FROGMAN' CASE,. UINTD-FRAN AND P C N E

The San Francisco Frogman case was one of; the first cases.in
which allegations linking specific Contra organizations to drug
smugglers' surfaced. In;a July 26, 1986 report to- the ^Congress on
Contra-related narcotics allegations, the State Department de-
scribed the Frogman case as follows:
"This case gets it nickname from swimmers who brought .cocaine
ashore, on the West Coast from a Colombian vessel in 1982-1.983; It
focused on a major Colombian cocaine smuggler, Alvaro Carvajal-
Minota, who supplied a number of West Coast smugglers. It was al-
leged, but never confirmed* that ISficaraguan citizen Horacio Perei-
ra, an associate of Carvajal, had helped the Nicaraguan resistance.
Pereira was subsequently convicted on drug charges in Costa Rica
and sentenced to twelve years imprisonment. Two other Nicara-
guans, Carlos Cabezas and Julio Zavala, who were among the jailed
West Coast traffickers convicted of receiving drugs,from Carvajal,
claimed long after their conviction that they had delivered large
sums of money to resistance groups in Costa Rica and that Pereira,
who was not charged in the case, has said the profits from the drug
sale wouldfinanceresistance activities."121
r'The allegations made by Cabezas and Zavala involved'two South-
ern Front Contra groups—UDN-FARN, a military group associated
witE'Fernando "El Negro" Chamorro, and PCNE, . a Contra politi-
cal group in the South. Cabezas claimed that he helped move 25 to
30 kilos of cocaine from Costa Rica to San "FranciscO, generating
$1.5 million. According to . Cabezas, part of that money was given to
Troilo and Fernando Sanchez to help Eden Pastora's and Fernando
"El' Ne&ro" Chamorro's Operations on the Southern Front in 1982
and 1983.122 ' : / " "--["r ' •
After the trial, the U.S. government returned $36,020 seized as
drug money to one of the defendants, Zavala, after he submitted
letters from Contra leaders claiming the fiinds were really their
property. The mOney that was returned had been seized by the FBI
after being found in cash in a' drawer at Zavala's home with drug
transaction letters, an M - l carbine, a grenade, and a quantity of
cocaiiie.123 " ' ••• - '^ 1 • '' '
The Subcommittee" found that the "Frogman arrest involved co-
caine fronr a Colombian source, Carvajal-Minota. In addition,
Zavala and Cabezas had as a secOnd source of supply, Nicaraguans
living in Costa Rica associated, with the Contras. FBI documents
from the Frogman case identify the Nicaraguans as Horacio Perei-
ra, Troilo SanChez and Fernando Sanchez.124

120 Subcommittee testimony of Crone, Sipple and Hood, ibid., pp. 147-167.
121 State Department Document #5136c,. July 26,1986.
122 San Francisco Examiner, March 16,1986.
Ibid. • .. ..
124 November 8,1982, FBI teletypefromSari Francisco to Director, U.S. v. Zavala, et al.
 "59

Pereira was convicted on cocaine charges in Costa Rica in 1985

and sentenced to 12 years in prison.125 Ah important member of
the Pereira organization was Sebastian "Huachan" Gonzalez, who
also was associated with ARDE in. Southern. Front Contra oper-
ations. iRobert Owen advised North in February 1985, that Gonza-
lez was trafficking in cocaine.126 Jose Blandon testified that Eden
Pastora knewthat Gonzalez was involved in drug trafficking while
hie was working with ARDE. Gonzalez later left the Contra move-
ment and. fled from Costa Rica to Panama* where he went to work
for General Noriega.127, •
During the Pereira trial, evidence was also presented by the
Costa Rica prosecutor showing that drug traffickers had asked
leader Ermundo Chamorro the brother of UDN-FARN leader Fer-
nando "El Negro" Chamorro, for assistance with vehicles to trans-
port cocaine and for help with a Costa Rica police official.128
Troilo and Fernando Sanchez were marginal participants in the
Contra movement and relatives of a member of the FDN Director-
ate.12® ;
X T H E CUBAN-AMERICAN CONNECTION

Several groups of Miami-based Cuba Americans provided direct

and indirect support for the Southern Front during the period that
the Boland Amendment prohibited official U.S. government assist-
ance. Their help, which included supplies and training, was funded
in part with drug money.130
The State Department described the allegations in its July 1986
report to Congress as follows:
There have been allegations that Rene, Corbo and other
Cuban Americans involved in anti-Sandinista activities in
Costa Rica were connected with Miami-based drug traffick-
ers. Corbo reportedly, recruited a group of Cuban American
and Cuban exile, combatants and military trainers in the
< Miami area who operated inside Nicaragua and in the
northern part of Costa Rica: Two Cuban exiles in this
group, Mario Rejas Lavas and Ubaldo Hernandez Perez,
were captured by the Sandinistas in June 1986. They were
reportedly members of the UNO/FARN group headed by
Fernando "EI Negro" Chamorro. There is no information
to substantiate allegations that this group from Miami has
' been a source of drug money for the UNO/FARN or any
other resistance organization.131

12s egg Evening News, June 2,1986.

1 2 6 Jran/Contra Testimony of Robert Owen, May 14,1987, Exhibit RWO 7, p. 801.
1 2 7 Blandon, Part 2, pp. 132-133.
1 2 8 CBS Evening News, June 12,1986.
128 Staff "interview with Carlos Cabezas, March,' 1988, and with former Contras in San.Fran-
cisco and Miami. „ ' ; -
lso FBI 302's of Special Agent George Kiszynski, released in U.S. v. Calero and U.S. v. 'Corbo,
both Southern District of Florida, including 3/8/85 interview of Frank Castro; 12/17/84' inter-
view of Raphael Torres Jimenez, 3/1/85 interview of Rene Crobo; 9/6/84 interview of Jose
Coutin; see also grand jury testimony of Carlos Soto in U.S. v. Luis Rodriguez, Northern District
of Florida.
1 3 1 State Department Document #5136c, July 26,1986.
 "60

On May 6, 1986, Committee sta|f met with, representatives of the

Justice. Department,; FBI, DEA, CIA and State Department, to
advise them of allegations of gun rimriiag and drug trafficking in
connection with this group. . .- • * ,- ,
In August 1986, the Committee requested information from the
Justice Department regarding the allegations concerning. Corbo
and fellow Cuban Americans.Felipe Yidal, Frank Castro, and Luis
Rodriguez and Frank Chancer .(two. of the principals in F£igorif|cos
de Puntarenas and Ocean Hiinter), concerning their 'involvement
in narcotics trafficking. The Justice Department refused to provide
any information in response to this request, orrtlie grounds'that
the information, requested remained under active investigation,
and"that'the Comniittee's ^amblihigf through/open investigations
gravely risks compromising those efforts.132
Less than three months earlier, the Justice Department had ad-
vised both the press and the Committee that the -allegations had
been thoroughly investigated and were without foundation.133
At no tinie did the Justice Department disclose to the Committee
in response to its inquiry that extensive information had in fact
been developed by the FBI from 198S through 1986 suggesting that
many of the allegations the Committee' Vas investigating were
true. •• , " . ••, •.
:At the May 6, 1986 meeting with: Committee staff, the CIA cate-
gorically denied, that weapons had been shipped to the Contras
from the United States oh the flights; involving.Rene Corbo, noting
that the material on which they were basing these assertions was
classified, and suggested that the allegations that had been, made to
the contrary were the result of disinformation.134
In fact, as the FBI had previously learned from informants,
Cuban American ^supporters of the Contras had shipped weapons
from south Florida to Ilopango, and froni there to John Hull's air-
strips in Costa Rica. ^ 5 The persons involved admitted to the FBI
that' they had participated in such 'shipments, making general
statements about them; beginning in 1985. On June 4, 1986 and
June 16, 1986, Rene Corbo, one of the principals in the shipments,
explicitly told the FBI that he had participated in shipping,weap-
ons to the Contras in violation of U.S. Neutrality laws;186
The Cuban-American contingent supporting the Contra effort on
the Southern Front work with Pastora until May 30, 1984 bombing
at La Penca. After tlie assassination attempt on Pastora they, shift-
ed their allegiance to Fernando "El Negro" Chamorro of UDN-
FARN. By mid-June 1984, the drug smuggling through the South-
ern Front zones controlled by the Contras had grown sufficiently

13 3 Letter of John Bolton to Senator Richard G. Lugar and Senator Claiborne Pell, August 11,
1986.
133 Statements of DOJ spokesman Pat Korten to National Public -Radio, May 5, 1986; New
York Times, May 6, 1986; statements of Korten, Kenneth Vergquist, and other Justice Depart-
ment officials to Committee staff prior to June 26,1986 Executive Session; see generally Kellner
Deposition to Subcommittee, November 8, 1988, noting his objections to statements by Justice
regarding the case.
... 134 Winer Memcom, May 6,; 1986 meeting, Subcommittee files.
1 3 5 See generally the investigative files of Special Agent Kisysnski; released in U.S. v. Corbo
and U.S., v. Calero; SD .Florida 198S; admissions of Ramon Milian Rodriguez to Customs .in May
19833, U.$. v. Milian Rodriguez, SD Florida, documents released in connection with U.S. v. Luis
Rodriguez, ibid.
13B FBI 302's of SA Kisyznski, released in U.S. v. Corbo, SD Florida, 1988.
 "61

obvious that Robert Owen warned Lt. Col. Oliver North at the NSC
that the "Cubans (are) involved in drugs."137
Notes taken by Colonel Robert L. Earl during his tenure at the
NSC described how in August 1986, thfe CIA was worried about
.. . . ^'reputable characters in the Cuban-American com-
munity that are sympathetic to the Contra cause but caus-
ing more problems than help and that one had to be care-
ful in liow one dealt with the Cuban-American community
, .. and its relation to this, that although their motives were
in the,right place there.was a lot of corruption and greed
and drugs and it'was a real mess.138 ,
In August 1988, Corbo and Castro were indicted in a Neutrality
Act case involving, the Contras brought by the U.S. Attorney for
Miami and prosecuted by Assistant U.S. Attorney Jeffrey Feldman.
No narcotics-related, allegations were included in the August 1988
indictment,139 .
One of the three principals in Frigorificos de Puntarenas and
Ocean Hunter, Luis Rodriguez, was indicted on drug charges in
April 1988. The others, Frank Chanes and Moises Nunez, partici-
pated in Contra military assistance operations in 1-984 and 1985.140
Nunez was employed by both the drug money laundering front,
Frigorificos de Puntarenas, and by,Glenn Robinette on behalf of
the Second-North Enterprise. Former CIA Costa Rica Chief of Sta-
tion Thomas Castillo told the Iran-Contra committees that Nunez
"was involyed-in a very sensitive operation" for the Enterprise.141
X I . R A M O N M I L I A N RODRIGUEZ AND FELIX RODRIGUEZ .

A particularly controversial allegation arose during the course of

the Subcommittee's -investigation. This involved Ramon Milian Ro-
driguezes .offer to assist the Contras, following his arrest for money-
laundering. '
In a June 25, 1987 closed session of the Subcommittee, Milian Ro-
driguez, testified that in a meeting arranged by Miami private de-
tective Raoul Diaz with Felix Rodriguez, he (Milian) offered to pro-
vide drug money to the Contras. Milian Rodriguez stated that Felix
accepted the offer and $10 million in such assistance was subse-
quently provided the Contras through a system of secret couriers.
Milian Rodriguez testified that he also offered to assist in entrap-
ping the Sandinistas in a drug sting—all in return for dropping the
charges then pending against him. -
Felix Rodriguez strenuously denied Milian Rodriguez's version of
the meeting, stating that he reported Milian's offer to a number of
U.S. i government agencies, including the FBI and CIA. No action
was taken by those agencies,; and Milian Rodriguez's case went to
trial.
Raoul Diaz refused to respond to a Committee subpoena to dis-
cuss his recollection of the meeting. Therefore, because of the diffi-
127 North Notebook Entry Q-0344.
138 Iran/Contra Deposition of Robert L. Earl. Appendix B, Vol. 9, p. 1109.
139 U.S. V. Calero etal and U.S. V. Corbo et aL, ibid.
140 U.S. v. Luis Rodriguez, Northern District of Florida;FBI 302's of SA Kisizynski, ibid.
1 4 1 Iran-Contra Testimony of Owen, Appendix B, Vol. 20, pp. 733-735; deposition of Thomas
Castillo, Appendix B, bol 3, p. 180.
 "62

culty ..the Subcommittee faced in ascertaining whowas .telling the

truth—Ramon "Milian Rodriguez or Felix, Roclriguez-rMilian was
asked, whether he would be .willing to take a polygraph examina-
tion. He agreed to submit to an examination on the question of pro-
viding drug money to the Contras through Felix Rodriguez."
Senator Kerry, the Subcommittee Chairman, arranged for one of
the country's leading polygraph experts, Dr. Donald Raskin of the
University of Utah; to travel to Washington, D.C; to administer the
test. Dr. Raskin administered a partial examination of Milian Ro-
driguez on June 3-4, ^1988. On two critical questions, Ramon Milian
Rodriguez's' answers 'weredetermined to be deceptive' by Dr.
Raskin. The questions were as follows:
•1. Did Felix Rodriguez ask you to arrange deliveries of money for
the Contras during the meeting at Raoul's office? !
Answer, yes. •
2. Did you arrange approximately five deliveries of money for the
Contras on the basis of phone calls you personally received from
Felix Rodriguez?
Answer, yes. . , . .
On the third question, Dr. Raskin could not determine whether
or not RainOn Milian Rodriguez was being truthful in his response.
The question was as follows: , , - •'
3. Did yOu arrange the deliveries of at least $5 million for the
COntras using the procedures that you and Felix jworked out?
Answer-, yes. -• • "'• ' '•'• >
At that point, Milian Rodriguez stated that he did' not want to
continue the. examination. Based, upon Dr. Raskin's oral evaluation
of RamOh Milian Rodriguez, the Chairman concluded that his ver-
sion of .the meeting with- Felix Rodriguez and his; subsequent rela-
tionship with Felix in providing drug money for theaContras was
not truthful.- The Chairman-reached no conclusion regarding the
issue of whether Ramon Milian arranged for the deliveries of, at
least $5 million fbr the Contras. . - •
During Felix Rodriguez' public testimony-before the Subcommit-
tee on July 14, 1988, Senator Kerry stated that he did not believe
Ramon Milian Rodriguez' Version Of the meeting was truthful.
However, Milian Rodriguez' testimony regarding the Cartels,
General Noriega's role in narco^traffickmg,:and his involvement in
seeting up companies which were later Used to support the "Con-
tras, was corroborated by a number of witnesses, including Jose
Blandon, Floyd Carlton, Gerald Loeb, and a Miami attorney who
had supplied information; on the Cartels in a closed'session deposi-
tion. In addition, Mihaa - Rodriguez' testimony on many-of these
points Was corroborated by extensive documentary evidence and by
grand jury statements by his partners in federal criminal proceed-
ings.
CUBA AND NICARAGUA

INTRODUCTION

Drug trafficking knows neither national nor ideological, bound-

aries, as evidenced by allegations of Cuban and Sandinista involve-
ment in the drug trade.
 "63

'"The Subcommittee received testimony that throughout the

1980's, Cuba, has been used by drug traffickers as a transit point
and haven for laundering money;-Cuban authorities have, provided
protedlaoH' for their b6ats and aircraft; According to
Subcoihmittee1 testimony, Fidel Castfro himself acted as a mediator
on behalf of General Manuel Antonio Noriega in disputes Noriega
has had with r.ihe Medellin: cocaine cartel'. Finally, the" Subcommit-
tee received testimony1 tliat Cuban officials^were'involved in efforts
to establish, ties between leftist revolutionary groups such as the
M-19 ancl cocaine, traffickers. .-
Several witnesses testified that Nicaraguan officials were also in-
volved in drug trafficking. The Subcommittee* also received testimo-
ny that representatives 6f the Medellin Cartel entered into negotia-
tions with the Sandinista: government over using Nicaragua for
drug trafficking operations. Finally, the Subcommittee received tes-
timony regarding alleged statements by leaders of the Cartel that
the provided assistance to the Sandinistas.
'". . HISTORICAL BACKGROUND

Pre-revolutionary Cuba had an extensive tradition as a base for

the smuggling of illegal goods to the-United States, as far back as
the 18th Century; and continuing through Prohibition to the over-
throw of the Batista government by Castro. The United States has
frequently sought the cooperation - of the Cuban government in
stopping such'smuggling.1
By the time of the Castro revolution, organized crime had a sig-
nificant position of power in Cuba based on the wealth it had accu-
mulated by smuggling and related illegal, operations.2 At the time
of the Cuban revolution', Castro liimself claimed one of his objec-
tives was to cleanse Cuba of the environment of corruption. Since
then, Castro has conducted a highly visible public campaign
against smuggling, and the Government of Cuba regularly issues
reports highlighting its successes in the war against drugs.
The-Subcommittee received testimony that despite Cuba's aggres-
sive public stance against narcotics, during the 1980's Cuban offi-
cials had again begun to provide assistance to drug smugglers.
• CUBA'AS A „WAY-STATION FOR SMUGGLERS

Cuba lies on the most direct air route from South America to
Florida. Due to its size, unless smugglers,.get overflightrights,hun-
dreds o£ jqajles are addedto their "trips. This greatly increases the
risk of getting caught and' forces traffickers to decrease the pay-
loads they carry. Quite naturally as the volume of drugs moving
into south Florida by air increased in the early 1980's, the traffick-
ers became interested tin obtaining overflight rights from the
Cubans. Elements of the Cuban government began to offer assist-
ance. According to smugglers, this assistance was gradually ex-
tended to refueling and repair services, assistance in laundering

1See e.g. U.S. Convention with Cuba to Prevent Liquor Smuggling; February 10,1926.
2Boris Goldenberg, The Cuban Revolution and Latin America, 1965, p. 110; Bonachea and
Martin, The Cuban Insurrection, 1952-1959, p. 34-
 04

money,Mid-providing safe haven from -U.S. Jaw enforcement au-

thorities,?^- . , ^ - . -
. kuis Garcia told the Subcommittee. that -in -late .1979 , or. .early
19^0, Cuban officials, offered him use of airstrips for 'refueling.drug
flights. While Garcia said he never took themupon the,offfeiy.he
was aware of other smugglers who did.4 Over time, according - to
the Subcommittee testimonyr several different smuggling, organiza-
tions w£r e able to reacli an understanding with Quban officials
that enabled them to . use that country to ^facilitate u ^eir ^oper-
ations.5 ' - -. . " '.„' . . „ . "
Other testimony concerning Cuban ^involvement in jcfrug oper-
ations came from Richard Gregorie, whose office obtained Grand
Jury indictments against a number pf Cuban officials.6'
In the 1983 case of XJhited States v. Jainie Guillot-Eara, four high
ranking Cuban officials were implicated in drug smuggling. They
included a member of the Cuban Communist P&rty Central Com-
mittee: Fernando Ravelo-Renedo, the former Cuban Ambassador to
Colombia; the former Minister Counselor of the Cubarr Embassy in
Colombia; and a vice admiral of the Cuban Navy. The four officials
were indicted for their role in a smuggling conspiracy but were
never brought to trial because they, never came within the jurisdic-
tion of the United States. All of the other co-conspirators in the
case were convicted by a, jury which received testimony about the
involvement of the four Cuban officials-7 •
In 1988, a grand jury indicted Reinaldo Ruiz and Hugo Ceballos
based on videotaped evidence that showed Cuban military protec-
tion was provided to cocaine traffickers coming to';the,;United
States from Colombia. Both are scheduled to: go to trial.8 , r
CASE HISTORY: GEORGE MORALES''

The experience of Colombian drug trafficker George Morales pro-

vided- insight into the opportunities afforded narcotics traffickers
by Cuban authorities. '' :
According to Morales, he first developed a relationship with
Cuban officials in 1979. Morales testified that he attended a meet-
ing in Cuba at which Cuban officials* offered to sell him planes
seized for violating their airspace.9 He developed the relationship
over a period of time. By 1980, he obtained Cuba's agreement to
allow his pilots overflight rights through Cuban airspace.10 Li
return for U.S. currency, Cuban authorities provided Morales with
identification' codes, enabling hipii and his5 pilots , to usei' their air-
space safelyaird land in the: event of an Emergency.11 ' • , * ' ' '
According to Morales, Cuban assistance was then extended to
protection for boats and aircraft/used'in .drug smuggling oper-

3 Subcommittee testimony of George Morales^ Part 3, April 7,1988, pp. 294-296.

4 Subcommittee testimony of Luis Garcia, Part 1,'May 27,1987, p. 16. * -
s Subcommittee testimony of Floyd Carlton, Part 2, Feb. 10,1988, p. .210; Paul Gorman^ Part 2,
Feb. 8,1988, p. 42; Richard Gregorie, Part 4, July 12,1988, p. 160; George Morales, Part 3, April
7,1988, pp. 294-296 and Parti/July 15,1987, pp. 47-49/63^66.
, 8 Gregorie testimony, p. 160.
7 Prepared Statement of Richard Gregorie, Part 4, July 12,1988, pp. 388-389.
8 Ibid-
9 Subcommittee testimony ofGeorge Morales, Part3, April 7,<1988, p. 296.,
"Morales, Part 1, July 15,19$7, p. 48.
11 Morales, Part 3, pp. 294-295.
 "65
s

ations. Morales was also given the opportunity to buy drugs Cuban
authorities had seized from other traffickers.12 Morales testified
that the Cubans sold him the radiofrequenciesof the U.S. Coast
Guard, Secret Service, Drug Enforcement Agency, Customs and
local U.S. law enforcement agencies.13 He said their only motiva-
tion was obtaining U.S. dollars.14
Morales testified that Cuban cooperation with him did not end
^fter his 19§4 indictment. Instead, the Cubans offered him the op-
portunity to relocate his entire smuggling operations in. Cuba. He
testified that Cuban officials offered him a house, and operational
runway and the use of Cuban banking facilities.15 Although he did
not move to Cuba, Morales said he used a Cayo Largo bank to laun-
der over $500,000 in drug money.16 From Cayo Largo, Morales was
able to transfer his drug money to other banks around the world.17
( :
. IDEOLOGICAL U S E OF DRUGS

In the late 1970's Castro identified what has been referred to as

the "natural marriage" between, the drug traffickers and revolu-
tionaries.18 The traffickers have the money which the revolution-
aries heed to launch their operations, and the revolutionaries con-
trot the land and the people" the traffickers need to grow the crops
and run the processing laboratories.19' '~
Jose Blandon - told the Subcommittee of Castro's decision to
become involved with;the traffickers.20 According to Blandon,,in
the late 1970's, Castro decided to use the growing power of drug
traffickers arid, drug money to expprt revolution throughout Latin
America. Castro's overall "aim was tb influence events in Central
America by simultaneously aligning himself with narcotics traffick-
ers and regional /military leaders, following the example, set by
General Noriega in Panama.21
: Castro pursued this policy by working closely with the M-19. The
M-19 received advice and assistance from the Government of Cuba
even as it reached a working agreement with the Cartel's following
their war in Colombia.22
Maintaining a relationship between the Cartel and the various
Colombian guerrilla movements has been a significant policy goal
of the Cuban government. Blandon testified that Castro assigned
the Cuban Ambassador to Colombia, Ravelo-Reriedo, the task of
mediating the relationship between the guerrillas and the Cartel.
According to Blandon, Rayelo-Renedo reported to Manuel Piniero,
the head of the Cuban Communist Party's'Latin American-Depart- -
ment.23 A witness at the Miami conspiracy trial in which Ravelo-

12 Ibid., Part 3, p. 296; part 1, p.49.

13 Morales, Part 1, pp. 89--90.
Ibid., p. 65.
1 5 Morales, Part 3, p. 296 and Part 1, pp. 65-66.
16 Morales. Part 3, p. 294.
17 Morales, Part 1, p. 48. '
18 Subcommittee testimony of Nestor Sanchez, Part 4, July 12,1988, p. 197.
19 Ibid., and testimony of David Westrate, Part 4, July 12,1988, p. 146.
2 0 Subcommittee testimony of Jose Blandon, Part 2, Feb. 9,1988, pp. 106-108.
21 Ibid.
2 2 Subcommittee testimony of Ramon Milian Rodriguez, Part 2, pp., 249, 255-256; Blandon,
Part 2, p. 106.
23 Blandon testimony, Part 2, pp. 106-107.
 "66

Renedo was an indicted co-conspirator, quoted the high ranking

Cuban officials as " saying,; "We'll- drown-them; [the Americans^* in
drugs."24 .. : • -
CUJSA, P A N A M A , AND THE CARTEL

CastrO's role as a mediator was not .limited to disputes between

the guerrillas and the Cartels. According to Jose Blandon, Castro
also acted as a mediator in a dispute.between the Medellin Cartel
and Noriega. The dispute arose when Noriega raided a Cartel-labo-
ratory in the Darien province of Panama " in June, 1984,' arresting
23-employees Of the Cartel and seizing millions of dollars' worth of
equipment and drugs, after accepting^ $5 million from the Cartel to
protect it. The Cartel decided to kill Noriega'in revenge, and Nor-
iega turnedtoCastro for help.25 • ••
At Noriega's request, Blahdon met with Qastro in Havana on
June 21 or 22, 1984. Castro recommended that Noriega return the
$5 million in protection money and return the plant, personnel and
equipment to the Cartel.2® During his testimony,.Blandon produced
photographs of himself with Castro which he said were taken
during that meeting. The. photographs were sent .to Blandon by
Cuban intelligence three months after the meeting- They .were
made part of the hearing record and were used by the Miami grand
jury which, indicted Noriega.27 V
Blandon testified that a week later, on June 27th or 28th, Nor-
iega and Castro met directly in a meeting .that lasted five to six
Hours. At"itif conclusion, Noriega, told Blandon that, "everything
had been arranged and they were going to proceed according to
Castro's proposal." 2 8 Although^ a deal "with the Cartel had been
concluded, Noriega was still concerned that his life was in danger",
as about one hundred members of the Cartel werfe liviug. in
Panama.29 The-Cubans sent a 25-soldier military unit to fly back
with Noriega to Panama to ensure his safety until the terms of the
deal with the Cartel,could be carried out.?'6;
CASTRO DENIES INVOLVEMENT

Fidel Castro personally denounced the Blandon testimony as a

fabrication , in a lengthy interview with an NBC reporter. He
denied the-allegations that he mediated the dispute between Nor-
iega andtHe Cartel. In addition* Castro said that ;Cuba was not -in-
volved in drug trafficking and offered tO proye it. l|e said that if
the Subcommittee members would, visit Cuba .they would see "irre-
futable" evi(^nce proving that Blandon had lied.3 \
Senator Kerry, the Subcommittee Chairman, told a representa-
tive of the Cuban Interest Section in Washington that he Would not
visit Cuba unless staff was permitted to advance the trip ' and

24 Gregorie Prepared Statement, Part 4, p. 389.

25 Subcommittee testimony of Jose Blandon, Part 2, Feb. 9,1988, pp. -101-106.
26 Ibid. - .
27 Ibid. .• -
- s Ibid., p. 104.
2 9 Ibid., p. 103.
3OIbid.,-p-~106. .
3 1 "Cuban Leader Castro Denounces Jose Blandon Senate Testimony," NBC Nightly News.
Feb. 25,1988. . -
 "67

unless the Cubans agreed to 'discuss the drug trafficking problem in

general. Senator Kerry also requested that Subcommittee, staff be
allowed to interview Robert Vesco during the course of the visit.
The~ Cubans ,never replied, to any of these requests, and never made
any further arrangements, for the visit* As a consequence, the trip
never took place.32
ALLEGATIONS CONCERNING NICARAGUA

. In 1984, the Cartel explored using Nicaragua as' a site for the
transshipment of cocaine and money laundering. Finding alterna-
tives to Colombia was important,because the Colombian authorities
bad raided and destroyed several • Cartel laboratories in the
Amazon region. Further, Colombian authorities -dramatically in-
creased their pressure on Cartel operations after the murder of
Justice Minister Lara-Bonilla. In Panama,1 where a base of oper-
ations had been established^ General Noriega was demanding in-
creased control of the drug trade and a larger share of the prof-
its.5?' ..
_ Floyd Carlton testified that. Pablo Escobar sent him to Nicaragua
twice in -1984. The first time he went with Ricardo Bilonik, a busi-
ness partner of General Noriega's, to deliver money. Carlton said
he did not know who the money was for since Bilonik handled the
delivery. The second trip to Nicaragua was to locate airstrips
which -could be used for the transshipment of narcotics.34 Carlton
was told by another pilot that the Cartel needed long range planes
and airstrips with extended runways to handle flights carrying co-
caine paste from Bolivia to Nicaragua. This led Carlton to assume
there were processing laboratories in. Nicaragua.3 5
During the. same period, Escobar asked Ramon Milian Rodriguez
to explore the possibility of starting drug-related operations in
Nicaragua, documenting, them, and then using the information to
bargain with the United States for amnesty.36
Ramon Milian Rodriguez' account of this request is supported by
the testimony of a Miami attorney who first met with lawyers for
the Car,tel in Bogota in 1985 and later with all the Cartel leaders in
Medellin.
In October, 1986, the Miami Attorney began talking to the FBI
and the DEA about his meetings with the Cartel. He was given a
polygraph examination, which he passed. He told the DEA that
during early 198.6, a Bogota lawyer for the Cartel told him that the
Cartel wanted to make "a deal "with the U.S. Government for im-
munity from prosecution, and they, in turn, would help stop the
flow of cocaine into the U.S," 37
The Cartel lawyer told, the Miami Attorney that Cartel leader
Jorge Ochoa //finances both Sandinista and anti-San dim'sta forces
in Nicaragua by setting up .drug operations there." 3 8
3 3 March 14,1988 meeting between Deputy Chief of the Cuban Interest Section in Washington
DC, Manuel-Davis, and Senator John F. Kerry and Blandon, Part 3, pp. 31-32.
S3 Subcommittee deposition of Floyd Carlton, Dec. 4, 1987, pp. 86-87; Blandon testimony, Part
2, Feb. 3,1988, p.147. =
3 4 Deposition of Floyd Carlton, Dec. 4,1987, p. 89.
3 5 Ibid,, pp. 93-95.5
aa Closed session-testimony of Ramon Milian Rodriguez, June 25,1987, pp. 53-55.
3 7 Debrief, "Miami Attorney," DEA, October 21,1986.
3 8 Ibid., p. 2.
 "68

The Miami Attorney then met with Jorge Ochoa and other lead-
ers of the Cartel. At these nieetings in Medellin, Cartel principals
told the Miami Attorney that they had invited him to meet witih.
them to act as a representative to "open negotiations with the'U.S.
Government." "Ochoa told the Miami Attorney that the Cartel had
"certain information which could be of interest to the national se-
curity of the U.S." regarding ..developments in Nicaragua, Cuba,
Mexico, Panama, and Colombia.39
Ochoa. told , the, Miami ? Attorney that the: Cartel had "worked
with the Communists in the past.'kOchoa stated that/'there" was a
100,000 man army/6f radicals in the mountains consisting; of Pales-
tinians, Libyans," Peruvians, Argentinians, Ecuadorians and
Cubans, which were better equipped than the army of the Republic
of Colombia and had received arms from Libya;"-40 " /
The Carte! leaders told the Miami Attorney that they wished to
"work for American intelligence by supplying information about
guerrilla, activities, thereby incurring amnesty for; their efforts."
The Cartel leaders proposed "to have their representatives collect
intelligence" for a period" of six months to a year, thfereby-assisting
the U.S.; government' in getting the'intelligence it needs on the
commimist guerrilla problem. At "the end of this time period, they
would^receive amnesty or an end to -their. extradition proceed-
ings" 41 • ; '• -
The Miami Attorney returned to the U.S. with the Cartel's offer,
relayed it to U.S. authorities, and passed a polygraph regarding
this account. The DEA and FBI then decided that conversations
with the Cartel would be inappropriate and subsequently broke off
all contact with the Miami Attorney. The material provided by the
Miami Attorney was not subjected to further investigation by
either agency in connection with Nicaragua or the Contras.
Additional allegations about Sandinista. involvement in drug traf-
ficking came from Barry Seal who worked as a DEA informant
after he was caught smuggling drugs. Sieal "was given the task of
documenting the relationship of the Colombians and the Nicara-
guans by using cameras installed in a plane he flew as part of an
undercover operation.42
Seal flew to Nicaragua and obtained photographs of a Federico
Vaughn, who U.S. authorities identified as a Nicaraguan govern-
ment official, and Pablo Escobar loading Seal's plane with drugs.43
The material gathered'by Seal became the central evidence
thereafter used hy U."S. officials qiting Sandinista involvement in
narcotics.44 ' ^ . "
After the Seal operation, was exposed, Federico Vaughn disap-^
peared, and no further information about the Seal allegations ma-
terialized. The House Judiciary Subcommittee on Crime found that
the phone number used by Vaughn iri calls he received from Seal
was a phone number controlled by the U.S. Embassy since 1985,

80 Ibid. " "

40 Miami Attorney Deposition to Subcommittee; DEA debrief November 13,1986.
41 DEA Debrief of Miami Attorney, November 13,1986.
4 2 Gregorie, Part 4, p. 165.
4 3 Jacobsen Testimony, House Judiciary Subcommittee on Crime, July 28,1988.
4 4 See Subcommittee testimony of General Paul Gorman, Part 2, pp. 104-107; Lawn testimo-
ny, Part 4, pp. 134-135.
 "69

and by the U.S. Embassy or other foreign missions continuously

since 1981.41?
In its International Narcotics Control Strategy Report regarding
Nicaragua, the State Department noted that there is "no evidence
of the use of Nicaragua to ship drugs to the U.S. "since the allega-
tions made in 1984" in;connection with the Seal case.46
SUMMARY AND CONCLUSIONS

The Subcommittee testimony regarding Cuban involvement in

narcotics* trafficking was consistent with the findings of the State
Department in its most recent U.S. International Narcotics Control
Strategy Report. That report notes:
U.S. law enforcement agencies, report the routine use of
Cuban airspace and terroritorial waters as safe havens
against U.S. Government interdiction efforts. Some of the
flights or sailings may enjoy the sanction of Cuban au-
thorities, as there has been some reporting that Cuban au-
thorities have permitted narcotics' traffickers to use this
strategic location in exchange for facilitating Cuban aid to
guerrillas: and subversive elements in .third countries.47
As the State Department report recognized, "corruption exists, in
Cuba's malfunctioning economy."48 ^It is difficult to determine
whether the involvement of Cuban officials with drug traffickers is
a matter of personal corruption,' or as Jose Blandon testified, a
matter of policy by the Cuban government. ;
.'. • HAITI : ;

INTRODUCTION

By 1985, the cartels-began to seek additional transit points for

cocaine coming to the United States.-A natural candidate was the
island-country justsouth of the Bahamas—Haiti.
Haiti, is a^particularly appealing option for drug traffickers be-
cause of its location, its weak and corrupt government, and its- un-
stable-political situation. "The Island of Hispaniola on which Haiti
is located, is on the most, direct route—barring transit of Cuba—
from Colombia to the United States. Haiti has harbors and inlets
which afford excellent protection to drug smuggling vessels. More-
over^ the Haitian.-Air Force has no radar facilities and does not
routinely patrol Haitian airspace. Drjig planes can take off and
land freely at any of the island's numerous secondary airstrips.1
Since the day of "Papa Doc" Duvalier, Haiti's government has"
been notorious for its corruption. The Duvalier^family and their as-
sociates profited enormously from the protection of many illegal
enterprises, including narcotics trafficking.2 However, until 1987,
46 House testimony,'ibid. . . . . .
46 U.S. Department of State "International Narcotics Control Strategy Report," March, 1988,
p. 144.
4 7 U.S. Department of State International Narcotics Control Strategy Report, March 1988 p.
157.
4 8 Ibid., p. 159.
1 Subcommittee testimony of Thomas Cash, Part 4, July 11, .1988. pp 21-22.
2 International Narcotics Control .Strategy Report, Bureau of International Narcotics Matters,
U.S. Department of State, March 1988, p. 162.
 "70

most of the drug smuggling through Haiti was conducted by indi-

vidual "transportation' organizations which made their own. ar-
rangement swith'the Haitian government officials. .
T H E COLOMBIANS M O V E I N . • .. , .

Following thei "departure of Baby "Doc" Duvalier !and

the presi-
dential elections of 1987, the .Colombians; took advantage of the
complete breakdown of government institutions and began to move
into the: country m? force. They.focused-their efforts on corrupting
key military officers who were in a position to -assure, that there
woul&beL&o dnterferei&e. witMbeif bperationsv • ,.
According to DEA intelligence, -the number of Colombian narcot-
ics traffickers residing, m Haiti has b§en growing ^daily and the nar-
cotics organizations are .now using Haiti as a base of operations,
storage site and staging area. In addition, these organizations are
buying up legitimate businesses to serve as front bompanies for
their,smuggling operations. Once, havings gained access to local
commence, they then, focus on corrupting public officials to protect
their"iMerests.3 ^. •,."'. .;
The Subcommittee heard a detailed -account of the process the
Colombians used to establish themselves in Haiti from Osvaldo
Quintana, a CubanAmerieah who became involved in, drug smug-
gling frOm Hiaiti tor Miami. Quintana later testified about Ms expe-
rience-before a-Feder&l grand jury in Miarrii. He explained that the
Colombians established a working relationship with Colonel-Jean-
Claude Paul by working through a Haitiannamed Cardozo. The
Colombians agreed to. pay Colonel Paul, the commander of the De-
sallines Barracks, for protection and for the use of runway on his
ranch for cocaine flights.4 Command, of the Desallines Barracks al-
lowed Colonel Paul to play a pivotal role in Haitian politics be-
cause this force is the elite unit, responsible;for the protection -of
the Presidential Palace.5 Colonel Paul's influence was very much
in evidence during the 1987 election, when much of the violence
was attributed to soldiers, aind security officials known as Tontons
Macoute acting under his direction.*6- r - .
According to Quintana, 'the payoffs to Paul were to be made by
Cardozo on a shipment'by shipment basis.. In October, 1986, Colonel
Paul became dissatisfied with the amount of money he was receiv-.
ing and seized a shipment of drugs in protest. The Colombians in-
vestigated the seizure and; found that their middle man, Cardozo,
had been pocketing most of what they thought he had been paying
Colonel Paul. The Colombians sent a team of gangsters to Haiti
and brought Cardozo^ back to Colombia, where they brutally beat
him for his "theft"; The money was-repaid and Paul's^ demands
were satisfied.7 . • '
Quintana also told the. Subcommittee about the efforts- Colonel
Paul, his wife Marie Mireille Delinois, and his brother made to es-
tablish their own cocaine distribution system in Miami.8 Roger

3 Cash testimony, pp. 21-22 and Gregorie testimony, p. 183

* Quintana testimony, Part 3, April 3,1988, p. 148.
s Ibid., p. 129
6 Ibid., and Holwilltestimony,Part 4, July 11,1988, pp. 55-56.
7 Quintana, pp. 148-149. .
a Ibid., p. 131.
 "71

Biamby, a Haitian community leader in Miami, told the Subcom-

mittee, that Colonel Paul and other military officers owned ships
which sailed between Miami and Haiti carrying cocaine.9
Quintana's testimony coupled with that of other witnesses led to
the indictment for cocaine trafficking .of Colonel Paul and his wife
by a federal graiid juVy in Miami.io However, once indicted, they
could hot be prosecuted because there is not an extradition treaty
between the -U.S. and Haiti. Further, the Haitian constitution in
effect at the time prohibited the extradition of Haitian nationals.11
Richard Holwill, the Deputy Assistant Secretary~ of State in
charge of Caribbean Affairs was questioned by the Subcommittee
on the decision to 'go forward with the indictment and the issue of
coordination between the .Departments of State and Justice. He
said that the extradition issue and the problem of actually bringing
Colonel Paul to trial in the United States was not fully resolved in
the'pre-indictment meeting^ between State and Justice.12
.Confronted with a situation where an important military official
with a central role in the. Haitian government was protecting the
narcotics trade, the United States tried to pressure the. President of
Haiti, Leslie Manigat, to have .Colonel Paul-removed from the mili-
tary. However, a coup drove President Manigat from office on June
20, 1988, and Colonel Paul continued to. play a prominent role in
the armed forces.13 r-'
Political chaos continued after the first coup which placed Gener-
al Henri Nampjby at the head of the government. On September
18, r1988 a second coup removed General Namphy and brought
Colonel, Prosper Ayril to power. Avril was installed as the new
President and, Colonel Paul was finally forced to resign.14 On No-
vember 7, 1988, Colonel Paul was found dead. His wife, Marie Mir-
ei£le Delinois, under indictment in Miami for drug dealing, was de-
tained by Titian authorities a& the murder suspect.15
T H E M I A M I CONNECTION

Roger Biamby testified that government officials in Haiti use a

Miami branch of the Tontons Macoute :to terrorize the local Hai-
tians into cooperating with smuggling operations.16
Biamby said that the Miami based Tonton Macoutes are con-
trolled by -Lionel Wooley, a Haitian national residing in Miami's
Little Haiti.17 According to/ federal law enforcement officials in
Miami, Wooley's gangsters protect crackJiouses and crack process-
ing plants. They protect the drug shipments; the cash proceeds
from drug sales and they insure the silence .of tlie- Haitians who
have been used to unload drug shipments from the boats on the
Miami River.18

8 Biamby testimony, Part 4, July 11,1988, pp. 10-11.

10 Prepared statement of Richard Gregorie, Part 4, July 12,1988, p. 395.
11 Holwill testimony, Part 4, July 11,1988, p. 48
12 Ibid.
13 Holwill testimony, p. 55.
14 Ibid.
15 The New York Times, November 12,1988.
14 Biamby testimony, pp. 9,12.
"Ibid., p. 9.
18 Subcommittee interviews in Miami.
 "72

, " D E A ' s OPERATIONS IN M I A M I AND IN HAITI '

" The Miami police and Drug .Enforcement Agency have had great
difficulty in. development of prosecutable cases against the princi-
pal Haitian traffickers in Miami- In order to penetrate the close-
knit Haitian society, "the authorities rely on wiretapes, informants
and undercover . operations. However, law enforcement agencies
employ a limited riumber of French-Creole speaking officers, and
undercover operations have been limited as . a result. DEA regional
chief Tom Cash testified that DEA operations in Haiti were also af-
fected by this problem.19 '
In Haiti, DEA participates with a Haitian surveillance unit in
watching the Port au Prince airport.20 However, according to testi-
mony before the Subcommittee, the drugs rarely come through the
airport, but are instead moved by private ship and'plane through
other transshipment points.21 Even if the "surveillance provided
useful information, U.S. Attorney Gregorie argued that Haiti lacks
an honest police force and army to make arrests and punish offend-
ers.22 Moreover, when Haitian authorities seize" drugs from traf-
fickers, the smugglers are not only set free, but the narcotics, in-,
stead of being destroyed," are often resold by the authorities.23 In
characterizing the Haitian governmental structure,'.Deputy^Assist-
aht Secretary of State Holwill Observed that there is no cen-
tral government . . . no judicial system . . . and the. local army
commanders function as feudal lords." 2 4 " 1 .
The weakness of governmental institutions in Haiti Has made it
extremely difficult for the DEA .to carry outf its mission. The DEA
regional chief, Tom Cash, testified that his agency had developed a
joint DEA-Haiti Narcotics Center for Information Coordination. He
then conceded that because there are ho corresponding institution-
al structures—such as a navy or coast guard—to tackle the narcot-
ics problem, the information center didh't meah much. He ac-
knowledged, DEA efforts in Haiti are "rudimentary at best." 2 5
. . CONCLUSIONS
! There is little hope that serious inroads can be made into the Co-
lombian narcotics trafficking through Haiti until legitimate democ-
ratization efforts are undertaken. As long as-the Haitian military
continues to control virtually every government institution, includ-'
ing the judiciary andv law enforcement agencies, the cartels will
continue to operate unchallenged in that country.
However, there ^are steps which could be taken to make it more
difficult for Haitians to run. their cocaine distribution networks in
the United States. One of these might include an immediate review
by the Department of State of visas which have been granted to
Haitians residing in Miami who are suspected of being involved in
the drug trade. For example, two witnesses identified Lionel

19 Biamby testimony, p. 12.

Gash testimony, p. 28.
21 See generally Quintana testimony.
2 2 Gregorie testimony, pp. 183-184.
2 8 Biamby testimony, p. 6.
2 4 Holwill testimony, pp. 53-54.
2 6 Cash testimony, pp. 33-44.
 "73

Wooley as running the Tontons Macoute in Miami and controlling

a major cocaine distribution network. He resides in Miami on a
XJvS. issued visa. His case should be carefully reviewed to determine
whether he has committed acts incompatible with his immigration
status.
In addition, a major effort should be undertaken by drug-enforce-
ment agenfcies to train specialists in the Haitian dialect. There are
few law enforcements officials with this skill, which has been a
major obstacle to^developing effective intelligence operations direct-
ed-at the; Haitian distribution networks.
-Direct, government-to-govemment assistance, with 'the exception
of humanitarian assistance provided through private and voluntary
agencies, should continue to be prohibited to Haiti until legitimate
democratization efforts are underway.
HONDURAS
INTRODUCTION

Honduras has been a transit point for narcotics coming to the

United States since the late 1970's. Its relatively sparse population,
large number of remote dirt airstrips, long coastline and unpoliced
Bay Islands, make it an attractive stopover point halfway between
Cdlombia and the United States. Colombian marijuana smugglers
have used Honduran waters to transfer loads from mother ships to
smaller boats headed for the United States. Colombian cocaine traf-
fickers have used Honduran airstrips for refueling and transship-
ment of cocaine heading north.
In addition, two large recent cocaine seizures demonstrate that
Honduras is being used to repackage narcotics to avoid-detection as
the drugs' come across. theU.S. border. In 1987, Customs, bfficials
seized 2,268 kilograms of cocaine in a shipment of Honduran plan-
tains and 3,629 kilos in a" sMpment of Honduran furniture.1
There is evidence that individuals in the Honduran military,
which controls tire police, have protected the cocaine trade. The
military has dominated the elected civilian government since de-
mocracy was presumably restored in 1981. The Honduran military
has consistently supported U.S. policies in Central America, most
notably the Contra war.
Honduras has received large amounts of U.S. assistance. In 1986,
Honduras was the eighth largest recipient of U.S. foreign assist-
ance, receiving $189 million in loans and grants. The peak year for
U.S. aid to Honduras .was 1985, when the county received $289.1
million of which $73.9 million was in military assistance.2
HISTORY OF NARCOTICS TRAFFICKING I N HONDURAS

Members of the Honduran military leadership became involved

with gun running and smuggling through their relationship with
then-Colonel Noriega. According to Jose Blandon, Colonel Noriega
used his relationship with military intelligence counterparts
11NCSR, State Department, March 1988, p. 128.
2 "Honduras: U.S. Foreign Assistance Facts," by Robert E. Sanchez, Foreign Affairs and Na-
tional Defense Division, Congressional Research Service, updated May 26; 1988, p. 3.
 "74

throughout Central America to protect his arms dealings and his

entry into the drug trade. His counterpart in Honduras, the head
of .the Honduran military intelligence in the late11970's and early
80*s was Colonel Torres-Arias.3 - :
Jose Blandon testified that Noriega drew Torres-Arias and a
close associate of his, Colonel Boden, the commander of an armored
division, into the . business of supplying weapons' to the FMLN
rebels in El Salvador, Several weaponsflights?from Noriega to the
FMLN in Salvador went through Hohduran^territory and were, pro-
tected by Torres-Arias and Boden. When' Blandon was asked
whether he personally knew that weapons were being shipped
through Honduras to the rebels in El Salvador, he responded, Of
course."4, ... . r • :.. •• •
He went on to testify: * ,
. . . Noriega coordinated, meetings in Panama with the
Directorate of the Farabiihdo Marti Front to establish two
routes for the supply of arms to El Salvador, one through
. . . the Gulf of Fonseca and another in the Northrof Hon-
duras called the Ho Chi1 Minh Trail.5
Did you attend any of those meetings? . "" -
• ' Answer1.1 attended both meetings.5 " ' ""• / ••
In .1933, Noriega arranged two meetings between. Torres-Arias,
Bodein and the FMLN rebels. Noriega wanted to have Fidel; Castro
introduce-Torres-Arias and, Boden to the FMLN leadership in oi;der
to facilitate the development of, a direct relationship.6, To conceal
Havana as their real destination, Torres-Arias and Boden said they
were traveling to. visit Noriega in Panama. They wfenl; to Panama
but were then flown to Havana in a Panamanian' military jet for
secret meetings with Castro and th§ FMLN/When the word of the
trips to Havana begaii to circulate among the Honduran inilitary
leadership, Noriega passed the details back, to the CIA,7 News of
the trips caused a scandal which led to the dismissal of both
Torres-Arias and Boden from the Honduran military.
Blandon testified that by 1981, the relationship between Noriega
and Torres-Arias had.expanded into narcotics trafficking.8 Blandon
also testified that , he .had indications that the network of clandes-
tine airstrips in Honduras which was being used to supply the
Honduran-based Contras were being used;by drug planes.®
Honduran coastal waters also have been -used to transfer mari-
juana from mother ships to smaller shrimp boats, for/runs, to the
United' S t a t e s . Convicted smuggler, JJeigh Ritph testified that he
had cargoes .of marijuana transferred'from Colombian mother ships
to their shrimp boats in Honduran waters. Ritch testified that the
shrimp boat they used leaked exactly like the ones the Hondurans
used and blended in with the Honduran fleet. The Colombian
mother ships off-loaded the marijuana to the shrimp boats at night
3 Testimony of Jose Blandon, part 3, April 4,1988, pp. 14-16.

Slbidr -
5 Ibid.
a Ibid., pp. 17-18.
7 Ibid., p. 15.
8 Ibid., p. 15.
8 Ibid., p. 17.
 "75

and the shrimp boats would then head back to the United States.10
Convicted trafficker Michael, Vogel testified that his smuggling
group "was offered the same off-ioading use of Honduran waters.11
While Vogel. testified that he never personally used Honduras, he
was "aware of a group working out of Honduras in conjunction with
the Honduran military.12
Bitch's and Vogel's account of using Honduran waters for the
transshipment of marijuana was confirmed by Tomas Zepeda, the
agent who , opened the first DEA office , in Honduras in ,1981.
Zepeda,. in a Subcommittee deposition,. stated that Honduran
waters were being used for transshipment to a considerable
degree.1-3 : .
_ He went on , to say that such transshipments were protected by
the military. When the DEA would ask the Honduran Navy to
intercept the smugglers' boats, Zepeda said they (Honduran naval
officers) Would: "
. stall for time, identifying a number of problems, lack of
' fuel, the boat would be. unable to operate. And frequently I
,. would have to go: into headquarters and request authoriza-
tion to buy fuel for the patrol boats so we could go out ion
an operation. It was usually after-the fact when we got out
in the patrol area.14 ....
Zepeda also said that he had received information that Torres-
Arias was involved in the drug trade and that he had passed the
information on to Washington.15 According to Zepeda," when
Torres-Arias was replaced i>y General Gustavo Alvarez the corrup-
tion at senior levels of the armed forces "continued. " ?epeda said
that he filed extensive reports on the corruption of this rmlitary by
the drug traffickers and that the corruption made his work in Hon-
duras difficult: '
"It was difficult to conduct an investigation and expect the Hon-
duran authorities1 to assist iri-.arrests when it was them" we were
trying to investigate/' he explained.16 ' v
Without consulting Zepeda, the7 DEA office in Honduras was
closed in, June of 1983 for budgetary reasons." 17 Zepeda said that
if he had been' asked, he woUld have argued that the office should
have stayed in operation. He said that^even though there had not
been ihany arrests* the office had generated a substantial amount
Of useful intelligence, when the office closed, Zepeda was sent to
the Guatemala City .DEA Office, where he continued to spend 70%
of his time dealing with the HoiidtiranVdtfug \j>roSl|an*: Zepeda. tes-
tified that the drug problem in Guatemala was legs severe than the
one in Honduras.18

10 Testimony of Leigh Ritch, Part 2, February 8,1988, p. 63.

11 Deposition of Michael Vogel, March SI, 1988, pp. -24-25.
12 Ibid., p. 32.
1 3 Zepeda Deposition, Part 4, April 6,1986, p. 720.

"Ibid., p. 722.
l s Ibid., p. 720.

"Ibid., pp. 721-723. ^

"Ibid-, p. 724.
18 Ibid., pp. 724-725.
 "76

BUESO ROSA, LATCHINLAN AND NARCO TERRORISM ' -

On October 28, 1984, the FBI seized a shipment of 345 kilos of

cocaine worth an estimated. $40 million on a ,rural airstrip in South
Florida. The proceeds from the sale of cocaine were to have bfeen
used to finance a plot to assassinate-Honduran President Roberto
Suazo Cordoba.19 . . '
Arrested in. the plot were General Jose Bueso^Rosa, who was at
the time the Honduran military attache in Santiago, Chile, Geoard
Latchinian, a Honduran -arms dealer living in Mianiii and •Faiz' Si-
kaffy* a Honduran businessman also living iii Miami; All were
charged with conspiracy to commit murder.2p '
At the time of the arrests, FBI Director William Webster stated:
We don't want international' terrorists to Establish
beachheads or bases for operations in the United Stages
such as they havfe enjoyed for years in other parts of the
world.21
Factual Admissions by the United States in th<§ trial of Oliver
North; released publicly on April 6, 1989, revealed that "in mid-
September, 1986, Lt. "Coll North advised Admiral' Poindexter that
U.S. Ambassador Negroponte, General Gorman; of South Com,
senior CIA official Duane Clarridge, and Lt. Col. North had worked
out arrangements for support of the [Contra] Resistance with Gen-
eral Bueso-Rosa, .a former Honduran military officer wihoihad re-
cently been convicted of offenses in the U.S. Lt. Col, North suggest-
ed that efforts be made on Bueso-Rosa's, behalf Jto deter him from
disclosing details of these covert activities^2
Bueso-Rp|a was subsequently extradited from: Chile to the United
§tates. While Latchinian was conyict^d.;by a federal jury on con-
spiracy changes an$ sentenced , to 30 ,years in ^prison,, Bueso^Rosa
was treated very leniently. He was sentenced to five years at Eglin
Air Forbe Base federal prison..camp in Florida, after senior .U.S.
government. officials attempted to intercede on his behalf since
. . he had "been a "friend to the US..... / involved in helping -us
with the Contras."23 The Justice Department had" objected strenu-
ously to the lenient treatment accorded Bueso-Rosa, arguing that
the .conspiracy , was ,4he "most "significant .case of n^rco-terrorism
yet discovered."24 ,' • ."..
./On. November 21, 1987, Jorge Ochoa was arrested on a highway
in Colombia driving'a $70,000 pori&e owned by Said Speer, a,Hon-
duran Colonel; serving as a military attache in ^Bogota: Said-Sp§er
denied Iolowing Ochoa and said1 that his use " of the car was unau- <-
thorized, "but he could not explain" how he was 'able to purchase
such'an expensive car on the' pay of a Honduran Colonel.25
is "FBI Nips Plot to Kill President of Honduras," By Robert E. Taylor, The Wall Street Jour-
nal, November 3, 1984.
2 0 "Papers Show Drug Link to Suspect in Alleged Plot Against Honduran," by Jon Nord-
heimer, The New York Times, November 3,1984.
2 1 Taylor, op. cit.
3 2 Agreed Statements, U.S. v. North, U.S. District Court, 1988, #102. . .
2 3 Subcommittee testimony of Francis J. McNeil, Part 3, April 4,1988, p. 52. Iran/Contra dep-
osition of Mark M. Richard, Appendix B, Volume 23, August 19, 1987, pp. 122-128
2 4 Ibid., pp. 44-49.
2 5 "Military officers in Honduras are linked to the drug trade," by James Le Moyrie', 'The New
York Times, February 12,1988, p. A1 ;
 "77

On November. 19,1987, a week after authorities in Florida confis-

cated: the largest seizure of drugs ever, in the U.S. (8,000 pounds of
cocaine) which had been packed in hollow furniture in a Honduran
factoiy, £)EA announced plans to reopen its Honduran office;26
' ' " -. V T... .. " , R A M O N MAITABALLESTEROS

•;.' Jh March ;1985, DEA -Agent • Enrique Camarena was kidnapped

ahd-brutally murdered in Mexico. Camarena had been investigat-
ing the-activities of Ramon Matta Ballesteros and Miguel Felix
Gallardo at-the time'of his kidnapping- Both Ballesteros and 'Gal-
ilardo were believed to have been partners in a large cocaine smug-
gling organization-wMch-worked through Mexico to the United
States. Following Camarena's murder, DEA began an intensive
search for Matta. -
Matta was born in Honduras and grew up in an environment of
extreme poverty and illiteracy. As a young man he obtained a false
visa and moved to the United States. He was eventually captured
by immigration officials and deported. He' returned to the United
States where he was sentenced to five years at a minimum security
prison in Florida: Aft;fer serving three and one-half years of his sen-
tence, he bribed his way out. or prison and fled to Mexico where he
joined a, drug smuggling ring. He rdse through the ranks to become
one of 'the'top people in the smuggling organization at the time
DEA. agent Camarena began his inquiry.27
DEA tracked Matta to Cartagena, Colombia where he was arrest-
ed and set for extradition. The Medellin cartel planned ah escape
from the La Picota prison in Bogota but the warden, Aicides Aris-
mendi, blocked their plans.'Ih revenge, the Cartealmurdered Aris-
mendi while his car was stalled in Bogota- traffic. The Carters
^second-attempt at rescuing Matta was successful.- They paid $2 mil-
lion in bribes" to the prison guards and Matta walked out of jail and
flew -to Tegucigalpa-.- Once- back, in Honduras, he surrendered to au-
thorities "on outstanding -murder charges. He was subsequently
found innocent and resumed a "normal" life. He believed^ that he
was safe from extradition to the United States because the Hondu-
ran constitution forbids the extradition of Honduran nationals.
..Matta, who had been characterized by U.S. Customs officials as a
class 1 DBA violator, quickly become- one of Tegucigalpa's leading
citizens. He helped establish an airline company, SETCO, which
among other services provided cargo transport services for contras
based in Honduras.?8 He took up residence on k la^ge estate and
began giving money to the poor. At the same time, U.S. law en-
forcement officials believed that he began running his cocaine
smuggling operation from Tegucigalpa, Their suspicions about his
activities increased as the result of two large seizures of cocaine
from Honduras in South Florida. The seizures, which ^totaled more
.than 5,000 kilos were both concealed in containers shipped from
Honduras to the United States.

2 0 U.S. looks at Honduras as drug transfer point; DEA reopening office in Tegucigalpa," The
Washington Post, By Wilson Ring, December 7, 1987, p. A2. INSCR U.SV Department of State,
INM Bureau, March 1988, p. 128-129. ^
2 7 "U.S. grills Honduran drug lord" Dave von Drehle, Miami Herald, p. 1 April 7,1988.
2 8 U.S. Customs Investigation Report, May 9,1983, pp. B-10.
 '78

In addition, convicted smuggler Michael Vogel stated that in -the

-course-of/his drug-trafficking and looking into the possibility of
trafficking1 through Honduras, "he wasinformed that an individual
named Matta was the Cartel's point-man in Honduras specifidally
and Central America generally, apd that to engage in any narcot-
ics activity in Honduras one had to have his cooperation.29
Despite his connection-to the Camarena murderandhis ' widely
suspected drug dealing^ the. United;rStates did not pressure;,,the
Honduran government to take steps tQaexpel him from the country
or curb his activities until. Aprtt 1988. Oh1 April 5, 1988, the mili-
tary arrested him and expelled : him. from the country by ^putting
him. on a plane to the Dominican Republic. Upon arrival in the Do-
minican. Republic, he'was put on a plane to Miami with American
authorities who arrested his as soon as the plane was in American
airspace. The arrest occurred on the eve of Zepeda's scheduled tes-
timony before the Subcommittee.. . •.
RIGOBERTO REGALADO LARA • ..

On May 16, 1988, the Honduran Ambassador to .Panama was or-

dered held without bond in Miami after. U.S.'Customs agents fou^d
nearly 26 pounds of cocaine in his luggkge. -J .; ; v\ ,;"
The Ambassador, Rigoberto Regaladp Lara, a retired Honduran
army Colonel arid step-brother ofthe Honduran armed, forces* com-
mander-in-chief, had been Ambassador to Panama since 1986. In
response ,tothe arrest, the Honduran government notified U.S.^ au-
thorities that Regalado's diplomatic immunity had been suspended,
allowing Regalado to be prosecuted under the laws of the United
States.' •. ' • v
Regalado had arriyed at Miami International Airport from Tegu-
cigalpa on a TAN Airlines flight on May l5. ,A Customs inspector
checking his luggage found the cocaine inside 10 packages sur-
rounded by coffee and wrapped in plastic; concealed inside pant
legs and other clothing in his suitcase:8® ' .
POLICY ISSUES

A review of the hiltory of gim running ahd drug trafficking

through Honduras suggests that elements of the Hondiiran mili-
tary were involved in the shipment of weapons-to the FMLN In El
Salvador and in the protection of drug traffickers from 1980 on.
These activities were reported to appropriate U.S. government offi-'
cials throughout the period. . . "
• Instead of moving decisively to close down the drug trafficking
by stepping up the DEA presence in the country and using the for-
eign assistance the United States was extending to the Hohdurans
as a lever, the United States closed the DEA office in Tegucigalpa
and appears to have ignored the issue. Little public attention..was
focused on the presence of Matta Ball&steros in the country until
the February 1988 New York Times article.31

20 Ibid., pp. 32-33.

30 "Ambassador held .on drug-charge," The Miami Herald, May 17, 1988.
31 "Le Moyne, New York Times, op. cit.
 "79

Moreover, as previously noted, when a former Honduran mili-

tary officer .who has assisted the United States in the Contra war
against Nicaragua became involved in a "narco-terrorist" plot to
kill the; elected president of Honduras, high officials of the U S.
government interceded in an effort to get his sentence reduced.
Denying weapons to the FMLN was a major U.S. policy objective
in the early 19§0's. It was so important that it became , a central
issue in United States-Nicaraguan relations and became a justifica-
tion for various U.S. supported actions against the Sandinistas.
As in the case of Panama, it appears that a compelling factor in
United States-Honduran relations was support for American policy
in the region, especially support for the Contra war. As long as the
Honduran government provided that support, the other issues were
of secondary importance. ••
:PANAMA *,
INTRODUCTION

The indictment of General Manuel'Antonio Noriega on federal

narcotics charges in late January, 1988, did not come as a surprise
to either the Executive Branch or the Congress.
By the time General Noriega was. indicted, the United States
government had received substantial information about the crimi-
nal involvement of top Panamanian officials for nearly twenty
years and done little to respond.
The failure of U.S. officials to act was largely the result of the
relationships Panamanian officials had developed with U.S. intelli-
gence ;*and law enforcement agencies in performing services for
them on a variety of-matters, including drug^ enforcement. It was
also a consequence of the desire of US officials to maintain good
relations with the Panamanian government during" the negotation
and ratification period of the new Panama Canal Treaties during
the Nixon-Ford and Carter Administrations. And it was a conse-
quence of General Noriega's provision of Panamanian help with
the Contras during the Reagan Administration.
The Subcommittee has reached these conclusions on the basis of
sworn testimony from former U.S. officials responsible for handling
U.S. policy toward Panama, Panamanian officials who formerly
worked with General Noriega, and drug traffickers who had been
in the narcotics business with the Panamanian dictator. The testi-
mony of both the former Panamanian officials and the drug traf-
fickers associated with Noriega were, used by the federal govern-
ment as the basis for the Noriega indictments. In; addition, the Sub-
committee received testimony from drug traffickers who entered
into agreements with General Noriega to move drugs or launder
money. > r1
Significant information-essential to reaching a more complete
understanding of the evolution of US policy to Noriega has been
kept from the Congress by the Executive Branch. In April, 1988,
Senator Kerry asked the General Accounting Office to review rele-
vant files in the U.S. agencies involved with Panama policy to de-
termine the process by which that -policy was made. Iji July, the
National Security Council denied the GAO access to the files neces-
 "80

sary to complete the job on the grounds of national security. The

NSC ordered all relevant agencies to withhold their files on
Panama from the GAO. As a consequence, the Subcommittee has
hot been able to undertake a full analysis of how the Noriega prob-
lem was handled by the U.S. prior to his indictment.
The Subcommittee believes it is essential that t^e new Adminis-
tration make it possible for the GAO to follow through with its
review of past U.S. policy toward Panama.1
' / ORIGINS OP CORRUPTION IN M O N E Y LAUNDERING

Until 1968, Panamanian politics were; dominated by a small

group of leading families which controUed the economic and politi-
cal life in the country. Key decisions were made by coalitions of po-
litical parties which worked out disputes among these elites.2
Omar Torrijos, a populist general, changed the system in 1968,
when he led a coup against the civilian government and put him-
self in charge of the country. The military took control of the polit-
ical system, and began to integrate the urban lower classes and the
rural peasants into the political and economic mainstream of Pana-
manian society.® , .TV .
Torrijos then turned his attention to developing the Panamanian
economy. These efforts included the < development of Panama as an
international banking; center. Torrijos was advised that Panama
could simultaneously become a tax. haven by eliminating incpme
taxes and a bank haven by developing strict bank secrecy laws
along the lines of Switzerland. By using the U:S. dollar as its offi?
cial currency and developing a legal system" which allows the for-
mation of "bearer share'' anonymous corporafions, Panama could
become an ideal site for peoplerand -ihstitutions ^from around the
worlds to deposit their money without i having to worry about con-
vertibility, taxation; or disclosure.4
During the late 1970's and early 1980's, . illegal dollars began to
enter Panama/via private planes,\by private couriers, in passenger
suitcases on commercial flights, and as air-freight Eventually, this
activity was facilitated by the Panamanian'military, who super-
vised the off-loading of cash into armored oars.5 <
By the end of the Carter Administration, U.S.* intelligence had
begun to recognize Panama's increasing importance as a center for
laundering U.S. currency. By the early 1980's, the Central Intelli-
gence Agency suspected that Panamanian officials were involved in.
facilitating money laundering for drug traffickers.9 U.S. policy
makers did not take any-steps in response to this evidence, "howev-
er, and official corruption in Panama spread from money launder-
ing to a wide array of criminal activities, including narcotics traf-
ficking by public officials, their relatives and associates.

See GAO-NSC correspondence'.

1 '
"Panama's Political Crisis: Prospects and U.S. Policy .Concerns/' CRS Issue Brief, June 16,
2
1988, p. 2.
3 Ibid. , , . . .
See Subcommittee testimony of Martin Mayer, Part 3, April 5,1988, pp. 67-68. x
5 Subcommittee testimony of George-Morales, Part S„ April 7, 1988, pp. 293-294; .Leigh Ritch,
Part 2, February 8,198S, pp. 66-68; Ramon Milian Rodriguez, Part 2, p. 247. .
8 Subcommittee testimony of Admiral Murphy, Part 4, July 14,1988, p. 239.
 "81

Prior to Torrijo's death, in 1981, Noriega began providing money

laundering services for the Colombian cocaine traffickers: through
their Miami accountant and money launderer, Ramon Milian Rod-
riguez. Milian Rodriguez testified that he had;begun to rely on
Panamanian Defense Force officials to assist him in laundering
money from 1976 through 1979, before reaching a personal agree-
ment regarding the handling of drug money with Noriega in 1979.
Milian .Rodriguez testified that at that meeting in 1979, he negoti-
ated an agreement on behalf of the :Medellin Cartel under which
Noriega received a commission for providing security and related
services for the drug money, ranging from one-half of one percent
to ten percent, depending on the services performed.7
According to Milian Rodriguez, between 1979 and 1983} the PDF
helped theMedellin cartel launder billions of dollars through
Panama, meeting airplanes .filled with Cartel money from Miami
at the Panamanian airport, guarding the money as it was loaded
into armored cars, and delivering the money to the Banco National
de Panama.8
Milian Rodriguez testified that in May 1983, Noriega decided to
eliminate him as a middle-man for laundering cartel drug money.
Noriega arranged to have information ,£ibout the money laundering
activities of Milian Rodriguez passed , on to the DEA. The tip result-
ed in Milian Rodriguez' krrest by the Customs Service and the end
of his money laundering career. Milian Rodriguez beHeved Noriega;
had him arrested to allow "Noriega's cronies", to take control of
the money laundering business, an assertion corroborated by Jose
Blandon. in earlier testimony before the Subcommittee.® The asser-
tion is further corroborated by a letter that DEA Special Agent
James L. Bramble wrote Jtforiega on July 15,1983 to thank him "for
assisting in the investigation of Milian Rodrignez.10
Shortly after Milian Rodriguez7 arrest in 1983, Cesar "Rodriguez, a
member of Noriega's "civilian group," began referring: drug traf-
fickers with currency to launder to the Bank of Credit and Com-
merce International branch in Panama.1} BCCI had opened a
branch-in Panama "in 1980, following a period during which its
London staff cultivated relationships with then President Royo,
General Torrijos and Colonel Noriega.1^ Amjad Awan, a BCCI offi-
cer who had entertained a number of the Panamanians in^ London,
became the BCCI's Panamanian branch manager,13
In sworn testimony taken by the Subcommittee, Amjad Awan
denied the allegations, that he or the BCCI branch in Panama han-
dled money from drug dealers,14 However, the bank: 1MS acknowl-
edged having an account relationship with Cesar Rodriguez which
included multi-million dollar loans. Furthermore, ^twan's subse-
quent indictment on money laundering charges in Tampa suggests

7 Subcommittee testimony of Milian Rodriguez, Part 2, pp. 230-231.

8 Ibid., pp. 227-228.
0 Testimony of Ramon Milian Rodriguez, Part 2, Feb. 11, 1988, pp. 254-255, Blandom Part 3,
April 4,1988, pp. 26-27.
10 See The Washington Post, April 3, 1989, "Panamanians Arrest 5 Accused in Drug Ring, A-
35. • - -
11 Subcommittee testimony of Leigh Ritch, Part 2, Feb. 8,1988, p. 70.
12 Deposition of Any ad Awan, Part 4. Sept 30,1988, pp. 470-471.
1 3 Ibid., p. 472.
»4 Ibid., p. 513.
 "82

he lied to the Subcommittee about his role in the money launder-

ing business.-His testimony on this subject has been referred to the
U.S. Attorney forpossibleprosecution fbrperjury.; _
.. According to Awan and officials of the bank, in 1982 'Noriega
opened an account at BGCI with large amounts of cash. The ac-
count gradually grew to abound" $20 million through deposits of sev-
eral hundred-thousand dollars in cash at a time.- Noriega instruct-
ed the bank-to keep^the records of the account away from Panama-
nian nationals^ and to bookHhe account-outside of-the country.15
-Noriega then used the account-to make" cash payments to Pana-
manian politicalfigures.Awan said that he assumed that the pay-
ments were being made in connection with the presidential elec-
tion scheduled for 1984. He Said Noriega gave the politicians hand-
written notes which instructed the bank tcrhand over to them cer-
tain amounts of cash; Noriega then called the bank to say that
someone would be^ coming by with a note of instruction, and Awan
would give the cash to the person with the note.16
.; EARLY P A N A M A N I A N INVOLVEMENT IN NARCOTICS

The Panamanian military first formed ties with drug traffickers

in the early 1970's. According to press account^, these initial con-
tacts were rioted , bv the US Bureau of Narcotics and Dangerous
Drugs (the "BNDD), which identified Noriega, £hen in charge of
Panamanian military intelligence, as working with the traffick-
ers.17 . . "
; Ih 1972, while the United States was negotiating with Panama
ov^r thefiiturecontrol of the Canal, the brother of the late Gener-
al Omar Tomjos, Moises Tprrijos, was indicted for smuggling 'drugs
in Panamaniaii diplomatic pouches: U.S. law enforcement authori-
ties learned that he was planning to transit .the Canal Zone, which
at that time was under U.S.' jurisdiction, and made plaris to have
him , arrested. However, General Torrijos was alerted, that his
brother was about to be arrested as soon as he entered the Canal
Zone. It was this tip that allowed Moises-'Torrijos to escape cap-
ture.18 . - . <
During consideration of tb.e Panama 'Canal Treaties, the Senate
Select Committee on Intelligence was asked to evaluate narcotics
intelligence on Panamanian involvement ih the drug trade. The
Committee's then-Chairman, Senator Birch Bayh, reported to the
Senate on the BNDD'sevidence Of involvement of prominent Pana-
manians in drug trafficking. Among 'those cited by Bayh were Gen-
eral Torrijds' brother, Moises TOrrijos, then-Foreign Minister Juan
Tack, who was said to have signed the1 diplomatic passports of. drug
smugglers, and Raphael Richard Gonzalez, the son of the then-Pan-
amanian Ambassador to Taiwan.19 Moises Torrijos5 drug traffick-
ing was cited by some Senators as justification for voting, against
the Treaty.20
15 Ibid., pp. 477-479. .. • •« -
"-Ibid.1,top. 479-480. -
17 See Panamanian military officers deemed drug traffickers," Knut Royce, The Times-
Union, Albany, New York, June 10,1988, p. A-l.* -
18 Congressional Record, Feb. 22,1989, p. S4115. - ^
« Senate Congressional Record, Feb. 21,1978, S3980-3981.
2 0 Congressional Record Feb. 21,1978, pp. S3975-3988.
 "83

After the passage of the Treaty* no further action was taken by

the US to respond to the drug-related corruption in Panama.
Indeed,, the issue of official corruption in Panama faded from
public prominence until Noriega took power following the death of
Torrijos in a plane crash on July 31,1981.
NORIEGA'S CORRUPTION OF P A N A M A N I A N INSTITUTIONS

The first ties between the Panamanian military and narcotics

traffickers tookplace while.General Torrijos was still alive.21 How-
ever, as General Noriega consolidated his power, the narcotics situ-
ation in Panama grew significantly more serious. As a conse-
quence, the military took increasing control of Panama's most im-
portant institutions, and used them not only to generate revenue
for PDF officials, but also to exercise control over the drug trade.22
Noriega gained control of the Customs, Immigration and Pass-
port Services, Civil Aeronautics, the National Bank of Panama and
the Attorney GeneraTs Office, which together represented the
major Panamanian institutions with jurisdiction over the narcotics
tirade. Noriega pushed legislation through the National Assembly
consolidating the National Guard, Air Force, Navy, police, and Cus-
toms under a single command called, the Panamanian Defense
Forces (PDF).23 ^
. As head of the PDF, Noriega now controlled all elements of the
Panamanian government essential to the protection of drug traf-
ficking and money laundering, thus accomplishing two goals simul-
taneously—increasing his control over Panama and Enriching him-
self. Noriega had turned Panama^ political system into what one
Witness, termed a "narcokleptocracy," a political system in which
Panamanian government became controlled by personal loyalties
to Noriega, cemented by graft and corruption, and substantially
funded with narcotics money.24 v .
According to Noriega's former political advisor, Jose Blandon,
and Ms former personal pilot, Floyd Carlton, Noriega's partners in
corruption in Panama ultimately included many of the PDF's top
officials. Among them were: Major Nivaldp Madrinan, chief .of the
National Department of Investigations; Major 'Luis Cor&oba, Chief
of the Transportation Department of Panama; Major Luis del Cid,
Commander, Chiriqui Region, an area used by drug smugglers for
their operations; Major Cleto Hernandez, who simultaneously
served as Chief of the Panama Penitentiary and as a liaison with
the drug dealers; Major Jaime Benitez, Commander, Colon Region;
Major Rafael Cederio, Noriega's personal assistant; Major Hilario
Trujillo, Commander of the Central Zone; and'Captain Luis Quiel,
whom Noriega simultaneously placed, in chairge (^Panama's anti-
drug smuggling unit and as a liaison to the Medellin cartel. Iron-
ically, Quiel was at the same time Noriega's representative to the
DEA, and thus in a position to alert the drug traffickers to what-
ever information the DEA had provided him.25

Subcommittee Testimony of Carlton, Part 2, February 10,1988, p. 216.

2 2 Ibid ; -
» 3 Blandon, Part 2, February 9, i988, pp. 101-102.
at Milian Rodriguez, Part 2, p. 255; Blandon, Part 2, p. 14B.
2a Blandon, Part 2, pp. 91-93; Blandon Memorandum to Subcommittee, Feb. 8, 1988; Carlton,
Part 2, p. 213. -
 "84

Blandon told the Subcommittee that a groUp of officers from the

Panamanian Air -Force also participated in drug trafficking, for
Noriega, among them Colonel Alberto Purcell, Lt. Col. Lorenzo
Purcell, and Major Alberto Fundora, as well: as Air Force Chief Of
Staff Marcos Justines, all Of whom 'enjoyed'the profits of the smug-
gling operations.26 ^ ;/' , . . . .
In addition to these military groups, Noriega also worked closely
with a group of non-inilitary personnel who became known as *the
civilian group/'. This group, which:-included his personal pilots; en-
gaged in a variety of criminal activities at Noriega's direction.
Prominent members of this group wholiandled illicit operations for
Noriega included Enrique Pretelt,- Ricardo Bilonik, John and Jorge
Krupnick, Carlos Wittgreen, George Novey III, Cesar Rodriguez,
and Floyd Carlton.27 ~ •••• > 5
; NORIEGA'S INVOLVEMENT IN THE A R M S BUSINESS

Even before Torrijo's death, Noriega had been active in the gray
market'arms business, using his control of the government security
apparatus to arrange Panamanian end user , certificates which le-
gitimized thie shipment of arms to Panama. Once in Panama, Nor-
iega would "sell the weapons to whomever bid the most-for them. 28
His earliest clients included the . Sandinistas who' were then
trying to overthrow the Nicaraguan government of Anast&sio
Somoza.29 The weapons were purchased in Europe by Michael
Eiarari and Jorge Krupnick, who. worked with Noriega.30 The arms
were moved to Costa Rica for shipment to the Sandinistas under
the eye of Noriega's partner, Costa Rican Security Minister Johnny
Echevarria. Although many weapons were in fact soldto the Sandi-
nistas, many more wound up in storage in. Costa Rica when the
Sandinista war ended in 1979.31 ' .
According to Floyd Carlton, a partner of Cesar Rodriguez and
pilot for Noriega, the excess weapons were .then marketed by
Panama to the rebels in El Salvador.32
Carlton and his partner Cesar Rodriguez flew the guns into El
Salvador in 1980 using Panamanian military aircraft. One one of
the trips, Rodriguez' plane was damaged, on takeoff and crashed
when he tried to land in El Salvador. Carlton, who flew a second
plane on the same delivery mission, pulled Cesar Rodriguez from
the wreckage, put him in his plane and flew to Panama where they J
both.went into hiding.33 . : , 5

; When Salvadoran officials discovered the wreckage of the Pana-

manian,, Defense Forces plane, the" origin of the weapons for the
rebels was obvious. According to Blandon, the Salvadoran govern-
ment formally protested to Torrijos about the weapons deliveries,

26 Blandon Memorandum to Subcommittee^ Feb. 8,1988.

27 Blandon, Pari 2, p. 91; see.also testimony of Steven M. Kalish, SenatesPermanent Subcom- J
mittee on Investigations, January 28,1988; and Blandon Memorandum to Subcommittee, Feb. 8,
1988.
2 8 Blandon, ibid., pp. 86,138.
20 Ibid.
3 0 Subcommittee Testimony of Jose Blandon, Part 2, February 9,1988, pp. 93-94,140. •
3 1 Blandon, Part 2, Feb. 9,1988, pp. 139-140 and Testimony of Francis McNeil. Part 3: April 4.
1988 p 53 %
32 'Subcommittee-testimony of Carlton, Part'2, Feb. 10,1988, p. 193.
33 Carlton, Part 2, February 10, 1988, pp. 193-195.
 "85

and the; General conduct a superficial inquiry that failed to ex-

plain the incident34 * - .
According to Carlton, me political crisis caused by the.crash sub-
sided and the Noriega weapons continued to expand. Noriega used
his!, contacts.jwith. military intelligence counterparts in the region to
find and develop weapons markets which he could supply profit-
ably. - .- . ., V
One such inarket _ became the Contras. With the; El Salvador
tirade slowing,' Noriega put hfe. pilots to work flying weapons from
Panama: to .Costa Rica for the Contras. According-to Werner Lotz,
jnany of the pilots moved mixed cargoes of guns and drugs to the
bases in Costa Rica, dropped off the guns and flew on to the United
States with drugs.35 - • • .
.Noriega alio developed other criminal enterpriseis to supplement
the revenues'he was receiving, from money laundering, weapons
deals, and narcotics. Among Noriega's business interests were rela-
tionships with. companies operating in the Colon "free zone,"
opened in 1953-as a center for duty free transshipment of goods in
and out"of Panama.36'' ' .. .
Npriega allowed the Cuban government to establish companies in
tHfe zone. The .feompMie^ 'repacl^ed^^mbargoed Cuban goods for
export'to the United States and imported prohibited high technolo-
gy goods from the United Stated for re-export to Cuba. The trade in
Cuban seafood through Panama to tHe U.S. became particularly
large.37 - ' _ r. _
Other Noriega business interests have included a company
owned by Noriega's brother-in-law Ramon Serio, called Marinac,
which has had the monopoly on all identity cards for seamen in
the Panamanian merchant marine. The identity card business pro-
duces more'than $20 million a year.88 According to Blandon, Nor-
iega also controlled the liquor concessions at the Panamanian air-
ports, the leather export monopoly, the company controlling the
free zone, a television station, a number of banks, and a variety of
other businesses.39
NORIEGA AND THE CARTEL

According to Milian-Rodriguezj the cartel chose to deal .with Nor-

iega rather than other corrupt officers of equal rank because they
believed Noriega alone was in the position to provide them with
both the intelligence and protection they needed.40
By i mid-1982, Noriega' was working with the" Medellin cocaine
cartel oh severalfronts.First, lie was laundering their drug money
through the agreement negotiated by Milian Rodriguez*- Second, he
permitted the cartel to establish processing plants in (Panama, in-
cluding one in the province of El Darien in La Palma, near the Co-
lombian border. The plant was built as the result of an agreement

a4 Carlton, Part 2, February 10,1988, pp. 193-195.

35 Lotz Deposition, Part 4, April 8,1988, pp. 682-684.
as Blandon, Part 2, pp. 93-99; for free zone's status and history,- see Area Handbook for
Panama, Foreign Area Studies Department, American University, 1972, p. 329.
3 7 Blandon,. Part-2> Feb. 9^1988, pp. 84-85, p. 93,
3 8 Blandon, Part 2, Feb. 9,1988, p. 95.
3 8 Ibid., pp. 98-99, •
4 0 Closed Testimony of Milian Rodriguez, June 25,1987, p. 88. ^
 "86

negotiated on Noriega's behalf by1 Lt; Colonel Julian Borbua Melo

of the Panamanian National Guard. Third, he began to use mem-
bers of his "civilian group" to smuggle narcotics directly.411 ^
In 1982, Floyd "Carlton was botli a" member :of General Noriega's
• "civilian group" and." General Noriega's personal i>ildt. In 1986,
Carlton was%rrested by the' United States, and convicted on nar-
cotics charges. In 1987, Carlton became a principal, witness against
Noriega:- in. th& Grand Jury case brought^in the Southern District of
f^o&dS-that-led t o - •*?'. !
Carlton -described in detail to' the Siibcommittee how he estab-
lished a narcotics trafficking business, on Noriega's behaif1 with the
Medellin cartel. f - • ; : "
Carlton testified that he entered th^ business 0f smuggling co-
:
caine' in mid-1982 while working as Konega'^'pierson^lpilot..Carl-
ton said that he'had several meetings with Pablo Escobar and Gus-
tavo Gavera,:'-tWo leadefs of the cartel, who asked him to smuggle
cocaine froip Colombia: into Panama for the cartel:Carlton initially
declined, but changed his mind after discussing the matter; with
Noriega a few weeks later. „r , . . •
.•
J Carlton testified' that on his second meeting* with Escobar, Esco-
bar offered to pay Noriega $30,00,0 to: $40,000 .per load of cocaine,
and Carlton $400 per kilo. According to Carlton, Noriega' advised
Carlton that this was too little, £hd that he wanted $100,000 for the
first trip "in advance. The cartel agreed. Ultimately, Noriega was
paid $100,000 for Carlton'sfirstflighty$150,000 for Carlton's second
flight $200,000 for Carlton's third flight of cocaine, and $250,000 for
Carlton's fourth flight of cocaine.42 , .. ^
Carlton testified that he was only ;one of Noriega's several part-
ners in drjiig trafficking. Among, others wer§ Cesar Rodriguez, a
drUg pilot who obtained the planes needed to smuggle narcotics
from among those seized by the Panamanian government from
other traffickers.43 . .
NORIEGA'S RIFT W I T H THE CARTEL

In May, 1984, on the day of the Panamanian elections, the lead-

ers of the Medellin cartel came to Panama to meet with the former
president of the country, Lopez Michelsen. They had engineered
the assassination of the, Colombian Minister of Justice, Lara Bo-
nilla, a week earlier, and needed protection and asylum until the
furor , died down.44 Noriega told asspciates that thecartel paid be-
tween,$4 million and $7 million for Noriega's protection of individ-
uals in the Cartel during this period.45 --.;--'
.However by paid-May, Noriega became concerned about the pres-
sure he was receiving from U.S. law'enforement personnel concern-
ing the cocaine processing plant he had allowed the cartel to estab-
lish in Darien, Panama.46 Now that he was harboring the cartel

41 Blandon, Part 2, Feb. 9,1988, pp. 8S, 101-102. - - ,

42 Subcommittee -testimony, of Carlton,- Part 2, February 10,1988, pp. 188-190. -
43 Subcommittee testimony of Carlton, Part 2,Feb.-10,1988;' p. 191'. ' .. . ' -"'
4 * Subcommittee testimony of Blandon, Part 2, Feb. 9,1988; pp. 101,103- Carlton, Part 2, Feb.
10,1988, p. 197. ' '
4 5 Blandon, ibid., pp. 101,103; Carlton, ibid., pp. 197-199. ,
4 6 Carlton, ibid., p. 199.
 "87

leaders, Noriega feared that if he allowed Darien to remain open,

the'U.S. might recognize that he had become a partner of the Me-
dellin cartel. He therefore decided to allow the Panamanian de-
fense forces to conduct a raid oh the cartel's cocaine processing
plant at Darien. Twenty-three of the cartel's personnel were cap-
tured in the raid, and the plant and equipment were seized.47
Blandon testified that the Medellin cartel had paid Noriega $5
million to protect the plant, in addition to protection money for
harboring them from Colombian justice. The cartel leaders felt
Noriega . had betrayed them and began planning his assassina-
tion.48 Noriega, who was travelling, in Israel, learned of the plot
and decided to stay in London until arrangements could be made
through Fidel Castro to rescind the cartel's order to have bdm
killed. v
Blandon testified that Noriega personally sent him to meet with
Castro to solve the problem with the cartel. Blandon said that
Castro proposed a solution whereby the $5 million would be re-
turned to the cartel along with the machinery for the plant. The 23
persons arrested in the raid on, Darien would be released. Noriega
agreed to the terms proposed by Castro. The 23 people were deport-
ed, and the Panamanian government dropped the criminal cases
against the cartel's employees.49
NORIEGA'S U . S . PARTNERS

By 1983, Noriega's willingness to become an active -participant in

narcotics trafficking. became known among U.S. drug traffickers,
who began to approach him for assistance in moving narcotics
through Panama to the United States.
One American partner of General Noriega was the Ritch-Kalish
organization,., which smuggled significant quantities of marijuana
into the U.S. -over a period Of -more than a decade. Initially, the
Ritch-Kalish organization had used the Cayman Islands to launder
money. After learning that the PDF and General Noriega were
making Panama available to narcotics traffickers, the organization
approached Noriega and paid him a $300,000 cash bribe in Septem-
ber, 1983. Noriega allowed the organization to use Panama as its
base, permitted the drug traffickers to purchase a residence near
one of his own personal homes, and ultimately entered into a full
partnership with the organization.&0
Noriega invited Kalish to become a partner in Servicios Turisti-
cos, a business operated by "civilian group" members Rodriguez
and Pretelt as well as Noriega/Kalish- made a $400,000 payment
for 25 percent of the stock of the company, of which half went to"
Noriega. By the end of 1983, Kalish was negotiating^or Noriega on
the purchase of airplanes, including a Boeing 727- to be used by
Noriega for money laundering. According to Kalish, Noriega'in-
tended to use that plane to fly money out of Washington, D.C.
under diplomatic cover.51

Carlton, ibid., Blandon, ibid., pp. 101-106.

48 Blandon, ibid., pp. 101-102.
49 Blandon, ibid., pp. 101-106.
5 0 Testimony of John Kalish, Senate Permanent Subcommittee on Investigations, Jan. 28,
1988, p. 4.
5 1 Ibid., pp. 5-8. v/
 "88

In return for such favors, Noriega provided the Kalish drug

smuggling organization with military protection and favorable
treatment. Kalish himself received, three Panamanian passports,
including one .Panamanian diplomatic passport., Noriega continued
to work, with Kalish in drug smuggling operations until Kalish's
arrest and incarceration in Tampa, Florida on July 26,. 1984.52
" U . S . KNOWLEDGE OF NORIEGA'S ACTIVITIES

As a consequehce of the 'NSC's decision: to proMbit GAO investi-

gators from receiving information regarding US policymaking on
Noriega and narcotics, the Subcommittee cannot definitely deter-
mine what U.S. agencies knew about Noriega and when they !knew
it. (The GAO's report to the Subcommittee Chairman regarding the
status of its inquiry, as well as a chronology of the GAO's^attempt
to reach agreement with the various agencies of the U.S.^govern-
ihent in compiling the information oh General Noriega requested
by the Congress, are included as ah appendix to this report.)
However, it is clear from the testimony5 of a number of witnesses
"before the Subcommittee that Noriega s activities in connection
with narcotics'had become widely known within L^tin America by
the mid-1980's.53 ' . . . ;.. ' •
This knowledge extended to some of Noriega's political opponents
in Panama. By 1984, a prominent member of th& Panamanian op-
position, Dr. Hugo Spadafora, began to publicly criticize Noriega
for working with Colombian traffickers in the-narcotics business.
Subcommittee witnesses testified - that Noriega arranged iri re-
sponse. to have Spadafora tortured and; murdered by members of
the Panamanian Defense Forces in September 1985; The involve-
ment of the PDF-:was confirmed by a number of sources, including
Noriega's personal pilot, Carlton and- Blandon. The murder >of "Spa-
dafora focused further attention in Panama pn Noriega's involve-
ment with narcotics and related activities.54 1
The most detailed* account of the evolution of U.S. policy toward
Noriega provided the Subcommittee came from Francis J. McNeil,
a career State Department Official -who had been Ambassador to
Costa Rica from 1980 through 1983 and Deputy Assistant Secretary
of the Intelligence and Research Bureau at State.
According to McNeil, the State Department never trusted Nor-
iega,. referring to him "early Oh" as --the rent-a-cOlonel, in tribute
to his ability to simultaneously milk the antagonistic intelligence
services of the United States." 5 5 - •
McNeil characterized Noriega's relationship with American in-
telligence agencies as too "cozy,'Meading our intelligence agencies
to depend on-him and Panamanian intelligence for handouts, and
treating Noriega assan allied service. McNeil stated that the conse-
quence was that the U.S. took a "see no evil approach" to Noriega,
which was a "true intelligence failure, the accountability for which

52 Ibid.
53 Subcommittee testimony of Ritch, Part 2, pp. 65-69; Bljandon, Part 2, pp. 112-113;. Camper,
Part 4, pp. 292-293; see testimony of Dr. Norman Baily, House Select Committee on Narcotics
Abuse and Contril, March 28,1988, pp. 5-8. / v -
B4 Subcommittee testimony of Floyd Carlton, Part 2, Feb. 10, 1988, p,'202;- McNeil Prepared
Statement, Part 3', p. 222. "
5 5 McNeil Prepared Statement, Part 3, p. 318. ... v
 "89

rests with the intelligence folk who had become Noriega's cli-
ents." 56
McNeil described how in 1980 the U.S. was aware that Cesar Ro-
driguez was engaged in smuggling guns to Salvadoran rebels while
smuggling drugs to the U.S. The U.S. complained to General Torri-
jos, who in turn ordered Panamanian officials to "knock it off."
The consequence was "a dimumtion of Panamanian involvement"
until Torrijos' death.57
According to McNeil, the Spadafora murder and the exposure of
the involvement of a PDF officer in cocaine trafficking "had upped
the pressure oh narcotics," although the US still had not confront-
ed Noriega directly On these problems.58
On' June 13, 1986, a lengthy article appeared in the New York
Times describing Noriega's narcotics trafficking, quoting unnamed
White House and. Administration officials. After the article ap-
peared, the State Department commissioned an investigation of the
charges, which concluded that Noriega ran Panama, that Noriega
was corrupt, :and that "we know for certain PDF officials are in-
volved in the cocaine trade but we don't have that evidence on
Noriega." According to McNeil, the analysis" recognized that "not a
sparrow falls [in Panama] without him taking a feather," and that
"Noriega has to know [about the drug trafficking] and is likely get-
ting a share." 59 -
, McNeil testified that a formal policy review took place shortly
thereafter in 1986. The participants in the review included the
Manama Regional Interagency Group, and representatives of the
CIA, State Department and Defense Department. At the meeting
"several of us suggested in different wayis that the Noriega issue
wasn't going to go away if for no other reason than narcotics."
However, after the meeting, "a decision was made to put Noriega
on the shelf until Nicaragua was settled."60
Assistant Secretary of State for Inter-American Affairs, Elliott
Abrams, in a public statement, subsequently denied McNeil's asser-
tion that the U.S. delay responding to the Noriega drug problem
because of Nicaragua. r
Other US officials who testified before the Subcommittee gave
conflicting accounts of when the U.S. first had information about
Noriega's involvement in narcotics.
- According to a DEA agent based in South America, the U.S. first
received reports linking Noriega and narcotics before 1978.61 Ac-
cording to this" official, Col. Noriega and Gen. Omar Torrijos were
then seen visiting Medellin where they were met by drug traffick-
ers. This trip'and subsequent trips to Colombia by Noriega and.
Torrijos were reported to DEA headquarters.62
By 1980 or 1981, according to Nestor Sanchez, the CIA liaison for
Central America, U.S. officials were aware of "rumors" that the
Panamanian Defense Forces and government officials were in-

56 Ibid., p. 819.
57 McNeil Prepared Statement, ibid, pp. 320-321.
s« McNeil Prepared Statement; ibid, Vol 3, p. 323.
5 9 Ibid., p. 323.
6 0 Subcommittee testimony of McNeil, Part 3, April 20,1988 p. 42.
6 1 Deposition of Thomas Cepeda, Part 4, April 21,1988, pp. 729-730.
6 2 Ibid.
 "90

volvedin-naxcotics trafficking, but that there, was no hard- evidence

to confirm the rumors as fact.®3
.While Noriega was aggressively expanding his; criminal enter-
prises,,; .the U.S.!, was. apparently unable to make any farther
progress in -detemnniiig whether tHe "rumors" were trueor false,
according, to General' Paul Gorman, former coipmaiider ihchief of
the, United States Southern. Command.-Gorman told the Subcom-
mittee that after he assumed his position in Panama , in 1983, he
specifically tried to find out. whether the rumors about Noriega's
criminal involvement were true,"and was . unable to establish that
Noriega was Committing any Crimes.-Gorman testified that he had
been assured by the U.S. Embassy in Panama that Noriega was co-
operating with American efforts to .combat natrcotics' trafficking.
Gorman contended that he only learned of Noriega's personal in-
volvement in laundering narcotics money in 1986^ upon reviewing
a report of the President's Commission on Organized Crime.64.
A different assessment was provided by,Dr. Ndrinari Baliley, a
former senior staff member of the National Security Council under
President Reagan between-1981 and 1983. In testimony before; the
House Select Committee on Narcotics, Dr. Bailey stated that at the
time he was at the NSC there already existed "available to aaiy au-
thorized official of the U.S. government . . . a plethora of human
intelligence, electronic intercepts and satellite arid overflight pho-
tography that taken together constituted] not a 'smoking gun' but
rather a twenty-one cannon" barrage of evidence" of Noriega's in-
volvement in criminal- activity and drugs.6,s "
- Dr. Bailey testified that "in. connection with his duties and in col-
laboration with the White House Office of Drug Enforcement" he
discovered while at the NSC that f'the Panama Defense
Forces . . . and its high officials have been extensively and direct-
ly: engaged in or engaged in aiding/and abetting'' drug trafficking
to the U.S., gunrunning to the Sandinistas, Contras, Salvadoran
guerrillas,- the M-19 and FARC in Colombia, illegal technology
transfers to the Soviet bloc, and money laundering.66
According to the DEA, between 1970 and 1987, Noriega's name
appeared in more than 80 different DEA files.67 However, there
were no follow up investigations as these references were not cor-
roborated, but were typically "third party or hearsay information
which we cannot pursue very well."68 Less than eight weeks before
Noriega was indicted, Drug Enforcement Agency Administrator
John Lawn told Admiral Murphy that no indictment would be
issued because there was insufficient evidence against Noriega.69
William Von Raab, the Commissioner for the Customs-Service
testified before the Committee that his organization had evidence
linking General Noriega and narcotics trafficking as early as
1983.70

".Subcommittee testimony of Nestor Sanchez, July 12,1988, p. 195;

S4 Subcommittee testimony of Paul Gorman, Part 2, pp. 3S-39.
6S Bailey testimony, House Select Committee on Narcotics Abuse and Control, SCNAC-100-2-
3, "U.S. Foreign Policy and International Narcotics Contro—Part II," March 29, 1988, p. 79.
6 8 Bailey, ibid, pp. 5-6.
•67 Subcommittee testimony of John C. Lawn, Part 4, p. 141.
6 8 Subcommittee testimony of David Westrate, Part 4, p. "141.
6 0 Subcommittee testimony of Admiral Daniel C. Murphy, Part 4, pp. 239-240.
7° Senate Foreign Relations Committee hearing to review the President's Annual Internation-
al Narcotics Control Strategy Report, March 14,1988, p. 95.
 91

In April, 1986, Senator Jesse Helms, as chairman of the Western

Hemisphere Subcommittee, held hearings on Panama which pro-
vided some public details about drug trafficking by Panamanian of-
ficials. In those hearings, Norman Bailey, a former Reagan NSC
staffer, testified publicly that Noriega was "widely suspected of
drug dealings" and that the Organization of American States
needed to meet to restore constitutional government in Panama
and remove Noriega in order to respond to Panama's growing drug
problem.71
During those hearings, Raymond J. McKinhon of the Drug En-
forcement Agency testified that the United States knew that
Panama was becoming a money laundering center, a transit coun-
try for narcotics en route from South America to the United
States, a transit country for precursor chemicals, principally ether
used for the production of cocaine, and a center for the local culti-
vation of marijuana.72 Then-Assistant Secretary of State Elliot
Abrams further testified that the United States also was "aware of
and deeply troubled by persistent rumors of corrupt, official in-
volvement of Panamanians in drug trafficking.73
Following the hearings chaired by Senator Helms, a number of
press accounts provided further information regarding Noriega's
narcotics-related corruption,, beginning with the front-page The
New York Times article on June 12, 1986, which quoted officials in
the Reagan Administration, and past' Administrations as stating
that they had overlooked General Noriega's illegal activities be-
cause of his cooperation with Ameripan intelligence.74 By January
1987, the Reader's Digest cited "U.S. officials and Panamanian
sources" as describing Noriega as a key figure in the international
drug trade." Writing for the Digest; David Reed quoted "experts"
as saying that ."Noriega and other PDF officers have received mil-
lions, of dollars for permitting the traffic to continue."75
W H Y DID THE U . S . FAIL TO RESPOND T O NORIEGA ALLEGATIONS?

The hearings chaired by Senator Helms established publicly that

there was a significant body of evidence pointing to Noriega's in-
volvement in money laundering and drug trafficking as of early
1986. Yet, the U.S. relationship with Noriega continued to be a
closes one up until the moment he was indicted by the U.S.
There were differing explanations for this failure to distance our-
selves from Noriega earlier than we did.
The former operations chief of the. South Florida Drug Task
Force, Admiral Daniel Murphy, stated that information about Nor-
iega was received by lower-level government officials, but not
passed on to policy makers. According to Admiral Murphy, the al-
legations ". . . were never considered that critical that they should
be at the highest level of government[TAnd they were probably re-
ported at lower levels."76
71 Testimony of Norman Bailey, Senate Foreign Relations Western Hemisphere Subcommit-
tee, April 20,1986, pp. 17-18. ...
7 2 Testimonly of Raymond J. McKinnon, Administrator, DEA, idid, April 21,1986, p. 43.
Abrams, ibid, p. 40.
7 4 Seymour Hersch, The New York Times, June 12,1986, p. A-l.
7 3 Reader's Digest, January, 1987.
7 8 Subcommittee testimony of Admiral Murphy, Part 4, pp. 240-242.

v/
 "92

A different view was taken'by former NSG Staffer Bailey and* by

Ambassador McNeil. • " •
According to Bailey:
Clear and. incontrovertible evidence was? at best, ig-
nored, and at worst, hidden and denied by many different
agencies and departments- of the Government of the
United States in such a way as to provide cover and pro-
tection for [Noriega's] activities while; at the same time, '
assuring that they did the maximum damage to those very
interests that the officials involved were sworn to uphold
and defend.77
Ambassador McNeil stated succinctly that the United States was
"coddling . . . Noriega beyond any time when one could reasonably
doubt Noriega's involvement in drug trafficking to the United States '
because he was helping the United States with the Contras.78
Bailey and McNeil's view is .corroborated in part by the factual
admissions made by the United States in the trial of Oliver North,
in which the United States revealed that Noriega had provided
Contras on the Southern Front with $100,000 in July 1984,. as well
as by other Admissions in the North trial discussed below.79
United States law enforcement agencies also considered Noriega
to be a friend of the United States, a belief largely based on the
significant amount of information and assistance Noriega had pro-
vided United States agencies over many years. This view was ar-
ticulated by DEA Administrator Jack Lawn, who inthe -past had
written Noriega letters, of comendation "for his help an fighting the
war on drugs.80 In a May 8, 1986 letter to Noriega,. fLawn stated
the DEA's '%eep appreciation for the vigorous anti-drUg trafficking
policy that you have adopted, which is reflected ihv the numerous
expiulsions from Panama of accused traffickers,.. . ." 8 1 -
Lawn testified before the Subcommittee that the DEA had'had a
long-standing, cooperative relationship with the Panamanian De-
fense Forces in the areas of crop eradication, narcotics investiga-
tions, money laundering and drug interdiction. Lawn stated that
"our narcotics efforts in Panama continue, despite the corrupting
and ^ intimidating influence of drug trafficking on government offi-
cials and institutions."82 Lawn stated unequivocally that DEA had
been granted every single narcotics request ever made to the Pana-
manian Government.83 •
In fact, according, to Blandon, while DEA Administrator Jack
Lawn was referring to Noriega's liaison to the DEA, Luis Quiel as
"integral to the success" offightinginternational drug trafficking,
Quiel was serving as Noriega's enforcer to eliminate competitors of
the Medellin cocaine cartel by turning them over to the United
States.84

7 7 Bailey testimony, House Select Committee on Narcotics Abuse and Control, SCNAC-100-2-
3, March 29,1988, p. 5.
78 Subcommittee testimony of McNeil, Part 4, p. 42.
79 Agreed upon statements of fact, United States v. North, DC District Court, 1988.
8 0 Letter from John C. Lawn to General Manuel Antonio Noriega, Part 2, p. 393.
81 Lawn-Noriega Correspondence, May 8,1986, Part 2, p.' 391. '
8 2 Subcommittee testimony of Lawn, Part 4, p. 112.
s 3 Ibid., p. 122.
84 Subcommittee testimony of Jose Blandon, Part 2, p. 122; letter from John G. Lawn to Gen-
eral Noriega, May 27, 1987, Part:2, p. 391. •
 "93

One unintended consequence of the close relationship between

Noriega and the DEA was the fact that the Panamanians were
able to share DEA information with traffickers with whom they
were friendly. As convicted American narcotics trafficker Steven
Kalish testified, Noriega's close relationship with the DEA, allowed
Rodriquez and his partner, Enrique Pretelt, to advise other drug
smugglers about whether or not their planes were on a DEA watch
list.85
The DEA's close working relationship with Noriega may have in-
fluenced that agency to ignore allegations it had received regarding
Noriega's involvement in the narcotics trade. Carlton testified that
in 1986, he went to the DEA offering to testify about money laun-
dering, drugs, weapons, corruption, and assassinations involving
Noriega. But when Carlton mentioned the name of General Nor-
iega, the DEA agents to whom he volunteered the information
became "upset." Carlton then decided that he or his family might
be harmed because of the connections Noriega had with the U.S.
Embassy in Panama, and decided to say nothing further. The DEA
tried to reach Carlton by telephone after his initial meetings, but
no further contacts took place. The DEA stated that Carlton did
not mention General Noriega's name during his contacts in
Panama with their Agency,86 ~
The difficulty of insuring the integrity of DEA operations in
Panama surfaced in another case involving aDEA informant in
June 1988. According to the U.S. Attorney's office in Miami, the in-
formant brought a collection of documents relating to General Nor-
iega's involvement in drug trafficking and money laundering to the
U;S. Embassy in Panama, asking that the documents be sealed and
shipped to the DEA office in Miami. When the informant arrived
in Miami, the box containing the documents had been opened and
he asserted that key documents were missing. The informant
passed a lie detector test and DEA began an internal affairs inves-
tigation which remains open.817 -
It is clear that the DEA continued to rely on Noriega even after
information had been developed regarding Noriega's involvement
with drugs. DEA Administrator Lawn wrote Noriega as- late as
May 27,1987 to assure him that "DEA has long welcomed our close
association and we; stand ready to proceed jointly against interna-
tional drug traffickers whenever the opportunity arises."88 More
recently^ the DEA relied on the Panamanian Defense Forces to
carry out arrests on March 29, 1989 in connection with the indict-
ment of 29 defendants for laundering $433 million in drug money
for the Medellin cartel. The risk of relying on General Noriega for
such cooperation was highlighted when^-one of the principal defend-
ants, identified by the Justice Department as Eduardo Martinez of
Medellina and the cartel's chief money-launderer in Panama, "es-
caped" from the PDF after being tipped off to the planned arrest.89

85 Kalishtestimony,Senate Permanent Subcommittee on Investigations, January 28, 1988, p.

4. . .
86 Subcommittee testimony of Carlton, Part 2, p. 211.
87 Subcommittee testimony of'Richard Gregorie, Part 4,'July 12,1988, p. 174.
88 Letter from John C. Lawn to General Noriega, Part 2, p. 391,
80 See Washington Post, March 30, 1989,"U.S. Sues Nine Banks in Drug- Money-Laundering."
 "94

MIXED MESSAGES

The tension between law enforcement and foreign policy objec-

tives appears .to have led to a series of mixed messages being sent
Noriega from various branches of the U.S. government. This prob-
lem became acute in 1985, a time when Noriega was worried that
the U.S. might respond to his continuing criminal enterprises. "
According to testimony before the Subcommittee, Noriega recog-
nized that the war being waged by the Contras against the Nicara-
guan government was the highest priority of many members of the
Administration in Washington^ M accordance MtK-his past han-
dling of U.S. officials, Noriega sought to assure the United States
he would cooperate.91)1
According to Jose Blandon, Noriega met with Lft Colonel Oliver
North in June 1985 on a boat anchored off Panama City to discuss
Panamanian cooperation With the United States in the conduct of
the1 war against Nicaragua in the period when U.S. intelligence
agencies were prohibited by the Bolahd Amendment from "directly
or indirectly" supporting the Contras. Blandon testified that this
meeting led to: an agreement by Noriega to help train Contra
troops and to'permit-Contra. leadership to enter and exit Panama
freely to facilitate the conduct of the war. Blandon testified that
during a second meeting betweeh Noriega and North,: Noriega-sug-
gested the Panamanian units could be used in operations" 6n Nica-
raguan territory. ^However, Blandon had no information that Nor-
iega took action -inresponse to North'sreqUest.91
According to McNeil, following the meetings with North, Noriega
met with the late CIA Director William Casey on November iL,
1985. A. memorandum Casey wrote after the meeting, suggested
that Noriega left "reassured." The narcotics issue was :not men-
tioned. Casey justified his failure to raise the issue in his; discus-
sions on the ground that Noriega , was providing valuable support
for our policies in Central America; especially'Nicaragua. Casey be-
lieved that Noriega understood the U.S. opposition to drug related
corruption and that the issue; could best be left for the U;S. Ambas-
sador to Panama to handle. However, other U.S. officials concluded
that Casey had "let Noriega off the hook." 9 2
Following the Noriega-Casey, meeting, the U.S. ambassador to
Panama, Everett Briggs, complained that Casey had given Noriega
the wrong signal, and NSC director Admiral John Poindexter was
sent to Panama to "upbraid" Noriega on the narcotics issue a few
weeks later.93
On December 17, 1985,, Noriega met with Admiral Poindexter
and Ambassador Briggs. Blandon testified that after the meeting,
Noriega gave him the following version of what happened: Poin-
dexter told Noriega that a group of military officers would have to
be sent out of the country because of their involvement in the Spa-
dafora murder and that Noriega should reconsider returning Nich-

w80 See e.g. Subcommittee testimony of Jose Blandon, .Part %, pp. 158-163; McNeil Prepared
Statement, Part 3, p. 325.
Subcommittee testimony of Blandon, Part 2, pp. 158-163. •
9 3 Subcommittee testimony of McNeil, Part, 3, April 4, 1988, pp. 101-102; McNeil Prepared
Statement, Part 3, p. 323. ''
0 3 McNeil Prepared Statement, ibid, p. 323.
 "95

olas Barletta, whom Noriega had fired the previous spring, to the
Presidency. The message was considered a strong one. Blandon tes-
tified that regardless of the understanding reached in Washington
that Poindexter would confront Noriega on his drug problem, Poin-
dexter neglected to raise the issue of narcotics, or indeed, of any
form of criticism of Noriega.94
Blandon testified that while Noriega was meeting with Poin-
dexter in Panama, a group of U.S. citizens working as registered
agents for the Government of Panama were simultaneously meet-
ing in Washington with Constantine Menges of the National Secu-
rity Council staff. Menges informed them that the PDF would have
to be reformed, Noriega Would have to stop dealing with the
Cubans and would have to call an election Or install Arnufo Arias
as President. Menges said that political, economic and military
pressure would be exerted if Noriega did not follow instructions.
However, the message was received as one significantly "softer"
than the one delivered to Noriega himself by Poindexter.95
Blandon testified that the mixed messages delivered in the Casey
meeting, the Poindexter meeting, the two North meetings, and the
Washington meeting with Menges led Noriega to believe that the
U.S. Government was divided and that he could play factions
within the government against each other. Noriega always chose to
ignore the tougher message and to work with those who were
giving him a softer one.-96
Noriega may also have believed his problems with the United
States had been resolves as the result of a quid pro quo with the
Reagan Administration for his support.for the Contras.
A number of the Admissions in the North trial suggest that the
Reagan Administration agreed to a series of quid pro quos with
several foreign governments in connection with their support for
the Contras. In the case of Noriega, discussions about such quid pro
quos continued through at least late 1986.
. For example, in late August 1986, Noriega told the U.S. through
one of his representatives that "in exchange for a promise to help
clean up Noriega's,image and a commitment to lift the U.S. ban on
military sales to the Panamanian defense forces, Noriega would as-
sassinate the Sandinista leadership for thie U.S. Government." 9 7
In response to,Noriega's offer, Lt. Col. Oliver North told Noriega's
representatives that U.S. law forbid such actions. "The representa-
tive responded that Noriega had numerous assets in place in Nica-
ragua and could accomplish many essential things, just as Noriega
had helped the previous year in "blowing up a Sandinista arse-
nal." 9 8
According to the Agreed Statements in the North trial, Admiral
POindexter responded that if Nori^gar had assets inside Nicaragua
he could be helpful. The USC could not be involved in assassina-
tion, but Panamanian assistance with sabotage would be another
story." 9 9 North then met with Noriega, with Poindexter's approv-

04 Subcommittee testimony of Blandon, Part 2, p. 162.

95 Ibid.:
96 Ibid.
6 7 Agreed statement #97, U.S. v. North, DC District Court, 1988-
9 8 Ibid.
8 9 Agreed statements, #99, U.S. v. North, ibid.
 "96

al, in London in late September 1986. At that time, Noriega agreed

"to take immediate actions against the Sandinistas and offered a
list of priorities, including an oil refinery, an airport, and the
Puerto Sandino off-load facility." 1 0 0
The problem of mixed messages continued as the United States
moved closer to indicting Noriega. As late as November, 1987, Nor-
iega still believed he had a second channel open to him which
would, support for him and his operations.101
Noriega's belief was based in part upon two trips Admiral
Murphy made to Panama in 1987. Murphy visited Noriega in
August and November, 1987, accompanied by TongsUn Park, and
discussed what Noriega might do to improve his relationship with
the United States.102 Murphy said he made the trips as a private
businessman. However, before he went to Panama, he met with top
officials Of the CIA, State Department, Department of Defense,
NSC and Vice President's office, including Assistant Secretary
Richard. Armitage at Defense* Assistant Secretary Elliott Abrams
at State, then NSC director Frank Carlucci and the Vice Presi-
dent's National Security Advisor, Donald Gregg.'Whenhe returned
from Panama, he debriefed these U.S. officials as Well.103 >•->
While in Panama, Murphy met with Noriega and with the Pana-
manian opposition. He advised Noriega of the hostility toward him
in the United States and the Administration, and explored what it
might take to improve the atmosphere with the United' States.
Murphy testified that he made recommendations to Noriega re-
garding the steps he could take to improve US-Panamanian rela-
tions. The steps-included turning government functions Over to ci-
vilians, having fair and free elections, and meeting with the opposi-
tion. Noriega" replied that Panama already was controlled by civil-
ians and that elections were established by' law. Murphy felt that
Noriega was inflexible, and after meeting .with equally implacable
opposition leaders, he concluded that ^everybody' was 'in deep
cement," and there was very little business opportunity for l^im.104
In November 1987, Murphy reiterated his concerns and suggest-
ed that Noriega relax his control of civil liberties as well. There
was no discussion of the U.S. Government's concern about Norie-
ga's drug trafficking at either meeting.105
Murphy testified that his trip was made as a private citizen look-
ing for business.105 But according to Blandon, Noriega interpreted
his visit as a message from the United States Government. Noriega
believed that Murphy was ji^rxying tl^e mess^»e'st&at if he adopted
the proposed plan of reform he could remain in power until Febru-v
-ary 1989.107 . .... •" . , ;
Referring to the series of mixed messages sent to Noriega, former
Deputy Director of the Department of State's Intelligence ,and Re-
search bureau, Frances McNeil, summarized thesitiiation by stat-

100 Ibid, #106.

Blandon, Part 2, pp. 173-176.
102 Murphy, part 4, pp. 245-256.
Jos Murphy, ibid, p. 246.
1 0 4 Ibid p. 247.
1 0 6 Ibid pp. 248-249.
ibid p. 245.
1 0 7 Blandon, Part 2, pp. 173-174.
 "97

ing that while the Department of State was attempting to distance

itsfelf from Noriega, the Department of Defense and CIA were si-
multaneously sending him encouraging signals.108
CONCLUSION

General Noriega provides the best example in recent U.S. foreign

policy of how a foreign leader is able to manipulate the United
States to the detriment of our own interests.
. .General Noriega recognized that by making himself indispensible
to various U.S. agencies, he could develop U.S. clients who would
become dependent on . him. As a result, they would be reluctant to
pursue intelligence on Noriega's criminal activities, and less likely
to investigate what intelligence they did receive.
Noriega also understood the divided nature of the U.S. Govern-
ment and attempted to play each agency off against the others. For
example, he attempted to manipulate the DEA office in Panama by
feeding U.S. officials cases and providing information leading to ar-
rests and seizures, but which did not affect his drug operations. As
a result, DEA focused on the cooperation it received and ignored
Noriega's obvious and ultimately, c[uite public involvement with
the Medellin, cartel. Noriega achieved similar results in performing
services for U.S. intelligence.
Finally, Noriega recognized that so long as he helped the United
States with its highest diplomatic priorities, as Torrijos had done
with the Panama Canal, the United States would have to overlook
activities of his that affected lesser U.S.. priorities. In the mid-
1980's, this meant that our government did nothing regarding Nor-
iega's drug business and substantial criminal involvement because
the first priority was the Contra war. This decision resulted in at
least some drugs entering the United States as a hidden cost of the
war. x
U . S . GENERAL ACCOUNTING OFFICE,
NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, December 6, 1988.
H o n . JOHN F . KERRY, -
Chairman, Subcommittee on Terrorism, Narcotics and International Operations,
Committee on Foreign Relations, U.S. Senate, Washington, DC.
D E A R M R . CHAIRMAN. YOU asked that we ascertain how information about drug
trafficking by high-level government officials of nations friendly to the United
States affects U.S. foreign policy decisions. You stated that you were concerned
about recent revelations that the U.S. government'knew about such activities but
close to overlook them for national security reasons. We agreed that we would ex-
plore this issue using the information available within the government on General
Manuel Noriega of Panama as'a "case study". t
. On August 8, 1988, we gave you a letter summarizing our efforts to conduct this
review and a chronology of the contacts we had made with executive branch agen-
cies and officials in our attempts to obtain access to needed information. As we
pointed out in that letter, we were able to perform only a limited amount of work at
the Department of; Defense before the Nation^TSecurity Council (NSC) directed the
Department and the other executive branch agencies not to meet with us or to pro-
vide us with any information related to this assignment until NSC had the opportu-
nity to provide them with "guidelines" concerning GAO's access to information on
the assignment.
Subsequently, NSC concluded that |he administration could not participate in the
review as orginally designed and stated its willingness to reconsider participation in
a reformulated review.

" a McNeil, Prepared Statement, Part 3, p. 322.

 "98

•Although we do not necessarily agree with the bases for the administration's ob-
jections, we" believe, it is unlikely that we could obtain the necessary cooperation
from the administration to conduct this review and successfully^pursue ,the original
objective of this assignment.
As discussed with your office, we are terminating our work on this assignment
and will reformulate the assignment objectives to review the development, imple-
mentation, and enforcement of the economic, sanctions imposed on Panama by the
administration. ' ^ ~ " ..
We have sent a similar letter to Representative Bill Alexander whb also bad
asked us to review information concerning General Noriega. '
If you have any further questions concemin g this assignment; -please do not hesi-
tate to call: on us. • ••••-,- •.,-..- <
. Sincerely yours, - ,• •' .- . •
. * . N A N C Y R . KINGSBURY,
- Director, Foreign Economic Assistance:

U . S . DEPARTMENT OF STATE,
. Washington, DC, August 2, 1988,
N A N C Y KINGSBURY, ^ 5 *
Associa,te Director., General Accounting Office, National Security and International
Affairs Division, Washington, DC. ,
DEAR M S . KINGSBURY. I ain pleased to respond to 'your July 1 2 letter on the pro-
posed case study your office is undertaking about how U.S. government agencies
used information about General Noriega -in its policy decisions regarding Panama.
As you are aware, the National Security Council staff and the office of White
House Courisel have been working closely with your office on this investigation:-'All
executive branch agencies have been instructed byvthe "White House npt to take,any
action on your request until various legal issues have been analyzed by the Admin-
istration. Accordingly, at the present time it will hot be possible, for the Department
to meet with your staff or produce information until this examination is completed,
for the time being, Nicholas Rostow, Legal Adviser to the National-Security Council,
is acting as the administration's point of contact on this matter. H
Sincerely,
RpGEK B . FELDMAN, .
' ' " Comptroller,

NATIONAL SECURITY COUNCIL,

Washington, DC, July 13, 1988.
M s . NANCY R . KINGSBURY, -
Associate Director, National Security and International Affairs Division, U.S. Gener-
al Accounting Office, Washington, DC.
DEAR M S . KINGSBURY. I am writing in response to your request ^concerning a
study of the alleged drug activities of Manuel Noriega, and the rolte information
about such activities played in decisions about TJJS. foreign policy (Study #472165).
As described in Mr. Kelly's May 13, 1988, letter to Paul Stevens and your June 23,
1988, letter to me, your request seeks access to sensitive law enforcement and intel-
ligence files covering a substantial period of time. In our meeting, your staff con-
firmed- that your three areas of interest were intelligence files,, law enforcement
files, and the deliberative process of the Executive branch, including internal comf
munications and deliberations leading to Executive branch actions taken pursuant
to the President's constitutional authority. I was disappointed that your letter did
not contain any narrowing of the request. The request raises important statutory
and constitutional issues. The Administration is analyzing them now, and when its
deliberation is complete, I shall reply further to your letter of June 23, 1988,
Sincerely,
NICHOLAS ROSTOW,
Special Assistant to the President
and Legal Adviser.
 99

U . S . GENERAL ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, August 8, 1988.
H o n . JOHN F . KERRY,
Chairman, Subcommittee on Terrorism, Narcotics and International Operations,
Committee on Foreign Relations, U.S. Senate, Washington, DC.
DEAR SENATOR KERRY. In March 1988 you asked us to review how information
about drug trafficking by high-level government officials of nations friendly to the
United States affects U.S. foreign policy decisions. Because the information required
to successfully undertake this assignment would potentially involve information re-
lated to. intelligence gathering and on-going law enforcement investigations which is
difficult to obtain, we suggested, and you. agreed, that we would explore the issue
using as a case study the information concerning the drug trafficking activities of
General Noriega of Panama. The following is a summary of the experience we have
had so far in satisfying your request.
Since May 11,1988, we have been formally trying to gain access to personnel and
records at the Departments of State, Justice, and Defense. We were successful in
gaining access to the Department of Defense and in fact performed a limited
amount of audit work at that agency. In late May, we were advised that the Nation-
al Security Council (NSC) would serve as the Administration's focal point on this
assignment. Concurrently, we were advised that the Departments of Justice and
State were instructed not "to meet with the GAO staff or provide any information to
GAO on this assignment until NSC issues .guidelines concerning GAO access to in-
formation. The Department of Defense notified us on July 12, 1988, that it also was
instructed by the NSC to cease operation with GAO until such guidelines are avail-
able. We have by letter andr telephone' discussions continued to try to obtain infor-
mation and schedule meetings with the Departments of State, Defense, and Justice
but these efforts have been refused, with each agency citing the NSC's direction as
the reason for .refusal.
We have been working with "the NSC to facilitate' access to agency personnel -and
records. We met with them on June 6, 1988 and June 22, 1988, and discussed at
some length our approach to the work, our views about our access to information,
and' our previous experience on other successful assignments involving similarly
sensitive information. On June 23, 1988, at NSC's request, we delivered a detailed
letter to them giving further detail on the kinds of information we would be seek-
ing. Although that letter identified some information which ultimately may. not be
made available, the information related tovthe primary focus of our work, that is,
the organization and decision process for foreign policymaking when information is
available on foreign officials' drug trafficking,- would not uniformly be expected to
raise similar concerns. Our normal procedures in such situations are to consider
access questions on a case-by-case basis, following discussions with agency officials
and examination of otherwise available records. NSC's actions to prohibit such pre-
liminary discussions until after guidelines concerning access are established has
foreclosed that approach.
On July 13, 1988, the NSC -wrote in response to;our June 23, 1988, letter that our
request seeks access to sensitive law enforcement and intelligence files covering a
substantial period of time" and "raises important statutory and constitutional
issues." The letter advised that the administration is analyzing those issues and
would reply when its deliberations were completed. We have on several occasions,
most recently today, asked the NSC about the status of the operating guidelines. We
continue to be told the issues are being analyzed" and guidelines will be issued when
the review is completed.- NSC officials say they-cannot provide a specific date when
guidelines will be available.
We are now into the fifth month of our effort to address the issue you asked us to
review, and it is difficult to predict how much further delay is likely. Although we
have assembled some information available from/public records, we have made es-
sentially no progress on the audit itself. We believe it should be possible to reach
agreement with the agencies involved, as we pursue our audit questions, that much
of the information we need to examine should be considered to be releasable, and to
discuss special arrangements for security of the information if such arrangements
are warranted. In fact, we were successful in such ah approach with the Depart-
ment of Defense prior to July 12.
A detailed chronology of our efforts to^meet with NSC and agency officials, and to
obtain information/ is provided in Enclosure I. Copies of the letters we sent to NSC
and the agencies are provided in Enclosure-II. The NSC responses to our June 23,
1988 and July 12, 1988 letters axe in Enclosure HI; the CIA denial to our request for

v/
access is in Enclosure IV; and, the Department of Defense response to our July 13,
1988 letter, along with NSC instructions to all agencies, is in Enclosure V.
We are currently awaiting the NSC guidelines. We will continue to keep you in-
formed of the status of our efforts, and will discuss further steps which we believe
may be appropriate, if any, after we have reviewed any guidelines issued by NSC.
Sincerely yours, r
N A N C Y R . KINGSBURY,
Associate Director.
{Enclosure I]

CHRONOLOGICAL S U M M A R Y OF G A O CONTACTS W I T H EXECUTIVE BRANCH: AGENCIES

AND OFFICIAL

May 11-16, 1988.—We sent routine notification.letters to the Departments of

State, Justice, and Defense, and the National Security Council advising them of our
review and identifying the subject and scope of our work. Letters .were sent specifi-
cally within the Department of Justice to the Drug Enforcement Agency (DEA), the
Executive Office for-U.S. Attorneys, and Justice's Criminal Division,
May 23,1988.—We received our first response from the NSC. M^. Nicolas Rostow,
Special Assistant to the President and Legal Advisor, told us by "telephone that he
wanted to "think about it"before scheduling a meeting with us. < ,.
May 24, 1988—We sent a notification letter to the Central Intelligence agency
asking for a meeting to discuss the issues.
. May 30-June 1, 1988.—We began contacting personnel at State find. Justice to ar-
range for initial meetings to discuss the scope and depth of opr audit. Mr. Manuel
Rodriguez, U.S. Attorneys Office liaison who was coordinating the Justice Depart-
ment components, declined to set up a meeting .stating that NSC was coordinating
the Administration's response to our notification and he was going to wait until he
heard from NSC before proceeding. Mr. Bob Harris, from the Department of State,
advised us, that State would not deal with us. on this assignment until we had dis-
cussed our-work with'the NSC. . . -
June 1.—We conducted our initial, meeting with the Department, of Defense, We
performed work at the Defense Intelligence Agency (DIA) and the military depart-
ments untilJuly 12,1988. - '
June 6, 1988.—We had our first meeting with Mr. Dan Levin, Deputy Legal Advi-
sor, NSC. Mr. Levin stated he understood the purpose of. our review, but wasn't sure
we could have access to sensitive, intelligence or law enforcement files. He promised
to discuss access with the agencies-involved and would get back to us quickly. We
were officially notified that NSC would be our focal point" on this assignment. We
advised Mr. Levin that we preferred to deal with the .agencies directly without
having to clear everything with the NSC—our normal practice. Mr. Levin stated we
are free to deal with each agency directly and that NSC. would not be a bottleneck.
June 8-9, 1988.—We again contacted the Departments of State and Justice, to ar-
range for initial meetings. Despite Mr. Levin's statement that we could deal directly
with the agencies, both Mr. Harris at State and Mr. Rodriguez at Justice advised us
the, NSC instructed them not to deal with us until NSC had developed operational
guidelines on what to do and what not to do on this assignments
June 13,1988.—Mr. John L. Helgerson, Director of Congressional Affairs, CIA, re-
sponded to our notification letter. He stated that all- agency activities in Central
America and information it gathers is under close and continuing scrutiny by the
House and Senate Intelligence Committees. Furthermore, the CIA advised "all policy-
related questions should be directed tp the appropriate components of the Executive
Branch. It stated that therefore it could not be of help to us.
June 15-16, 1988.—We .began efforts to contact Mr. Levin, NSC, to determine
when the NSC guidance would be issued and we could continue our review. Mr.
Levin requested another meeting to learn more about the review.'
June 16, 1988.—We conducted an initial meeting with representatives of the Cus-
toms Service. , Mr. Bill Rosenblatt, Assistant Commissioner for Enforcement, did not
provide any information and: said he wanted first for the U.S. Attorneys Office to
establish ground rules as to how much of the information Customs has is covered by
grand jury secrecy provisions and what information they can provide to us.
June 22, 1988.—We held a second meeting with the NSC and White'House staff
personnel. Attending for the Executive Branch were Mr. Nicolas Rostow, Special As-
sistant to the President and Legal Advisor; Mr. Dan Levin, Deputy Legal Advisor,
NSC; Mr. Jonathan Scharfman, Assistant Legal Advisor, NSC; Mr. Dan McGrath,
Legal Counsel, White House Staff; Mr. Bob Harris, Department of State; and an-
other official from the Department of Justice.
 101

We reiterated our purpose, and our requirements in terms of access to personnel

and. documentation to the extent that we could.. We explained that we needed to
conduct initial meetings to more fully determine our documentation needs. We dis-
cussed the availability of documents used in the deliberative process, grand jury and
other enforcement actions, foreign intelligence^ and .other types of documentation.
Some were considered to fall under executive privilege and not available to GAO,
according to the administration officials. We discussed in general terms our access
experiences in other kinds of iiigbly sensitive assignments and pointed out that spe-
cial security arrangements could be agreed.upon if. circumstances warrant.
At the request of Mr. Levin, we agreed to submit in writing a more detailed expla-
nation of the specific types of documents and information we wanted access to so
they could more fully consider our request. They promised a prompt response. We
asked for a response within one or two weeks. Mr. Levin was not willing to commit
to a specific time period.
June 23, 1988.—GAO hand delivered the explanatory letter to the NSC. The docu-
ment explained that in order to accomplish our objectives, we planned to:
(1) Obtain agency briefings that describe the general organizational structure
and the operational procedures related to the agency's data collection, analysis,
and dissemination systems;
(2) Interview relevant agency personnel who are responsible for defining
agency information needs with regard to General Noriega and Panama, imple-
menting the information collection process, collecting and reporting raw data,
and analyzing and disseminating data on Panama and General Noriega;
(3) Review documents to include specific directives, instructions, or taskings to
collect data on General Noriega or alleged illegal activities involving General
Noriega* cables and reports from field offices regarding General Noriega's in-
volvement in or toleration of illegal activities, analyses or summaries of field
reporting on General Noriega, and geographic/subject-area studies discussing
the roll or suspected role of General Noriega in illegal activities; and
(4) Examine the use of-information about General Noriega in the foreign
policy process by identifying the agencies, organizations, and individuals who
play a role in deciding national security and foreign policy issues with regard to
Panama and interview each and review documents to determine whether infor-
mation, about General Noriega reached them and how that information was
used in making decisions. .
June 27, 1983-—We contacted Mr. Levin at NSC on the status of its response to
our June 23 letter. He said Jthey were preparing a response and it would be provided
"promptly." "
July 1,1988.—We called Mr. Levin again, at NSC. He said they hoped to have a
response soon. We inquired about who in the, White House or the NSC is making
the decisions and what the specific problems or objections are, and Mr. Levin de-
clined to provide any information.
July 5, 1988.—We again called Mr. Levin at NSC- He advised us that a letter was
"in for . signature," but he declined to predict when it would be signed. He also
would not say what position the response would take or who it was with for signa-
ture. He said he .would not "sit on' a signed response and that he would call us
when it is signed.
July 7,1988,—We called Mr. Bob Harris, State Department, in another attempt to
gain cooperation and were told State would not meet with us until it hears from
NSC. We advised Mr. Harris that we planned i o send a second letter to them specif-
ically asking for an initial meeting and access'to documents.
July 8, 1988.—We called Mr. Paul Prise, DEA, asking to meet. He told us that
NSC gave instructions not to meet with us until NSC gives the "go ahead." We ad-
vised a second letter was coming.
July 12, 1988.—We sent a second letter, more_ detailed in what we requested in
the way of cooperation to the Departments of State and Justice (DEA, Criminal Di-
vision and the U.S. Attorneys Office), and the NSC. ^
July 12, 1988.—We attempted to continue our work at the Department of Defense.
Up to this point, we had conducted a series of interviews with personnel involved in
'intelligence gathering and analysis in Latin America. We had identified and re-
quested about 100 documents, files, reports, cables, etc., that we felt were relevant
to our review. We had some additional meetings scheduled with agency personnel.
We were advised by Mr. Nacho Morales, Army Intelligence and Security Command,
that NSC directed DOD to postpone any meetings with us on the assignment. Mr.
Craig Campbell, a GAO liaison official with the DOD/IG, confirmed that DOD was
told to withhold, contacts with us. Mr. Martin Sheina, DIA, told us he could not pro-
vide documents we had requested until NSC provides guidance.
v/
 "102

July 13, 1988.—We sent a letter to the department of Defense, similar to those
sent to State and Justice on July 12, 1988, asking for" a resumption of cooperation—
i.e., to provide the requested doeumentsand to continue meeting with us.
July 13, 1988.—Mr; Don Schrainak, Justice liaison, said that the Justice General
Counsel staff had been working with NSC to develop a response, and indicated that
it would be sent within a day or so. "
July 18, 1988.—We received a letter from Mr. Nicholas Rostow, NSC, dated July
13, 1988 which expressed his disappointment that we had not narrowed the scope of
the information we wanted and stated that the administration is still considering
our request. '
August 1, 1988.—We- telephoned Mr. Levin at NSC asking for the status of the
response. He said it was being reviewed at the-Department of Justice and there was
no-definite date it would be issued. He'hoped it would be issued by- the week of
August 8,1988.
August 2, 1988—We advised Mr: Levin, NSC, that Senator Kerry's staff had in-
formed us that Senator Kerry is prepared to hold a press conference about the lack
of cooperation with GAO. I advised Mr. Levin that the Senator's staff had stated
that if we did not have guidelines by 9 o'clock a.m., August 8, .1988,- or at least a
definite delivery date, Senator Kerry would hold a press conference.
August 3, 1988.—The Acting Assistant Secretary of Defense for International Se-
curity Affairs responded to our July 13,1988, letter requesting documents by stating
that the Department of Defense could not release the information Until the NSC
had completed its legal analysis. He attached'a-copy-of the NSC guidance that had
been sent to the Departments of State, the Treasury, Defense, and Justice; and the
Ceutral Intelligence Agency on July 22,1988. ^
August 8, 1988—We telephoned Mr. Levin, NSC, to determine the status of their
response. Mr. Levin said that, although he could not provide a definite, date, he ex-
pects the Justice legal opinions to be provided this week. He said he would let us
know if he learns that it will take substantially longer.
,,• U . S . GENERAL ACCOUNTING OFFICE,
GENERAL- GOVERNMENT DIVISION,
Washington, DC, May 11,1988.
M r . PETER F . GRUDEN," . "
Assistant Administrator; Planning and Inspection Division, Drug Enforcement Ad-
ministration, Department of Justice, Washington, DC.
DEAR M R . GRUDEN. The General Afccounting Office, has been requested to under-
take a study of Panamanian leader Gen.Manuel Noriega's alleged' drug activities.
The study, under code 472165, will examine (!) the broad parameters of U-S^Pana-
manian relations over the past 20 years, (2) the type of information about Noriega
developed by various intelligence and law enforcement agencies," (3) the extent to
which this information reached foreign policy decision-makers, and (4) the role that
such information played in decisions on U.S. foreign policy.'
This work will be performed by Mr. Donald L. Patton, Group Director, Mr. James
O. Benone, Evaluator-in-Charge; and Mr. Jon Chasson; of our Foreign Economic As-
sistance Group, National Security and International Affairs Division. '
The work will be conducted in Washington at the Drug Enforcement Administra-
tion, the Department of State, the Department of Defense, the Department of the
Treasury, and other federal agencies. We will advise you of any need to visit facili-
ties outside the Washington area.
We appreciate your assistance in notifying the appropriate officials of the assign-
ment. If you have any questibns, please contact Mr. Patton at 275-1898 or Mr.
Benone at 275-7487. -'
Sincerely yours,
ARNOLD P . JONES,
Senior Associate Director.

[Enclosure H]
. , U . S . GENERAL ACCOUNTING OFFICE,
NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, May 12, 1988.
H o n . F R A N K C . CAKLUCCI,
Secretary ofDefense, DOD Office of theInspector General, Deputy-Assistant Inspector
General, for GAO Report Analysis, Washington, DC.
DEAR LIFE; SECRETARY: The General Accounting Office, has been requested to un-
dertake a study of Panamanian leader Gen. Mimuel Noriega's alleged drug activi-
 "103

ties. The study, under code 472165, will examine (1) the broad parameters of U.S.-
Panamanian relations over the'past 20 years, (2) the type of infonnation about Nor-
iega developed by various intelligence and law-enforcement agencies, (3) the extent
to which this information reached foreign polity decisionmakers, and (4) the role
that such information played in decisions on U.S. foreign policy.
This work will be performed by Mr. Donald L. Patton, Group Director; Mr. James
O. Benone, Evaluator-in-Charge; and Mr. Jon Chasson; of our Foreign Economic As-
sistance Group.
The work mil be* conducted in Washington at the Department of Defense, the De-
partment of State, the Department of Justice, and other federal agencies. We will
advise you of any need to visit Department facilities outside the Washington area.
We appreciate your assistance in notifying the appropriate officials-of the assign-
ment. If you have any questions, please contact Mr. Patton at 275-1898 or Mr.
Benone at 275-7487.
Sincerely yours,
NANCY R . KINGSBURY,
Associate Director.

U . S . GENERAL ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, May 13, 1988.
M r ; PAUL SCHOTT STEVENS,
Executive Secretary, National Security Council, Old Executive Office Bldg., Washing-
ton, DC.
DEAR M R . STEVENS: The General Accounting Office, has been requested to under-
take a study of Panamanian leader Gen. Manuel Noriega's alleged drug activities.
The study, under code 472165, will examine (1) the broad parameters of U.S.-Pana-
manian relations over the past 20 years, (2) the type of information about Noriega
developed by various intelligence and law-enforcement agencies, (3) the extent to
which this information reached foreign policy decisionmakers, and (4) the role that
such information played in decisions on U.S. foreign policy.
This work will be-performed by Mr. Donald L. Patton, Group Director; Mr. James
0. Benone, Evaluator-in-Charge; and Mr. Jon Chasson; of our Foreign Economic As-
sistance Group.
The work will be conducted at the National Security Council, the Department of
State, the-Department of Defense, the Department of Justice, and other federal
agencies.
We appreciate any assistance you can provide to our staff. If you have any ques-
tions, please contact Mr. Patton at 275-1898 or Mr. Benone at 275-7487.
Sincerely yours,
JOSEPH E . KELLY,
Associate Director.

U . S . GENERAL ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
, Washington, DC, May 13, 1988.
H o n . GEORGE P . SHULTZ, ,
Secretary of State, GAO Liaison, Office of the Controller, Washington, DC.
DEAR M R . SECRETARY. The General Accounting Office, has been requested to un-
dertake a study of Panamanian leader Gen. Manuel ^Noriega's alleged drug activi-
ties. The study, under code 472165, will examine (1) the broad parameters of U.S.-
Panamanian relations over the past 20 years, (2) the type of information about Nor-
iega developed by various intelligence and law-enforcement agencies, (3) the extent
to which this information reached foreign policy decisionmakers, and (4) the role
that such information played in decisions on U.S. foreign policy.
This work will be performed by Mr. Dpriald L. Patton, Group Director; Mr. James
O. Benone,-Evaluator-in-Charge; and Mr^Jon Chasson; of our Foreign Economic As-
sistance Group.
The work will be conducted in Washington at the Department of State, the De-
partment of Defense, the Department of Justice, and other federal agencies. We will
advise you of any need to visit State Department facilities outside the Washington
area.
 "104

We appreciate your assistance in notifying the appropriate officials of the assign-

ment. If you have any questions, please contact Mr. Patton at 275-1898 or Mr.
Benone at 275-7487. • - . ..
Sincerely yours, ,
JOSEPH E . KELLEY,
Associate Director.

U . S . GENERAL ACCOUNTING OFFICE,

. GENERAL GOVERNMENT DIVISION,
— Washington, DC, May IS, 1988
M r . JOHN C. KEENBY,
Assistant Attorney General, Criminal Division Department of Justice, Washington,
DC
DEAR M R . KEENEY. The General Accounting Office, lias been^requested to under-
take a study of Panamanian leader Gen. Manuel Noriega's alleged drug, activities.
The study, under code 472165, will examine (1) the broad parameters of U.S.-Pana-
manian relations over the past 20 years, (2) the type of information about Noriega
developed by various intelligence and. law-enforcement agencies, (3) the extent to
which this information reached foreign policy decisionmakers, and (4) the role that
such information played in decisions on U.S. foreign policy.
This work will be performed by Mr. Donald L. Patton, Group Director; Mr. James
O. Benone, Evaluator-in-Charge; and Mr. Jon Chasson; of our Foreign Economic As-
sistance Group, National Security and International Affairs Division.
We would like to meet with knowledgeable Criminal Division officials. We also
plan to conduct work at other Department of Justice offices, the Department of De-
fense, the Department of State, and other federal agencies.
We appreciate your assistance in notifying the appropriate officios of the assign-
ment. If you have any questions, please contact Mr, Patton at 275-1898 or Mr.
Benone at 275-7687. Os
Sincerely yours, - >
ARNOLD P . JONES,
Senior Associate Director.

U . S . GENERAL ACCOUNTING OFFICE,

GENERAL GOVERNMENT DIVISION,
, Washington, DC, May 16r 1988.
M r . MANUEL RODRIQUEZ,
Legal Counsel, Executive Office for U.S. Attorneys, Deparment of Justice, Washing-
ton, DC.
DEAR M R . RODRIQUEZ. The General Accounting Office, has been requested to un-
dertake a study of Panamanian leader Gen. Manuel Noriega's alleged drug activi-
ties. The study, under code 472165, will examine (1) the broad parameters of U.S.-
Panamanian relations over the past 20 years, (2) the type of information about Nor-
iega developed by various intelligence and law-enforcement agencies, (3) the extent
to which "this information reached foreign policy decisionmakers, and (4) the role
that such information played in decisions on U.S. foreign policy. -
This work will be performed by Mr. Donald L. Patton, Group Director; Mr. James
O. Benone, Evaluator-in-Charge; and Mr. Jon Chasson; of our Foreign Economic As-
sistance Group; National Security and International Affairs Division:.
We would like to meet with the U.S. Attorney in both Miami and Tampa, Florida,
who have brought indictments against Gen. Noriega to discuss the genesis of the
indictments, identify other people that we should, talk with, and obtain information
about the cases. We also plan to conduct work at other Department of Justice of-
fices, the Department of Defense, the-Department of State, and other federal agen-
cies. -""
We appreciate your assistance' in notifying the appropriate officials of the assign-
ment. If you have any questions, please contact Mr. Patton at 275-1898 or Mr.
Benone at 275-7687.
Sincerely yours,
ARNOLD P . JONES,
Senior Associate Director.
 "105

U . S . GENERAL ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, May M, 1988.
H o n . WILLIAM H . WEBSTER,
Director, Central Intelligence Agency, Director, Office of Legislative Liaison, Wash-
ington, DC.
DEAR M R . WEBSTER. The General Accounting Office, has been requested to under-
take a study of Panamanian leader Gen. Manuel Noriega's alleged drug activities.
The study, under code 472165, . will examine (X) selected aspects of U-S. Panamanian
relations over the past . 20 years, (2) the type of information about Noriega developed
by various intelligence and law-enforcement agencies, (3) the extent to - which this
information reached foreign policy decisionmakers, and (4) the role that such infor-
mation played in decisions on U.S. foreign policy.
This work will be. performed under the direction of Nancy R. Kingsbury Associate
Director by Mr. Donald L. Patton, Group Director; Mr. James O. Benone, Evaluator-
in-Charge; and Mr. Jon Chasson; of our Foreign Economic Assistance Group.
The work be conducted in Washington at the Department of State, tie Depart-
ment of Defense, the Department of Justice, and other federal agencies.
We would like to meet with the Agency representatives to discuss these issues
and obtain the Agency's perspective on them. We appreciate any assistance you can
provide to our staff in this regard. If you have any questions, please contact Mr.
Patton or Mr. Benone at 275-5790.
Sincerely yours,
FRANK C . CONAHAN,
• Assistant Comptroller General

U . S . GENERAL ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, June 23, 1988.
M r . C. NICHOLAS ROSTOW, . .
Special Assistant to, the President and Legal Advisor, National Security Council,
Washington,. DC. - .
DEAR M R . ROSTOV^ As you are aware, Senator John Kerry, Chairman of the Sub-
committee on Terrorism, Narcotics, and'International Operations and Representa-
tive Bill Alexander, are concerned that information about illegal activities by high-
level officials: of other nations may not be adequately considered in U.S. foreign
policy decisions. At their request, rtiie General Accounting Office is undertaking an
initial case study of how information about General Noriega was developed by vari-
ous government agencies, and what role such information played in policy decisions
regarding Panama.
To satisfy this request, we will: '
(1) Obtain an agency overview.—At each agency that develops relevant informa-
tion on General Noriega or his possible involvement in illegal activities, we will re-
ceive a briefing that outlines the general organizational structure and the oper-
ational procedures related to the agency's data collection, analysis, and dissemina-
tion systems.
(2) Interview relevant personnel.—Once we understand the basic organizational
structure, we will then interview key personnel responsible for (1) defining agency
information needs with regard to Noriega and Panama, (2) implementing the infor-
mation collection, process, (S) collecting and reporting raw data, and (4) analyzing
and disseminating data on Panama and Noriega.
(3) Review documents.—As we learn more about each-agency's collection and re-
porting processes, we will request relevant documents. We anticipate that these will
include: specific directives, instructions, or taskings to collect data on Noriega or al-
leged illegal activities involving Noriega, cables and reports from field offices re-
garding Noriega's involvement in or toferation of illegal activities, analyses or sum-
maries of field reporting on Noriega, and geographic/subject-area studies discussing
the role or suspected role of Noriega in illegal activities.
(J}) Examine the use of information about Noriega in the foreign policy process.—
After completing a systematic review at each agency, we will attempt to determine
how agency reporting on Noriega may. have influenced foreign policy decisions on
Panama. We mil first identify the agencies, organizations, and individuals who play
a role in deciding national security and foreign polipy issues with regard to Panama.
Through interviews and a review of relevant documents, we will determine whether
 "106

information about Noriega reached them, and how that information was used in
making decisions. \
As part of our review, w§ will contact appropriate officials of the National Securi-
ty Council who are now or were in the past involved in policy decisions regarding
Panama. We intend to discuss their knowledge and utilization of information con-
cerning General Noriega's illegal activities.
We understand that this review will involve potentially sensitive material that
may require special controls and safeguards. We are willing to discuss this issue
with you, and take appropriate precautions.
Mr. Levin indicated that, you would handle this request expeditiously, and I look
forward to hearing from you early next>week. If you have any additional questions
about our review, please contact Mr.-Patton at 275-1898 or Mr. Benone at 275-7487.
Sincerely yours, •
- NANCY : ®.J£INGSBURY.
- Associate Director.

U ; S . GENERAL, ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
• , Washington, DC, July 12,1988.
M r . LAWRENCE S . MCWHORTER, .
Director, Executive Office for U.S. Attorneys, Department of Justice, Washington, DC.
D E A R M R , MCWHORTER. A S we informed your staff in our letter of May 16, 1988,
the General Accounting Office is undertaking a case study of how information about
General Noriega was developed by various government agencies, and what role such
information played in policy decisions regarding Panama. As agreed with your staff,
we initially postponed audit work at the Justice Department until we had met. with
National Security Council officials to more fully explain our review objectives and
give them an opportunity to coordinate agency participation in our_review. Howev-
er, because the National Security Council has not acted, and because of the high
level of congressional interest in this assignment, we must now implement our
review independently at each agency.
We are therefore requesting that you provide us with the following: -
1. Documents outlining the organizational components involved in, and the
operational, procedures related to, the U.S. Attorney requests for and analysis of
foreign intelligence.data.
2. Documents relating to the investigations of.alleged drug trafficking by Gen-
eral Noriega conducted by the U.S. Attorneys .in Miami and Tampa.
3. Any memos, reports, analyses, studies, briefing 'papers, meeting records, or
other documents generated by the offices of the U.S. Attorneys which discuss
allegations of illegal activities by General Noriega, and interagency communica-
tions on these matters.
We anticipate that as our review progresses, we will make additional requests for
documentation.
To facilitate our review, we request that: appropriate officials meet with us at an
opening conference no later than July 20. At that time, we will establish a schedule
for obtaining the needed documents. .
With the input and cooperation of U.S. Attorney officials, I am confident that we §|
can successfully complete our review in a timely manner.
If you have any additional questions about our review, please contact Mr. Donald
L. Patton at 275-1898 or Mr. James O. Benone at 275-7487.
Sincerely yours, ' "|T
' NANCY R . KINGSBURY.
Associate Director.

U . S . GENERAL ACCOUNTING OFFICE,

• NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
~ Washington, DC, July 12,.1988.
M r . EDWARD S . DENNIS, . , > .
Assistant Attorney General, Criminal Division; Department of Justice, Washington,
DC. • ,
DEAR M R . DENNIS. A S we. informed your staff in our letter of May 16, 1988, the
General Accounting Office is undertaking a case study of how information about
General Noriega!'was developed by various, government agencies, and what "role such
 "107

information played in policy decisions regarding Panama. We initially postponed

audit work at the Justice Department and several other government agencies until
we had met with National Security Council officials to more fully explain our
review objectives and had given them an opportunity to coordinate agency participa-
tion in our review. However* because the National Security Council has not acted,
and because of the high level of congressional interest in thus assignment, we must
now implement our review independently at each agency.
We are therefore requesting that youprovide us with the following:
•1. Documents outlining: the organizational components involved in, and the
operational procedures related to, the Criminal Division's development of law
enforcement information and its request for and analysis of foreign intelligence
data provided by the various-collection agencies.
2. Any memos, reports, analyses, studies, briefing papers, meeting records, or
other, documents generated by. the Division which discuss allegations of illegal
activities by General Noriegk br the possible impact of such activities on U.S.
relations with Panama. "" \
We anticipate that as our1 review progresses, we will make additional requests for
documentation.
To facilitate our review, we request that appropriate officials meet with us at an
opening conference no later than July 20. At that time, we will establish a schedule
for obtaining the needed* documents.
With the input, and cooperation of Criminal Division-officials, I am confident that
we can "successfully complete our review in a timely manner.
-If you have any additional "questions about our review, please contact Mr. Donald
L. Patton at 275-1898 or Mr. James O. Benone at 275-7487.
Sincerely yours,
• N A N C Y R . KINGSBURY,
- Associate Director.

U . S . GENERAL ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, July 12, 1988.
M r . JOHN C . L A W N , \
Drug Enforcement Administration, Washington, DC
DEAR M R . L A W N . A S we informed your staff in our letter of May 11, 1988, the
General Accounting Office is undertaking a case study, under code 472165, of how
information about General Noriega was developed by various government agencies,
and what role such information played in policy decisions regarding Panama. At the
request of your staff, we initially postponed audit work at the Drug Enforcement
Administration until we had explained our"review objectives to the National Securi-
ty Council and had given them an opportunity to: coordinate the executive agency
participation in our review. However, because the National Security Council has not
acted, and because of the high level of congressional interest in this assignment, we
must now implement our review independently at each agency.
We are therefore requesting that DEA provide us with:
1. Documents outlining the organizational structure and the operational pro-
cedures related to DEA's development of law enforcement information and its
foreign intelligence data collection, analysis, and dissemination systems.
2. Documents which establish DEA's procedures for (a) defining foreign intel-
ligence information needs with regard toiSeneral Noriega and Panama; (b) im-
plementing the information collection process; (c) collecting and reporting raw
data; and (d) analyzing and disseminating data on Panama and General Nor-
iega. C
3. Specific directives, instructions, or taskings to collect data on General Nor-
iega Or his alleged illegal, activities, cables and reports from field offices regard-
ing his involvement ih or toleration of illegal activities, analyses or summaries
of field reporting on him, and geographic/subject-area studies discussing his
role or suspected role in illegal .activities.
To facilitate our review, we are requesting an opening conference with appropri-
ate officials no later than July 20. At that time, we will more fully discuss the spe-
cific parameters of our audit work and establish a schedule for obtaining the needed
documents.
With the input and cooperation of DEA officials, I am confident that we can suc-
cessfiilly complete our review in a timely manner.
 "108

If you have any additional questions about our review, please contact Mr. Donald
L. Patton at 275-1898 or Mr. James O. Benone at 275-7487.
Sincerely yours,
N A N C Y R . KINGSBURY,
Associate Director.

U . S : GENERAL ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, July 12, 1988.
M r . P A U L SCHOTT STEVENS^
Executive Secretary, National Security Council, Old Executive Office Building; Wash-
ington, DC. ' "•'•/ ' •
DEAR M R . STEVENS. A S we informed you in our letter of TVIay 13, 1988, and Mr.
RdstoW in our letter of June 23, the General Accounting Office is undertaking a
case study of how information about General Noriega was develpped by .various gov-
ernment agencies, and what role such information played in policy decisions regard-
ing Panama. At the request, of the National Security Council staff* we initially post-
poned audit work at the Council and. several other government agencies until we
had met with them to more fully explain our review objectives and had given them
an opportunity to coordinate agency participation in our .review. However, because
we have not received a response to our letter of June 23, and because of the high
level of congressional interest in ifchis assignment, we must now implement our
review independently at each agency. ?
We have sent requests to each'agency, asking that" appropriate officials meet with
us to establish a. timetable for collecting and reviewing relevant documents. We ask
that the National Security Council provide us with:
1. Documents outlining the organizational structure and the operational pro-
cedures related, to the National. Security Council's requests for iand analysis of
foreign intelligence data provided by the various collection agencies.
2. Any memos, reports, analyses, studies, briefing papers, meeting records, or
other documents generated by the National Security Council staff which discuss
allegations of illegal activities by General Noriega and the possible impact of
such activities on U.S. relations with Panama.
We anticipate that as our review progresses, we will make additional requests for
documentation. •. ,.
To facilitate pur review, we request that appropriate officials meet with us at an
.opening Conference no'later than July 20. At that time; we will establish a schedule
for pbtaining the needed documents. ~
, With the input , and cooperation of National Security Council officials, I am confi-
dent that we can, successfully complete our review in a timely maimer.
If you have any additional questions about our review, please contact Mr. Donald
L. Patton at'275-1898 or Mr. James O. Benone at 275-7487,
Sincerely yours, . . -
N A N C Y R . KINGSBURY,
Associate Director.

U.S. GENERAL ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, July 12,1988.
H o n . GEORGE P . SHULTZ, R'

Secretary of State, GAO Liaison, Office of the Comptroller, Washington, DC.

DEAR M R . SECRETARY. A S we informed you in our letter of May 13, 1988, the Gen- -
eral Accounting Office, is.undertaking a case study, jinder code 472165, of how infor-
mation about General Noriega was developed by various government agencies, and
what role such information played in policy decisions regarding Panama. At the re-
quest of your staff, we initially postponed audit work at the State Department until
we had explained our review objectives to the National Security Council and had
given them an opportunity to coprdlnate the executive , agency participation in our
review. However, because the National Security Council has not acted, and because
of ihe high level of congressional interest in this assignment, we must now imple-
ment our review independently at each agency.
We are therefore requesting that the State Department provide us with: -
 "109

1. Documents outlining the organizational structure and the operational pro-

cedures related to the State Department's foreign intelligence data collection,
analysis, -and dissemination systems.
2. Documents which establish the State Department's procedures for (a) defin-
ing foreign intelligence information needs with regard to General Noriega and
Panama, Ob) implementing the information collection process, (c) collecting and
reporting raw data, and (d) analyzing and disseminating data on Panama and
General Noriega.
3. Specific directives, instructions, or taskings to collect data on General Nor-
iega or his alleged illegal activities, cables and reports from embassies regard-
ing his involvement in or toleration of illegal activities, analyses or summaries
..of field reporting on.him, and geographic/subject-area studies discussing his
role or suspected role in illegal activities.
We anticipate that many of these documents are available within the Offices of
the Assistant Secretary of State for Inter-American Affairs, the Assistant Secretary
for Intelligence and Research, and the Assistant Secretary for Narcotics Matters.
To facilitate our review, we are requesting an opening conference with appropri-
ate officals no later than July 20. At that time, we will more fully discuss the specif-
ic parameters of our audit work and establish a schedule for obtaining the needed
documents.
With the input and cooperation of State Department' officials, I am confident that
we can successfully complete our review in a time manner.
If you have any additional questions about our review, please contact Mr. Donald
L. Patton at 275-1898 or Mr. James O. Benone at 275-7487.
Sincerely yours,
N A N C Y R . KINGSBURY,
' . . . . . Associate Director.

U . S . GENERAL ACCOUNTING OFFICE,

NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION,
Washington, DC, July 13, 1988.
H O N . FRANK C . CABLUCCI,
Secretary of Defense, DOD Office of the Inspector General, Deputy Assistant Inspector
General for GAO Reports Analysis, Washington, DC.
DEAR M R . SECRETARY. A S we informed you in our letter of May 12, 1988, the Gen-
eral Accounting Office is undertaking a case study, under, code 472165, of how infor-
mation about General Noriega was developed by various government agencies, and
what role such information played in policy decisions regarding Panama. With the
cooperation of Department of Defense officials, including those from the military
Services and other Defense' agencies, we have already made substantial progress
toward ach|eving our review objectives. However, we were advised on July 12, 1988,
that these officials have been directed to postpone meeting withi us and providing us
with documents until the National Security Council provides guidance on the extent
that the Department should participate in our review.
Since initiating this review, we have fully briefed the National Security Council
staff on our review objectives and methodology and allowed them time to provide
guidance to execute branch agencies. However, because the Council has not issued
such guidance and because of the high-level of congressional interest in this assign-
ment, we have advised the Council that we must now implement our review inde-
pendently at each agency.'
We are therefore requesting that-the Department resume cooperating with us on -
this assignment and provide us with documents we need to accomplish our review
objectives. In addition to the documents that we already have requested, we need to
obtain:
1. Cables and intelligence reports generated by, or in the possession of, the
Department of Defense and its various components which discuss General Nor-
iega and his alleged illegal activities.
2, Any other memos, reports, analyses, studies, briefing papers, meeting
records, other documents, or recorded information generated by, or in the pos-
session of, the Department or its components which discuss allegations of illegal
activities by General Noriega and the possible impact of such activities on U.S.
relations with Panama. \ "
To facilitate our review, we would appreciate being advised in writing no later\
than July 20, 1988, of your intended action on this matter.
 "110

With the Department's renewed cooperation, I am confident that we can success-

fully complete our review in a timely manned
If you have any additional questions about our review, please contact Mr. Donald
L. Patton at 275-1898 or Mr. James O. Benone at 275-7487.
. Sincerely yours,
NANCY R . KINGSBURY,
Associate Director.

[Enclosure HI] -.
NATIONAL SECURITY COUNCIL,
Washington, DC, July 13, 1988.
M s . NANCY R . KINGSBURY, ""
Associate Director, National Security and International Affairs Division U.S. Gener-
al Accounting Office, Washington, DC. ' .
DEAR M S . KINGSBURY. I am writing in response to your request concerning a
study of the alleged drug activities of Manuel Noriega,-and tl\e role information
about such activities played in decisions about U.S. foreign policy (Study #472165).
As described in Mr. Kelly's May 13, 1988, letter to Paul Stevens &hd your June 23,
1988, letter to me, your request seeks access to sensitive law enforcement and, intel-
ligence files covering a substantial period of time. In our meeting, ^our staff con-
firmed that your three areas of interest were intelligence files, law enforcement
files, and the deliberative process of the Executive branch, including, internal com-
munications and deliberations leading to Executive' branch actions taken .pursuant
to the President's constitutional authority. I was disappointed that your letter did
not contain.any narrowing of the request. The request raises important statutory
and constitutional issues. The Administration is analyzing them now, and when its
deliberation is complete, I shall reply further to your letter of June 23^ 1988.
Sincerely, N
NICHOLAS ROSTOW,
Special Assistant to the President and Legal Adviser.

NATIONAL SECURITY COUNCIL,

Washington, DQ July. 25, 1988.
M s . NANCY R . KINGSBURY,
Associate Director, National Security and International Affairs Division, U.S. Gener-
al Accounting Office, Washington, DC.
DEAR M S . KINGSBURY. I am responding to your' July 12,jL1988, letter, concerning
your study involving Manuel Noriega- As Nicholas Rostow has informed you, the
legal issues raised by your request are under consideration. We will respond to your
request promptly after the completion of the necessary legal analysis. In the mean-
time, we must decline your request for an "opening conference" oh or before July
20,1988.
Sincerely, •. ,
"" P A U L SCHOTT STEVENS, .
Executive Secretary,

[Enclosure IV]
CENTRAL INTELLIGENCE AGENCY,
- Washington, DC, June 13,1988.
M r . FRANK C . CONAHAN,
Assistant Comptroller General, National Security and International Affairs Division,
Generdl Accounting Office, Washington, DC. *
DEAR M R . CONAHAN. The Director has asked me to respond to your letter of 24
May 1988 that described the General Accounting Office's investigation of allegations
mad£ against General Noriega of Panama. .
All Agency activities in Central America, as well as information we receive con-
cerning other U.S. Government activities in the region, are subject to close and con-
tinuing scrutiny by the House and Senate Intelligence Committees. Furthermore,
any assessment of policy-related questions should be directed .to the appropriate
components' of the Executive Branch, such as the Departments of State and Defense.
 "Ill

I am sorry that we cannot be more helpful in this case.

Sincerely,
JOHN L . HELGERSON,
Director of Congressional Affairs.

[Enclosure V]
T H E ASSISTANT SECRETARY OF DEFENSE,
Washington, DC, August 3, 1988.
M s . NANCY R . KINGSBURY,
Associate Director, National Security and International Affairs Division, U.S. Gener-
al Accounting Office, Washington, DC.
• DEAR Ms. KINGSBURY; Reference is made to your letter to the Secretary of De-
fense dated July 13,1988, concerning a request for documents related to your review
into General Noriega^ alleged drug activities (GAO Code 472165).
-In accordance with the attached policy guidance from the National Security Coun-
cil •(NSC),. the Department of Defense may hot release information involved in your
review until the NSC legal analysis has been completed.
Sincerely, t
LAWRENCE ROPKA, J R . ,
Acting Assistant Secretary of Defense.
Attachment.
[Memorandum]
To; . .. ;
Mr. Melvyn Levitsky, Executive Secretary, Department of State.
. -Mr. Robert B. IbellickJ Executive - Secretary, Department of Treasury.
Col. William M. Matz, Executive Secretary,'Department of Defense.
Mr, Mark R. Levin, Chief of Staff, Department of Justice.
Mr. H. Lawrence Sandall, Executive Secretary, Central Intelligence Agency.
From: National Security Council, Washington, DC, July 22,1988.
Subject: GAO Revest on1 Noriega: ?• . . _
GAO has sent letters to a number of departments and agencies concerning a
study if is conducting"'into the activities of Manuel Noriega. Following interagency
meetings, it was determined'that GA'O's request raises a nuniber of legal issues re-
quiring in-depth analysis. GAO has been so informed (Tab A), and that analysis is
underway, and should be completed shortly. , c .
Li order to ensure that thie Executive branch deals with this GAO request in a
consistent manner, there should be no meetings with GAO,' and ho documents or
other information should be provided to GAO, in connection with this request until
the .legal analysis is completed and a decision is made on how to respond.
"Any questions concerning this matter should be addressed to Nicholas Rostow,
Legal Adviser to the National Security Council (456-6538), or his Deputy, Dan Levin
(395-3854)., _ ^
P A U L SCHOTT SEVENS
Executive Secretary.

Attachment: Tab A—Letter from Nicholas Rostow to "Nancy Kingsbury,

NATIONAL SECURITY COUNCIL,
Washington, DC, July 13, 1988.
M s . N A N C Y R . KINGSBURY,
Associate Director, National Security and International Affairs Division, U.S. Gener-
al Accounting Office, Washington, DC.
DEAR Ms. KINGSBURY. I am writing in response to your request concerning a
study of the alleged drug activities of Manuel Noriega, and the role information
about such activities played in decisions about U.S. foreign policy (Study 472165).
As described in Mr. Kelly's May 13,1988, letter to Paul Stevens and your June 23,
1988, letter to me, your request seeks access to sensitive law enforcement and intel-
ligence files covering a substantial period of time. In our meeting, your staff con-
firmed that your three areas of interest were intelligence files, law enforcement
files, and the deliberative process of the Executive branch, including internal com-
munications-and deliberations leading to Executive branch actions taken pursuant
to the President's constitutional authority. I was disappointed that your letter did
 "112

not contain any narrowing of the request. The request raises important statutory
and constitutional issues. The Administration is analyzing them now, and when its
deliberation is complete^ I shall reply further to your, letter of June 23,1988.
Sincerely,
NICHOLAS ROSTOW,
Special Assistant to the President
and Legal Adviser.

MONEY
INTRODUCTION ' •••"
". J . ' -t 1

The phenomenal profit associated with the. narcotics trade is the

foundation upon which the carters power is based. Therefore, a
concerted attack on the .cartels' money-laundering operations may
be one of the most effective means to damage th§ international
narcotics trade. :
The Subcommittee heard testimony from a number of witnesses
concerning the magnitude of money-laundering. Those testifying
ranged from narcotics traffickers who laundered drug profits, to
one of the Medellin Cartel's money launderers, to an authority on
international banking.
In reviewing this, testimony,, members of, the Subcommittee sub-
sequently drafted money-laundering legislation yfhieh was= incorpo-
rated into the Omnibus Drug Bill of 1988 and enacted into law in
October, 1988. ..' x 1

DEFINING THE PROBLEM OP MONEY LAUNDERING

The phrase "money laundering" has been used to describe a wide

range of illegalfinancialoperations.. The most basic form of money
laundering is the skimming of funds from cash-generating business-
es to evade taxes. The Internal Revenue Service estimates that in
1988 some $50 billion was hidden in this way.
The term is also used to describe schemes to hide the cash pro-
duced by a range of illegal activities, including illegal gambling,
prostitution, and drug -trafficking. Estimating the size-of this un-
derground economy is extremely difficult for obvious reasons. How-
ever, law enforcement officials have consistently estimated that
these activities may generate as much as $100 billion in illicit cash
profits each year in the United States.
For the relatively small-time drug trafficker, the laundering of
money is simple—they spend their profits. They .pay the wages of
accomplices and suppliers in cash; and, they use cash to purchase
luxury items such as cars, jewelry and vacation homes.
However, as one moves higher up the drug distribution hierar-
chy, the profits are so large that they cannot be completely hidden
through consumption, and capital is retained. Holding capital in
the form of currency is very costly. Not only are secure storage and
transportation of currency prohibitively expensive, but also the op-
portunity costs in terms of lost earning power are substantial.
These problems can be' overcome only by depositing the money, in a
financial institution which takes custody of the currency, piays in-
terest on the balances, and can transfer funds anywhere in the
world through the use of electronic funds transfer system.
 "113

THE B A N K SECRECY A C T RESTRICTS M O N E Y LAUNDERING

As the worldwide drug trade mushroomed during the 1970's, the

United States become the center of money-laundering activities. In
response to this problem, the Bank Secrecy law was enacted in
1974. The Act requires that all cash transactions in excess of
$10,000 must be reported monthly to the Internal Revenue Service,
including bank and securities brokerage transactions, transactions
in, cash at casionos, real estate closings, and even automobile, boat
and aircraft purchases. Large shipments of cash into or out of the
country must be reported as well.
The reporting requirement was viewed as an essential step to
prevent the proceeds of crime from being laundered. The require-
ment created a paper trail whereby law enforcement authorities
could trace funds invested in legitimate enterprises to determine
whether or not such funds had their origins in criminal activities.
However, initial enforcement of the currency reporting require-
ments of the Bank Secrecy Act of 1974 proved to be lax, and signifi-
cant sums of money continued to be laundered through U.S. finan-
cial institutions.1 Increased attention to the problem by the Treas-
ury Department brought stricter enforcement efforts during the
Reagan Administration. These, efforts included a much publicized
prosecution in 1985 of the Bank of Boston, and indictments of other
financial institutions for accepting cash deposits of over $10,000
without reporting them in the IRS.
In the wake of the stricter enforcement measures, the Treasury
Department determined that financial institutions in the United
States were , increasingly complying, with the reporting require-
ments. However, Treasury also recognized that as compliance in-
creased in the United States, those, engaged in criminal activities
were moving more and more U.S. currency overseas to countries
whose banking regulations guaranteed that such transactions
would remain secret.
T H E INTERNATIONAL LOOPHOLE

Testimony delivered before the Subcommittee described in detail

the movement of U.S. currency to be laundered in offshore banks
and the methods used by both drug dealers and bankers to avoid
regulation and detection.2
The profits from the international drug trade are moved to any
country which guarantees the fewest problemg,for the trafficker in
handling the proceeds from the illicit activities. As a result, drug
money is moved to countries, such as Panama, which do-not collect
taxes on foreign accounts and which provide the fewest restrictions
on the movement of U.S. currency across their borders.3
The business has been highly competitive, attracting many
smaller nations which historically have served as "tax havens" in
order to attract capital from'around the world. Among the princi-
pal money-laundering/tax havens -have been the Bahamas, the

1 See testimony of Martin Mayer, Part 3, April 5,1988, p. 64.

2 Subcommittee testimony of Martin. Mayer, April 5,1988, p. 64.
3 Ibid., p. 65.
 "114

Cayman Islands, Hong Kong, Liechtenstein, Luxembourg* Monaco,

Nauru, Singapore, and the Turks and Caicos Islands.4
7 By the mid-1980's, Panama became an important center for the
drug trade because it offered everything, a trafficker needed.
Panama is strategically located on the major route between-the
United States and South America. It has very stringent bank secre-
cy laws, and in thefigureof General Noriega, guaranteed physical
protection of money couriers moving currency to Panama.
The use of these jurisdictions to launder drug money is described
in the case histories below, selected from the Subcommittee hear-
ings, Evident in the case histories is the ease with whjch 4rug traf-
fickers move nloney out of the United States to foreign jurisdic-
tions for deposit where, in turn, the funds can then-be electronical-
ly transferred back into the United States.
CASE HISTORIES 3a
£
CAYMAN ISLANDS

Leigh Ritch, convicted of narcotics trafficking in 1986, rah one of

the largest marijuana smuggling organizations ever uncovered in
the United States. By the time he was thirty years old Ritch was
transacting drug deals worth hundreds of millions of dollars.®
Ritch told the Subcommittee that all of his distributors paid him
in cash and that he stored the bills in a safehbuse in the Tampa,
Florida area.6 He employed old high school friends to count and §
package the money for shipment to an offshore banking haven
where the money could be converted into a bank deposit.7 For
Ritch, =the ideal place was the Cayman Islands, renowned for its
bank secrecy laws.8
Ritch held dual U.S.-British citizenship and had lived and II
worked in the Cayman Islands. He had learned that-the Island's
hundreds offinancialinstitutions existed principally to assist Latin Ii
Americans in evading exchange controls and taxes in their own f|
countries. These institutions would not require any information on
deposits of large sums of U.S. currency.9
Ritch testified that the Cayman,fcankscharged a one percent fee
for laundering, the money, which they characterized as a fee for
"counting the cash." After taking such a fee, the banks would then
ship the funds to the U.S. Federal Reserve System.10
When Ritch first began selling narcotics, the amounts of curren-
cy he handled were in the hundreds of thousands of dollars. He
would place the currency in a suitcase and fly from-Tampa to the
Cayman Islands. As the amounts of cash he handled grew, and his
trips became more frequent, Ritch began to fear that His activities
would be uncovered. As Ritch put it, "there was a lot of U.S. intel-
ligence on the island, watching the airport, watching . . . the bank

* Senate Committee on Government Operations, Crime and Secrecy: The Use of Offshore
Banks .and Companies, Senate Report 99-130, p. 141.
6 Subcommittee testimony of Leigh Ritch, February 8,1988,- pp. 179-180.
8 Ibid., p. 155.
7 Ibid., p. 154.
8 Ibid., p. 154.
a Ibid., p. 148. -
10 Subcommittee testimony of Lee Ritch, February 8,1988, p. 74.
 "115

transactions there." Ritch also learned that Cayman banks were

being pressured by the U.S. not to accept deposits from known drug
traffickers. Accordingly, Ritch decided to move his money to
Panama.11
. In Panama Ritch relied on Ms partner in the smuggling oper-
ation, Stephen-; Kalish, to act as his "agent to deal with, the Pana-
manians." Kalish actually bought a penthouse apartment in
Panama City for use by the organization. He shuttled between
Florida and Panama ainxi, according to Ritch, negotiated with Gen-
eral Noriega to insure the security of the money laundering oper-
ation.12
' BAHAMAS

Louis "Kojak" Garcia, a marijuana smuggler turned federal gov-

ernment informer, described the dimensions of the currency gener-
ated by his drug transactions by recounting how there were times
he would sit in his spacious living room, ankle-deep in twenty, fifty
and one hundred dollar bills.13 After receiving the money from dis-
tributors who paid him: for the marijuana he smuggled into the
Miami area, Garcia then paid his suppliers and members of his
drug organization. He claims also to have paid several high rank-
ing Bahamian officials up to $250,000 for permission to transship
marijuana through the Bahamas.14 These payments still left him
with hundreds of thousands of dollars in currency at a. time which
required laundering. .
Initially, Garcia used the Bahamian banking system to launder
the profitsfromLthe, narcotics business, particularly since he was
already using the islands as the transit point for drugs coming into
the United States. The Bahamas had strict bank secrecy laws, and
there were no requirements for reporting the deposit of U.S. cur-
rency in Bahamianfinancialinstitutions,
Garcia found that initially many Bahamian banks were more
than willing to have his business. But like the Riteh-Kalish organi-
zation, the Garcia organization found that increasing pressure by
the U.S. was making the Bahamas a less attractive place to do
business for money laundering. Accordingly, on the advice of
Ramon Milian Rodriguez, a money launderer for the Medellin
cartel, and a number of Cuban American narcotics traffickers,
Garcia decided to join the cartel, Rodriguez and the Ritch-Kalish
organization in laundering his profits in Panama.
PANAMA

Panama had grown into a money-laundering center long tyefore

General Noriega came into power, in large part as a result of bank-
ing "reforms" instituted in the late 1960's. Bank secrecy laws were
adopted and regulations on financial institutions repealed which
led to a virtual explosion in the Panamanian banking industry by
the early 1970's. Dozens of foreign banks opened branches in

11 Ibid., p. 161.
12 Testimony of Leigh Ritch, Part 2, February 8,1988, pp. 67-68.
13 Subcommittee testimony of Luis Garcia, May 27,1987, pp. 33-34.
14 Ibid., p. 17.
 "116

Panama, many of them geared toward attracting the proceeds of

illegal activity.
By the early 1980's, there were well over one hundred banks in
Panama and more than fifty of those were owned by Colombians.
These banks attracted significant sums of drug money as the Car-
ters-relationship with General Noriega grew. Panama became so
successful in attracting drug money, that according-to U.S. Treas-
ury estimates, staggering sums of currency, amounting to at . least
several billion dollars were being laundered each year.. (Panama's
development as a money laundering center prior to 1984 is de-
scribed more fully in the chapter on Panama.) "
Amjad Awan, the former manager of the Bank of Credit and
Commerce International Panama, stated in a Subcommittee deposi-
tion that many of the international- banks in Panama willingly
laundered money. He said that when unusually large amounts of
cash were returned from Panama to the Federal Reserve Bank in
New York in 1984, the Panamanian Bankers' Association, a self-
regulatory organization, met to discuss how to deal with -this prob-
lem. Voluntary limits on the amount of U.S. currency that any one
bank could return-to the National Bank of Panama were proposed.
A suggested $5 million dollar limit was vigorously protested by the
Swiss banks and a ^number of large7 North American banks. When
voluntary limits were'adopted, the Swiss banks avoided compliance
by chartering aircraft to fly; currency back to Europe^
Awan also stated that the bankers could get money laundering
business by paying kickbacks of one or two percent to the owners
of Brinks of Panama/ According to Awan, Bririks controlled the
placement of many drtfg deposits and for a fee, would direct the
shipment of cash to the bank which paid a" commission. In addition,
banks which laundered money tolerated cash skimming by officials
of the National Bank of Panama when the money was transferred
for repatriation. To offset these expenses and earn a substantial
profit, the banks charged special cash handling fees for taking in
large sums of currency.16
Marijuana smuggler Leigh Ritch confirmed this account. He tes-
tified that Cesar Rodriguez, a drug trafficker who worked "for Nor-
iega, had established a two to three percent fee1 for money laun-
dered by his organization. The fee dropped to one percent for each
deposit over $5 million. The services Cesar Rodriguez provided in-
cluded meeting the shipments of money at the airport with ar-
mored cars, bodyguards and limousines, and providing continuous
personal security while the traffickers remained in Panama.17
Panama became so secure for money laundering, that the princi-
pal problem for the drug traffickers was security for the money as
it left the United States, not once it reached Panama. To solve this
problem, the Cartel experimented with different methods of han-
dling funds in order to prevent seizures.18 Often, the money was
flown to Panama as commercial air freight on either Braniff air-

15 Subcommittee deposition of Awan, Part 4, pp. 473-503.

" Ibid.
17 Subcommittee testimony of Lee Ritch, February 8, 1988, p. 67.
18 Ibid., p. 50.
 "117

lines or Eastern Airlines.19 Currency was shipped in pallets or in

containers.
The use, of palletized shipments was confirmed by an Eastern
pilot- who testified that after his plane landed in Panama he
watched pallets being unloaded from his craft into-waiting armored
cars. When he inquired as to the nature of the cargo, he Was in-
formed that dt was money.20 According to Roman Milian Rodriguez
the statibn managers for the-airlines were in the employ of Gener-
al Noriega, thus insuring that the currency cargos received special
protection. Noriega also maintained an ownership interest in the
armored car-business that met the planes at the airport.21
After being laundered, many of the drug profits of the Cartel de-
posited in Panamanian financial institutions found their way back
to Colombia where they were invested in newspapers, radio sta-
tions, television stations, soccer, teams, pharmaceutical firms, auto-
mobile agencies,^and construction companies. 22
(3NE M O N E Y LAUNDERER'S EXPERIENCE

Iri his Subcommittee testimony, Milian Rodriguez described his

career as a money-launderer and explained the techiiiques used by
the major traffickers to handle and invest their money. As an ac-
countant in Miami, Milian Rodriguez attracted business from mem-
bers of the Cuban exile community who had turned from shellfish-
ing to drug trafficking during the 1970's.23
Beginning on a modest scale, Milian Rodriguez took the responsi-
bility for counting, packaging and shipping his client's money to
Panama, where the funds were deposited in a local bank. Typically,
Rodriguez set up the account at the Panamanian bank in the name
of ^Panamanian corporation created for the sole purpose of receiv-
ing the one time currency deposit:24 Shortly after the initial depos-
it, the money would then be .moved to another group of accounts in
the same bank through a cash withdrawal in the form of a teller's
receipt. This transaction did not leave a paper trail to "the receiving
accounts. TJhe moneys would then be moved to a second bank in the
form of teller's notes and deposited to the account of another group
of "dummy" Panamanian corporations, further hiding the source
of the funds.25 From there, it was transferred to a visible, and on
the surface, legitimate investment corporation in the Netherlands
Antilles.26 That corporation would in turn purchase a wide range of
assets as. passive investments, including luxury real estate, stocks
and bonds, and otherfinancialinstruments.27

19 Ibid., p. 39-40.
20 Subcommittee testimony of Gerald Loeb, February 8,1988, pp. 131-132,143.
2 1 Subcommittee testimony of Ramon Milian Rodriguez, February 11, 1988, pp. 235, 247 and
closed testimony June 26,1987, p. 91.
22 Subcommittee testimony of Ramon Milian Rodriguez, April 6, 1988, p. 45.
23 Subcommittee testimony of Ramon MUian-Rodriguez, February 9,1988, pp. 220-221; see also
Milian-Ro&riguez. indictment and related'documents in U.S. v. Five Million Four Hundred, Forty
Seven. Thousand, Nine Hundred Forty Nine Dollars, No. 83-1652 Civ-JWK, and U.S. v. Rodri-
guez, both US District Court for Southern District of Florida.
24Ibid., pp. 24-25, 36-40.
25Ibid., pp. 41, 45-46 and testimony of April. 6,1988, pp. 40-41.
MRMR testimony of February 11,1988, p. 49.
21 Subcommittee testimony of Ramon Milian Rodriguez, April 6,1988, p. 45.
 "118

Milian-Rodriguez -testified that in 1979 he established a cash

management system for Pablo Escobar, a key figure in the Medel-
lin Cartel.2® Milian Rodriguez designed this system to maximize
profit and interest, and minimize risk. As -he described it, currency
received irom wholesale cocaine purchases:was-delivered to cartel
operatives in the major cities around the United States. These
"cutouts" in turn passed, the money t6 messengers' who delivered it
to safehouses, where Colombians counted and bundled 'thfe money
and shipped it to consolidation points for shipment to* Panama.29
The packaging and shipment of currency was handled by-freight
forwarding companies owned by the Cartel.30 Milian-Rodriguez pro-
vided the subcommittee" with cardboard boxes that had "been de-
signed to exact dimensions for packing money and carried the logo
of the captive freight forwarder. 31 •»;•;, •
Milian Rodriguez was convicted under federal RICO statutes as a
money lauriderer and sentenced to 43 years in federal prison. In
May 1983, he was arrested with $5.4 million in cash as he attempt-
ed to leave Fort Lauderdale for Panama on his personal Lear jet.
At the time of his arrest, federal authorities touted him as the big-
gest drug money launderer apprehended, in Florida.
THE U . S . RESPONSE T O T H E PROBLEM

By the time the Subcommittee on Narcotics and Terrorism began

its investigation, the use of offshore banks by drug traffickers al-
ready had received significant attention by Congress. Beginning in
1982> the Permanent Subcommittee on Investigations of the Senate
Government Affairs Committee undertook a major investigation of
the use i>f banks, trusts and companies in offshore bank secrecy ju-
risdictions by drug runners. In the case of Panama, the Subcommit-
tee concluded that-'•the evidence indicates that a significant per-
centage of the currency [in circulation^-in Panama] was drug
money.'- •• ' *' • -
In the House of Representatives, Congressman George Wortley
(R-lSTY), a member oftheBanking Committee, introduced a propos-
al which would have authorized the Treasury Secretary to subject
a wide range of foreign financial institutions,' including branches,
subsidiaries, and affiliates of institutions doing business in the
United States, to the record-keeping and reporting requirements of
the Bank Secrecy Act. The House Banking Committee included this
proposal in H.R. 5176, the money laundering bill that it reported in
August 1986. Accordiiig. to the Committee report (H.R. Report No.
746, 99th Congress, 2nd Session, 34):
By including Section 6(a). in the bill, the Committee's
intent is to send a clear aiid unmistakable message that it ~
expects United States financial institutions doing business r
in this country to not only abide by the letter of the law
but to live up to their moral responsibility to fully cooper-

28 Ibid.,
pp. 20, 22.
23 Ibid.,
pp. S6-39.
30 Ibid.,
p. 40.
31RMR Subcommittee testimony of April 6,1988,- p. 28.
 "1X9

ate in this country's efforts to "stamp out the illicit traffick-

ing of drugs."
Foreign governments, , bankers and the Treasury Department op-
posed the Wortley provision from becoming a part of the final drug
bill passed by the Congress in 1986, arguing that it represented an
unprecedented extraterritorial application of U.S. law. A substitute
provision* was included [See. 1363, Subsection (c)j which required
the Secretary of the Treasury to report to Congress within one year
on the extent to which foreign branches: are used to facilitate
money laundering-to evade the reporting requirements.'of the Bank
Secrecy Act, to examine the issue of extraterritoriality, and to
identity methods of 'obtaining the ^cooperation of foreign govern-
ments.
In July 1987, the Treasury Secretary submitted his report to Con-
gress. In the report, he stated that "Treasury is aware of very few
examples of Bank Secrecy Act or money laundering cases involving
transfers through foreign branches of United States financial insti-
tutions." The Secretary further noted that "because there is no ac-
curate means of determining how much money is laundered
through each type of financial institution, Treasury can offer no re-
liable. estimates on the amount of money that may be laundered
through foreign branches of domestic financial institution."
EFFECTIVENESS OF CURRENT REPORTING REQUIREMENTS

In the wake of indictments of a number of prominent U.S. finan-

cial institutions for their failure to abide by the reporting require-
ments of the Bank Secrecy Act, the Congress in 1986 made it a
crime'to deposit large sums of cash ^without providing basic infor-
mation about the depositor such as name, address, and taxpayer
identification. This statute applies to every bank, broker and finan-
cial institution in the. country, including casinos, that handle large
sums of cash. Depositor information, or Currency Transaction Re-
ports (CTR), are now being filed at a rate of nearly 600,000 a
month.
The 1986 law, and the data generated by CTRs, have begun to
pay off. More, than 270 targets of suspicious activity have been
identified, and there have been'several major-prosecutions, includ-
ing the well known Washington, D.C. and New York City "Pizza
Connection^' case in which a number of persons were convicted in a
major heroin smuggling operation. {
But while these laws have been extremely effective in fighting
distributors of illegal, narcotics in the United States, a major loop-
hole has made them, entirely ineffective against drug smugglers
who operate from foreign sanctuaries. As the Subcommittee testi-
mony detailed, the drug traffickers have developed systems to ship
the moneys generated by drug sales out of the US, for deposit in
countries with strict bank secrecy laws, and then electronically
transfer these funds back to the rUnited States where they are law-
fully invested in income-producing assets.
 "120

. SUMMARY AND. CONCLUSIONS , ,

To function, the criminal organizations which control the drug

business must have access to commercial banks -willing to take
large amounts, of U.S. currency anonymously.; Moreover, they must
be . able to keep secret the identity of the beneficial owners of the
secret accounts. Restricting these two essential requirements; for
successful money ^ laundering activities,- even imperfectly, is " the
most important action the United States government can take in
challenging seriously the pperations of the large traffickers.
. The Subcommittee on -Narcotics and Terrorism therefore pro-
posed that rthe Secretary of the Treasury negotiate agreements, per-
mitting foreign banks to cooperate with U.,S.; narcotics investiga-
tions. As a result' of an amendment sponsored by the chairman and
ranking member of the Subcommittee (Senator John,-F. Kerry and
Senator Mitch McConuell), legislation incorporating this, proposal
was included in the Omnibus Drug Bill passed at the. close of the
100th Congress after, passing-the Senate by a vote of 85 to' 3..
All banks—both U.S.' and foreign-owned—which, do business in
, the United States, should be required to record :tj.S, cash deposits
in excess of $10,000 as a condition of their'U.S. charter or their
right to transfer funds electronically into this coutftry. The prompt
negotiation's of such agreements with other countries, as' mandated
by the Omnibus Drug Bill of 1988, should be undertaken: 1 ' _ S
It is the belief of the members of. the Subcommittee that these
agreements will ensure that banks maintain a record on the identi-
ty of anyone who conducts a cash transaction in excess of $10,000.
The records of . such transactions would be requested only in con-
nection with a narcotics investigation. Institutions which choose
not to comply with this requirement should be denied access toythe
U.S. banking .market and the financial wire transfer network
maintained by the Federal Reserve. ; •\v
LAW ENFORCEMENT VS. NATIONAL SECURITY: CONFUSED
PRIORITIES
INTRODUCTION

The Subcommittee identified a number of cases in which, law en-

forcement operations and criminal prosecutions were subordinated
to other foreign policy concerns. More often than not, the interfer-
ence with law enforcement processes was the,result of a.d hoc deci-
sions made at' the operational level of the. .^tioxi^i' security agert:
cies involved, rather than the product of carefdlly'considered deci-
sions made at" the highest levels of our government. ' ' ";
Instances in'which foreign policy considerations took precedence
over the war on. drugs included the Barry Adler Seal episode, law
enforcement investigations into illegal activities associated with
the ContraS oh the Southern Front, a narcotics sting operation di-
rected at a high Bahamian government official, the intervention' of
U.S.* officials on behalf of the Honduran General convicted in a
narco-terrorism plot, and the handling of Panama's General
Manuel Antonio Noriega. (Accounts "of the Bahamian sting and
General Noriega were provided in the Bahamas and Panama chap-
ters respectively.)
 "121

BAKKY SEAL AND THE CARTEL

Barry Adler Seal, a former narcotics smuggler, was utilized as an

undercover agent by the DEA in a highly sensitive operation being
run against the Colombian cocaine cartels and officials of the San-
dinista regime, in Managua. Based upon intelligence the DEA had
received, an interest had been, expressed by some members of the
Sandinista Directorate in providing a base of operations in Nicara-
gua for the cartels. U.S. law enforcement officials had hoped to
entrap both members of the cartels and Sandinista officials in a
drug sting being run by Seal.
However, the operation was disclosed prematurely by an admin-
istration official who leaked to the press evidence supposedly col-
lected by Seal in an effort to influence a pending Congressional
vote on Contra aid.. Law enforcement officials were furious that
their undercover operation was revealed and agents' lives jeopard-
ized because one individual in the U.S. government—Lt. Col. Oliver
North—decided to play politics with the issue.1
Associates of Seal, who operated aircraft service businesses at
the Mena, Arkansas airport, were also the targets of grand jury
probes into narcotics trafficking. Despite the availability of evi-
dence sufficient for an indictment on money laundering charges
and over the strong protests of State and federal law enforcement
officials, the cases were dropped.2 The apparent reason was that
the prosecution might have revealed national security information,
even though all of the crimes which were the focus of the investiga-
tion occurred before Seal became a federal informant.
BUESO-ROSA AND THE CONTRAS

Senior U.S. Government officials intervened with a federal judge

to bbtain.a reduction to five years in the sentence for Honduran
General Jose Bueso-Rosa, who-was convicted in 1985 of conspiring
to assassinate President Suazo Cordoba of Honduras. The assassi-
nation attempt was to have beenfinancedby the proceeds from the
sale in the United States of $40 million in cocaine seized in connec-
tion with the plot. The other defendants in the case received sen-
tences as long as forty years.
In addition, officials of the U.S. government intervened to ensure
that Bueso-Rosa served out his sentence in a miniiriutri security fa-
cility at a U.S. military base in Florida. The officials intervened be-
cause the general was a friend of the U.S. government and had
been of particular help to the U.S. military in Honduras. According
to the Admissions of the United States in the criminal trial of
Oliver North, "Lt. Col. North suggested that efforts be made on
Bueso-Rosa's behalf to deter him from disclosing details of [his sup-
port of the Contras]."3
These officials seemed unconcerned that the Justice Department
had touted the conspiracy as the ^most significant case of narco-
terrorism yet discovered.' 4

1 Subcommittee testimony of John C. Lawn^ July 12,1988, pp. 134-135.

2 Subcommittee staff interviews with local<-and federal law enforcement agents in Mena, Ar-
kansas, August 2 and 3,1988.
s Admissions, U.S. y. North, DC District Court, 1989, #102.
* Subcommittee testimony of Francis McNeil, Part 3, April 4,1988, pp. 44-49.
 "122

Mr. Mark M. Richard, the Deputy Assistant Attorney General of

the Criminal Division for the Department of Justice was adamant-
ly opposed to these interventions. Originally, the Department of
State? supported the Justice Department's position in .the Buesb-
Rosa 'case. Richard said that early on the Pentagon took the initia-
tive in- support of intervention oh behalf of Bueso-Rosa. J, ''!
In a deposition before the Iran/Contra Committee, Richard re-
called being called, to &' niteetmg^ 'which' 'included/ cufeqq? oihfcrs,
Oliver North, General Paul Gorman, Eniott, Abraihs,. rand Dewey
;Clarridgej who was representing the CIA; "In" that" meeting' No£th,
Gorman, Abrams and Clarridge all agreed theit Bueso-Rosa should
be accommodated; Richard said h^ wias surprised that the State' De-
partment's' position had changed. Richard said he' responded by
saiying: - / ' " " . ; . , 1. *
Look . . t anything we. do for this man; seems to undercut. .
our position that we, have repeatedly taken that this is an .
international terrorist.; This is certainly not consistent
with .the position we have .articulated, throughout the. "
course of this prosecution, that this man is a serious inter-
national terrorist/and should be treated accordingly.5
Francis McNeil, in/testimony before the Subcommittee' smd the,
successful intervention on behalf of Bueso-Rosa, over the objections
of the^ustiee Department, undermined President^ Rfeag^'s;policies
in thrfee areas: ''toli^ie^oriisih,' anti-n^cotics,; fowl support? Jfor. de-
mocracy. . J'; . / 5 7 " /

INTELLIGENCE VS. L A W ENFORCEMENT

Despite obvious and widespread trafficking through the war

zones of northern Costa Rica, the Subcommittee was miable to find
a sihgle case against a^drug trafficker-' dperating in those zories
which was made on the . basis Of a tip or report by an official, of a
U.S. intelligence agency. This is despite art executive ordefc requit-
ing intelligence agencies % report trafficking to law erifprcement
officials and despite direct testimony thai trafficking on. the. South-
ern Front was reported to CIA officials.6
Where traffickers and suspected traffickers "were mentioned/ by
name in documents divulged in the course of "the Iran-Contra hear-
ings, the names'were deleted by thie authorities charged with docu-
ment declassification. This deletion was effected, notwithstanding
the fact that a copy of a memorandum detailing the trafficking ac-
tivities written by Rob' Owen and sent to Oliver North, had already
been widely circulated.7; ; ; J . ,;
Assistant U.S. Attorney Jeffery' Feldman. and FBI Special Agent
Kevin Currier were sent to San Jose in l986 to investigate illegal
weapons shipments to the Contras operating in" Costa |jica.,rXet,
U.S. embassy officials were not only unsympathetic with, their ob-
jectives but also attempted to dissuade them from interviewing a
key witness.

? Iran'/ Contra deposition of Mark M. Richard, Appendix E, Volume 23, -August 19, 1987, pp.
122-128. ' :
6Lawn testimony, pp. 115-116,118. • : . " - ' .
'April 1,1985 Owen memorandum to North, Iran-Contra. exhibit Robert W. Qwne 7.
 "123

In his testimony, Richard Gregorie said that the failure of the

State Department to turn over important materials was jeopardiz-
ing the prosecution in his case against Sarkis Soghenalian, an arms
dealer. Gregorie testified that the case against General Noriega
could well be jeopardized if U.S. intelligence agencies failed to
come forward with information about the General's role in narcot-
ics trafficking.
. It is impossible [to know with certainty] in a world
, where the secret to conducting intelligence activity is com-
partmentalization, that is you get information on a need to
know basis.
: . . . if a compartment goes out of wack, that is if they,
go off on their own wild spree, there is nobody to supervise
them. And if it happens that Mr. Noriega was working for
a compartment I don't know about and their superiors in
other departments don't know about, there may be a
whole source of information unknown to the prosecutor.
Gregorie, referring to the CIA, went on to say, " . . . with the
Noriega case we have requested the right to see certain things. I
can honestly tell you that I am convinced that we have not seen
even a small percentage of what we should see."
MISGUIDED PRIORITIES

Law enforcement operations directed at narcotics traffickers

should be a clear government priority. Law enforcement agents
who are on the front-lines, day-in and day-out, of the war on drugs
should be secure in the knowledge that as they develop evidence on
anyone associated with the drug trade, their efforts will not be
jeopardized or terminated for so-called national security consider-
ations. "v
The .most graphic example of this Conflict between law enforce-
ment and foreign policy priorities is that of Richard Gregorie, who
for eight years led the war oh drugs in the U.S. Attorney's office in
Miami. He had achieved a reputation as one of the nation's most
effective and toughest federal narcotics prosecutors.
Yet, Gregorie, in frustration, resigned his position in January of
this year due to increasing opposition he was meeting from the
State Department to his investigations and indictments of foreign
officials. C
In an interview with NBC, aired on February 22, 1989, Gregorie
said the opposition from the State Department made it almost im-
possible to pursue top cocaine bosses. He stated, in that interview:
"I am finding the higher we go, the further I investigate matters
involving Panama, high level corruption in Colombia, in Honduras,
in the Bahamas, they are concerned that we are going to cause a
problem in foreign policy areas and that that is more important
than stopping the dope problem."
Gregorie said he felt a lot like the soldiers in Vietnam felt. "We
are not being allowed to win this-war." 8

8 NBC News interview with. Richard Gregorie, February 22,1989.

 "124

The Drug Enforcement Administration has expressed a clear re-

luctance to develop cases against- officials of foreign governments
because of that agency's status as a guest in the countries where it
operates. Many law Enforcement officials in south Florida have
been discouraged in pursuing cases that lead to the Bahamas be-
cause of past interventions by the foreign policy _ agencies, of our
government. . ,
When cases are brought against those involved in the drug trade,
prosecutors should be "able to rely upon the cooperation of all the
agencies of the Federal government to assist them in indictments
and prosecutions. Obviously, secrecy is" essential to mamtaining the
security of certain U.S. government operations. However, the. con-
cern for:secrecy and the heed for the classification, of important na-
tional security information should hot be an insurmountable obsta-
cle for prosecutors in their ability to obtain evidence critical in
waging a more effective war on drugs.
In addition, the Nicaraguan war complicated law enforcement ef-
forts, particularly in south Florida, at a time when the illicit nar-
cotics trade mushroomed put of control, A unique problem 'surfaced
with the privatization of U.S. foreign,policy in Central America,;at
the direction of Lt. Col. Oliver North. The following section to this
chapter discusses the nature of this problem. //
T H E CONSEQUENCES OF PRIVATIZING U . S . FOREIGN POLICY

A major consequences of privatizing support for the Contras, par-

ticularly during the Boland Amendment prohibition on official U.S.
government assistance, was that, it attracted numerous individuals
and organizations involved in illicit activities.
As revealed during the Iran/Contra hearings, an extensive net-
work of private support. for the,Contras was established and coordi-
nated by a haiidful of government officials working with private or-
ganizations. .Although it might have been unintended, this private
support network', encouraged by certain officials of the U.S. Gov-
ernment, served as a magnet for many individuals "who exploited
their activities on behalf of the Contras as a cover for illegal gun-
running and narcotics trafficking. It appears that anyone or any
organization was welcomed as participants in supporting the
Contra cause.
The private efforts 6n behalf of the Contras attracted a number
of5 drug traffickers who understood full well the high priority the
U.S. government gave to the war against Nicaragua. Testimony
before the Subcommittee revealed narcotics traffickers were par-
ticularly astute in offering to assist the Contras in an effort to riot
only protect their operations, but also to avoid prosecution for their
activities as well. This technique is known as "ticket punching." "
In the environment of South Florida, with exiles from around
Latin America plotting a variety of activities-aimed at toppling
left-wing regimes around the hemisphere, and wi.th legal and ille-
gal covert operations a commonplace, the opportunities for ticket
punching are endless. According to Richard Gregorie of the U.S.
Attorney's office in Miami, the result is a prosecutor's nightmare.9
a Testimony of Richard D; Gregorie, July 12,1988, pp. 156-16S.
 "125

The Subcommittee repeatedly encountered this phenomenon as it

tried to understand the relationship between law enforcement and
foreign policy priorities. Many of the stories connecting the Contras
and drug trafficking were the result of efforts by traffickers to es-
tablish; a cover for their operations by "marrying" them to covert
activities and to revolutionary groups desperate for help.10
Ramon Milian-Rodriguez' offer to assist the Contras was. not
madet until after he was arrested on drug-related charges. The offer
was an obvious attempt to reverse the legal proceedings being
brought against hiin.
George Morales, the convicted cocaine-trafficker, was quite
candid that his primary motivation in providing support to Eden
Pastora's organization was his belief that the CIA would actually
intervene to assist him with his legal problems.11 Unlike Milian-
Rodriguez, Morales in fact delivered planes, weapons and money to
the Contras who were desperate for help at the time.1^ When his
relationship with the Contras developed more fully, Morales began
to take1 advantages,of the Contra infrastructure to enhance his
drug operations.
DIACSA, which was the headquarters for the Floyd Carlton/Al-
fredo CabaJlero cocaine transportation organization, was paid by
the State Department's NHAO office ag a supplier of humanitarian
assistance to the Contras.; CabaHero was indicted on drug charges
and entered into a plea bargain with U.S. authorities. Carlton was
one of the key federal grand jury witnesses in the drug indictments
brought against Panama's General Manual Antonio Noriega.
SETCO was the recipient in 1986 of $185,924, in State Depart-
ment NHAO office funds for the transport of humanitarian assist-
ance to the FDN'based in Honduras. A 198$ U.S. Customs Service
report stated that "SETCO aviation is a corporation formed by
American businessmen who are dealing with Matta and are smug-
gling narcotics into the United States." The Matta referred to in
the report is Juan Matta Ballesteros, a major cocaine trafficker in
the region* and wanted by U.S. law enforcement agencies for the
brutal murder of DEA agent Enrique Camarena in Mexico.
Frigorificos de Puntarenas, a Costa Rican seafood company, was
owned and operated by convicted drug traffickers, Luis Rodriguez,
Carols-Soto and Ubaldo Fernandez. Frigorificos received $231,587
in humanitarian assistance funds for the Contras from the State
department in late 1985 and early 1986. Luis Rodriguez was finally
indicted on September 30, 1988 for drug-smuggling which^took
place between November 1980 and January 1983. '(
Tom Posey, Mario Calero, Jack Terrell, Frank Castro, Joe
Adams, and Rene Corbo were all indicted in August 1988 for Neu-
trality Act violations that occurred in 1985 and 1986. The FBI had
extensive investigative files on Corbo who readily adniitted that he
had been providing; weapons to the Contras in violation of the Neu-
trality Act. All claimed, they were acting on behalf, and with the
encouragement, of the U.S. government in the Contra war against
Nicaragua.

10 IbicL, p. 137, and 'Subcommittee testimony of David Wesfrate, Part 4, July 12, 1988, pp. 144.
11 Subcommittee testimony of George Morales, Part 3, April 7,1988, p. 300.
12 Ibid., pp. 60-62.
 "126

T H E CASE OF MICHAEL PALMEK

The most, puzzling example of this phenomenon the Subcommit-

tee encountered was the case of Michael Palmer. Palmer's career
as a drug smuggler also , included numerous government associa-
tion^ that clearly revealed a government working at cross-purposes.
Palmer was a former Delta Airlines flight engineer who went'
into the marijuana business with Leigh Ritch and Michael Vogej in
the late 1960's. He' participated in the smuggling of hundreds' bf
tons of marijuariat into the United States over a six-year'period
without getting caught. .. , • 4 : '.
In 1984, he, flew to Colombia with a load of money'to purchase a
large shipment of marijuaiha.; The plane was trapped;on the ground
by the Colombian military and Palmer was thrown into ja£. l s As
he sat in jail he. had the chancfe to contemplate the risks^ he
facet!.'14 Ther6 was a strong 'prbbability that Ms/brgaQizatibn had'
been compromised and that one or more; bf its members were work-
ing with the police. He risked being identified as the key figure in
a multi-billion dollar drugringand face a possible life sentence.
For Palmer the message was clear: Get, out of jail in Colombia
and go to work for the U.S. government. Depending on the story
one chooses to believe, Palmer was either released ^because the Co-
lombians had no case against him or because his Mends paid off
Colombian officials. Upon hiis return to the United States he told
his former colleagues that, he was retiring and promptly looked for
government agencies which would be able to use his services.15
Palmer's major assets were an interest in a DC-6 which had
beeii involved in drug smuggling operations, an interest in Vortex,
a minor Miami-based air cargo business, and excellent connections
in the drug world.16 Within a matter of months after his return to
the United States, Palmer was handling "humanitarian'' cargoes
for the State Department, working for the' Drug Enforcement Ad-
ministration, and informing for an office of the Customs/Service;
Palmer's decision to become a government informant _was pre-*
scient because he was in factiridicted in Detroit for his role in the
marijuana smuggling operation. His ploy worked. Over the objec-
tions of law enforcement agencies involved in the cases against Mm,
Palmer's indictment was dropped as "not being in the interest of
the United States." _
Throughout Palmer's career as a government informant the vari-
ous agencies using'him didribtseem to know that he was involved'
in more than 6ne operation with more than one agency. In fact,
some agencies, were tracking him as a smuggler unaware that he
was doing the smuggling for DEA. Palmer's varied government op-
erations all involved using the" same airplane. The results were
chaos and confusion.17
The DC-6 which was the centerpiece of Palmer's operation had
been purchased in 1979 and had "been used to pick up a multi-ton
load of marijuana in Colombia. The plane "was overloaded and hit
13 Subcommittee testimony of Michael Palmer, Part 3, April 6,1988, p. 202.
14 Ibid., p. 204.
Ibid., pp. 202-203, and Subcommittee testimony of Michael Vogel, April 5,1988, p. 114.
1 5 Palmer, ibid, pp. 197-198.
*» Ibid., pp. 215-216.
 "127

some trees and shrubs as it took off from Colombia. According to

Michael Vogel, Palmer's partner, the plane flew north with tree
limbs and shnibs: sticking out of the wings. The intended destina-
tion was a farm . in Tennessee but because of the , damage the crew
had to dump the load of drugs over a-small town in Georgia.18
The . plane landed in Tallahassee and the occupants fled before
the police closed in. Hie plane was seized and left on the runway at
Tallahassee for several years before it was retrieved from the gov-
ernment by Palmer's lawyer. Palmer invested a substantial sum of
money in rebuilding the plane and gave it to Vortex's Steve Her-
reros in exchange for an interest in his company. Herreros had sev-
eral air freight contracts for which he could use the plane.19
When Palmer decided to-become ah informant the plane became
an essential part of the plan. DEA wanted-him to fly to Colombia
where the plane would be used to entrap a Colombian smuggling
ring. The Colombians agreed to sell Palmer marijuana and a load
was sent back to Detroit.
Unfortunately, Palmer testified, the DEA did not properly co-
ordinate with the Customs Service.
According to Palmer, Customs agents in Detroit who did not
know he was working for the government came close to shooting
him and breaking up the entire operation before the DEA could
find out who the distributors were and before DEA could complete
the sting.20
At the same time Palmer was flying drugs as part of a DEA
sting, the DC-6 was being used for State Department humanitarian
assistance flights to the Contras.21 Members of the press corps had
become aware of the plane and suspected that the plane was a key
link between the drug trade and the covert war in Central- Amer-
ica. They staked out the plan$ and began to investigate Palmer's
background. ,
In the meantime Palmer and his partner were repainting the
plane and changing its tail numbers to make it less conspicuous.
Each of the tail number changes and new paint jobs was recorded
by a professional photographer at the Miami airport who makes
his living tracking, alterations made in the appearance of junk
planes parked in the airport's famous "corrosion corner." Un-
known to the covert operators or the DEA, the photographer sold
copies of the pictures to the press which,was now sure it found the
link between covert operations and drug trafficking.
On one occasion, the plane returned "from Central America and -
was subjected to a careful search at the Miami airport. The pilot
protested claiming that the search endangered sophisticated navi-
gation equipment which had been installed for government oper-
ations. He asked that Palmer be called to the scene to verify the
fact that the plane was being used on an official government oper-
ation. The Customs officials were incredulous because they knew
that Palmer was under indictment in Detroit in a huge marijuana
18 Testimony of Michael Vogel pp. 101-102, m 100-773, pt. 3.
ift Ibid, p. 197.
20 Ibid., pp. 220-224
21 Ibid., p. 208.
 "128

smuggling case. To their amazement, Palmer got the government

to acknowledge the plane.22 • • ; ; '
• As the public controversy about Palmer grew, the different law
enforcement agencies' involved with the case ciould not agree on
how it should be handled, DEA wanted his' Detroit case dropped be-
cause of his undercover work, while other agencies suspected that
he was continuing his own drug business using his work for the
DEA as cover. >. -• .• -J
The Detroit prosecutor decided to drop the charges against
Palmer, a decision which infuriated Palmer's former partners in
the marijuana business who all received long prison terms.23 ,
THE CASE OF F R A N K CAMPER

The story of Frank Camper is one clear example of how the pri-
vatization of foreign policy cbuld lead to tragedy.
Camper is a Vietnam veteran who began working as an inform-
ant out of Birmingham, Alabama for the FBI in the early 1970s. In
1980, Camper decided to establish "a private school for people who
would be interested in paramilitary work," which he called "the
Mercenary School."24 v / ' '
Advertising in publications like "Soldier of Fortune," "Gu'ng
Ho," and "Eagle," Camper conducted two-week paramilitary train-
ing courses for individuals and groups . . While training these in-
dividuals, Camper was acting as an informant for the FBI and mili-
tary intelligence.
The training provided by Camper included instruction in assassi-
nation techniques, the use of plastic explosives, and various bomb-
ing techniques.25 u : •
" 1 ' ; '.'
From the beginning, the Camper school attracted4 violent' and ex-
treme elements. Among Camper's first students was Robert Cis-
benby, who according to Camper was planning a public bombing
mid assassination in Miami. Camper informed law- enforcement
agents and the plot was halted. Other Camper students, "used the
tecliniques that they had learned" at his school to steal items from
the Redstone Military Bake in northern Alabama.26 - '
According to Camper, he founded the school with" two principals
in mind. First, to "enable the U.S. Government to gain a great deal
of intelligence and indeed initiate many operations that were suc-
cessful to stop criminals,and terrorists;" Second, "to get and prove
out possible foreigners who would work for the"U.S. Government inr
the future."27 Between 1981 and 1986, Camper received approxi-
mately moire than $25,000 from the U.S. Government in connection
with these'operations.28
As Camper's school- became increasingly well-known, he found
himself being drawn into contact with representatives Of foreign,
governments and with the Contra program.
22 Ibid., pp. 229-230.
83 Vogel, ibid, pp. 113,117.
24 Subcommittee testimony of Prank Camper, Part 4, pp. 287-288.
25 Camper, Part 4, p. 301-
2 6 Camper, p. 289.
2 7 Ibid., p. 301.
3 8 Ibid.
 "129

Camper testified that in 1984, he was approached by members of

the Panamanian Defense Forces who wanted him to participate in
training programs for PDF anti-terrorism commando units.
Camper said he learned during a meeting in Panama that the PDF
was working with the Medellin cocaine cartel, and reported this in-
formation to military intelligence. Camper claimed that military
intelligence did not follow up on1 the information he had provided
them.?9
The same year, the Civilian Military Assistance Group ("CMA")
of Decatur, Georgia, began .sending individuals -who wanted to fight
with the Contras to train with Camper for "deep penetration raids
into Nicaragua." These individuals were later expelled-^ from Hon-
duras. Camper also trained members of CMA who went to fight
with the Contras on the Southern Front, working with John Hull:
Ainong them were British mercenaries Peter Glibbery and John
Davies, who were arrested by Costa Rican officials in April, 1985
after conducting a raid in Nicaragua.30
Camper also participated in training members of an exile group
attempting tp conduct a coup, against the Ghanian government.
These individuals were later-arrested on a barge off the coast of
Brazil as they were heading for Ghana, and imprisoned.31
In November 1984, four Sikh nationalists were trained at Camp-
er's school. The Sikh's asked Camper .to train, them in guerrilla tac-
tics for a war against the government df lndia following the assas-
sination of Indira Ghandi and the Indian government's assault on
the Sikh, Golden Temple. Camper advised the FBI of the Sikh's
plans. Camper testified the FBI advised him to continue training
the Sikhs as a means of momtoring their activities. Camper testi-
fied that as a result of this monitoring the . FBI was able to stop
planned assassinations of Rajiv Ghandi and an Indian state minis-
ter, and that many of the Sikh terrorists were arrested. Other
Sikhs trained by the Camper schbol escaped. According to Camper,
the Sikhs used plastic explosives they obtained" from his school to
blow up Air India Flight 182 over the Atlantic in June, 1985, kill-
ing 329 people.32
Camper's school was closed after he was arrested in 1986 oh
weapons and racketeering charges in connection with a Los Ange-
les bombing.33 "
The Frank Camper story exemplifies many^of the perils of the
privatization of 'foreign policy. While being monitored by the FBI
and the military, Camper was permitted to train individuals who
participated in military expeditions, attempted coips, and bomb-
ings involving many nations.- While the missions were clearly not
authorized by the U.S., many of them were tolerated in a period
that U.S. foreign policymakers were seeking to engage the U.S. in
a variety of low-intensity conflicts using a mixture of private and
public resources.
The tragic irony is that Camper's school was the source- for the
training and plastic explosives used to blow up the Air India plane.
29 Ibid., pp. 291-294.
2"Camper, Part 4, pp. 295-296; see also Iran/Contra Testimony of Tom Posey, Vol. 21, p. 125.
31 Camper, Part 4, pp. 302-303.
aa Camper, Part 4, pp. 302-304.
3 3 Ibid., pp, 307,320. ^
 "130

This occurred even though the operation' was being monitored by

the FBI, and. highlights the risks of permitting pyiyate military
training camps to operate in the United States,
T H E CASE OF RICHAKD BBENNBKE

Certainly; one of the unintended-consequences of the privatiza-

tion of U.S. policy toward Nicaragua, were the number of individ-
uals who surfaced claiming to have been engaged in illicit activities
on behalf of federal agencies supporting theContras. One such in-
dividual was Richard Brenneke. '- "•J -/ y"
Brenneke fe the President of a Portland/Oregon property man-
agement'company. According to him, in his spare time'he had been
involved in arms deals in the Middle East and Central America
arid as a participant iri'-a number of covert operations. ;..•
Brenneke'first came to the Subcommittee's attention through
Will Northrop, one of the defendants in the'"Eyansw Iranian arms
sale case in New York. Brenneke was "the sourbe for 'a lengthy iVew.
York Times story on weapons saleis to Iran. M that story he re-
counted his purported role in the ' T)emevand" project, which lie
said was the code name for a weapons purchasing operation; rup; by
the Iranian government. * / 7
;S6me months later Brenneke began to assert,..publicly that' he
had participated in % guns for drug arrangement in Central Amer-
ica which Was officially sanctioned by the U.S. government. ,As part
'of this arrangement he:; said be had smuggled, drugs into the United
States ,and arranged weapons purchases for the Contras in. Eastern
Europe., . :v .... *-• , . • j ; . . . ,
. - As *. the result t pf 'these n e ^ assertions the staff^contacted Mr.
Brenneke who. agreed to be .deposed The deposition twas taken on
Apni;23,1988'in Portland,;0?,eg9n; ,, '
In his. testimony. Brenneke asserted that he had worked. for the
CIA as a contract employee in the Middle .East in-! the ^1970's, that-
he became involved working for Israeli intelligence and the-CIA- in
the early 1980's. He claimed that in the course ,o£;bis dealings lie
was asked by the Israelis, to make -arrangements for the purchase
and shipment of Eastern European weapons to the Contras. He
said that, after clearing the request -with the CIA "he bought the
weapons from Omnipol in Czechoslovakia, and. had the weapofis
shipped to a warehouse in Bolivia. -He said that the Israelis then
flew the weapons to Panama and Honduras. :• - > •«'-» •• • c
; Brenneke' said that he had worked closely with; a number ofeIs-
raeli agents active in! the Central-American weapons project "who
were running drugs into the United States.5 He said > that he was
told by White House* officials that the operation was officially sanc-
tioned, and he had personally discussed the operation with mem-
bers of the Vice President's "staff. •
The Subcommittee then began an exhaustive "effort to determine
whether Brenneke's sworn statement had any basis in fact. Dozens
of individuals whom Brenneke bad named in his deposition were
interviewed, thousands of pages of documents from government
files relating to him and thousands more from his files and other
sources were reviewed. "
 "131

A careful analysis of the files shows that he spent considerable

effort unsuccessfully in trying to become an intelligence agent and
when that failed, an arms dealer. The records show that Brenneke
was never officially connected to U.S. intelligence and that he was
never tasked by a U.S. Intelligence agency to gather information.
Although Brenneke produced thousands of pages of documents re-
lating to proposed arms deals, there is no evidence that any of
them ever came to fruition.
Brenneke began telling stories about his "secret" life as a spy
sometime, after he was stopped by the Customs service coming
through the Seattle airport on a return trip from Europe. He was
carrying a briefcase which contained references to arms deals. The
Customs Service wanted to know whether he was involved in ille-
gal weapons transactions. His response was to offer to become a
Customs informant.
The Subcommittee confirmed that Brenneke applied for a job
with the CIA when he finished school but his application was re-
jected. He worked for an international banker and securities dealer
and spent some time in the Middle East and Central America. As
the result of his employment he developed contacts in the world of
international arms dealers.
When the Iran/Iraq war intensified the adversaries went into
the world market to buy weapons. A' number of Brenneke's old con-
tacts asked him to join them in their efforts to sell weapons to both
sides. Brenneke traveled to Europe and met with his old contacts
and with representatives of both the Iranian and Iraqi arms pur-
chasing missions. He traveled to Czechoslovakia and met with rep-
resentatives of Omnipol, the Czech arms company.
Although Brenneke's files are filled with evidence of this travel
and of correspondence -arranging meetings he did not produce any
evidence of any business transacted. There are no signed contracts,
invoices, shipping instructions, delivery records, end user certifi-
cates whether real or falsified, or financial records of any kind to
support the assertion that he was an active participant in arms de^
liveries to either Iran or Iraq.
Moreover, Brenneke did not produce any evidence that he was
reimbursed for any of the expenses he incurred while trying to ar-
range arms deals.
It appears that Brenneke learned about the secret U.S. arms
deals with Iran from his business associates who in turn had
learned about them from the Iranians. It also appears that Bren-
neke received completely fabricated information about arms deals
from undercover agents of the Customs Service who were setting
up a sting operation and were talking to his business associates.
When direct efforts to arrange the arms deals failed, Brenneke
began to tell every agency of the U.S. government which would
listen that he could get the hostages in Lebanon released. In ex-
change, he wanted the right to sell weapons to the Iranians. Ap-
proaches were made through Marine Corps Intelligence, the State
Department's Office of Trade and Commercial Affairs, and the De-
fense Department. These approaches were all passed on to the Cus-
toms Service, which, at that time, was in the process of preparing
the "Sam Evans" case in New York.
 "132

Customs agents interviewed Brenneke extensively, reviewed his

records and decided thiat he had little to offer. He appears not to
have been indicted in the Evans case because he did not: play any
substantive role in the transactions which were at issue. . -
Undaunted by his failure to secure authority to negotiate with
the Iranians over hostages, Brenneke began to offer additional pro-
posals to various federal agencies, including the ^Defense Depart-
ment to trade the Iranians U.S. weapons for Soviet made 'T-80
tanks. These offers were rejected both because of the negative as-
sessment which had been made 6f him and Brenneke's demand
that he be allowed to sell weapons to the Iranians.
. CONCLUSION - '

The Senate and House Select Committees which .were constituted

to investigate the Iran-Contra affair described in, detail how the
Oliver North operations undermined basic U.S. foreign policy,objec-
tives.
In their Report, the Select Committee noted:
Covert operations of this Government should- only be di-
rected and conducted by trained professional services that
are accountable to the President and the . Congress. Such
operations should never be delegated as they were, here, to. _
private citizens in order to evade Governmental restric-
tions.34
The Select Committee observed further that:
The President set the stage for welcoming a huge dona-
tion for the contras from a foreign Government—a contri- .
button clearly intended to keep the Contras in the field f
while U.S. aid was barred. The NSC staff thereafter solicit-
ed 'other foreign Governments for military add, facilitated
the efforts of U.S. fundraisers to provide lethal assistance -
to. the contras, and ultimately developed and directed ,a
private network that conducted in North's .words, "a full
service covert operation" in support of the Contras. 3 5
The Subcommittee members believe it is important to reinforce
the concerns laid out by the Iran-Contra Committees. Not only did
the actions of the North network undermine our government's'war
on terrorism, but they also damaged the war on drugs. Throughout
the decade of the 1980's, the two threats which have exacted ^a
tragic human toll in the lives of our citizens have been the actions
of-ihe political terrorists and narco-terrorists. Yet, in the name of
supporting the Contras, we abandoned the responsibility our gov-
ernment has for protecting our citizens from all threats to their se-
curity and well-being.
Those U.S. officials who were involved in encouraging and active-
ly pursuing the participation of private -individuals and organiza-
tions in the contra supply network, must bear the responsibility for
the illegal activities of those .who responded to that call. When ac-

3 4 Keport of the Congressional. Committees Investigating "the Iran-Contra Affair, November

1987, p. 16. '
3 5 Ibid., 18-19. '
 "133

countability is sacrificed in support of a cause, control over those

who exploit the situation for their own illicit ends is lost, as well.
Those XJ.S. officials who turned a blind eye to General Noriega,
who intervened on behalf of General Bueso-Rosa, and who ada-
mantly opposed the investigations of foreign narcotics figures by
honest, hard-working law enforcement officials, must also bear the
responsibility for what is happening in the streets of the United
States today.
As Gregorie stated so succinctly in this interview:
If it was the communists that were taking over South
and Central America, we would have done" somthing about
it. But it's the drug dealers and therefore they (the govern-
ment) don't see that as at significant priority.36
The casualty list for the continued narrow perception as to what
constitutes threats .to the national security of the United States has
grown quite lengthy, particularly with the Iran-Contra episode. It
includes, the people of the- United States who are threatened on a
daily basis by narcotics-related violence sweeping the country.
There are few neighborhoods in the United States that are secure
from this threat. It is individuals like Richard Gregorie, an excep-
tional" public servant who tirelessly gave of himself to protect the
citizens of this country, but who finally gave up because his own
government would not allow him to win the "war on drugs. It is the
credibility of government institutions who turn a blind eye to do-
mestic and foreign "corruption associated with the international
narcotics trade because of the preception there' are higher foreign
policy priorities which.demand our attention.
In-the end, the Contras themselves became victims of the very
network created to support them.
CONCLUSIONS

NATIONAL SECURITY ISSUES

1. International drug trafficking organizations are a threat to U.S.

national security. Our government must first acknowledge the
threat and then Establish a more coherent and consistent strate-
gy for dealing with it.
Hearings before the Subcommittee on Narcotics and Terrorism
established that the international drug cartels constitute a serious
threat to the .national security of the United States and, indeed, to
the stability of many of our friends in the Western hemisphere. In
the United States illegal narcotics exact enormous costs in terms of
increased crime, lower economic productivity and general health
problems. In Latin America, the cartels not only create social, and
eonomic instability as ;a result of their operations, they have also
demonstrated the capability to undermine government institutions
through corruption and violence-
The drug cartels are multinational in scope and operation .zln
many instances, such as in the case of Colombia, they use the sov-
ereignty of foreign governments as a shield to protect themselves

36 NBC Nightly News interview with Richard Gregorie, February 22,1989.

/
 "134

from law enforcement activities directed at their operations. In the

past, when the United States has pressed for action on such mat-
ters as the extradition of cartel leaders, the traffickers have been
able to demonstrate, through the use of corruption and violence,
that there is a price to be paid for cooperation between govern-
ments on criminal and legal matters. -- -
The scale of the cartels operations and the-dimensions of their
economic, political and military power make these organizations
far more dangerous than any criminal enterprise in U.S: history.
They ^have access to sophisticated weapons and; intelligence, They
havefieldedtheir own armies, and even have entered into alliances
with a variety of revolutionary groups and military institutions in
the hemisphere. In many respects, they have taken on the at-
tributes of sovereign governments.
The United States government needs to recognize the enormous
threat these organizations pose to the vital national interest Of our
country. The government should consider how to utilize more 'effec-
tively the various political, economic and, if need be; even military
options in order, to neutralize the growing power of the cartels.
2.. In the past the United States government has either -failed to a
^ knowledgeor- underestimatedthe seriousness, of-the emerging
. threat to national security posed by organized, drug trafficker
The reasonsjfor this failure should'be examinedby the Senate
Select .Intelligence Committee, in conjunction with the Senat
Foreign Relations Committee,to determine what steps should
be taken. . • •. • ..
The operations of the drug cartels in' the-1980's exceeded the
scope of all previous organized criminal behavior. The ^Subcommit-
tee received testimony detailing how cartel leaders rented islands
in the Bahamas for use as transshipment points for cocaine coming
in the U.S., and how drug-related corruption'within the Haitian
military during recent years opened up another major transit point
in the Caribbean. "
The judicial system in Colombia has been subjected to such vio-
lent assault it's almost impossible, to find a judge who will approve
imprisonment or extradition for major cartelfigures.By late 1984,
the Medellin Cartel, in particular, consolidated an important rela-
tionship with General Manuel Antonio Noriega of Panama. That
relationship became one of the most significant developments for
the cartel , in a country , whose 'stability and security has long been,
considered of vital national interest to the United States.
Intelligence reporting on narcotics issues has been marginal arid
woefully inadequate. The intelligence reports reviewed by the Sub-
committee failed to focus oh the scope of the drug crisis, the politi-
cal and economic power Of the cartels, or the threat the narcotics
trade posied to regional U.S. interests. It appears the. operations of
the cartels too often have been viewed as an adjunct to what has
been perceived as the more important issue of East-West, conflict in
the region.
Law enforcement officials and prosecutors during this period
have far too often focused only on individual caseis and rarely con-
sidered the issue of narcotics trafficking in the broader context of
national security. However, there appears now to be a greater ap-
 "135

preciation within the law enforcement community on this dimen-

sion of the problem than there is within the foreign policy and na-
tional security apparatus of our government.
In sum, each agency with a responsibility for waging the war on
drugs has focused oh its own tasks and set its own priorities. This
not only has affected the ability of the federal government to wage
a coordinated strategy for dealing with the problem, but also in the:
establishment of differing criteria by" which individual agencies
view the cooperation of other countries in the drug effort.
Because of the implications of this failure .for American intelli-
gence as a whole, the Subcommittee urges the Select Committee on
Intelligence to review the process by which intelligence regarding
narcotics is brought to the attention of government officials. The
Select Committee on Intelligence also should determine if precon-
ceived definitions 'Of what constitutes! a national security threat
prevented^ the delivery of effective and timely intelligence' report-
ing about'narcotics trafficking.
FEDERAL PRIORITIES

3. The threat, posed by the cartels should be given a major priority

in the U.S. bilateral agejida with, a number of countries includ-
• ing Panama, ttie Bahamas, Haiti, Colombia,> Peru, Bolivia and
' Paraguay. It should be among the most important issues with a
number'of other countries, including Mexico and Honduras.
The Subcommittee hearings demonstrated that in some bilateral
relationships, such as the case of the Bahamas, policy priorities of
the United States, including law enforcement, were neither :clearly
defined nor regdlarly reviewed/ In other relationships/ Such as the
case of Pahaml:, dru£ enforcement was considered but viewed as
less important than other foreign policy objectives. V
The members of the Subcommittee believe that narcotics-related
issues should-be given a high priority within the State Department.
U.S. ambassiadors should receive clear instructions on the impor-
tance of narcotics-related issues in the countries to which they are
assigned. The; Ambassadors should, in turn, regularly report to the
State Department on. the host government's responsiveness, or lack
thereof, in dealing with this problem. The Department should
signal clearly that our government places the highest priority on
diminishing significantly the effectiveness and power of the cartels.
While joint eradication efforts, such as those being undertaken in
Bolivia and Peru, are positive signs of the MLlingness of other gov-
ernments to assist us in the war on. drugs, these efforts can only
promote marginal results. Eradication is essentially a war on small
farmers struggling to meet the basic needs of their families. Extra-
dition of major drug leaders and cooperation in diminishing the ca-
pability to -launder money will have a much more significant
impact in curtailing the power of the cartels.
 "136

4. In order to convey to other countries the seriousness with which

the United States regards the drug issue, the President should
convene a summit meeting of Latin American leaders to ratify a
coordinated strategy for dealing with narcotics trafficking,
money laundering and related economic problems,
A summit meeting of the United States and our Latin neighbors
would signal that the United States' considers curtailing interna-
tional, narcotics trafficking to. be of vital national and hemispheric
interest. " ' ?
Such a meeting also should be a forum for the discussion of eco-
nomic issues which must be addressed as an essential component of
any solution to putting the cartels out of business; U.S. economic
assistance to the region is dwarfed by the amount of money the
drug cartels can bring to bear:in influencing the region's politics
and economies^ The United States^ must accept this reality and
begin to.assist creatively in developing long-term economic solu-
tions" for Latin America. A meaningful debt relief program: for
many Latin countries is an obviousfirststep.
COVERT ACTIVITY ISSUES

5. The war in Central America contributed to weakening an already

inadequate law enforcement^ capability which was exploited
easily by a variety of mercenaries, .pilots and cartel members in-
volve^ in drug smuggling. In Several.cases, drug smugglers, were
hired ~by Contra organizations to move Contra supplies. In addi-
tion, individual contras accepted weapons, money and equip-
ment from drug smugglers "
The Subcommittee did not find evidencethat the Contra leader-
ship participated directly in narcotics smuggling in support of their
war against the Sandinistas, although the largest .Contra organiza-
tion, the FDN, did" move Contra funds through a narcotics traffick-
ing enterprise and money laundering, operation^ There was, more-
over, substantial evidence of drug smuggling through the war zones
on the part of individual Contras, pilots, whoflew,supplies,, merce-
naries who worked for the Contras, and Contra supporters through-
out the regidn. ;
There is also evidence on the record:that U.S. officials involved^
in assisting the Contras knew that drug; smugglers were exploiting
the clandestine infrastructure established to suppbrt the war and
that Contras were receiving assistance derivedfrom'drug traffick-
ing. Instead of reporting these individuals to the appropriate law
enforcement agencies, it appears that some officios may have
turned'a blind eye to these Activities. ~ : 1

6. There are serious questions as to whether or not UjS.. officials in-

volved in Central America failed to address, the drug issue for
fear of jeopardizing the war effort- against Nicaragua
The Subcommittee received testimony from a number of individ-
uals who asserted that the U.S. government failed to address the
drug problem because to do so might have interfered with the war
in Nicaragua. Serious questions have-been raised as why our gov-
ernment waited so long to deal with the Noriega problem in
 "137

Panama. The Barry Seal sting operation directed at officials of the

Sandinista government in Managua was prematurely announced
publicly by U.S. government officials, shortly before a crucial Con-
gressional vote on Contra aid, thereby jeopardizing an ongoing
DEA investigation.
There are also serious allegations surrounding the case of Gener-
al Bueso-Rosa, a former Honduran military officer involved in an
assasination plot funded by money from the sale of cocaine in the
U.S., against President Suazo Cordoba. A number of U.S. govern-
ment officials intervened in the case of Bueso-Rosa, who ultimately
received a light sentence in a minimum security facility for his role
in this episode. , - "
The Subcomniittee urges both the Senate Select Committee on
Intelligence and the Senate Judiciary Committees to investigate
these episodfes to determine if they had a deleterious effect on the
war on drugs.
7. The Subcommittee testimony of Frank Camper raises questions as
to what various military intelligence units knew about illegal
activities. The testimony also raises questions as to whether or
not military intelligence was involved in improper domestic op-
erations. The Senate Select Committee on Intelligence should
review the testimony and consider whether remedial legislation
may be necessary
Frank Camper testified that he had reported violations of the
Neutrality Act to U.S. military Intelligence agents. There is a ques-
tion as to whether or not these reports were forwarded to appropri-
ate law. enforcement agencies. Camper also testified to a number of
unauthorized operations which were developed at his "Recondo"
mercenary training camp in Dolomite Alabama. He maintained
these operations were reported to military Intelligence, which al-
legedly did not interfere with their implementation.
The Subcommittee found it difficult to assess the Camper testi-
mony. Nevertheless, in light of the serious questions raised by his
statements, the Subcommittee believes the Senate Select Cojhmit-
tee on Intelligence should investigate how the Camper case was
handled and whether actions of Military Intelligence were appro-
priate. ,
L A W ENFORCEMENT ISSUES C

8. A primary focus of the U.S. drug effort must be on the major nar-
cotics trafficking organizations located in foreign havens. Law
enforcement efforts concentrated on the pusher in the streets,
the distributor in the U.S., and interdiction at our border have
failed to stem the flow of drugs pouring into this country
In recent years, the public has witnessed announcements by fed-,
eral, state and local authorities of record drug seizures and arrests
of major distribution organizations in the United States. Yet, more
cocaine than ever before is flooding our streets as evidenced by the
continued decline in the price per kilo and the frightening increase
in drug-related violence in the U.S. -
The current strategy is failing to stem the narcotics ti3i because
law enforcement authorities are focused on the least vulnerable
 "138

level of the cartels' operations: the pushers and. the distributors.

When drug salesmen and distributors are arrested, they are re-
placed immediately without serious disruption to the overall oper-
ations of the cartels themselves.
Witnesses have compared stopping drugs at the border to futile
attempts at plugging a funnel at the wide end. In addition, many
law enforcement officials doubt whether the current. efforts to
deploy high tech equipment in interdiction efforts will produce
meaningful results. While the United. States must continue to de-
velop "and implement a strategy for interdiction, the most signifi-
cant portion of the federal effort should focus on denying the drug
cartels comfortable foreign havens where they are protected by pri-
vate armies and corrupt government officials.
Senate advise and consent to the ratification of a number of
mutual legal assistance treaties would not only send a strong
signal as to the seriousness with which the U.S. is waging the war
on drugs, it would also enable us to deal more effectively on extra-
dition and money-laundering, where the cartels are most vulnera-
ble. '
In addition, pursuant to the Omnibus Drug Act of 1986, the Con-
gress provided the Administration with a range of sanctions to
apply to-foreign governments which harbor drug traffickers; export
narcotics or facilitate the laundering of drug money. However, the
Congress did not clearly draft language which creates standards by
which the Administration can measure the "full cooperation" of
other countries. The result has been that the Administration has
consistently argued against decertification for such countries as
Mexico and: the Bahamas.
While sanctions pursuant to the certification process will not'end
foreign official corruption, they would send a strong signal of U.S.
concern and seriousness. Members of the Subcommittee urge the
Foreign Relations Committee to again review the certification proc-
ess and to work with the Executive branch to develop clearer
standards and more coherent definition of "full cooperation."
9. The President should deny Customs preclearance for any country
identified as a narcotics source or transit country by the- U.S.
Department of State in its annual International Narcotics3 Con-
trol Strategy Report which does not "fully cooperate" with the
U.S. in anti-drug efforts
In the Bahamas, Canada, and Bermuda, the United States pro-
vides "pre-clearance" to foreign visitors^. In addition, a number of
Caribbean nations are currently asking the U.S. to be considered
for pre-clearance. Under pre-clearance, persons entering the
United States are checked by. Customs in the foreign country,
rather than when they land in the United States. T
Some foreign nations, especially in Latin America and the Carib-
bean, prefer pre-clearance because it facilitates tourism and the
movement of people to and from the United States generally. The
Immigration and Naturalization Service also prefers pre-clearance,
principally because it allows INS to exclude persons without a
valid right of entry before they arrive in the United States.
By contrast, the Customs Service has expressed concerns about
pre-clearance, because if any contraband is found it remains in the
 1'39
foreign country and the person who is carrying it is handled by.its
law enforcement system rather than that of the United States. Tor
example^ the Subcpmihittee received testimony that drugs seized in
the Bahamas by C^toms officials of that country were later sold to
other narcotics smugglers. Accordingly, the Subcommittee believes
that the Overall U.S. policy of pre-clearance needs to be re-evaluat-
ed in paajor drug-trahisit countries with a substantial record of offi-
cial corruption or. a law enforcement system that has proven inad-
equateto combat narcotics trafficking in the"United States.
The United States should consider ending Customs pre-clearance
in the Bahamas to: force that government to reconsider its.ap-
proach and, attitude toward* narcotics trafficking. .
10. The existing distrust and competition between law enforcement
agencies working on the drug problem and agencies working in
the national security arena must be resolved. .Ways must be
found to make-it possible for law enforcement agencies to have
access to national secufity inielligehce information
Iii testimony before the Subcommittee, it was .apparent that
.members of both the "law enforcement and the intelligence commu-
'nities regard each other with suspicion, if not outright distrust.
The intelligence community is legitimately concerned that the
information it provides to law enforcement agencies, particularly
. sources.and methods, could be eventually be disclosed in court pro-
ceedings. The primary concern of the intelligence community is,
therefore, to protect its sources and methods in gathering intelli-
gence wEibh could h© Critical to successful prosecutions. , _
It is incumbent upon the- executive branch, of the government to
' deviseva" mefchanisfn thereby a, useful, intelligence product can
assist law enforcement efforts in the war on drugs. A workable
system for protecting classified information particularly as it re-
lates to sources arid methods in the criminal justice setting must be
developed. This , issue should receive the serious attention of the
Select Coihhiittee on Intelligence and the Judiciary. Committee, as
well as by the new National Director of Drug Policy. ^
11. U.S. law enforcement agencies should devote more attention to
Qdunter-inielligehce to prevent drug dealers and organizations,
from penetrating their operations
The Subcommittee received extensive testimony • detailing the
manner in whic]i the cartels have penetrated U.S. law enforcement
operations. at home and abroad. Janitorial and clerical workers
have been bribed for access to files; low level officials have been
bribed to find out the disposition of ships and aircraft; law enforce-
ment radio frequencies have been monitored and police and federal'
agents have been placed under surveillance.
The narcotics, trafficking organizations leave nothing to chance.
They have hired former la^r enforcement officials, including, police
investigators, former federal agents and former prosecutors who
now work as private detectives or private lawyers for the cartels.
'Not only does this give the cartels access to the identity of inform-
ants, but also access to significant intelligence on the law enforce-
ment assets directed at their operations.
 "140

As with any threat to the security of the .United States, the war
• against the drug cartels must .rely heavly on the use of intelligence
and counter-intelligence. Intelligence gathering and investigative
efforts that are compromised easily, places our law enforcement
agencies in a virtually unwinnahle situation in this war. '
One of the first tasks of the new National Director of Drug policy
should be to take the steps necessary to remedy this situation. A
strong counter-intelligence capability must be developed", as a
means of reversing the serious compromise of our. law enforcement
efforts. . "/
12. Individuals who represent. themselves as working for the CIA or
other national security agencies of the United States Govern-
ment, and who in fact do not, should be promptly prosecuted to
the fidl extent of the law
Misrepresenting oneself as a U.S. government official is normally
not considered to be a major crime. However, during the course of
this investigation, the 'Subcommittee found that many individuals
who became involved in gun running, Neutrality Act violations
and even supporting narcotics trafficking did so because^they-^were
told that their actions were either on the behalf of, or sanctioned
by, the U.S. government. •
Given the number of individuals involved in Central America
who. were by turns, engaged in activities which were legal, illegal,
official or unofficial, the proposition that some criminal behavior
'was officially sanctioned is not surprising. It is evident that many
individuals took advantage particularly of the Contra effort for per-
sonal gain, while representing that they were either working di-
rectly for the U.S. government or undertaking activities witV the
approval of officials in Washington. ;
The Subcommittee recommends that the Judiciary Committee
develop legislation to provide civil and criminal penalties relating"
to such misrepresentations. Prosecutions of individuals who so mis-
represent themselves could serve as a deterrent to others who may
unwittingly become involved in illegal activities they think are offi-
cially sanctioned by our government.
IS. The State Department should make a special effort to control
multiple entry visas from countries which are major transit
countries or which harbor drug traffickers
Witnesses told the Subcommittee that one of the most effective
ways for controlling drug traffickers is to deny their access to mul-
tiple entry visas into the United States. There is not a legitimate
reason for the United States to allow anyone suspected of working
with drug organizations to enter and exit freely from the United
States. An example cited in the testimony is Lionel Wooley, a Hai-
tian national who allegedly controls the Tonton Macoutes organiza-
tion in Miami and who is viewed as a major player in the Haitian
cocaine distribution network in southern Florida.
The State Department should, therefore, reexamine the issuance
of visas tb foreign nationals with"suspected connections to the drug
trade and, in cooperation with the Department of Justice, seek the
deportation of such individuals.
 "141

lit. The Federal Aviation Administration should undertake a major

effort to inspect the hundreds of substandard aircraft, mam of
Xvhich are used for smuggling illegal narcotics, which are locat-
ed throughout the United States. Those aircraft which do not
meet FAA specifications should be grounded immediately
Former narcotics pilots testified before the Subcommittee that
many of the planes they used to fly their illegal cargoes into the
United States were substandard. The Subcommittee staff also in-
spected numerous aircraft used by smugglers that could not even
come close to meeting FAA standards. The planes were not main-
tained, their instrumentation was inoperable and the required log-
. books were not kept. One plane, Vortex's famous N22VX, crashed a
month after it was discussed in the hearings, killing the pilot and
crew.
The members of the Subcommittee believe that if the FAA close-
ly inspected these aging cargo planes each time they appeared at
the ramp of a U.S. airport, many would be removed from service
permanently. Such an inspection program would make it more dif-
ficult for the smugglers to use legitimate air fields and airports fn
this country.
15. The use of criminals in undercover operations should be limited
to" intelligence .gathering for criminal investigations. Otherwise,
our government risks allowing criminals to continue profiting
from their illegal activities on a free-lance basis, while using
their government connection as a cover
It is an accepted fact that for a drug trafficking informant to be
useful he must be involved in the narcotics business.. Undercover
operatives provide an easy and effective way to gather information
and" evidence. The danger, however, is thiat too many informants
operate independently of their handlers.
While law enforcement agencies are able, in large part, to con-
trol informants,-national security agencies have a more difficult
task because of the need to protect an entire operation.^"
The Subcommittee encountered deliberate efforts by criminals to
cover their illegal activity through their association with law en-
forcement and government undercover activity. When an individ-
ual criminal supposedly working for the government is arrested for
criminal acts, the CIA defense is often raised. According to prosecu-
tors, the defense has become especially commonplace in south Flor-
ida and is frequently successful. However, the Subcommittee be-,
lieves that the pursuit of legitimate foreign policy objectives should
not require any agency of the United States government to assist a
drug smuggler in any way.
•16. Drug traffickers, money launderers, and their criminal enter-
prises should not receive federal contracts, either by inadver-
tance or design. Such contracts can be used by drug traffickers
or other criminals both as a means of supporting and legitimiz-
ing criminal activity
The Subcommittee found that the State Department contracted
with four companies controlled by drug traffickers to provide goods
iShd service to the Contras in 1986. The State Department also en-
 "142

tered into negotiations with one of these, companies on its own

behalf, after the company had been identified by the F.B.I. ^as the
headquarters of a major narcotics conspiracy. In each case, federal
law erifprcement agencies had information from more than one
source that the companies were significantly involved in narcotics
trafficking.
; The payment of funds by the State Department to drug.traffick-
ers, while they were under investigation by law enforcement or al-
ready indicted, is compelling evidence of our government's failure
to coordinate the war on drugs.
The Subcommittee believes that the State Department should in-
stitute procedures to ensure that all of its contracts are reviewed
by federal law enforcement agencies to insure that public funds are
not given to drug traffickers for State Department contracts in the
future.
MONEY LAUNDERING ISSUES ,

17. The Treasury Department should begin negotiations oh gath

ing deposit information on large foreign U.S. dollar.deposit
authorized by the 1988 Omnibus Drug Bill "V .
The ability to launder large quantities of U.S. currency is. essen-
tial to the success of the major narcotics smuggling organizations.
The Subcommittee believes that tracking the drug money and ag-
gressive steps to prevent the movement of large amounts of cash
are the most effective and efficient ways to damage the cartels. To
operate on a global scale, the Colombian cartels rely on banks will-
ing to accept large deposits of U.S. currency while maintaining the
anonymity of such transactions.
The 1988 Omnibus Drug Bill calls for negotiations with foreign
governments ;to require foreign banks, that, accept U.S. dollars to
record depositor information. (Banks in the United States must not
only record such information, they must report it to the Treasury).
The Subcommittee recommends that the President instruct the
Secretary of the Treasury to pursue expeditiously and seriously
these negotiations.
18. The United States must take the lead in promoting internatio
al anti-money laundering regimes and regulations
Money laundering is a global problem of enormous dimensions.
However, few of our allies have laws which make money launder-
ing^ crime.
. Just as the United States has taken the lead in the development
of international organizations such as GATT to govern,trade, and
World Administrative Telephone and Telegraph Conference
(WATC) and Intelsat in telecommunications, the Subcommittee be-
lieves that United States must persist in pressing for international
money laundering control laws. Late last year, the United" States
became a signatory to the Vienna- Convention, which eliminates
bank secrecy as grounds for refusing requests for information
aboutfinancialtransactions related to narcotics activity. The Con-
vention obligated parties to take measures making money launder-
ing a criminal offense, and to enact laws for the identification,
tracing, seizing and forfeiture of proceeds of narcotics trafficking
 "143

and money laundering. In addition, the U.S. supported the adop-

tion of the Basle Committee's statement of principle "for the pre-
vention of the use of banking systems for the purpose Of money
laundering."
The U.S. government, needs to follow up these initiatives with
support for detailed, international standards to inhibit money laun-
dering and to facilitate the prosecution and extradition of narcotics
money launderers. ,-
PERSONNEL ISSUES

19. Narcotics law enforcement often takes a back seat to other diplo-
matic and national security priorities. This is due, in part, be-
cause the relevant agencies have little regard for the people
working on the drug problem
Foreign service and career officers in the intelligence community
have told the Subcommittee that working on drug issues can be
detrimental to even the most promising of careers. In fact, young
Foreign Service Officers are told by their career advisors that
working on as few as two drug assignments can lead to exclusion
from consideration , for promotion. , .
One reason that some government officials may not take the
drug issue as seriously as other issues, is that those with the skills
and .qualifications are not rewarded over the course of a career.
This attitude within the personnel system must change'in order to
attract motivated and competent people into the narcotics policy
area. Only then will the narcotics issue receive the attention it de-
serves within the various government agencies.
20. To encourage the most talented and-experienced/personnel to
remain on the job the Federal government must raise the sala-
ries of senior prosecutors and investigators and create special
senior positions
The present federal pay scales make it almost impossible for the
government to keep its best senior prosecutors. Private practice op-
portunities offer three times the federal salary and benefits. Pri-
vate sector working conditions, including clerical and research sup-
port, and benefits, are generally far better. Obviously, the federal
government cannot meet the private sector pay scale. The gap in
salaries, however, has' grown far too wide to permit top people from,
seriously considering a government career. •
Similarly, law enforcement agenices encourage early retirement
for skilled investigators who do not move into senior management
jobs. For the most part, these investigators collect their pension
and then earn twice their salary working as private detectives.
Consideration should be given to creating a non-management
career path to encourage the retention of especially competent in-
vestigators.
 "144

22.' The; Senate Judicary Committee should consider prohibiting

anyone who has held a policy position on the narcotics issue for
the U.S. government from working as a registered agent or lob-
byist on that issue for a foreign government
Foreign governments, such as the Bahamas, have sought to im-
prove their image in the United States and to prevent U.S. action
against them for their failure to address narcotics issues. A
number of foreign governments have hired former officials who
have had responsibility for drug issues in the U.S. legislative or ex-
ecutive branches. The Subcommittee' learned of situations where
these former officials represented their clients on drug issues ih
meetings with current U.S. government officials. ; .
If the drug issue is taken seriously as a national security matter,
the people who worked on the issue inside the American govern-
ment, and know our law enforcement strategies, should not be able
to market that knowledge to governments that are working direct-
ly with drug traffickers. *
NEUTRALITY ACT-
• \

23. Private citizens should not be permitted to mount expeditions

from the United States aganist foreign governments without
formal U.S. government approval in advance and prompt notice
to law enforcement
As presently worded, a violation of the Neutrality Act is defined
as action taken against foreign governments "at peace with the
United States." Nevertheless, a variety of private persons became
involved in supporting U.S. policy regarding, the Contras, in some
cases while engaging in non-approved criminal activity. The result
was a situation in which it became increasingly difficult for,various
governmental entities, including law enforcement agencies and the
Congress, to determine what activities were authorized and what
were not. In criminal cases brought in South Florida since the
Iran/Contra affair, prosecutors and judges have had difficulty prov-
ing that free-lance activities by American citizens, including gun
running, were in violation of the law.
The Subcommittee believes that private mercenary action mus£
be subject to effective prosecution. A mechanism needs to be estab-
lished to ensure that law enforcement and other relevant govern-
mental entities, including the Congress, can promptly determine iii
fact whether or not ostensibly "private" military expedition has
been authorized by the United States.
The Chairman of the Subcommittee intends to file legislation ad-
dressing ai number of these concerns as a companion to this Report.
 APPENDIX: NARCOTICS AND THE NORTH -NOTEBOOKS.
SUMMARY

Among the voluminous testimony and documents received, by the Iran/Contra

Committee was a significant amount of material relevant to matters under investi-
gation by the Subcommittee on Narcotics, Terrorism and International Operations.
In early 1987, the Subcommittee Chairman, Senator John F. Kerry and "Senator
Daniel K. Inouye, the chairman ofthe Senate Select Committee on Secret Military
Assistance to Iran and the Nicaraguan Opposition, worked out an agreement under
which the staff assigned to the Subcommittee would receive the necessary special
security Clearances to study all of the documents to which the Iran/Contra commit-
tees had access.
In November and December 1987, the cleared Committee staff read thousands of
pages of Iran/Contra Committee material, including the "North notebooks," which
consisted of 2,848 pages of spiral-bound notes taken by North on a daily basis from
September, 1984 through November, 1986 covering his activities, telephone calls and
meetings while he was at the National Security Council. In reviewing these note-
books, the Committee staff found a "number of references to narcotics, terrorism and
related matters which appeared relevant and material to the Subcommittee's in-
quiry. However, .in many of-these cases, material in the Notebooks adjacent to the
narcotics references has been deleted from the material provided to the Committee.
' Upon reviewing the . matter with ;staff . of. the'Iran/Contra Committees, the Sub-
committee learned that neither the Iran/Contra Committees nor the White House
had had access to uncensored North Notebooks. Instead, North or his attorney had
deleted portions of. the Notebooks which they, considered to be outside the jurisdic-
tion of the Iran/Contra Cpipnittees. In all, 1,269 of the pages of the Notebooks were
censored to some extent by North or his attorneys prior to being delivered, to the
Iran/Contra Committees, with 155 pages blacked out completely.
This occurred because North took the Notebooks, from the White House in No-
vember 1986 before his documents were impounded, and turned them over to his
lawyer, Brendon Sullivan. The'Notebooks were than subpoenaed by the Iran/Contra
Committees. North asserted his Fifth Amendment Constitutional right, and was
then given limited immunity by the Cbmmittees to compel his testimony. After
North was given immunity, his attorneys still objected to furnishing the full Note:
books, contending that they were not relevant to the Committee's investigation and
North need only furnish portions which he and his attorneys determined were rele-
vant. _/
Because of the Iran/Contra Committee's very tight deadlines and the need to
have the Notebooks for at least a brief period prior to beginning the questioning of
North, the Committees agreed to allow North's lawyers to make dqlejions from , the
Notebooks. North or his attorneys blacked out hundreds of Notebookpages and nu-
merous entries. Some of the censored entries were read by the Committee lawyers,
but most were not. Most important, the lawyers who read the diaries at that time
did not know names, dates and places which would later prove to be important, and
therefore were not in a position to determine the relevance of the material deleted;,
The Iran/Contra Committees' staff had 9nly a few days to review the material -
before* North was questioned. The thousands of pages were furnished in often illegi-
ble copies and would have required weeks of analysis to make sense of under the
best of conditions.
Under a fundamental agreement over classification which the Iran/Contra Com-
mittees made with the White House, the Notebooks were classified at codeword
level and Could only be released after a review by a White House declassification
team. ~
Following the review of the diary entries by cleared staff, Senator Kerry read sev-
eral hundred pages of the North Notebooks and wrote the White House on January
25, 1988 requesting the immediate .declassification of 543 pages containing refer-
ences to drugs and drug trafficking, North's probe of the investigation into North's
activities initiated by the Foreign Relations Committee in 1986, and related matters.
(145)
 "146

A White House declassification team declassified some of the requested materials.

Some of the materials were deemed "not relevant to the investigation," and others
were not declassified because the White House team could not determine what they
meant without reading, portions not in their possession since they had previously
been censored by North and his attorneys. The White House did not declassify 104
of the pages requested by the Committee staff, contending that all further declassifi-
cations would have to await the processing of materials necessary for Independent
Counsel Walsh in connection with the prosecution of Admiral John Poindexter^
North, Albert Hakim and Richard Secord for alleged criminal activity in connection
with their roles in the Iran/Contra affair.
When the Committee staff discussed the problem, posed by th&high' classifications
given the materials within the North, notebooks, White House Counsel A.B. Culva-
house said the White House considered the Notebooks the property of the federal
government and subject to classification at the highest levels.
The Subcommittee chairman, Senator Kerry, wrote the White House to state that
if the Notebooks were as sensitive as the White House contended, they should not
be allowed to remain in the possession of either North, whose clearances had been
terminated and who remained under indictment, or in the hands of his attorneys,
who cannot be cleared to the codeword level. While reiterating that it considered
the materials to be highly classified, the White House took no steps to secure the
materials it contended remained federal property.
COMMITTEE ACTION

On April 26, 1988, the Committee voted 17-1 to approve a subpoena for the full
North Notebooks. The subpoena was served on Lt. Colonel North. On May 10,19&8*.
North's attorney, Brendon V."Sullivan, Jr., appeared before a Committee hearing
called for the purpose of receiving the subpoenaed materials. Sullivan provided no
materials and asserted North's fifth Amendment privilege. He further asked the
Committee to rescind the subpoena on the grounds that its issuance would jeopard-
ize North's right to a fair trial, and that the material requested was beyond the ju-
risdiction of the Foreign Relations Committee: After receiving legal advice from the
Office of the Senate Legal Counsel, the Committee voted 10-8 to enforce the subpoe-
na on September 14, 1988, but was unable to secure the materials prior to the end of
the 100th Congress; >
CASE STUDY: T H E DRUG-RELATED ENTRIES

-Because of the extensive delections.in the Notebooks made first by North and his
attorneys and secondly ;by the White House, it is difficult to gauge from the non-
classified materials of the Notebooks the full extent to which the Notebooks relate
to terrorism or narcotics trafficking, the areas of the Subcommitee's direct .jurisdic-
tion. However, even in their highly incomplete state, the Notebooks do contain-nu-
merous reference to drugs, terrorism, and to the attempts of the Committee itself to
investigate what North" was doing in connection with his secret support of the Con:
tras.
Among the entries in the North Notebooks which discernably concern narcotics or
terrorism are; ,t
May 12,1984 . . . contract indicates that Gustavo is involved w/drugs. (Q0266)
June 26, 1984. DEA—(followed by two blocks of text deleted by North) (Q0S49)
June 27, 1984. Drug Case—DEA program on controlling cocaine—Ether . cutoff-
Colombians readjusting—possible negotiations to move refining effort to Nicara-
gua—Pablo Escobar-Colombian drug czar—Informant (Pilot) is indicted criminal—
Carlos Ledher—Freddy, Vaughn (Q0354) .'", '
July 9, 1984. Call from Clarridge—Call Michel re Narco Issue—RIG at 1000 Ten
morrow (Q0384)—DEA Miami—Pilot went talked to Vaughn—wanted A/C to go to
Bolivia to p/u paste—want A/C to p/u 1500 kilos—Bud to meet w/Group (Q0385)
July 12, 1984. Gen Gorman—'Include Drug Case (Q0400) Call from Johnstone—
(White House deletion) leak'on Drug (0402).
July 17, 1984. Call to Frank M—Bud Mullins Re—leak on DEA piece—Carlton
Turner (Q0418) Call from Johnstone—McManus, LA Times-says/NSC source claims
W.H. has pictures of Borge loading cocaine in Nic. (Q0416)
July 20, 1984. Call from Clarridge:—Alfredo Cesar Re Dmgs-Borge/Owen leave
Hull alone (Deletions)/Los Brasiles Air Field—Owen off Hull (Q0426)
July 27, 1984. Clarridge:—(Block of White House deleted text follows)—Arturo
Cruz, Jr.—Get Alfredo Cesar on Drugs (Q0450)
July 31, 1984—Finance: Libya—Cuba/Bloc Countries—Drugs . . . Pablo Escobar/
Frederic Vaughn (Q0460)
 "147
July 31, 1984. Staff queries re (White House deletion) role in DEA operations in
Nicaragua (Q0461)
December 21, 1984., Call from Clamdge: Ferch (White House deletion)—Tambs-
Costa Rica—Felix Rodriguez close, to (Wljite House deletion)—not assoc. W/Vil-
loldo—Bay of Pigs—No drugs (Q0922) . / /
January 14, 1985. Rob "Owen—John Hull—-no drug connection—Believes (Q0977)
. : July,12,1985. $14 million, to finance came from drugs (Q1039)
.August 10, 1985. Mtg w/A.C.—name of DEA person in New Orleans re Bust on
Mario/DC-6 (Q1140) 1 ^
February 27,. 1986. Mtg w/Lew Tambs—DEA Auction A/C seized as drug run-
ners.—?250-260K fee (Q2027) s
Numerous; other entries contain references to individuals or events which Sub-
committee staff 'has, determined have relevancy to narcotics, terrorism, or interna-
tional operations, b^t whose ambiguities cannot be resolved ^without the production
of the deleted materia-by North and his attorneys.
Accordingly, the Subcommittee continues to believe, that the production of the de-
leted material. could ^hed iraportant light oil a number of issues in connection with
foreign policy, law, enforcement and narcotics aiid terrorism. The Chairman of the
Subcommittee will urge that further steps be "taken to secure the original North
notebooks in aii uncensored form.
ALLEGATIONS OF INTERFERENCE WITH THE COMMITTEE INVESTIGATION
•The current Subcommittee investigation grew out of a probe conducted in the
spring of 1986 by Senate staff of the Subcommittee chairman, Senator John Kerry.
This investigation moved to the full Foreign Relations Committee following an Exec-
utive Session of the Committee June 26j 1986.-
The Kerry probe explored a variety of charges from a variety of sources that the
contras ana their supply operations had engaged, in weapons smuggling, narcotics
trafficking,:- misappropriations <of funds, and related offenses.. The probe also ex-
plored allegations that the NSC and Lt. CoL Oliver North Were managing Contra
military- operations and supplies during the period' when such activity was pro-
scribed by the Boland Amendment.
Among'the specific allegations of criminal activity focused on by Senator Kerry's
office were: charges relating to alleged weapons shipments involving the Civilian
Military Assistance Group aid Cuban Americans in Miami active in supporting the
Contras, including a number of persons who have sinee been indicted on Neutrality
Act^ weapons charges, or-narcotics charges;
Beginning in April, 1986, Senator Kerry sought for eight months to convene
public, hearings regarding these allegations. No such hearings took place, in part be-
cause material provided to the Committee by the Justice Department and distribut-
ed to.'members following an* Executive Session June 26, 1986 wrongly suggested that
the allegations that had beensnade were false. .
•/ On October 5,1986, the Subcommittee received sworn testimony from an Assist-
ant U.S, Attorney that officials in the Justice Department sought to undermine the
attempts by Senator Kerry to have hearings held on the allegations. The Subcom-
mittee also learned that confidential transcripts of Committee proceedings had been
provided to the Justice Department without authorization, and placed in the files of
the then US, Attorney for the Southern District of Florida, Leon Kellner, who was
responsible for prosecuting the Miami Neutrality Act cases.
AUSA Jeffrey Feldman, who prosecuted the Neutrality Act cases in Miami relat-
ed to the Committee's investigation, testified under oath that on November 18, 1987,
he met with Tom Marum, assistant head of the Internal Security Division of the
Justice Department, , and with the liead of the Division, John Martin. Feldman testi-
fied that at this meeting Marum. stated,that representatives of the Justice Depart-
ment, DEA, and FBI met in 1986 "to discuss how Senator Kerry's efforts to get
Lugar to hold hearings on the case could be undermined," (Feldman MemCon of No-
vember 18, 1987, time-stamped 10:47 am at the Criminal Division of Justice, subpoe-
naed by Committee; Feldman Testimony, October 5, 1988, p. 24)
Feldman testified before the Subcommittee that as a result of Marum's state-
ments, he:
Became' concerned heciause I felt that perhaps the reason that my investi-
gation was delayed was because I was looking at the identical allegations
that you [the Senate Foreign Relations Committee] was looking at. It made
sense that if the Department didn't support your investigation, then they
wouldn't support my investigation. I became concerned that my investiga-
tion . . . could . . . have been quashed because had they gone forward with
 "148

it, it would , have lent credibility to the allegations1 that you wanted to ex-
plore. (Subcommittee Testimony of Feldman, p. 29)
Feldman testified that following his meeting with Marum and Martin, he re-
turned to Miami and reviewed documents given to him by Leon Kellner, the former
US Attorney for the Southern. District of Florida, Feldman testified that in review-
ing these files he found a transcript of an Executive Session of the Senate Foreign
Relations Committee, documents from the Committee investigation,-an<i memoranda
between Deputy Assistant Attorney General Kenneth Bergquist and Committee
staff on coordinating efforts "to basically show that what you [Kerry] were saying
wasn't necessarily correct." (Subcommittee Testimony of Feldman, p. 29)
Feldman testified that he has a number of questions regarding the information he
found in the files provided him by US Attorney Kellner. "If [fee Justice Depart-
ment] opposed your investigation, did Mr, Kellner know about, it, £rid if he did know
about it; did he let that factbr influence hi? decision in delaying my investigation?
. . . Was my memo revised for disinformation purposes?. Was it revised so that it
could be used against you? In other words, if going to the Grand Jury would lend
credibility to the [Senate] investigation, the opposite decision, would take away from
it, and if you had a memo to that effed:, it "would detract from the allegations that
you were trying to encourage the Senate to explore." (Ibid., pp. 45-46)
Feldman testified that he had recently learned that his memo, classified "sensi-
tive," had been leaked to the Senate Foreign Relations Committee. He testified "that
he had recently reviewed a June 26, 1986 memorandum prepared by Committee
staff in connection with reviewing the Kerry allegations. Upon reviewing that Com-
mittee memo, Feldman determined that it incorporated information from Feldman's
memo to Kellner, including some material-which was "verbatim." (Ibid., p. 48)
Feldman testified that has memorandum had a "sensitive," classification on it ahd *
was prepared because Kellner asked Feldman to produce it,, not for the purpose of
going to a Grand Jury. (Ibid., p. 51) .
Feldman testified that he would not draw conclusions as to the meaning of the
documents he'found, but that the documents Kellner had given him, taken together
with Mar urn's statements, had aroused "questions in my own mind again'about why
the memo was changed." (Ibid., pp. 57-58)
Previously,. Feldman had testified before the Iran/Contra Committees that a
memorandum he wrote recommending • that-the cases he was investigating be taken
to a grand jury had been rewritten without his knowledge in late May, 1936. Feld-;
man testified that, the recommendation had been changed to suggest that a grand
jury would be merely a "fishing expedition." Before the Subcommittee, Feldman tes -
tified that the statements made by Marum could create an inference that the deci-
sion not to move to a grand jury had been taken in order to slow down the Foreign ,
Relations Committee inquiry.
In testimony under oath, Marum denied-having told Feldman that there had been
an agreement to undermine the Committee's investigation into the allegations con-
cerning the Contras. Marum also denied that he had ever participated in discussions
to undermine or block Senator Kerry's attempts to hold Congressional hearings.
Marum said it was true that the Justice Department and the other participants in
the meeting were opposed to such hearings taking place. (Subcommittee Deposition
of Thomas E. Marum, October 25,1988, p. 56)
Marum testified that he was "totally unaware of anything that could even be con-
strued as an unethical attempt to mislead the Committee." Marum added that he
did "recognize that the Department saw no need to have hearings about a-matter
which we were handling." (Ibid., p. 75)
On November 7, 1988, Assistant Attorney General Mark1 Richard testified that
Feldman was "wrong" about there being any meeting attended by Richard in which
there was any attempt to undermine Senator Keriys attempts to have hearings.
(Subcommittee Deposition of Richard, p. 37) Richard said he was aware of a meeting
which had taken place May 2, 1986 regarding the Kerry allegations which he?did
not attend, and a second meeting on October 15, 1986, which he did attend. Richard
testified that the latter meeting, attended by 20 to 25 people, went down the list of
outstanding items requested by the Committee to inventory and- respond-to them.
(Ibid., pp. 38-40) Richard recalled that the . DEA did not want to provide any of the
information the Committee had requested. (Ibid., p. 39) Richard emphasized that his
concern was to respond to the Committee's requests, .not to-block them (Ibid., pp. 99-
100)
Richard recalled seeing the transcript of the Foreign Relations Committee Execu-
tive Session of June 26, 1986, but could not recall where or from whom he obtained
it. (Ibid., pp. 52)
 "149

Richard testified that he was "aware of nothing thai? VI would characterize as a

sinister, effort to frustrate" the Committee. (Ibid., pp. 91) •
• Former Miami US Attorney Leoh Kellner testified before the Subcommittee that
he did not recall seeing most of the documentswhich Feldman testified he had been
given ps a file--by Kellner. Kellner stated that he did recall previously reading the
transcript of the June 26,1986. closed session of the Committee which discussed alle-
gations concerning drug trafficking, weapons violations, corruption and related
charges concerning the Contras, but he did not know how he got the material. (Sub-
committee Deposition of Leon B. Kellner, November B, 1988 pp 10-11). Kellner testi-
."fie.dthat he talked to Justice Department spokesman Pat Korten in May of 1986
after Korten told The New York Times that the allegations concerning the Miami
Neutrality Act cases had been investigated and found not to be true. (Ibid., pp. 29-
30) Kellner testified that he told Korten his statements had not been correct and it
was improper to comment on pending investigations. (Ibid.) Kellner said that if any
one had come to'him and asked him not to go forward with a ease because of nation-
al security reasons," Kellner would throw the person out of his office. (Ibid., p. 34)
The Subcommittee obtained departmental correspondence from the Miami U.S.
Attorney's Office between Associate Attorney General Steve Trott and Deputy As-
sistant Attorney General Ken Bergquist regarding the Justice Departments re-
sponse to Committee inquiries in the spring and summer of 1986. These, documents
show that Bergquist sought to release some material from the Miami investigation
in order to put to rest contentions that the Justice Department was engaged in a
cover-up. These documents, including memoranda between Trott and Bergquist, fur-
ther show that the justice Department closely monitored press accounts of the Com-
mittee's interest in the allegations concerning the Contras. The memoranda, togeth-
er with statements made by Justice Department officials to reporters writing about
the allegations, also document that some officials in the Department of Justice
sought to discredit both the allegations concerning criminal activity relating to the
Contras and the persons making these allegations.-
Bergquist testified that he provided the Committee with the arrest records and
' law enforcement histories of four individuals who had been identified as the key
persons making the charges concerning the Contras. (Subcommittee Deposition of
Ken Bergquist, September .28,1987, p. 17)
Bergquist testified that the Office of Legislative Affairs of the Justice Department
was provided by July, 1986 with a copy of the "Feldman memo" regarding whether
to teke the Miami cases to a Grand Jury. He testified he might also>have seen it
earlier "when Leon Kellner came by." (Bergquist Deposition, pi 59) Bergquist testi-
fied that the .Feldman memo was the only material he was provided from the inves-
tigative files of the Miami investigation, and that he received it from John' Bolton
who in turn received it from Mark Richards. (Ibid., pp. 6u, 82)
Bergquist testified that he never had participated in any effort to interfere with
Congress or any committee of Congress, and had never knowingly misled Congress
or any committee. (Ibid., p. 65) More recently, Bergquist denied participating in
"any deliberate attempt to undermine a -Senate probe," but admitted the adminis-
tration opposed the hearings. (U.S. News & World Report, December 5,1988)
The testimony before the Subcommittee by these witnesses and the documents
provided the Subcommittee by the Justice Department conflict in many essential
areas. However, the material does enable the Subcommittee to reach some conclu-
sions as to what happened.
It is clear that: -
1. Confidential materials of the Foreign Relations Committee were improperly
provided to the Justice -Department and to the U.S. Attorney responsible for de-
ciding whether'or not tp bring allegations being investigated by the Committee
to a grand jury.
2. Confidential law enforcement information from the Miami investigation
was selectively made available to the Committee while the Miami investigation
was pending, at a time when the Justice Department was taking the position
that no such material would be provided the Committee on any pending case,
and without the knowledge of the AUSA handling the case" in Miami.
3. The Justice Department provided information to the. Committee that
tended, to discredit the allegations being investigated. The Justice Department
advised the Committee -that the persons who had made the allegations to Sena-
t o r KerryV staff had significant credibility problems, and that there was no
truth to the allegations under investigation by the Committee. Justice Depart-
ment officials made similar statements to the press, attacking the credibility of
potential witnesses and stating that the allegations under investigation by the
Committee had been investigated and determined to be false.
 "150

, 4.. The Justice Department did not provide information to the Committee that
would have corroborated the allegations rbeing investigated by the Committee,
although the FBI possessed such information: In'light \of the information pos-
--. , messed by. the FBI, the information that was provided' to the Committee by JUs-
• jtice Department officials was niisleading. Statements made tothe press by Jus-
i;tace Department officials regarding the allegations "were also misleading:
The conflicting testimony under oath raises Serious questions aobut;the actions of
Justice Department officials-which this Committee cahn'ot answer: • -
1. Did the US; Attorney's' Office'in Miami decide not to Convene a grand: jury
•• on allegations' of gunrurining and Neutrality Act violations jn May, 1986 be-
cause Of concerns that the Convening df a "grand jury, would increase the proba-
bility of an investigation into these allegations by tSe Foreign Relations Com-
• mittee? • _ -"•' * - "
,2. Did Justice'Department officials'seek to interfere with ,the Committee in-
vestigation, because the investigation might damage the Administration's goal
_ of supporting the Contras?
, delated questions, are reused by entries in the person^ notebooks _6f Oliver North
which appear to concern the Committee and Kerry probes.
The declassified North notebook entries include references to the Kerry and For-
eign Relations Committee investigations and investigators on April 18, 198.6; April
22, 1986; May 1, 1986; May 13, 1986; June 2, 1986; June 17, 1986; October 15,1986,
November 19, 1986; November 21,1986. . .. • ' . ! _ "
The entries show that North, was provided with information regarding Senator
Kerry's attempts to have hearings in the spring and fall of 1986, at a.'time when the
information was Committee confidential.. . ' ,
The North notebook entries raise the further question of whether North .and
others working with North took steps to interfere with the Committee investigation.
In August, North's courier, Robert Owen, was asked ,by John Hull to transmit
copies of falsified affidavits charging the.Kerry staff with bribing witnesses to both
the US Attorney's Office in Miami and to the Senate Ethics Committee.. The, US
, Attorney then provided a copy ,of these affidavits to the Justice Department in
Washington. Shortly thereafter, these false charges; against Kerry staff appeared in
, press account^, while the Committee investigation.^as pending.^.
Taken . together, these .facts raise the question of whether North, Owen, and Jus-
tice Department officials may have sought to discredit the Kerry investigation be-
cause of concerns that it might;harm the Administration's efforts to-support, the
Contras. , -
The Subcommittee views the'allegations—that high ranking officials, includhig of-
ficials in the Justice Department, may have acted in concert to obstruct the Com-
. mittee investigation—to be .quite serious. When high ranking officials, deliberately
provide false or misleading information to Congressional investigation, the result is
thai the Congress cannot: carry out its constitutionally mandated responsibilities,
and our system of government is put at risk. ;• - .
The following chronology details a number of events and facts relevant to any fur-
ther investigation of these matters.
CHRONOLOGY

May 4, 1983.—Ramon Milian Rodriguez, a self-professed money Iaunderer for the

Medellin cocaine cartel, is arrested by DEA agents while Attempting to leave Fort
Lauderdale^ aboard his personal jfet with $5 million hi. hi§ .personal jet. Prior to his
arrest oh money laundering charges, for which he, was later convicted; he told feder-
al agents, that "the money was all the proceeds of narcotics transactions," and he
provided a list .of narcotics traffickers, whose taxes he prepared. Among those he
named were "Luis Rodriguez!" Records of Milian Rodriguez seized by federal agents
when he was arrested. May 6, 1983 mciuded numerous references to the services he
provided "Luis Rodriguez," iSuad showed Luis Rodriguez' address to be 535 SW 98th
Place in Miami, the corporate address for . "Ocean Hunter," a seafqod import busi-
ness. (Trial documents, U.S.^v. Rodriguez, SD Florida 19S3) .
May 27, 1983.—While investigating the bombing of the Continental Bank in
Miami, Miami police detectives, receive allegations regarding Contra operations in
Costa Rica being supported by narcotics funds involving a company called "Ocean
Hunter," which is traced to Luis Rodriguez, a Miami based Cuban American, who
has beep, named as a drug trafficker earlier that month by his indicted accountant,
Ramon Milian Rodriguez. The address for the company was 535 SW 98th Street, the
same address shown in the records seized by the government in its prosecution of
 Ramon Milian Rodriguez. (On September 26, 1984, this material is approved to. FBI
Intelligence SA George Kiszynski and recorded, in an FBI-302)
March 2, 1984 and April 13, 1984.—Luis Rodriguez is interviewed by IRS agents
regarding Ocean Hunter, drug trafficking and money laundering and takes the
Fifth Amendment on almost every question. (Documents on file in U.S. v. Rodri-
gi«sr/ND of Florida, 1988) •
June 26, 1984.—North notebook entry reads "Call from Owen—John Hull—pro-
tection'. i l John now has "private army of T5-100"—Cubans, involved in drug—up
to lOQ more Cubans expected. (Redaction) (Iran/Contra Q344) -
July 20, 1984.—North notebook entry reads: "Call from Clarridge: Alfredo Cesar
re drugs—Borge—Owen leave Hull alone. (Iran/Contra 426)
July 23, 1984.—Oliver North notebook entry reads: "Call from Rob Owen—call
from John Hull. \ . Pastora convinced that Hull Has "sold out." Q0432
September 1, 1984.—Two Americans die in the downing of a helicopter by Nicara-
gua. The two Americans are members , of Civilian Military Assistance Group
("CMA"). The helicopter was equipped with rocket pods and an M/60 machine gun.
The attack is part of a Contra assault on a Nicaraguan base at Santa Clara. Follow-
ing the downing, members of CMA meet with a representative of the US Embassy
in Honduras, who 'instructed them in a cover story," directing them to say they
were not involved in combat, but on a: humanitarian ^mission, because the true story
wais^'not in the interests of the United States " (FBI 302 of Thomas V. Posey, 8/6/
87) - • - '
October 12, 1984.—The Boland Amendment is signed into law, prohibiting "direct
or indirect" support by the United States for the Contras.v
October 25, 1984.,—FBI SA George Kiszynski interviews Rafael Torres Jimenez,
who states that he has been working with Contra leader Eden Pastora in Costa Rica
to fight the Sandinistas, as part of a group of'Miami Cubans including Frank Castro
and Rene Corbo, who" established a military camp in Costa Rica. Jimenez states that
some of the Cuban Americans had obtained weapons and explosives in Florida for
foreign operations: (FBI 302 of 12/17/84) •
•November 29, 1984.—FBI SA George Kisyzriski interviews Joseph Marcos in con-
nection. with the Continental Bank'bombing investigation:. Marcos advises him that
a group of Cuban Americans have established a military caLpip in Naples, Florida,
and that Mariel Boat Cubans ("Marielitos") and Contras were being trained in the
camp before going to'Costa Rica to receive additional military training and to par-
ticipate in military operations against the Sandinistas. (FBI 302 of 12/17/84)
December 12,1984.—Frank Camper, who operates a mercenary training school in
Dolomite,11 Alabama, reports to the FBI , that there are approximately "one dozen
U.S. citizen volunteers and fifty or more FDN trainees training for deep penetration
raids into Nicarargua," and that the operation involves Posey and members of
CMA, along with a "Colonel Flacb.-" (Camper Document, subpoenaed by Subcommit-
tee) 1 '
Mid-December 84.—Meeting at Adolpho Calero home in Miami to discuss South-
ern Front operations of Contras., The attendees discussed what CMA could do on the
Southern Front with Hull as tfie coordinator. Attendees: Adolpho Calero, John Hull,
Robert Owen, Phillipe Vidal Santiago "Morgan," Enrique Bermudez, Joe Adams
"Tiradon," Jack Terrell "Flaco," Lanny Duyck "Doc Zorro," Aristide Sanchez,
Donald Lacey, and Frank Chanes. (Subcommittee Depositions -of Terrell and Adams,
Iran/Contra Deposition pf Robert Owen, Appendix B', Vol..20, pp. 799-800)
January 14,1985.—North notebook entry: "Rob Owen; John Hull—no drug con-
nection—believes." (Iran/Contra, North Notebook Q0977)
January 24, 1985.-^-Rene Corvo tells FBI SA George Kiszynski that he is the mili-
/ tary leader of a Contra training camp in Naples, Florida, working with Francisco
Chanes an<l Moises Nunez, together'with "John Hall" [sic} who is assisting the Con-
tras from his Costa Rican ranch. (FBI -302, March 1, 1985)
February 15, 1985.—Frank Castro, a Cuban American who had previously been
convicted on marijuana importation charges in connection with a spinoff of the
DEA "Grouper Case," tells FBI SA George Kiszynski that he is backing actions
against Communist targets outside of the United States, and has been providing
Rene Corvo's military camp with military gear. Castroi tells Kiszynski about the in-
volvement in the Contra war of. "John Hall" [sic] who has large holdings of farm
lands in Costa Rica. (FBI 302 3/8/85) . -
February, 1985.—Life Magazine identifies Bruce Jones as "a CIA man in Nicara-
gua," and describes his 55-acre citrus farm in the jungles of northern Costa Rica, 30
miles from the Nicaraguan- border, & farm which isractually controlled by John
Hull. (February 1985 LIFE) "
 February, 1985.—CMA leader Tom Posey is arrested in Miami on weapons
charges, where he meets Jesus Garcia, a booking officer, who offers to work with
Posey in providing assistance to the Contras. (Iran/Contra Deposition 6f Feldman,
Appendix B, Vol. 10, p. 42)
"February, 1985.—At Howard Johnson's Motor Lodge in Miami, group of American
mercenaries associated with CMA are introduced to Rene Corbo and others involved
in Cuban American operation in support of Contras and discuss Contra training ac-
tivities in Central America. Mercenary Steven Carr agrees to go to-Costa Rica to
help train Contras. (See Iran/Contra Deposition of Owen, Appendix B, Vol. 20, p.
799; Keiry staff interview of ^Stephen Carr in La Reforms Prison, San Jose, Costa
Rica, March 9,1986) ' ~ -
Late February-Early March, 1985.—Owen goes to Costa Rica at the request of.
Colonel North to coordinate meeting of Contra groups. He is accompanied hy Frank
Gomez of International Business Communications and Jonathan Miller of the NSC.
(Iran/Contra Deposition of Owen, Appendix B, Vol. 20, pp. 658-660) .
March 3, 1985.—Soldier-of-fortune Steve Carr, and- Cuban named "Papito" load
van full of uniforms, boots and medicine aboard cargo plane at Fort Lauderdale-Hol-
lywood Airport. (FBI 302's of Francisco "Papito" Hernandez, 6/17/86 and 6/24/86)
March 6,1985—In Miami, Carr picks up 14-foot 20mm cannon with 150 rounds, a
box of 30 G-3 automatic rifles and a. box of M-16s, two 60mm mortars and'80-100
mortar rounds, and a .50 caliber machine gun with 250 rounds of ammunition. Carr,
Corbo, Thompson and Carr aboard flight from Ft. Lauderdale/Hollywood airport.
Flight is on American Flyers, a Ft. Lauderdale air charter company, owned by
Daniel Vazquesz m , twice convicted of .running guns to Cuba in the 1950s and
1960s. Plane flies in to Ilopango, military airfield in El Salvador. No customs checks.
Material is offloaded. Includes 14' long 20 mm cannon, AK-47 autpmatic rifles, etc,
These weapons were collected from the residences of Corbo and of Frank Chanes.of
"Ocean Hunter," the partner ofLuis Rodriguez (FBI302's of Corbo, "Papito," docu-
ments, produced by FBI in U.S. v. Corbo, et al, SD Florida 1988, including false Cus-
toms declaration, cargo manifest, and records of Florida Aircraft Leasing Corp.)
March 9, 1985.—Hull pays to fly British mercenary Peter Glibbery from Miami, to
Costa Rica in support of Contra military activities. (Iran/Contra Deposition ^ of
Robert Owen, Appendix A, VoL 20, p. 797)
March 1985.—John Hull..says.he has.a friend at the National Security Council
who puts $10,000 a month in, Miami, bank account for turn. Hull also teUs Carr and
Glibbery around March 17 or 18th that he had gotten a call from -his/friend at the
NSC who told him the FBI was investigating him for drug. trafficking, and that, his
friend "for god sakes tell me -if you are so we can do,something.. . ." (Kerry Staff
interview x>f Peter Glibbery, March 9,. 1986 and May 26, 1986; Owen confirms
$10,000 a month came fron Contra funds maintained by Adolfo Calero, Iran/Contra
Deposition, Appendix B, Vol: 20, pp. 650-651) .Owen later testifies that a film pro-
ducer named Larry Spivey had told Owen he had talked with the FBI and that the"
FBI is; watching [Hull] for. drug trafficking." (Iran/Contra Deposition of Owen, Ap-
pendix B, Vol. 20, p. 821)
" March 20 or 24, 1985—SmalT plane lands at Hull's airstrip with an ARDE pilot,
In plane are clothes, boxes, US Army manuals written in Spanish from Special
Forces school. Pilot was- to bring supplies north, but had landed on wrong field.
Hull, Owen, Davies and Glibbery and ARDE pilot fly in the ARDE plane and Hull's
to the wrong .strip, 50 miles away, and find the plane. In the. pl&e is a 50 cal.
browning, boxes of uniforms and other materials. Arms are then'sent to1 right air-
strip. {Irian/Contra Deposition of Robert Owen, Appendix B, Vol. 20, pp. 664-665; see
also Kerry staff, interview of Peter Glibbery, March 9,1986 arid may 26,1986)'
April 24, 1985.—Carr, Glibbery and three other mercenaries are arrested in Costa
Rica on properly controlled by John Hull following an April 9 raid oh Nicaragua.
(See Iran/Contra Deposition of Currier, Appendix B, Vol. 8, pp. 199-200)
April 26, 1985.—The State Department confirms that two U.S. citizens have been
arrested by Costa Rican police. Diane Dillard, State Department Spokesman in
office of Consular Affairs, states "all we know is that they are in jail arid that the
consular officer from the embassy is visiting them." Dillard cites press reports that
Hull denied the men 'were on his property, and suggests that Hull "happens to have
his farm in the wrong neighborhood/ (Inter Press Service; April 26,1985)
June 7, 1985.—Adolpho CalerO meets with Robert Owen to conclude purchase of
weapons and ammunition for Contras, after telephone calls involving General Sing-
laub, who was providing the weapons, ahd Lt. Col. North, who was overseeing^ the
purchase. (Iran/Contra Testimony of Robert Owen, May-14,1987, pp. 343-346)
July 8, 1985.—Following a July 7,1985 press conference at La Rieforma Prison in
Costa Rica, The New York Times and Miami Herald report that two mercenaries
 claim to have flown out of Ft. Lauderdale^ March 6.011 flight loaded with Weapons
for the Contras. The mercenaries, Steven Carr and Peter Glibbery, name John Hull
as the chief liaison to the Contras in Costa Rica. (July 8, 1985 New York Times; July
21,1985 Miami Herald)
. July 28, 1985.—FBI Agent Currier initiates.Neutrality Act investigation on basis
of reading July 21, 1985 article in Miami. Herald quoting Carr and Glibbery's state-
ments about supporting the Contras from South Florida. (Iran/Contra Deposition of
Currier, Appendix B, Vol. 8, pp. 198-199)
August 8, 1985'.—New York. Times reports on front page that contras are getting
advice from White House on operations and that NSC aides were helping contras
raise money from private sources. It describes the contras as "the account", of an
unnamed "military officer" in the NSC. (New York Times)
August 9, 1985.—Following' meeting with- Robert Owen, North notebook entry
reads: DC-6-which is being used for run out of New Orleans is probably being used
for drug runs into U.S. (North Doc #36336)
August 10, 1985.—North notebook entry reads: "Southern Front. . . John Hull to
arrange for [redacted] training"* (Iran/Contra Appendix A, p. 374) Later entry for
that date reads: "Mtg: w. A.C.—Name of DEA person in New Orleans re bust on
Mario DC-6." (Iran/Contra Appendix A p. 376) ' ^
August 15, 1985.—Garcia is arrested on machine gun charges. He tells ATF ar-
resting officers that MAC-10 and silencer wer&,intended to be shipped to Honduras
for the Nicaraguan eontras and he was part of a paramilitary group that was going
to attack the Embassy in Managua:, -Nicaragua; He also states that he was a close
friend of Tom Posey, the head of CMA, and that Garcia had given firearms and am-
munition to Posey in the past to be shipped to the contras and Americans in Cen-
tral America. (Statement of Dennis Hamburger, ATF arresting officer, August 27,
1985, in U.S. vi; Garcia, SD Florida, 1985).
August 25, 1985.—The New York Times reports that John Hull is reportedly help-
ing Contras and is acting as the FDN contact in Costa Rica. (August 25, 1986 New
York Times, "New Anti-Sandinista Unit Forming on South Border," p. 3)
- October 11, 1985.—Financial Times of London publishes interviews with Carr and
Glibbery in which they claim that Hull said he was receiving $10,000 per month
from the National Security Council. (Financial Times, "Soldiers Fail to Find Their
Fortune, p. 5) A
December 20, 1985.—AP states "Reports Link Nicaraguan Rebels to Cocaine Traf-
ficking," describing case of Sebastian Gonzalez and alleged involvement of Eden
Pastora in using drug money to buy/supplies. (AP, Nexis)
January 7, 1986.—The Miami" U.S. Attorney's Office begins to investigate the
cases after Garcia was interviewed by FBI at MCC in Miami, alleging a plot hatched
iri.1985 in IVfiami to assassinate U.S. Ambassador Tambs and to pick up a reward
from Colombia Medellin cartel member Jorge'Ochoa. In the interview, Garcia
placed Tom Posey of Civilian Military Assistance (CMA), Stephen Carr, Peter Glib-
bery, Sam Hall and Bruce Jones in the plot. The FBI "had veiy very good informa-
tion of what actually had occurred regarding gun running [already]. The truth re-
garding thie flight and other flights, extremely good information. We were aware of
Miami Cubans involved in gun running, weapons^ ammunition, several occasions
from Miami to Central America, the people involved, where the guns had been
stored; how the money was raised." (Iran/Contra, Deposition of Currier, Appendix
B, Vol. 8, pp. 205-206)
January 9, 1986.—The State Department begins making payments from the U.S.
.Treasury to Frigorificos de, Puntarenas', a money-laundering and drug smuggling op-*
eration controlled by Cuban Americans working on Contra supply efforts with Rene
Corbo, on behalf of the Contras, from funds appropriated for' humanitarian assist-
ance by-the Congress. The payments-continue in installments to April 20, 1986, to-
talling $261,932. (GAO Analysis of NHAO Payments; FBI Memorandum of Inter-
view in Re: Luis Rodriguez, April 3, 1987 with Carlos Soto, from U.S. v. Rodriguez;
FBI 302's of George Kiszynski produced in U.S. v. Corbo.)
January 14,1986.—Garcia is polygraphed. The first FBI agent reviewing the poly-
graph determines that Garcia had passed. A second review in Washington concludes
that Garcia's answers were inconclusive on the existence of plot, and false on Tom
Posey's involvement. (Iran/Contra Deposition^of Mark Richard pp. 78-79, Currier,
Vol, 8, pp. 205-206)
January 22, 1986.—AUSA Jeffrey Ffldman's notes on Garcia allegations include/-
Rene Corbo and John Hull. (Feldman, 20) Between that date and mid-March, the1
FBI continued its investigation: The FBI agents involved, Kevin Currier and George
Kiszynski, discussed impaneling a grand jury as early as February. The name of
Oliver North comes up in FBI Miami Corbo/Garcia investigation in this "period.
(Iran/Contra Deposition of Currier, Appendix B Vol. 8, pp. 2H-212)' ,
February 7, 1986.—Senator Kerry learns of Garcia's allegations regarding private
assistance efforts on behalf of the Contras involving alleged weapons-and'narcotics
violations. Senator Kerry asks his staff to meet-with Jesus Garcia at Metropolitan
Correctional Center in Miami. Garcia suggests Senate staff, interview Carr and Glib-
bery to confirm his allegations; - ' - " . . • *-
March 5, 1986.—GAO's Frank Conahan testifies before Subcommittee oh Western
Hemisphere Affairs of House that $7.1 million of humanitarian aidT distributed by
NHAO contains no audit trail showing; payments from.'brokers' accounts to suppli-
ers, and only> partial documentation of .shipments from the^ suppliers to the resist-
ance forces. Records subpoenaed by House Subcommittee reveal payments" by the
State Department to Frigorificos de Punterenas, with the signatories on the .bank
account being Luis Rodriguez, Frank Chanes, and Moises J^unez; Chanes arid Nunez
have previously been cited in FBI investigative reports for their involvement with
the Contras in Central America; Chanes has been named as a narcotics trafficker to
the FBI; , and Luis Rodriguez has been named as a narcotics trafficker and previous-
ly taken the Fifth Amendment in response to questions by the IRS. (NHAO docu-
ments and GAO analysis of bank records subpoenaed by House Subcommittee; FBI
302 of George Kiszynski, September 24, 1984; IRS interview on file in U.S. % Rodri-
guez, ND Florida (1988) .
March 8,1986.—Senator Kerry's staff interview Carr and Glibbery at La Reforma
prison in Costa Rica. At that meeting, Carr 'and Glibbery repeat allegations they
had made in the past to the press regarding the presence of explosives and mines on
Hull farm, and the connections between North's courier Robert Owen, Hull, and the
Cuban Americans providing support to the Cpptras.
March 13, 1986.—Assistant Director of FBI Oliver B. "Buck" Revell sent an
urgent inquiry to FBI Miami about Costa Rican and Miami Neutrality .case, asking
for a summary of the Corbo investigation "expeditiously.", A 38 page, ffLHM" or.
letter head memorandum is sent in March to Revell: from Currier and Kiszynski in
response to Reveirs request: It mentions Owen's name, as well as Hull ,and Sam
Him as among the targets of the grand jury thap Currier and Kiszynski ate %en
anticipating^ (Iran/Contra Deposition of Currier, Appendix B, Vol. 8 p. 229), In addi-
tion to Revell, the original LHM was sent to US Attorney's Office in Miami, to Cus-
toms in Miami and to HQ. (Ibid., p.: 230). • . .
March 14,1986.—Assistant AG Mark Richard calls Miami US Attorney Kellner to
ask him about a case invblving allegations of an alleged plot to assassinate the Am-
bassador to Costa Rica and a: variety of other allegations, including blowing up. em-
bassies. (Iran/Contra Deposition of Kellner, Appendix B, Vol. 14 p. 1031). V"
FBI Agent Kevin Currier and Miami public defender John Mattes; Garcia's
lawyer, meet with Feldman. Feldman brings Custom's declaration forms on March, 6
flight and hotel bills confirming Garcia's claim that Carr and Thompson were at
Howard Johnson's hotel in Miami. Kellner appeared at meeting, asking, "does any-
body know anything about thtese mercenaries in Costa Rica?" It was Feldman's im-
pression that he asked this as a consequence of a phone call from Justice. As a
result of Kellner's interest, Feldman decides the base was more important than he
previously thought. Kellner and Feldman agree that Feldman will £o to Costa Rica
to check the case out. (Iran/Cohtra Deposition of Feldman, Appendix B, Vol. 10, p.
55)"Feldman tells Mattes that he hopes to impanel a grand jury on case: (Ibid., p:
117). •1 .
According to FBI Agent Currier, Kellner ' states he "had been on the phone with
high tanking .officials in the U.S. Department of Justice regarding Garcia and the
mercenaries incarcerated in La Reforma'prison in Costa Rica. (Iran/Contra Deposi-
tion of'Currier, Appendix'B, Vol. 8 p. 213).
March 17, 1986.—Kellner te "called by Mark Richard of Justice, to request a con-
tinuance in Garcia's sentencing hearing. According to Feldman, "between! March 14
and 17, it was a lot of momentum building up." Feldman files for a continuance at
Justice's request. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 60;
Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, p. 1034). 1 •
March 18, 1986.—The San Francisco Examiner reports that "one or two Contras
may have dealt cocaine." The article cites a State Department official-, William
Walker, as acknowledging that a few contras might have been involved who were
associated with the ARDE group, but could provide no details. (Examiner, p. A-12).
March 18, 1986.—Feldman's notes refer to Daniel Vazquez, Jaime Ortega, and
other possible targets of neutrality probe, include Rene Corbo, Frank Castro, Fran-
cisco Chines (sic) [Chanes], Philepe (sic) [Felipe] Vidall, Juan Perez Franco, Steven
Carr, Peter Glibbery. According to Feldman, George Kiszynski discovers that Corbo
 "155

and other Cubans might not only have been, involved in bomhing the Continental
Bank in. Miami but also in training people at paramilitary camps and sending them
down to Costa Rica. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p.
63),
March 18, 1986.—Feldman draws up list of witnesses which includes the pilot of
the March 6 weapons flight plane, Daniel Vasquez, Martha Honey, Tony Avirgan,
John Mattes, Jesus Garcia, Jack Terrell and Alan Saum. (Iran/Contra Deposition of
Feldman, Appendix B, Vol. 10, p. 64).
March 20, 1986.—Deputy Attorney General Lowell Jenson sends letter from FBI
Assistant Director Oliver "Buck" Revell regarding "NEUTRALITY MATTERS" in-
vestigations. Content, of entire memo redacted before sent to Iran/Contra commit-
tee. (See Iran Contra Exhibit EM-73).
March 21, 1986. Feldman makes note to make travel arrangements to meet with
Jack Terrell in New Orleans. Terrell has previously given a statement to an FBI
officer in New Orleans. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p.
66). .
March 24, 1986.—Assistant Attorney General Stephen S. Trott writes Assistant
AG Mark Richard to "Please get on top of this—DU [Lowell Jensen] is giving a
heads up to the NSC. He would like us to watch over it.-Call Kellner, find out what
he is up, and advise him that decisions should be run by you." (Iran Contra Exhibit
EM-73) (Iran/Contra Deposition of Richard, ^ppendix B, Vol. 23 p. 55) Jenson testi-
fies that he then briefed Admiral Poindexter in the NSC about the allegations made
by Jesus Garcia, including Neutrality Act violations and alleged Contra gunrun-
ning. It was the only , time Jenson ever briefed Poindexter on a case. (Iran/Contra
Deposition of Jenson,. Appendix B, Vol. 14, pp. 582-593) Richards says this memo
was justified because NSC should be alerted about1 a plot to attack U.S. facilities,
and "it's natural that somebody in this context better tell the NSC . . . assuming
you give any credence to the allegations." (Ibid., 56) Richards says that the memo
meant that decisions on the case to prosecute or not prosecute, the ultimate decision
toj indict or not indict, should-be run by him. (Ibid. 63-63) Richards says he has no
idea why the case was being treated so seriously, that one would have to ask Trott
or Jenson, (Ibid. 64) Richards has written on undated note from this period "Hull—
CIA". (Ibid. 71).
After March 24, 1986.—North is provided an FBI investigative report on the
Miami investigation written by Kiszynski, according to Justice Department spokes-
man. The report is later found in North's files at the NSC after the Iran/Contra
affair is uncovered. The exact date North received the document is unspecified. (See
AP, "North Got FBI Report on Contra-Supply Probe, Officials Say," April 14, 1987)
March 25, 1986.—Feldman and FBI SA Kiszynski meet with disaffected contra
mercenary Jack'Terrell in New Orleans, who describes paramilitary activities of
CMA, Terrell, Posey. Terrell is questioned for 14, hours. Feldman said Owen was
CIA. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 69; Deposition of
Currier, Vol. 8, p. 217).
March 26, 1986.—Assistant Attorney General Mark Richards notes that he "spoke
to Kellner, AUSA not back from N.O. File, contra-folder." According to Richard,
Kellner said story was "something being manipulated by a couple of reporters" and
by Garcia to mitigate his sentence, and involved "CIA involvement in this transac-
tion, government irregularities, and what have you." (Iran/Contra Deposition of
Richard, Appendix B, Vol. 23, p. 66)
March 27, 1986.—Feldman meets with Kellner, discusses Terrell interview and
confusion about "thousands of allegations" flying around, including assassination
.plot on Ambassador, mercenaries in Honduras, and common threats were people
who were attempting to assist the contras. According to Feldman, Kellner and Feld-
man were both very confused about allegations. (Kan/Contra Deposition of Feld-
man, Appendix B, Vol. 10, p. 70) ,r
March 28, 1986.—Feldman meets with Kelhier for six hours. Kellner has ho recol-
lection of substance of meeting. Feldman has no.recollection of substance of meet-
ing. It ends with Kellner advising him to go to Costa Rica. Feldmaij cannot recall
whether.-he discussed Oliver .North -or Feldman with Kellner -at meeting. (Iran/
Contra Deposition of Feldman, Appendix B, Vol. 10, p. 71;Tran/Contra Deposition of
Kellner, Appendix B, Vol. 14, p. 10,40)
. Prior to March SO, 1986—Feldman has,developed chart showing Oliver North,
National Security Council, "Staff Intelligence Adviser, CIA; Rob Owens, State De-
partment, something AID, John Hull. From Hull are lines .to Bruce Jones, Jim
Denby. ,Then a line from Hull to FDN and from FDN to Cuban (sic) allegience
: [Legion] [Rene Corbo's organization]. Feldman states that his "earliest notes showed
 "156

a reference to North." (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10,-pp.

72T-73) . " • - ' :•'•••,.
March '31,1986.—Feldman, Currier and Kiszynski fly to Costa Rica and go to U.S.
.Embassy, where they are advised by Assistant Security office Jim Nagel that Am-
bassador Tambs wishes to speak to them. Feldman "pulled out my little chart .with
Oliver North, Rob Owen and John Hull. The Ambassador turned white , . . "Hie
only ting he isaid when I pulled out the chart was 'Get ['Castillo'] in here.' (Iran/
Contra Deposition of Feldman, Appendix B, Vol. 10, p. 79; Deposition: of Currier,
Vol. 8, p. 222)
March 31, 1986.—"Thomas Castillo' is introduced to Feldman as CIA station chief
in Costa Rica, with Tambs present. 'Castillo' tells Feldman that Hull was classified
U.S. equipment prior to 19o4, and used by U.S. military to deliver supplies to .con-
tras prior to the Boliand Amendment. (Iran Contra Deposition of Feldman, Appendix
B, Vol. 10, pp. 80-81) 'Castillo' tells Feldman Hull hasn't been involved in any mili-
tary capacity for USG or contras since March of 1984, but that Corbo is a renegade
without any ties and has 50 people operating in Costa Rica out of Hull's ranch. Cas-
tillo* requests that Feldman or Justice contact him if Justice is to "take action
against Hull. Acccuses Honey and Avirgan of being tied into ''September murder,"
and of being Sandinista agents. 'Castillo' tells Feldman that "I can. tell you for a
fact that John Hull knows both Rob Owen and Oliver North," and that North "is
the person who introduced me to the President of the United States last Tveek."
(Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, pp. 82-83)
March 31, ,1986.—According to Currier; 'Castillo' said . Corbo was in Costa Rica
near Upala worked with Fernando El Negro Chamorro, that the CIA had an asso-
ciation with Chamorro and Vidal, but that Corbo was a renegade; and that the CIA
used Hulls farm until March 1984. (Deposition of Currier, Vol. 8, p. 224)
March 31,1986.—-Feldman concludes that 'Castillo- is directing Justice to go after
Corbo and leave the other people alone. (Iran/Contra Deposition of Feldman, Appen-
dix B, Vol. 10, p. 85) '
March 31, 1986.—North notebook entry states "Call from (redacted). . . Assistant
U.S: Attrorney/2 FBI and resident agent—Rene Corbo, Terrell (Flako), CMA—Guns
to (redacted)" (North notebook #Q2078) :_ v . -
April 2, 1986.—Feldman becomes increasingly certain he is being watched while
in Costa Rica. Nagel, security .officer of State at.Embassy, advised .Kiszynski that
"the U.S. Ambassador is the law and [Feldman, Kiszynski etc] are here through his
graciousness, there are other agencies that had their .operational requirments, and
we should not interfere with the work of these agencies. (Iran/Contra Deposition of
Feldman, Appendix B, Vol. 10, p. 86)
April 3, 1986.—Hull calls Feldman,. tells him he won't speak to" him on advise of
counsel. Feldman asks, whether anyone at the U.S. Embassy had advised him not to
talk. Hull denies this. Kirk Kotula at the embassy then .admits 40 minutes later
that Kotula advised Hull not to talk. Feldman testifies that he has.caught Hull in a
"dead he." (Feldman 59) But Feldman tells Currier that Embassy staffer Fitzgerald
has, told him that Hull went to the embassy, spoke to Tambs, and that Hull Had
been in contact with the NSC regarding the FBI/ justice inquiry. (Irah/Contra Depq-
sition of Currier, Appendix B, Vol. 8, p. £27) „
April 3, 1986.—State Department officer Nagel advises Feldman that "Hull is a
friend of Ronald Reagan, if you understand what I mean." (Iran/Contra Deposition
of Feldman, Appendix B, Vol. 10, p. 89 "They [at the embassy] seemed very protec-
tive of Mr. Hull and the others. They didn't interfere, but they were reluctant to
help." (Currier, Ibid., p. 224) ! T
April ,3, 1986.—Feldman is told by Vice Consul Paul Fitzgerald at Embassy that
Hull had been contacted by the National Security Council and the Voi^e of America
during Feldman's visit- (Iran/Contra deposition of Feldman', Appendix B, Vol 10 p.
89) Nagel is then following Feldman around remainder' of trip, which has Feldman
increasingly unhappy. According to Feldman, after The Miami Herald writes about
this incident, Kotula told reporters Feldman lied ahout what happened at Embassy,
and the Embassy treated John Hull like they would7 treat any other citizen. Qtan/
Contra:,Deposition of Feldman, Appendix B, Vol. 10, pp. 90-91)
April 4,T986.—Feldman, Kiszynski and Currier return to Miami. Currier contacts
FBI HQ's international terrorist unit to report, what Tiambs, Castillo rind the others
had told him while he was in Costa Rica. (Iran/Contra Deposition of Currier, Appen-
dix B, Vol. 8, p. 228) Feldman asks questions and raises issues about Boland Amend-
ment at meeting with Ana' Barnett, Larry Sharf, -Richard Gregorie and- Leon
Ktellner, asking-whether there were criminal penalties attached to Boland- They ask
David Leiwaiit to pull a copy off the machine, and he- enters meeting. Gran/Contra
Deposition of Feldman, Appendix B, VoL 10, pp. 97-98) Kellner can't remember who
 "157

the government officials were that were being discussed as being involved in connec-
tion with looking at the Boland Amendment. Kellner recalls they-were'looking at
the National Security Council, but does not recall them looking at Oliver North.
(Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, pp. 1128-1130) Gregorie re-
calls that the meeting lasted two-hours, and that Feldman mentioned Oliver North's
name as "thisifellow-North who is 'behind-all of this" in the bureaucracy. (Iran/
Contra Deposition of Gregorie, Appendix B, Vol. 12, p. 1164) Mark Richard calls
Gregorie several times after this meetingvasking Gregorie to check with Kellner to
see what the progress of the investigation is."-(Ibid., p. 1166)
April 4, 1986.—Feldman says that it was at this meeting that newspapers [David
Leiw'ant] say Kellner told him to go slow, but that he has no memory of that taking
place. He left the meeting with an order to write a memo so that they could study
the assassination and gun plots. Kellner expresses rlittle interest in Neutrality viola-
tion. (Iran/Contra Deposition of Feldman, Appendix R, Vol. 10, p. 98)
April 4," 1986.—Kellner remembers the meeting as including Barnett, Sharf, Gre-
gorie, Fieldman and himself, and that Feldman showed him a diagram and dis-
cussed the Boland Amendment with him at that meeting. This chart has the name
"North NSC" and "Robert Owen" on it. Feldman tells Kellner and the rest of the
group about his meeting with the CIA Station Chief Castillo? Kellner does not regis-
ter surprise. (Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, p. 1041-1050)
Richard says he talked to Kellner in this period regarding Garcia case, but did not
ever ask Kellner to slow it down. (Iran/Contra Deposition of Richard, Appendix B,
Vol 23 p, 93) Richard says to his ,knowledge, no-one else did, either. Richard is asked
whether he discussed with Kellner the.implications of the Garcia/Neutrality Act
case in regard to any pending votes in the Congress. Richard does not answer ques-
tion directly. Instead, Richard testifies there was "always controversy on one aspect
"of another of the contra matter" but "from my perspective, in dealing with some-
thing with—the "administration issuing all sorts of statements saying, look the CIA
is not doing this. The NSC is not doing this. We were fighting [sic] by the Boland
Amendment. We're'doing! this. We're acting in good faith in compliance with the
laws' . . , we take the'investigation where the facts take us . . . and then we take
the heat when it's not a particularly popular judgment." (Irah/Contra Deposition of
Richard, Appendix B, Vol. 23, pp. 93-94) Richard testifies that his understanding
wa£ that the CIA was denying any relationship with John Hull, that it" had previ-
ously terminated, (Iran/Contra Deposition of Richard, Appendix B, Vol. 23, p. 97).
April 7, 1986.—Rob Qwen writes Oliver North,' describing in detail the Feldman
investigation and the Feldihah, Currier and Kiszynski Visit to Costa Rica, based on a
conversation he had with CIA station chief 'Thomas Castillo.' Owen notes that
"Feldman looks to be wanting to build a career on this case. He even showed ['Cas-
tillo'] and the Ambassador a.diagram with your name at the top, mine underneath
and John [Hull's] underneath mine, then! a line connecting the various resistance
groups in C-R- • - Feldman stated they were looking at the "big picture" and not
only looking.at a possible .violation of the neutrality act, but at possible unauthor-
ized use of government funds. (Exhibit TC-15, Iran/Conta committees) Owen testi-
fies that he received his information regarding tKe Justice Department investigation
from Hull, CIA Station chief 'Thomas Castillo,' and. possibly from Ambassador
Tambs. (Iran/Contra, Appendix B, Vol. 20, p. 832); . . .
April 7-May,2, 1986.—Feldman works on memo about Garicia case, gun-running
and assassination plot.: (Iran/Contra Deposition of Feldman, Appendix. B, Vol. p. 99)
April llj 1986,—The Associated-Press reports that a federal investigation is under
way into assertions .that Nicaraguan rebels and some of their non-governmental
American backers have; engaged in .gun-running and drug trafficking. The AP says
the inquiry was "examining assertions that cocaine was smuggled to help, finance
the rebels' war effort, and that the Neutrality Act was violated. The article quoted
Jack Terrell as stating he had been interviewed by the FBI on allegations concern-
ing weapons shipments from the U.S. to contra base camps in Central America, in-
volvement of contras in drug smuggling, and a reported- conspiracy to assassinate
the U.S. Ambassador to Costa Rica, Lewis Tambs. AP report appears in The New
York Times and^Washington. Post.
* April 11, 1986.^~The Boston Globe reports that U.S. Attorneys Office in Miami is
• investigating allegations of extensive criminal activity by soldiers-of-fortune work-
ing with the contras, that include gun-running and ^.- plot to attack U.S. Embassy in
Costa Rica. Story quotes Ana Barnett, spokesman '"for Kellner, as saying "it is a very
hot topic." Article quotes Senator Kerry as saying "over the past few months my
-office has engaged in an investigation of alleged drug-smuggling, gun-running^Neu-
trality Act violations, and other equally, if not more serious offenses. To date, we
 "158

have received substantial corroboration for these activities. . . .- It's vital for. Cqn-
gress to investigate these matters fully in order to uncover the truth."
April 11,1986.—Feldman discusses Associated Press article with Lellner and Bar-
nett. Feldman tells Kellner the Miami cases are a "hot potato." - •Kellner-' replies,
"politics are not-for me to consider, the only thing that I need to consider is the
evidence and the law." (Iran/Contra Deposition of Feldman, Appendix B, Vol, 10, p.
ioo) •.:-• - , -.•-... • • -• • ••••• , •
April. 11,1986.—rPoindexter writes memorandum of "Senior Staff", meeting to dis-
cuss "FBI story on drugs and gun running by . contras." Poindexter Exhibits, Iran/
Contra Committees, p. 000041. • ,'•
April 12, 1986.—Attorney .General, Meese visits Miami and meets with Kellner in
course of visiting FBI agents hospitalized after a shoot-out. Kellner meets Meese. at
airport and drives in conyoy to hospital. At the .hospital, Meese calls Kellner aside
and asks him about the Garcia case, referring to the assassination plot. Kellner re-
plies that there is ho evidence for the assassination plot but that the gunrunning
was still under investigation. The conversation lasts only three minutes and Meese
asked no follow up questions. (Iran/Contra Deposition of Kellner, Appendix B, Vol.
14, pp. 1052-1054) - -
April 13, .1986.—Memo sent from Trott to Richard and Toensing of Justice refer-
ring to the Boland Amendment and requesting a memorandum on the amendment.
It is triggered by "one of many Congressional requests for appointment of special
prosecutor." (Iran/Contra Deposition of Richard, Appendix B, Vol. 23, p. 48)
April 17, 1986.—The Washington.Post-reports that the Reagan Administration ac-
knowledges that some rebels "may have engaged in" drug trafficking, but were not
acting on the orders of their leaders. According to the Post, Elliott Abrams devel-
oped a three page document for Congressman-Charles Stenhohh: stating that "indi-
vidual members of the resistance . . . may have engaged in such activity but it was,
insofar as we can determine, without the authorization of resistance leaders." (Post,
A-40) . _ ' '." '
April 17, 1986.—Senator Kierry writes Senator Lugar, provides a summary of alle-
gations of crinqlnal activities connected to contra supply operations, aixd asks for a
formal Senate Foreign Relations Committee., investigation.. Among the activities
cited by Senator Kerry are the Tambs murder conspiracy, the La Penca hoinbing,
drug smuggling connecting Columbia, Costa Rica, Nicaragua and the U.S., weapons
smuggling involving CMA and Brigade,.2506, transport of arms from Miami and
New Orleans to. contras in Central America. (Kerry-Lugar Correspondence)
. April 18, 1986.—Oliver North, writer & his notebook: "Sheenah investigating La
Penca in consort with Sen.Kerry trying to get evidence linking RR to £a Penca."
(North Notebook Q2109) .
April 21, 1986.—Stephen Carr writes Feldman, care of Kotula at U.S. Embassy in
Costa Rica, asking for opportuiiity to cooperate so that he caji get out 6f jail. (Iran/
Contra Deposition of Feldman, Appendix B, Vol. 10, p. 105)
April 22, 1986.—Kerry staff provides detailed information oh its investigation, in-
cluding a list of targets, to Committee staff of the Senate Foreign Relations Commit-
tee. Entry in North notebook reads: Bill Perry—Kerry investigation—violations.
(North notebook Q2111) ' ' '
April 24, 1986.—Feldman meets with Kellner. No notes of what was discussed.
(Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 106)
_ April 25, 1986.—Feldman"again meets with KeHher. No notes of what was dis-
cussed. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 105)
April 26, 1986:—Feldman again meets with Kellner, no notes of what was dis-
cussed (Iran/Contra Deposition of Feldman, Appendix B,'Vol.. 10, p. 105) Feldman
works on first draft of his prbsecutoral memo, down; playing the investigation, but
recommending a grand jury. It was the first of- many versions of the Feldman.
memo, all dated May 14. There are six in all (Iran/Contra Deposition of Currier,
Appendix B, Vol. 8, pp. 233-235)
April 28, 1986.—Feldman submits first draft to Kellner, who advises him that he
does not like it because it is not sufficiently detailed. Feldman rewrites it. Feldman
says "investigation has dispelled Garcia's story,'[but] we have learned GME (sic)
[CMA] actively assisted FDN in Honduras, Costa Rica between 'November 3 84 and
April '85.There is no question Rene Corbo and CME [sic], actively recruited.individ-
uals in the U.S. to train and/or fight with the FDN and contras; further investiga-
tion may also verify Carr's claim the weapons were among the items shipped from
the U.S. to Salvador." .(Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p.
106)
April 28, 1986.—Kellner says Feldman memo started in middle and its conclusion,
"further investigation may also verify Carr's claim-that weapons were among the
items shipped from the United States to San Salvador, El Salvador," was inad-
equate, Kellner says he intended it "to g o t o Washington, and wanted it to be clear
and formal. (Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, pp. 1059-1060)
'•"April 30,1986.—Miami Herald reports "that North's activities may have violated
Boland Amendment, citing his involvement in fund-raising for contras. (Miami
Herald, 8-A) Sometime in this period, Feldman shows Currier revised memoran-
dum. Feldman tells Currier that Kellner had told him to change the recommenda-
tion for tHe grand jury and that instead it concluded that the grand jury was prema-
ture. This version did not 'include the '"fishing expedition" language, and that lan-
guage was not included in the version the FBI was given in June of 1986. Currier
never sees the "fishing expedition" version until after Iran/Contra ciame to light.
(Iran/Contra Deposition of Currier, Appendix B> Vol. 8, pp. 234-235)
May 1, 1986.—Pat Korten, public affairs, U.S. Department of Justice tells AP that
there is no substance to gunrunnihg charges. "It's a classic case of much ado about
nothing. The U.S. Attorney and the FBI have conducted an inquiry into all of the
charges and none of them have any substance. It's unfortunate the junior Senator
from Massachusetts puts more credence in them than we do. All leads were com-
pletely exhausted. Interviews were conducted in Florida, Louisiana Central America
and turned up. absolutely nothing. We ran it down and there'isn't anything there."
(AP) Currier testifies that the FBI never interviewed Owen or Posey, two targets of
the investigation.. However, the FBI had by then interviewed Corbo and corroborat-
ed the fact that flights had occurred weapons were on board, arid Corbo and others
were recruiting individuals from Miami to fight with the contras. (Iran/Contra Dep-
osition of Currier, Appendix B, Vol. 8, pp. 237-239)
May 1, 1986.—North notebook entry reads: -"Mtg w/(redacted) re Kerry travel.
(Q2127) ' ' ,
Early May, 1986.—Kellner is annoyed at press reports saying there was no inves-
tigation of Garcia case and asks Barnett to call Washington and say it was wrong
that in fact there was an investigation going forward. Barnett calls Pat Korten.
Kellner decides that he will send Feldman memo to Washington to counter these
misstatements. (Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, pp. 1055-
1056)
May 2, 1986.—Representatives of the FBI; Justice Department, DEA, aiid State-
ment Department meet" to discuss the approach of their,Agencies to responding to
Senator Kerry's attempts to convene hearings on allegations concerning the Con-
tras. (Subcommittee Deposition of Tom Marum, October 25,1988)
May 5, 1986,—National Public Radio reports that Senator Kerry's staff has been
investigating charges of illegal activity involving not only contras but American offi-
cials with ties to the National Security Council, and names Lt. Col North. NPR
piece includes statement of Jack Terrell that he has seen direct involvement of CIA
in the field and NSC money going to Costa Rica. NPR piece includes statements by
officials at Justice Department who say that inquiry stopped "a month ago." Ac-
cording to NPR, a Justice spokesman said that "U.S. Attorney in South Florida and
the FBI conducted an inquiry into all of these charges and none of them have any
substance. All leads were completely exhausted, and interviews in Florida, Louisi-
ana and Central America turned up absolutely nothing."
May 5, 1986.—Kellner and Feldman meet to discuss memo again. (Iran/Contra
Deposition of Feldman, Appendix B, Vol. 10, p. 107)'
May 6, 1986.—Republican Foreign Relations staff member Rick Messick sets up
meeting or representatives of FBI, Justice, CIA, State Department, DEA, and
NHAO to meet with Senator Kerry's staff (Rosenblith, McCall and„Winer) regarding
allegations. Senator Kerry's staff details allegations about Neutrality Act violations
in Florida. CIA representatives state that the allegations are,false. The CIA repre-
sentatives state that they have information regarding the specific flights involved
cited by the Kerry staff, specifically including a March 6, 1985 flight. The CIA rep-
resentatives state that no weapons were aboard the planes. Tom Marum of Justice
states that Justice is conducting an ongoing investigation of the charges. Ken Berg-
quist states that the public statements by the Justice Department to the contrary
are "inaccurate." (Winer Memcom, 5/6/86; Marum Memcom, 5/6/86; Messick
Memcom, 5/6/86, Subcommittee Files)
May 6, 1986.—A spokesman for Justice Department tells The New York Times
that charges regarding gunrunning are false, that "all leads have been completely
exhausted" and that no further investigation is needed. (The New York Times, A-6)
May 9, 1986.—After previously^ meeting with FBI Assistant Director Oliver B.
Revell, North meets with FBI agents, and asks them to investigate half a^dpzen
people whose activities he believed were tied to foreign agents, including Terrell and
Senator Kerry. (FBI documents, Iran/Contra Appendix A, pp. 798-800)
 "160

May 12, 1986.—Justice writes Senator Kerry: asking him to provide evidence of
allegations. (Justice-Kerry correspondence) .. ..
May 12, 1986.—John Hull writes George Kiszynsky and Kevin Currier of FBI to
advise .them that he has been told the. investigation against him has "been dropped
for lack of evidence." (Hull-FBI correspondence)
May 13, 1986.—John Hull writes Ambassador Tambs asking for advice from the
political and legal department of the U.S. Embassy, and advising Tambs that Hull
will hot mail letter to Kiszynsky and Currier ,of May 12 (wtpch Hull encloses) with-
out the permission of Tambs and CIA station chief 'Thomas Castillo.' (Hull-Tambs
correspondence) ' .. . , X', . ...
May 13,1986—North notebook entry ..reads: "19:30—Call from Rick Messick—Ter-
rell told not to talk to FBI, Jonathan Winer [sic, reference to Kerry aide] (redacted).
Q2146 . . . ' : " . r
May 13, 1986.—Deputy Assistant Attorney General Ken Bergquist writes memo-
randum to Assistant Attorney General Steve Trott regarding the "Upcoming
'Contra' Hearings in the Senate Foreign .Relations Committee/' Bergquist provides
Trott with a list of the participants in the May 6, meeting with Senator Lugar's and
Senator Kerry's staff, and an outline of what was discussed at the meeting. Berg-
quist advises Trott that "the obvious intent of Senator Kerry is to try to orchestrate
a series of sensational accusations against the 'Contras' in order to obtain massive
press coverage at about the time of the next 'Contra Aid' vote. It does not matter
that the accusations are unfounded as long as they are uncontested at the'time they
are presented. If we are unable to immediately and effectively provide the;true facts
in each allegation at the time of the hearing, perception, will defeat reality and the
true story will never be heard or appreciated.' Bergquist recommends thai; Justice
provide information to the Committee regarding the individuals identified By Kerry
as making the charges concerning the Contras. Bergquist' states .thai- "Senator
Kerry will take every opportunity to make the implication or express; claim that
there is a conspiracy within the Administration to cover up illegal activities of .the
'Contras' and their supporters," and suggests that Justice work instead to show the
"true story." (Bergquist-Trott memo) "„ ,
May 14, 1986.—Senator Kerry writes Justice that he would be glad to have his
staff meet again with Justice to discuss such allegations further. Justice does not
respond to this letter until June 24. (Justice-Kerry correspondence)
May 14, 1986.—Miami Herald reports that Senator Kerry's staff is. looking into
charges of gunrunning and drug smuggling as well as White House'involvement
with the contras during the time such involvement was prohibited by Boland
Amendment,
May 14, 1986.—AUSA Feldman and FBI Agent Currier meet, go over, memo line
by line, and both conclude that they should go forward with a grand jury investiga-
tion. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 107) -
May 14, 1986.—Draft of "Feldman memo setting forth the prosecution's case in
connection with this Miami Neutrality Act prosecution of Rene Cprvo,.ei al., states
"a grand jury investigation would ultimately reveal gun running Activity, including
gun running and neutrality violations. Due to the political nature of this cas.ej I am
not sure such violations could be sucessfully prosecuted in South Florida.", dran/
Contra Deposition of Feldman, Appendix B, Vol 10, p. 108) Kellner scribbles out
last paragraph and inserted, "I concur^ we have sufficient evidence to institute a
grand.jury investigation into.the activities described herein.". (Iran/Congra Deposi-
tion of Feldman, Appendix B, Vol. 10, pp. 108-109; Iran/Contra Deposition of
Kellner, Appendix B, Vol. 14, p. 1060
May 20, 1986.—Sharf, Barnett, Kellner and Feldman meet. Sharf express^ oppo-
sition to going to grand jury. At end of meeting, Kellner asks Feldman to change
conclusion of memo and he agrees to do so..At end of meeting, Feldman rewrites
memo to state, "I conclude that we have sufficient evidence to continue the investi-
gation into the activities described herein. At present it would be premature to, take
this matter to the grand jury, some background work still needs to. be finished.
Upon completion of this work, I believe a grand jiiiy investigation may be in order."
Kellner, emphasizes that he is concerned about not destroying reputations. Feldman
says he had concerns about what they were doing, because there were articles in
the New York Times, and "I questioned in my own mind at that point whether or
not there was. some fishy business going on." (IraW Contra Deposition of Feldman,
Appendix B, Vol. 10, pp. 113-115) .
May 20, 1986.—Gregorie recalls being at above meeting, that Feldman had tie
facts together, that "there were all kinds of unanswered questions, people obviously
lying, individuals who had given us half the facts and half truths. . . up to that
time, he had some wild stories that were concocted by freelance newspaper report-
 "161

ers about mercenaries who were unreliable, and I did not think it was appropriate
to go into the grand jury." (Iran/Gontra Deposition of Gregorie, Appendix B, Vol.
12, p. 11719) Gregorie testified that Feldman's case in May was "thoroughly confused
arid had no direction." (Iran/Gontra Deposition of Gregorie, Appendix B, Vol. 12, p.
1181) -
•May 22, .1986.—Feldman choose to leave signature off final revised draft of Feld-
man prosecution memo, "I don't know why." He notes that at this point, they are
not looking at North, but are looking at the gun shipment and the neutrality viola-
tion that Corbo was involved in and perhaps CMA was involved in." (Iran/Gontra
Deposition of Feldman, Appendix B, Vol. 10, pp. 116-117)
May-22,1986.—ABC News Tonight reports that at least one shipment of weapons
was smuggled from U.S. to Central America from Ft. Lauderdale airport to Ilopango
to Costa Rica. - -.
• • May 23, 1986.—Deputy Assistant AG Be'rgquist writes Assistant AG Trott to pass
on requests for information regarding Steven Carr,. Jack Terrell and Jesus Garcia in
preparation for Foreign Relations hearings. The information requested is for arrest
records and any statements made to the FBI by each of these individuals. (Berg-
quist-Trott memo) Bergquist also provides Trott with a summary of "Key Stories on
Contras Involvement in Crime.'' The summary '-'Key Stories.on Contras Involve-
ment in Crime/' The summary lists 39 stories which appeared in the press from 12/
13/84 to 5/22/84. (Kellner File Provided to AUSA Jeffrey Feldman, subpoenaed by
Subcommittee)
May 24,1986.—FBI 302 of interview with Francisco Hernandez a/k/a Papito, who
confirms that he assisted Rene' Corvo in supporting Eden Pastora, Alfonso Robelo
and other Contras-in Costa Rica, including shipments of weapons from the United
States which went from Fort Lauderdale through Iloparigo Air Force Base in El Sal-
vador. '
May 27, 1986,—Feldman makes list of interviews that need to be conducted.
(Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 118)
June 1, 1986,—Miami Herald, reports that a special investigative unit will be set
up: within the House Judiciary Committee to probe allegations of criminal activity
by contras. Article quotes a Justice Department official as saying FBI and DEA
have "run down each and every one" of the allegations regarding gunrunning,
murder plots, drug trafficking, and corruption connected to contras and found "no
credible or substantive evidence" warranting prosecution^df contra leaders." The
Justice Department describes .the allegations as those of "disgruntled people with an
ax to grind who have little credibility," and said congressional efforts to investigate
the allegations smacked of 'McCarthyism," and that some congressional aides "were
seeking to destroy the contras by innuendo in the press." The Justice official quoted
said "I Can state categorically that the attorney general did not, at any time, ask or
instruct any U.S. prosecutor to slow down or in any other way impede any investi-
gations on the contras." The article said that a contra official admitted that North
and the NSC helped the rehels raise private aid,find:sources for weapons and am-
munition, and developed strategy and tactics. (Miami Herald, p. A-28).
June 2, 1986.—Kellner assigns Feldman to work on Thai heroin case. (Iran/
Contra Deposition of Feldman, Appendix B, Vol. 10, p. 121)
June 2,-1986.—AUSA Sharf resubmits Feldman's memo for "corrections" which
he does not show Feldman. He makes changes on memo without Feldman's permis-
sion; Feldman notes that the major change was in the conclusion. Feldman believed
when the background work was done, "the grand jury investigation may be in
order." Sharf rewrites this to say "a grand jury investigation at this -point would
represent a fishing expedition with little prospect that it would bear fruit." Feld-
man notes that some of Sharf s changes were "reaching," but that Feldman was
never shown them before it went out to Mark Richard at the Justice Department in
Washington (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, pp. 121-124)
June 3, 1986.—The Washington- Times reports, "Ahti-contra witness said to fabri-
cate story," regarding Jack Terrell's charges of Neutrality Act and weapons viola-
tion involving American supporters of the • Contras' and the involvement of the CIA.
June 3, 1986.—Kellner sends Feldman memo to Justice, never hears hack from
them, and never calls about any reaction. He testifies that "the purpose of the
memo was not for them to do anything;, the purpose of the memo was to give them
the information of "what I was doing." (Iran/Contra Deposition of Kellner, Appendix
B, Vol. 14, p. 1073 According to Richard, in the course o f a n earlier conversation
with Kellner, he had requested that Kellner keep him-appraised of the status of
case and developments. In response,-Kellner provided him both the Feldman memo"
and a copy of the Christie Institute lawsuit naming Secord. (Iran/Contra Deposition
of Richard, Appendix B/Vol. 23, p. 95) .
 "162

June 3,-1986,-^FBI Agents meet with Oliver. North who "expressed specific con-
cern as to why. no action has been'taken regarding . . charges1 placed-by Senator
Kerry against North, nor any attempt to obtain the information presently at the
Department of Justice (DO J) involving Senator Kerry's allegationsIn a June. 11,
1986 memo relating to this meeting, the FBI Agents conclude to the Director that
"WFO [FBI's Washington. Field Office] has no - predication into this investigation."
(Iran/Contra, Appendix A, Vol: .1, p. 805) -
Sometime after June 2, 1986.—The Feldman memo is leaked to the-press ^and to
Congressional staff. In his testimony before the Iran/Contra Committees, Feldman
is asked who leaked it. He says he does' not know, but that "the memo was stolen
out of my cabinet,"'because a note attached to it .about ['Thomas'] Castillo and John
Hull showed up under his. door several months later.' That note! was the "most sensi-
tive footnote in the entire memorandum" because it suggested that Hull was an. op-
erative for the CIA. Feldman notes that he didn't kick his office or fileiabinet, be-
cause both- were inm secure area, and "all you are locking your door from are your
colleagues." Feldman notes, ' ! wasn't cynical enough." (Iran/Contra Deposition of
Feldman, Appendix B, Vol-. 10, p. 129) -- - -- -
June 4,1986.—FBI 302 report on interview with Rene Corvo states that Corvo told
FBI "the only crime he 1ms committed are United .States neutrality violations for
shipping weapons from South Florida -to Central America. These weapons were des-
tined for the 'contras'." Corvo confirms details of allegations madeby Carr regard-
ing the shipment of weapons from Ft. Lauderdale on March 6, 1985, and involve-
ment of Salvadorean military officials-in his contra supply operation. (FBI 302 re-
leased in U.S. v. Corbo, SD Florida, 1988) (On May 6, 1986, the CLAhad advised the
Senate Foreign Relations Committee that it had specific intelligence that these alle-
gations regarding Corvo were false.) -
June 8, 1986.—Miami Herald runs front-page story by Alfonso Chardy, stating
that NSC and CIA managed contras during Boland Amendment, in a^ network over-
seen by North with help-from CIA. Chardy story cites Owen, and Singlaub as among
those helping North, and naming -Hull as one of Owen's contacts. (Miami Herald)
June 10, 1986.—AP rtuns story by Robert Parry and Brian Barger alleging-that
Reagan Administration managed 'private' contra aid network through North, using
Robert Owen as a "buffer," and John Hull ih Costa Rica. (AP)
June 10, 1986.—Feldman discusses Mattes and Garcia with Keener. (Iran/Contra
Deposition of Feldman, Appendix B, Vol. 10, p. 130) - " - ^ .
June 11, 19J86.—FBI Agents report to Director that the Christie "Institute com-
plaint-filed in Miami names individuals who "are presently aiding the Contra effort
under Colonel North's direction." (Iran/Contra, Appendix A,^p. 803)
June 11, 1986.—Associatedr Press reports that U.S: Allegedly Ran Private Net-
work to Arm Contras." The article stated that "the White-House, working through
outside intermediaries, managed a private aid- network that provided military assist-
ance to Nicaraguan rebels durihg last year's congressional aid ban, according to gov-
ernment officials, rebel leaders ana their American supporters/' (Baltimore Sun, p.
l) . T • • - . '
•June 12, 1986.—Washington Times reports that Kerry contra probe Is "witch
hunt."
June 13, 1986—FBI 302 interview of Rene Corbo, in which Corbo again confirms
his transport of weapons from South Florida into Central America for the contra on
March 6, 1985 and June 16, 1985. Corbo also confirms that John Hull provided as-
sistance to his and other Contra support groups in Northern Costa Rica.
June 17, 1986.—FBI 302 interview of Francisco Hernandez, in which Hernandez
again confirms involvement in Contra-support operations in Northern Costa Rica
involving Rene Corvo. Hernandez states that, he and other supporters of the Contras
were assisted from military officials at Ilopango in El Salvador.
June 17j 1986.—North writes in notebook, "Gene Wheaton wants to talk to
PFIAB—has talked to Kerry." Q2223
June 20, 1986.—Feldman leaves for-Thailand^ He remains "out of pocket" until
August 1. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 13,1); -
June 24,1986.—After Kerry staff contacts Rick Messick of FRC to say that Justice
has never called-to'gather further information regarding allegations, Justice sends
another letter to Kerry reaffirming its interest in vigorously and expeditiously" in-
vestigating any evidence to support- allegations -of. criminal activity. (Kerry-Justice
correspondence)
June 25, 1986.—Senator Kerry makes a presentation before.a closed door session
of the Committee. In-that presentation, Senator.Kerry states that in looking at alle-
gations concerning the Contras he had found that "some. American officials decided
to circumvent the clear prohibitions of the Boland Amendment, as a result of that it
appears that the contras and the infrastructure set up to support them determined
that they had a license in a sense, to violate laws -." He also reviews allegations
regarding narcotics trafficking involving, the Bahamas and Panama and calls for an
investigation of the links between narcotics trafficking, law enforcement acid foreign
policy. At conclusion of session, Richard Lugar announces publicly that Foreign Re-
lations Committee has ordered a "staff inquiry*' to "review allegations of drug run-
ning involving contras and Sandinistas.
June .26, 1986.—Kerry responds to Justice letter, again inviting Justice to contact
his staff to set up a meeting to provide further information on the allegations con-
cerning criminal activity in connection with the Contras. Justice never responds.
(Kerry-Justice correspondence)
July 11, 1986.—Glenn Robinette meets Jack Terrell, as part of an investigation of
Terrell on behalf of the Secord enterprise. (Iran/Contra Appendix A, Vol. 1,- pp. 819-
833) .
July 14, 1986.—CBS Evening News broadcasts a tape which includes a segment on
Oliver North's alleged involvement as a liaison between the White House and the
Contras. On July 18, 1986, Special Agents of the FBI review the July 14,1986 broad-
cast regarding North in connection with their investigation of Jack Terrell. (Iran/
Contra, Appendix A, Vol. 1, p. 814)
July 15, 1986.—FBI reports to Director of alleged threat to assassinate President
Reagan by Jack Terrell from a source not specified. (Ibid., p. 819) (Later Terrell is
polygraphed on the issue and the FBI concludes the allegation is false.)
July 17, 1986.—FBI agents meet with Glenn Robinette "believed to be working in
an unspecified government capacity" regarding Terrell and Robinette's surveillance
of Terrell on behalf of the Secord's enterprise. (Ibid., pp. 820-829) Robinette advises
the FBI of Terrell's ties to the Kerry investigation, notes that Terrell stated that he
received no funds from Senator Kerry, and- that he was aware of Secord's involve-
ment in covert air support oh behalf of the; Contras. (Iran/Contra Appendix A, Vol.
1, p. 832)
July 18, 1986.—A dozen FBI agents meet in Washington and agree to undertake
full-time FBI Special Operations Group surveillance of Jack Terrell. (Irah/Contra
Appendix A, Vol. 1, p. 812)
July 18, 1986.—ClA advises FBI that subjects of Miami Neutrality Act investiga-
tion Corbo, Carr, Thompson, Posey and Garcia are not CIA assets. No mention is
made of Hull or Felipe Vidal. (Letter to Director Webster regarding Jack Terrell
allegations.) j
July 21, 1986.—Kerry writes Attorney General meese, enclosing an article in The
Boston Globe which reports that the CIA provided financial and other assistance for
mercenaries fighting with the contras. Kerry asks for a summary of any investiga-
tions Justice has undertaken into Neutrality Act or Boland Amendment allegations
in connection with the contras. The Attorney General does not respond to the re-
quest. (Kerry-Justice correspondence)
July 22, 1986.—North is interviewed by FBI agents in connection with their inves-
tigation of Jack Terrell. North advises-the FBI that "Terrell's name had surfaced in
connection with a staff investigation being conducted by Massachusetts Senator
John Kerry;" and denies that he is involved with managing Contra support efforts.
(Iran/Contra* Appendix A, VoL 1, pp. 878-879)
Julv 24; 1986—State Department issues a Report to the Congress which states
that the available evidence points to involvement with drug traffickers by a limit-
ed number of persons having various kinds of affiliations with or political sympa-
thies for [the Contra] resistance groups." (State Department Document # 5136c)
July 24, • 1986.—'Robinette meets with FBI officials regarding Terrell, expressing
concerns that the FBI had targeted Robinette "as being a 'plumber' for the White
House . . and leaking information to the media concerning his contact with him."
He confirmed knowing North ,and working for Secord. (Iran/Contra Appendix A
Vol. 1, pp. 852-853) • - ?
July 25, 1986.—North writes Admiral Poindexter that Associate FBI Director
Oliver "Buck" Revell had called and asked for any information which NSC might
have regarding Terrell. According to North, FBI believes Terrell could be a paid
asset of Nicaraguaffifntelligence Service. (N45907,- Iran Contra committees)
July 28, 1986.—North writes memo from Poindexter to President Reagan regard-
ing Terrell, initialed and presumably read by the President, which describes anti-
contra and anti-U.S: activities by U.S. citizens Jack Terrell, Memo describes allega-
tions about Tambs bombing, alleged activities of CMA including weapons and nar-
cotics trafficking, states that Terrell's charges'are at the center of Senator Kerry's
investigation in the Senate Foreign Relations Committee, and that the Operations
Sub-Group (OSG) of the Terrorist Incident Working Group (TIWG) has made avail- ^
 able to the FBI all information on Mr. Terrell from other. U.S. government agencies
to consolidate it for investigating Terrell.' (N454896, Iran/Contra committees) Poin-
dexter memo to President states "it is important to note that'Terrell has been a
principal witness against supporters of the Nicaraguan resistance, both in and out-
side the U.S. government," and. "since it-is important to protect the knowledge that
Terrell is the subject of a criminal investigation, none of those with whom he has
been in contact on the Hill have been advised." (N-45897, Iran/contra committees)
July 28,1986.—FBI Special Agents conduct surveillance of Jack Terrell at Mariott
Hotel in Miami arid go through Ids trash when- he Ieaves:his hotel room- They find
.a newspaper with an article torn from it concerning statements by: Admiral John
Poindexter that "the relationship between the Nicaraguan Contras and Colonel
Oliver North did not violate a congressional prohibition on United.'States involve-
ment with the rebels," (FBI 302 reprinted in Appendix A, Iran/Contra)
July 31, 1986.—Feldman receives "PROS" memo, or prosecution memorandum,
from Kevin Currier of FBI, who was "looking for a way to. pressure Leon, into
making a decision." (Feldman 102) According to-Currier, the;memorandum ran 200
pages and was written "to force their hand." Currier describes it as "a 200 page
prosecutive report which outlines the violations and the evidence we had obtained
to that time to support the prosecution of this matter." (Iran/Contra Deposition of
Currier, Appendix B, Vol. 8, p. 238) However, "nothing happened in response to the
prosecutor's report. Nothing. Currier testified that "Kellner told Feldman to do
nothing on case until he made a decision on the prosecutor's report. The U.S. Attor-
ney's office was dragging its feet on this matter. We frequently went to Feldman's
office or the USA's office to pressure Feldman to make a decision, calling two or
three times a week." (Currier, Ibid., pp. 238-244) Among the. names which came up
in the investigation were Enrique Bermudez, Mario .and Adolfo Calero, Felix Rodri-
guez, Ramon Medina {Luis Posada], Richard Miller, Rafael Quintero, Richard
Secord, Ted Shackley and John Singlaub. (Currier, ibid.; pp. 255-261)
August 5, 1986.—Richard Lugar and Claiborne Pell, as chairman and ranking
member of Senate Foreign Relations Committee, jointly request information from
Justice Department "regarding 27 individuals for its investigation of narcotics - traf-
ficking. The request, based on a list supplied by Senator : Kerry, included-requests
for information on John Hull, Robert Owen, Tom Posey, Luis Rodriguez, Frank
Chanes, and Frank Castro. (FRC records)
August 8, 1986;—John. Hull Bends a letter to Leon Kellner, Senator Rudman and
Senator Lugar, charging Senator Kerry's staff with bribing witnesses to lie about
Hull, North, and-the Contras. The letter mentions "Democratic funds." (Iran/
Contra Deposition of Kellner, Appendix B, Vol. 14, p. 1091) Hull asks Robert Owen,
North's courier, to transmit the letter to Kellner and to the Senate Ethics Commit-
tee. (Iran/Contra Deposition of Robert Owen, Appendix B, Vol, 20, p.- 856)
August 11, 1986.—John Bolton, on behalf of Justice, writes Lugar and Pell to tell
them that Justice will not disclose information gathered during pending investiga-
tions and therefor will not provide any "information in response to the request, but
"we remain convinced that further rambling through o£en investigations gravely
risks compromising those efforts." (FRC files) ? u
August 18, 1986.—Feldman gives Kellner the PROS memo, from which he con-
cludes there is clearly sufficient evidence to go forward. Corbo has admitted there
were weapons on ,the March 6 shipment. Feldman believes they have enough to go
forward, noting that he believed that in May, but that now they clearly had enough
to satisfy Kellner,. (Iran/Contra Deposition of Feldman, Appendix B„ Vol. 10, p.. 132)
Kellner describes PROS memo as heing "quite thick," puts a little yellow sticker- on
it and. sends it to First Assistant US-Attorney Richard Gregorie, (Iran/Contra Depo-
sition of Kellner,- Appendix B, Vol. 14,-:pp. 1078-1079)
August 18-August 29,1986.—Feldman goes to Kellner on several occasions in re-
sponse to pressure from FBI Agent Currier, "nagging him to make va decision."
Kellner states that he must still read the memo and makes no decision. (Iran/
Contra Deposition of Feldman, Appendix B, Vol: 10, p. 133) - f
August 19, 1986.—Justice sends letter to Senators Lugar and Pell, informing them
that Justice would examine its files, but would only make information" available on
the one closed case, involving Cabezes and Zavala (Frogman Case.)
August 20, 1986.—Feldman has,- his "only" conversation with people at. Justice,
with Joe Tafe, who is in. charge- of neutrality violations. Tafe -'gave :me hints."
(Iran/Contra Deposition of Feldman, Appendix B, Vol. 10,-p. 133)
August-27,1986.—Kellner sayathis is the day he actually received August 8 letter
from John Hull charging that Kerry staff had engaged in misconduct. .Kellner "had
difficulty with those1 documents." {Iran/Contra Deposition of Kellner, Appendix B,
Vol. 14, p: 1082) - . .
 August 29, 1986.—Feldman returns to Kellner for fourth time or so in August
saying "I have to know." Kellner tells Feldman to'"sit on the ease until he gets
back from Washington DC," because "politics are involved." Feldman says, "Leon
that really upset me because he told me on April 11, during the- day of "the FBI
shooting, that politics were not a consideration." Kellner tells Feldman, "politics
aren't a factor for you to consider but they are a factor for me to consider." (Iran/
Contra-Deposition of Feldman, Appendix B, Vol. 10, p. 134) As of this date, Feldman
concludes the case is dead. It sits on-a box on his table. Kellner never gets back to
him about it. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 138)
September 3, 1986.—Kellner takes Hull affidavits regarding Kerry to Mark Rich-
ard in Justice, and oh his return gives them to Feldman. He brings back some
memos on the Neutrality Act, and asks Feldman to check them and to investigate
the affidavits concerning Senator Kerry. Kellner says that Richard read affidavits
about Senator Kerry in his presence but said nothing. Kellner believed the affida-
vits were "amateurish/' and "did -not make sense," and that he was "being set up
by somebody," but "couldn't figure out who." Kellner believed someone was trying
to have him investigate a Senator, either to embarrass Kellner or to embarrass the
Senator/' After meeting with Richard, Kellner told Richard he would "check out
the truth" of the affidavits by investigating the affidavits, although neither he nor
Feldman believed them. Kellner describes the allegations as being that Senator
Kerry's staff was paying witnesses to lie. Kellner says he did not believe these alle-
gations, but it "would impact, on the investigation." (Iran/Contra Deposition of
Kellner, Appendix B, Vol. 14, pp. 1082-1094) Kellner testifies that he went to Wash-
ington with charges about Senator Kerry "because this was an allegation of a
crime/' and didn't do so with the allegations regarding the Garcia case because "we
were still questioning whether or.not there was a crime involved in what they were
doing." (Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, p. 1146) Richard
says Kellner told him this "package" reflected all sorts of questionable activities by
the senator's staff, attempts by reporters to influence testimony and suborn perjury
and the like. (Iran/Contra Deposition of Richard, Appendix B, Vol. 23, p. 88) Rich-
ard testifies that he forwarded it to Steve Trott with a note that it be handled by
either the Publice Integrity Section of Justice or to first interview Hull. Ultimately
-it was decided to ask the FBI to see whether Hull was willing to submit to an inter-
view. Richard says he had no idea what happened after that, and whether the FBI
did anything or. not. -Richard says Kellner told him, the package from Hull "-vindicat-
ed his assessment" that Kellner was being manipulated by political forces where ev-
eryone had their own agenda, with "Kerry s staff attempting to discredit the actions
of—I don't know who—the CIA, the contras, or what." (Iran/Contra Deposition of
Richard, Appendix B, Vol. 23, p. 89)
September, 1986.—Feldman checks out the allegations against Senator Kerry's
staff and determines, after talking to "as many people as he could contact" that
"they weren't true." Kellner notes that "there were additions to the affidavits and
that at least in one case the signature was not accurate." In addition, "not only did
they not write some of these statement, but it was not factually true in any event."
Feldman told Kellner that at least one of the persons said he wrote the affidavit
defaming Kerry and Kerry's staff because it was .- a way to get out of Costa Rica.
(Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, p. 1093)
September 15, 1986.—Garcia is sentenced. Feldman states that Garcia's allega-
tions are irrelevent to his sentencing. (Iran/Contra Deposition of Feldman, Appen-
dix B, Vol. 10, p, 140) . ' . .......
Early October, 1986.—Mark Richard convenes a meeting, attended, by 19 members '
of FBI mid Justice, including Ken Bergquist, Leon Kellner, Chuck Sapho and
George Schenck. Bergquist and Sehenck had previously met with Kerry staff on
May 6, 1986, regarding the allegations. Present are representatives of narcotics' and
fraud sections of Justice: Group spent mqst of meeting discussing fraud issues relat-
ed to NHAO humanitarian aid. (Iran/Contra Deposition of Richard, Appendix B,
Vol. 23, p. 82)
October 6, 1986.—Gregorie sends PROS memo back to Kellner oh day of Hasenfus
crash, recommending that Kellner convene a grand jury. As Kellner concludes, the
crash may have figured in his decision to move "forward.. (Iran/Contra Deposition of
Kellner, Appendix B, Vol, 14, p. 1081)" When Hasenfus plane crashes, Feldman con-
cludes "it really wasri't any great revelation because it was apparent [in May} that
there was much more to this whole network than Renee Corbo . . . if for some
reason . . . the United States Government maiy be exposed or Oliver North's net-
work may be exposed, as far as I was concerneid, that had already been done. It is
jsut that it hadn't received the public attention the Hasenfus crash brought out."
Although Feldman does not find memo until November, Richard Gregorie, Assistant
 "166

U.S. Attorney to Kellner, sends memo to Feldman on this day authorizing him to go
to grand jury. {Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, pp. 140,
143) . , . ' ' - .' . . .
October 7, 1980.—William Weld asks Richard what he knows about Hasenfus
: crash, who calls Tom Marum about -Miami Neutrality investigation. Richard con-
tacts Kellner and asks Kellner what is going on, Kellner is angry,, because he is
"getting hit-with press inquiries and knew nothing about the pending investiga-
tion." (lran/Gontra Deposition of Richard, Appendix B, Vol. 23, p..l06)_
October 14, 1986.—Senator Kerry releases staff report describing ^'Private Assist-
ance and the Contras," Report refers to activities of North, Owen, Secord, Singlaub,
Felipe Vidal, Hull, and others. Includes statement, that "Max Gomez [Felix Rodri-
quez] was managing contra supply operations out of Hopango having allegedly been
, placed thereby-NSC."
October 15, 1986.—Washington Post prints story about Kerry Report and de-
scribes its allegations against persons named above. .
October 15, 1986—Oliver North writes in notebook "Kerry +2," below that is
something redacted, and below that a notation"Max Gomez/VP." North Q2583.
October 15, 1986.—Oliver North Notebook describes June 25th closed session of
Foreign Relations Committee regarding narcotics trafficking and contras. Notebook
states "list of 27 'witnesses, early August 8—sent to DOJ—Ken Bergquist, Vicky
Toennsing—46 boxes of transcripts of SF Frogman case, Justice never provided. In
April/May, (illegible) Rick Messick . . . John Kerry—has 8 votes. Scott Armstrong,
Natl Security Archives, Jack Blum. (North Notebook, Q2531
October 24, 1986. North writes in notebook about 6:30 pm meeting with-Assistant
Secretary • of• Defense Richard Armitage, that Senate Foreign Relatiom &mmittee
investigation has taken trips to Miami, Costa .Rica, San Francisco and Honduras.
(North notebook Q2566) '
October 30,- 1986. Feldman meets with Justice Public Integrity Section, (Iran/
Contra Deposition of Feldman, Appendix B, Vol. 10, p. 140 * ,-
Early November, 1986.—Feldman receives authorization to go to the grand jury.
November 18, 1986.—Feldman takes Neutrality Case to Grand Jury. ^an/Contra
Deposition of Feldman, Appendix B, Vol. 10, p. 143) " . ' y'
November 19^1986.—North notebook entry reads "Tom Dowling re Kerry Hear-
ings." (North Notebook Q2646)
November 21, 1986.—North notebook entry describes concerns about information
known by Gene Wheaton, who has "chart"- regarding Secord's involvement in both
Iran and contra initiatives, and who has provided information to Senator Kerry 1
. November 22, 1986.—Iran/contra diversion memorandum is found by Justice De-
partment investigators in North's safe at the NSC. :
December 2, 1986.—Feldman meets with Kellner, Sharf, Gregorie, Barnett, about
Garcia case, and they tell Feldman to stay away from Jose Coutin case. (Coutin was
being held as the supplier of the weapon used to kill DEA informant Barry Seale,
but had originally helped the FBI in the Garcia' case). Feldman gets authorization to
take. Robert Owen to a grand jury. He finds out that Owen was at "tons" of meet-
ings with "players involved ih both the Cuban and CMA organizations." (Iran/
Contra Deposition of Feldman, Appendix B, Vol. 10, pp. 147,149) J
December 29, 1986.—Grand Jury halts in order that case may be reviewed by In-
dependent Counsel Walsh, (Iran/Contra Deposition of Teldman, Appendix B, Vol.
10, p. .149) ' : -
January 21, 1987.—Independent Counsel Walsh declines Miami Neutrality Act
cases and Feldman proceeds. (Iran/Contra Deposition Of Feldman, Appendix Ba. Vol.
10, p. 149) ' " . .': "" . ^ .. . 5
„ ' April 7, 19S7.—Feldman is interviewed by Independent Counsel Walsh's office. 5
(Iran/Coritra Deposition of Feldman, Appendix.B, Vol. 10, p. 150) f
August 10,1987.—FBI 302 of Frank Castro. Castro states that in 1985 he Weht.to
Costa Rica to meet with John Hull at Hull's farm, and that he was working with |
Frank Chanes and Moises Nunez, with Rene Corvo and other Cubans, tod thiat this t
group had taken a number of Mari^l boat Cubans from their training, camp in |
Naples, Florida to Central America to fight the Sandinistas. . .
August 20,1987—FBI 302 of Frank Castro^ Castro reaffirms-statements regarding
inyolvement of Corbo and other? in military training in Naples, Florida before gtiwg
to Central America to fight Sandinistas. ^ , ,
September 30, 1987.—The Justice Department indicts. Luis Rodriquez as a drug-
trafficker, for smuggling which took .place between November 1980 and January J
1983. (U.S. v. Luis Rodriquez, 87-01044, U.S. District Coiirt for the Northern District
of Florida)
 "167

November. IS, 1987. AUSA Jeffrey Feldman goes to Washington to meet with
John Martin and Thomas Marum, the head and assistant head of the Justice De-
partment's Internal Security Division. At a meeting between 9:30 am and 10:20 am,
Feldman reviewed the: previous questions that had been raised abput the Justice De-
partment's handling of the Miami investigations, including the allegations made by
David Leiwant concerning a phone call allegedly made on April 4, 1986 asking
Kellner to delay with the cases; the revisions of the^Feldman memoradum; and-the
delay in prosecuting the case between August and November, 1986. According to
Feldman, after further discussions, Marum. "mentioned that he, Joe Tafe, Mark
Richard, Leon Kellner, and reps , from DEA and FBI met in Richard's, office some-
time last year to discuss how Senator Kerry's efforts to get Lugar to hold hearings
in this case could be undermined. Marum did not re: date." Feldman then makes a
contemporaneous memorandum of the meeting with Martin and Marum and time
stamps it at the Criminal Division of the Justice Department at 10:47 AM Novem-
ber 18. (Feldman Memcom, subpoenaed by Subcommittee)
April 5, 1988.—The Justice Department indicts Luis Rodriquez for tax evasion in
connection with the laundering of money through Ocean Hunter from June 1979
through April 1985. {U.S. v. Luis Rodrequez, 88-0222 CR-King, US District Court
Southern District of Florida) Grand jury statements on file in Northern District of
Florida narcotics case against Luis Rodriguez state that Ocean Hunter was estab-
lished to launder money for a narcotics smuggling enterprise involving Frigorificos
de Punterennas.
July 13, 1988.—The Justice Department indidts Mario Calero, Jack Terrell, Tom
Posey, and others on Neutrality Act "and weapons violation in connection with
CMA's support for the Contras. C
July 27, 1988.—The Justice Department indicts' Rene Corvo, Frank Castro and
others on Neutrality Act and weapons violations in. connection with the Naples,
Florida training camp and Cuban-American military assistance to the Contras.
• •( . WITNESSES 1

Aguado, Marcos. A Nicaraguan lijvmg in Costa Rica who served as a pilot for the
ARDE contra organization located on the Southern Front of the Contra/Sandinista
war.
Awan, Amjad. A marketing manager for the Bank of Credit and Commerce Inter-
national (BCCI).
Bannister, Gorman. The son of Everett Bannister, a Bahamina political operative,
currently in the Federal Witness Protection Program.
Berguist, Kenneth P. Former Deputy Assistant Attorney General, Legislative Af-
fairs, Justice Department.
Betzner, Gary Wayne. A federal prisoner, convicted of running a continuing
criminal enterprise for trafficking in cocaine, now serving a sentence of 27 years
and two months; c >••• •
Biamby, Roger E. An exile from Haiti, currently employed as the Executive Direc-
tor of the Haitian-American Community Association of Dade County, Miami Flori-
- da.
y Blandon, Jose. Former Panamanian Consul General, based in New York from
1986-1988, and political confidant of General Manuel Aiitonio Noriega; served as a
-federal witness inthe 1988 indictments brought against General Noriega by two
srFlorida grand juries; currently in the Federal Witmess Protection Program.
& . Camper, Franklin Joseph. A federal prisoner, convicted in 1987 of RICO, weapons
i:.and,conspiracy charges, now serving a sentence of 14 years; former owner and oper-
, ator of the Recondo Mercenary Training School in Dolomite, Alabama.
' - - Carlton, Floyd. A federal prisoner, convicted in 1987 on narcotics charges; former-
c ly the personal pilot of General Noriega in Panama; testified against Noriega before
ir; thefederalgrand juxy leading to indictments of Noriega in January, 19S8; currently
isiini the Federal Witness Protection Program.
| Cash, Thomas V. Special Agent in Charge of the Miami Field Division of the Drug
I^Enforcement Agency. 1

w 1 This list includes all witnesses who appeared in public, or whose testimony in closed session
P .Jias since been released by the Subcommittee in the four part edition of S. Hrg. 100-773, "Drugs,
l ^ w Enforcement and Foreign Policy/' Additional witnesses who appeared before the Subcom-
piimittee in -closed hearings, or .depositions not yet' released are listed separately under "Deposi-
tions" at the conclusion of this Ixst.-
 "168

'Cesar,- Octaviano*. A Nicaraguan living in Costa Rica who served as a political offi-
cial of the ARDE contra' organization on the Southern Front; brother of Nicaraguan
Resistance director, Alfredo Cesar. • - 1 -
Chamorro, Adplfo Jose "Popo". A Nicaraguan living iri Miami, Florida; formerly
the logistics chief and second in command of the ARDE 'contra organization ori the
Southern Front. . ' "* '
Crone, William. A U.S. citizen living in Costa Rica; a 'farme'r and-former business
associate of Johii Hull. - *'• - ^
: Feldman, Jeffrey B- Former Assistant U.S. Attorney for the Southern District of
Florida^ assigned to handle'prosecution of Miami "Contra -Neutrality Act and weap-
ons cases. -' ; • - ~ '
Garcia, Luis. A Miami-based narcotics trafficker who became a federal informant
from 1984-1987.
Gorman, General Paul (U.S.A.-Ret). Former Commander of the U.S. Southern
Command based in Panama (1983-1985); consultant to the President's Commission
on Orgnized Crime (1985-1986). ' > !
Gregorie, Richard D. Former Chief Assistanct U.S. Attorney (1987-1989), chief of
Criminal and Narcotics Divisions (1982-1987), Southern District of Florida, Miami,
Florida. :
Holwill, Richard. Deputy Assistant Secretary of State for the Carribbean.
Hood, Louella. A resident of Bradenton, Florida who hired John Hull to manage
farm property for her in Costa Rica. -
Kellner, Leon B. Former U.S. Attorney for the Southern District of Florida.
Lawn, John C. Administrator, the Drug Enforcement-Agency.
Loeb, Gerald. A former pilot for Eastern Airlines; currently Chairman of Legisla-
tive Affairs for the Airline Pilots' Association, . -
' Lotz, Werner. A Costa Rican-who became the personal pilot for Robert. Vesco,
former Costa Rican President'Carazo and Costa Rican President Daniel Oduber;
owner of an air taxi service in Costa Rica; convicted in- the U.S. for conspiracy to
import drugs in 1985 and sentenced to four1 years in prison; deported at the conclu-
sion of his sentence to Costa Rica. J • _
Marum, Thomas E._ Deputy Chief of Internal Security Division, Justice Depart-
ment1. . " - ' " * i i
Mayer, Martin P. An authority on banking, and author of such books as "The
Bankers and "The Fate of the Dollar."
McCann, John H. A federal prisoner convicted in 1987 for running a continuing
criminal enterprise in connection with cocaine trafficking; sentenced to life without
parole plus 110 years; formerly a la'ftyer and county-judge.
McNeil, Ambassador Francis. Former U.S. Ambassador to Costa Rica (1980-1983),
and former Deputy Assistant Secretary of State for Intelligence and Research (1984-
1987). '
Morales, George. A federal prisoner convicted in 1986 for running a continuing
criminal enterprise in connection with cocaine trafficking; sentenced-to 16 years.
' Morgenthau, Robert. District Attorney for New York County.
MurpKy, Admiral Daniel P. (U.S.N. Ret). Former Chief of Staff to Vice President 1
George Bush; chief of the South Florida Drug Task Force; chairman, working group fj
of the National' Narcotics Border Interdiction System (all71982-1985); currently ^
president of Murphy & Demory Ltd., a Washington,-D.C. consulting firm. $
Palmer, Michael B. Former Delta Airlines* flight engineer and copilot; became a f
narcotics trafficker iri-1977 with- the Carroll marijuana smuggling ring; later became ®
an informant for the Drug'Enfo'rcemeht Agency; Vice Presidents Vortex, Inc., a
company which'provided services to the Contras as'a contractor of the Nicaraguan
Humanitarian Assistance 'Organization (NHAO).
Prado, Karol. A Nicaraguan living in Costa Rica who served as chief of communi-
cations:¥or ARDE under Eden Pastora. ;
Quintan a, Osvatdo. President of Ocean International Seafood of Miami, Florida; a
federal witness in the 1988 grand jury indictment of Haitian Colonel Jean-Claude
Paul in Miami.
Rehman, Aziz. A former employee of the Bank of Credit and Commerce Interna-
tional in Miami, Florida.
Richard,. Mark, Former Deputy Attorney General, Criminal Division, Justice De-
partment. •* _ 1- - . ,
Rodriguez,?Felix Isrpael. A Veteran of the Bay of Pigs and former officer of the |
Central Intelligence-Agency; assigned by OHver .North in ^September 1985 to main-1
^nri Contra resupply operations at Ilopango Air Force base in El Salvador!.
 '169

Rodriguez, Ramon Milian. A federal prisoner, convicted of running a continuing

criminal enterprise in connection with laundering drug money and narcotics traf-
ficking; sentenced-to 43 years.
Sanchez, Nestor. A former Central Intelligence Agency Latin American Division
Chief (1980-1981); former Deputy Assistant Secretary of State for Latin American
Affairs; Department of Defense (1981-1987) and currently consultant to the Depart-
ment of Defense.
Sosa, Hon. Juan. Ambassador to the United States from Panama.
Vogel, Michael P. A federal prisoner, convicted of running a continuing criminal
enterprise in connection with narcotics trafficking; sentenced to 25 years.
Zepada, Tom. A narcotics field advisor to the Bureau of International Narcotics
Matters; formerly a Drug Enforcement Agency field director,
i
WRITS AND SUBPOENAS ISSUED DUBING INVESTIGATION

WRITS ( 1 3 )

Antonio Aizparua
Gary Wayne Betzner
Prank Camper
Floyd Carlton
Werner Lotz
John McCann
Ramon Milian Rodriguez
George Morales
Leandro Sanchez Reisse
Leigh Ritch
Michael Vogel
Zavala/Cabezas Wiretap Documents
SUBPOENAS ( 2 8 )

Antonio 4i2-parua .v'

Bank o£-Credit and Commerce International (4) [Awan, Shafi, BCCI Ltd.,
BCCI Intl.]
Gorman Bannister
Popo Adolfo Jose "Popo" Chamorro
RaoulDiaz
Jeffrey Feldman
Norman Faber
First City Foreign Currency Corp.
General Paul Gorman
Greenberg Bros.
Marta Healey -
John Hull
intercontinental Detective Agency
"Miami Attorney"
Oliver North Notebooks
Michael Palmer
Felix Rodriguez
Nestor Sanchez
Sarkis Soghenalian
Vortex Corp.
CLOSED DEPOSITIONS AND HEARINGS

Joe Adams
"Miami Attorney"
Kenneth Bergquist
Richard Brennecke
"Wanda Doe"
Michael Harrington
Leon Kellner
Thomas Marum
Mark Richard
Leandro Sanchez-Reisse
Jack Terrell