United States

The United States is a federal republic in North America. Its government, acting through the Central Intelligence Agency, the National Security Council and the State Department, supported the Contra forces fighting the Sandinista government of Nicaragua in the 1980s. The August 1996 San Jose Mercury News series Dark Alliance, by Gary Webb, reported that a drug ring in the San Francisco Bay area "sold tons of cocaine to the Crips and Bloods street gangs of Los Angeles and funneled millions in drug profits to a Latin American guerrilla army run by the U.S. Central Intelligence Agency."¹ Inspectors general of the CIA and the Department of Justice, a Senate subcommittee and the independent counsel for the Iran-Contra affair each examined parts of the allegations.

The series and Webb's account

Webb's 1998 book of the same name described a public campaign against crack dealers led by Reagan and George H.W. Bush alongside DEA and Federal Bureau of Investigation investigations that, in his account, pursued street-level dealers while leaving Contra-connected traffickers alone. Webb also wrote that the CIA and the National Security Council facilitated cocaine trafficking by Contra-connected networks.²

In Webb's account, Celerino Castillo, a DEA agent posted in Central America, sent reports to headquarters about Contra pilots smuggling drugs, and Webb placed the fate of those reports in a "bureaucratic black hole."³ The Justice Department inspector general, Michael Bromwich, wrote that "The government was not anxious to have DEA agent Castillo openly probe the activities at Ilopango airport because of the sensitive operations there."⁴ Castillo's 1994 account, Powderburns, places a conversation with the CIA chief of station in San Salvador on August 15, 1986, and states that three days later the chief of station gave him $45,000 in cash for an anti-narcotics group. CIA records show a $45,000 expenditure for three vehicles for the Salvadoran government accounted on August 18, 1986. An officer who recalls meeting Castillo in Guatemala denies that he "ever asked Castillo to back away from any narcotics investigation."⁵

The distribution network in Webb's account

In Webb's account, Norwin Meneses and Blandon operated a cocaine distribution network that moved drugs from Colombia through Central America into the United States, Blandon was the first major trafficker to establish a direct connection between Colombian cocaine sources and the street gangs of South Central Los Angeles, and Ross distributed the cocaine nationwide through the Crips and Bloods.⁶ Webb also wrote that the DEA, the FBI and U.S. Customs held extensive intelligence about Contra-connected trafficking but were prevented from acting on it, that investigations were shut down, evidence destroyed, and informants discredited or imprisoned.⁷

The California investigation (CIA Inspector General, Volume I)

The CIA Inspector General, Fred Hitz, issued Volume I of his report, "The California Story," on January 29, 1998. It reported that no information had been found indicating that any past or present CIA employee, or anyone acting on behalf of CIA, "had any direct or indirect dealing with" Ricky Ross, Danilo Blandon or Norwin Meneses; that Ross provided no money to any Contra group; and that the drug trafficking of Blandon and Meneses was not shown to have been motivated by a commitment to the Contra cause.⁸

CIA files contained other material. An October 30, 1986 cable from a CIA station reported that three individuals "claiming [CIA] affiliation" had been arrested in Los Angeles County on narcotics charges and asked headquarters for traces. Headquarters replied the next day that it had no traces on Ronald Lister or Blandon, and cited station reports of December 5, 1984 and March 25, 1985 describing Meneses as "the Nicaraguan Mafia" and as a kingpin of narcotics traffickers in Nicaragua before the fall of Anastasio Somoza. Further cables on Meneses between 1983 and 1995 recorded allegations of cocaine shipments to him in Miami and, in 1991, his arrest in Nicaragua.⁹ The report states that Blandon and Meneses each claimed to have donated between $3,000 and $40,000 to Contra sympathizers in Los Angeles, that no information had been found to substantiate the claims, and that Blandon had a personal relationship with Eden Pastora and gave him rent-free housing and two vehicles, mostly after Pastora left the Contra movement.⁸

For the northern California "Frogman" case, Volume I reported that CIA contacted prosecutors in the prosecution of Julio Zavala to protect what the agency believed was an operational equity, a Contra support group, and that a CIA cable indicates about $36,000 seized from Zavala was returned at CIA's request. The prosecutors told the inspector general that the decision to return the money rested on other considerations. The report states that the actions did not appear intended to influence the outcome of the trial, which ended in Zavala's conviction.⁸

The Contra program and drug allegations (CIA Inspector General, Volume II)

Director of Central Intelligence John Deutch asked the CIA Inspector General on September 3, 1996 to investigate the allegations. Volume II, "The Contra Story," was issued in classified form on April 27, 1998, and in unclassified form on October 8, 1998.¹⁰ On March 16, 1998 Hitz told the House Permanent Select Committee on Intelligence that the review had found "no evidence in the course of this lengthy investigation of any conspiracy by CIA or its employees to bring drugs into the United States." In the same statement he described "instances where CIA did not, in an expeditious or consistent fashion, cut off relationships with individuals supporting the Contra program who were alleged to have engaged in drug trafficking activity."¹¹ He had told the Senate Select Committee on Intelligence in open session on October 23, 1996 that his inquiry was under way.¹¹

Volume II found that "No information has been found to indicate that CIA as an organization or its employees conspired with, or assisted, Contra-related organizations or individuals in drug trafficking to raise funds for the Contras or for any other purpose."¹² The same volume recorded that CIA received information that one Contra-related organization, the ADREN "15th of September" group, engaged in drug trafficking for fund raising; that in 1984 it received allegations that five individuals associated with the Democratic Revolutionary Alliance (ARDE) were in a trafficking conspiracy with the known trafficker Jorge Morales; and that CIA broke off contact with ARDE in October 1984 but "continued to have contact through 1986-87 with four of the individuals involved with Morales." It also received allegations or information concerning 16 other individuals who supported Southern Front operations, nine Contra-related individuals in the Northern Front based in Honduras, five other individuals used to support the Contra program, 14 pilots and two other individuals associated with companies that supported the program, and three such companies used from 1984 until at least 1988.¹²

Volume II concluded that "CIA acted inconsistently in handling allegations or information indicating that Contra-related organizations and individuals were involved in drug trafficking," listing cases in which CIA pursued confirmation, cases in which knowledge of the allegations "did not deter their use by CIA," cases in which CIA "did not act to verify" the allegations although it had the opportunity, and cases in which it judged the allegation unsubstantiated or not credible. It found that "several pilots and one mechanic continued to be associated with their companies in support of the Contra program" despite law enforcement information indicating a possible trafficking connection, and that CIA "did not inform Congress of all allegations or information it received."¹³ During the period in which the fiscal 1987 Department of Defense appropriations act barred aid to any Contra group that retained an individual "who has been found to engage in drug smuggling," CIA held allegations about ten Contras and no information was found that CIA informed Congress of eight of them. Hitz found no information that any law enforcement agency or other executive branch entity had been told of allegations concerning eleven Contra-related individuals and assets.¹³ CIA reported the association of Southern Front Contra members with Morales to the Justice Department in 1984 and made a 1988 referral about another Contra official.¹³

The reporting arrangement

Attorney General guidelines in force from August 15, 1979 to March 2, 1982 required CIA to report possible violations of "any" federal law by persons "employed by, assigned to, or acting for" the agency, a definition that included assets, agents and independent contractors. Reports on non-employees were limited to a fixed list of offenses that did not include narcotics.¹⁴

The memorandum of understanding that replaced them was signed by Attorney General William French Smith. On February 11, 1982 he wrote to CIA director William Casey that "no formal requirement regarding the reporting of narcotics violations has been included in these procedures." Casey signed the memorandum on March 2, 1982.¹⁴ Under it, agents, assets and independent contractors were moved into the non-employee category, and the non-employee list still excluded narcotics violations. The memorandum gave CIA discretion to report any offense by a non-employee.¹⁴ A February 8, 1985 internal Justice Department memorandum stated that CIA had no requirement to report non-employee narcotics violations and suggested that the memorandum be renegotiated.¹⁴

Webb wrote that the arrangement allowed the government to say there was no evidence of CIA-connected trafficking because no one was legally required to report it.² The arrangement ran from March 2, 1982 to August 3, 1995, when it was revised and narcotics violations were added to the non-employee list.¹⁴ Hitz found that "No information has been found to indicate that the non-inclusion of narcotics violations by assets in the crimes reporting requirements of the 1982 DoJ-CIA MOU was intended to protect Contra activities."¹⁴ Hitz also found that no Agency-wide regulation explained CIA employees' crime-reporting duties under the memorandum until December 23, 1987, and that the 1982 memorandum did not require CIA to report narcotics violations by assets or independent contractors associated with the Contras.¹³¹⁴ The memorandum text appears as Exhibit 1 of the 1998 Hitz report.¹⁴

The Gates memorandum

On April 9, 1987, Robert Gates, then acting director of central intelligence, sent a memorandum to Clair George, the deputy director for operations, stating that it was "imperative" that the CIA avoid involvement with individuals tied to the Contra program who were "even suspected of involvement in narcotics trafficking."¹⁵ Hitz described the memorandum as instructing the operations directorate to vet contract air crews, air services companies and subcontractors with the DEA, U.S. Customs and the FBI.¹⁵ Hitz found that the memorandum "was not issued in any form that would advise Agency employees generally of this policy."¹⁵

The Justice Department review

In December 1997 Justice Department inspector general Bromwich completed a 407-page review of the investigations and prosecutions of Blandon, Meneses and Ross.¹⁶ Bromwich described the series as implying that "the Central Intelligence Agency (CIA) was aware of these activities and either attempted to protect the drug dealing of these Contra supporters or turned a blind eye to their activities."¹⁷ His conclusion was that "the allegations in the articles were exaggerations of the actual facts," and that the outcomes reflected ordinary investigative factors rather than "a systematic effort by the CIA to protect the drug trafficking activities of the Contras."⁴ Bromwich also found "no evidence that Blandon and Meneses were protected by any intelligence agency." He recorded that "The CIA did intervene in the Zavala case concerning the return of seized money to him" and that "Blandon did receive a green card improperly."⁴¹⁷

Blandon, arrested in May 1992, began cooperating with the government, pleaded guilty and was sentenced to 48 months; in September 1994 prosecutors moved for a further reduction and he was resentenced to "time served," 28 months. Ross received a sentence of life without parole in 1996 in a case developed by Blandon acting on behalf of the DEA. Bromwich wrote that the OIG "did not find that he had any ties to the CIA" and that the reductions rested on his cooperation.¹⁶

The attorney general invoked Section 8E of the Inspector General Act on January 23, 1998, citing law enforcement concerns, and blocked publication until July 1998, when the report was released with no changes.¹⁶

Congress and the Iran-Contra record

The Senate Foreign Relations subcommittee on Terrorism, Narcotics and International Operations, chaired by John Kerry, reported in December 1988, printed in 1989, that it had "uncovered considerable evidence relating to the Contra network which substantiated many of the initial allegations." The report states: "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 organizations, and elements of the Contras themselves knowingly received financial and material assistance from drug traffickers. In each case, one or another agency of the U.S. government had information regarding the involvement either while it was occurring, or immediately thereafter."¹⁸

The report lists among its findings "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 indicted by federal law enforcement agencies on drug charges, in others while traffickers were under active investigation by these same agencies."¹⁸ It names four companies selected by the State Department's NHAO (the Nicaraguan Humanitarian Assistance Organization) to supply humanitarian assistance: SETCO, established by Honduran trafficker Juan Matta Ballesteros; DIACSA, a Miami air company run as the headquarters of an enterprise of convicted traffickers Floyd Carlton and Alfredo Caballero; Frigorificos de Puntarenas, owned and operated by Cuban-American traffickers; and Vortex, an air service company partly owned by admitted trafficker Michael Palmer. Payments between January and August 1986 totaled $806,401.20: $185,924.25 to SETCO, $41,120.90 to DIACSA, $261,932.00 to Frigorificos de Puntarenas and $317,425.17 to Vortex. The report states that federal law enforcement had received information that the individuals controlling each company were involved in narcotics before the State Department contracted with it, and that neither the General Accounting Office nor NHAO could say whether the required screening of contractors had been done. NHAO's director, Ambassador Robert Duemling, could not recall how the companies were selected.¹⁹

In April 1986 the State Department told Congress that it had "evidence of a limited number of incidents in which known drug traffickers tried to establish connections with Nicaraguan resistance groups." In July 1986 it wrote that "the available evidence points to involvement with drug traffickers by a limited number of persons."²⁰ The chief of the Central American Task Force at the CIA told the Iran-Contra committees in a deposition about Pastora: "We knew that everybody around Pastora was involved in cocaine."²⁰ At a May 6, 1986 meeting with committee staff, CIA representatives "categorically denied that the Neutrality Act violations raised by the Committee staff had in fact taken place." Justice Department officials at the same meeting said the public statements by the department were "inaccurate." The report states that at that time the FBI had already assembled substantial information confirming the allegations.²⁰

The final report of the independent counsel, Lawrence Walsh, described the Posey-Corvo case, which the U.S. Attorney's Office in Miami investigated, as one that "involved allegations of contra-related gun-running, drug trafficking and Neutrality Act violations." Jesus Garcia, convicted in December 1985 of illegal possession of a machine gun, claimed that a pro-contra mercenary group led by Thomas Posey had plotted to assassinate the U.S. ambassador to Costa Rica to collect a bounty from a drug kingpin; other sources told federal investigators that Oliver North, Robert Owen and John Hull were involved in gun-running. Assistant U.S. Attorney David Leiwant said that during an April 4, 1986 briefing an unknown official telephoned from Washington and told Kellner of the Miami office to go slow, which no one else at the meeting corroborated; Walsh determined that the evidence did not support an obstruction charge. Walsh found no direct evidence that Edwin Meese III obstructed either of the two investigations he examined, although Meese openly admitted seeking a delay in one, the investigations of Southern Air Transport after the Eugene Hasenfus shootdown, to avoid exposure of the Iran hostage-recovery efforts.²¹

Walsh wrote that the CIA came to regard Pastora as a security and public relations risk as "evidence mounted that Sandinista spies and drug smugglers had penetrated Pastora's inner circle."²² North's note of a July 12, 1985 meeting with a logistics chief of the FDN, which also refers to to discussions with a CIA officer Walsh calls "Subject #1" about the "Supermarket," includes the line "$14M to finance came from drugs."²³