Albion Monitor /Features

The CIA, the Contras and Crack Cocaine

by Dennis Bernstein and Robert Knight

The CIA planes brought guns, washing machines, gourmet food, and fancy furniture intto Colombia and took drugs back to the U.S.

One day in the early 1980s, Wanda Palacio watched a Hercules cargo plane roll to a stop on the tarmac of Barranquilla International Airport, located in the Andean foothills just off the azure waters of Colombia's northern coast. According to Palacio, the aircraft bore the markings of Southern Air Transport, a private airline formerly run by the United States' Central Intelligence Agency.

Palacio was in Barranquilla that day with her host, Jorge Luis Ochoa, to arrange a cocaine deal. At the time, Ochoa was known as Colombia's most ambitious drug lord.

As Palacio watched men in green uniforms remove two green military trunks out of the plane and onto a truck -- she would describe this scene later in an 11-page sworn statement to Congress -- her host explained his operation: The plane was a CIA plane, Ochoa told her, and he was "exchanging guns for drugs." The crew, he said, were CIA agents, and "these shipments came each Thursday from the CIA, landing at dusk. Sometimes they brought guns, sometimes they brought U.S. products such as washing machines, gourmet food, fancy furniture or other items for the traffickers which they could not get in Colombia." And each time, Ochoa told Palacio, "they took back drugs."

"Some of the people involved in drug smuggling are present or past agents of the Central Intelligence Agency."

Beginning in late 1984, the Contras, a group of Nicaraguan anti-government fighters trained by the CIA and supervised by Oliver North, were desperate for cash. Congress had cut funding to the ragtag group of former Somoza national guardsmen and desperate peasants because of numerous reported human rights violations. So, to keep the Contras alive, the CIA and North were forced to seek out alternative funding. Those money-raising schemes included cutting an arms deal with the Iranians, soliciting money from friendly third party countries and arranging a marriage of convenience with Colombian drug traffickers.

Reports of those kinds of illegal activities began to surface in the press over a period of two years, culminating in October 1986 with the shooting down of Eugene Hafenfus' plane. Hafenfus was a long-time CIA asset working with North's resupply network in Nicaragua. Discovered in his plane were documents directly linking him to the U.S. government. In addition, one of the dead crewmembers was Wallace "Buzz" Sawyer -- the same man identified by Wanda Palacio as the CIA pilot bringing cocaine from Colombia to the United States.

The Hafenfus incident threw a spotlight on the whole illegal contra network, and in the following month then Attorney General Ed Meese was forced to go public with some of the details of the operation. Meese's press conference triggered a number of investigations in Congress and from the executive branch and led ultimately to the creation of the Iran-contra committees and the appointment of an independent counsel to investigate.

In her 1986 sworn testimony before Sen. John Kerry's Senate Subcommittee on Narcotics and International Terrorism, Palacio, a former airline employee whose cocaine trafficking career spanned two years, acknowledged that she could not prove the drug exchange operation was being conducted by the CIA. But, she added, "What I saw raised many questions about the source of the U.S. weapons which I know Ochoa has obtained."

Palatio1s involvement came about from her relationship with an upper-class Colombian whose social circle included 3people deeply involved in the drug trade,2 she told Senator Kerry in her 1986 statement to his narcotics committee. Concerned for the safety of her daughter, she eventually volunteered to work with the FBI in the early 1980s, because, she said, "I was angry about what drugs were doing to the people I knew and to the United States government itself."

As an FBI operative, Palacio would later realize the extent of the damage done to the United States government by the guns-for-drugs exchanges that permeated the hemisphere during the early- to mid-1980s. "To my great regret," she said in her statement, "the bureau has told me that some of the people I identified as being involved in drug smuggling are present or past agents of the Central Intelligence Agency."

And according to Palacio's deposition, it was not only the CIA that was involved with drug smugglers. The woman told Kerry that she spoke to the FBI about many individuals within the U.S. government who were involved in illegal drug operations.

"We have extensively discussed drug-related corruption in the United States including a regional director of U.S. customs, a federal judge, air traffic controllers in the FAA, a regional director of immigration and other government officials," she stated in sworn testimony.

Wanda Palacio is only one of scores of people to come forward with first-hand evidence of officially sanctioned transfers of drugs for covert policy objectives. Barranquilla is but one of many trans-shipment points in the hemisphere where drugs were loaded on secret flights headed for the U.S.

The lead DEA agent in Central America tried to tell Bush that "something funny" was going on

Celerino Castillo III, a 15-year veteran of the Drug Enforcement Administration, observed first-hand a drug-smuggling operation in the mid-180s at the Ilopango airport, a military facility under the direct control of the CIA and Lt. Col. Oliver North during the colonel's heady days at the National Security Council. But it was on January 14, 1986, the day he met then-Vice President George Bush at a Guatemalan embassy reception, that Castillo became truly concerned about what he had witnessed.

The lead DEA agent in Central America, Castillo tried to tell Bush that "something funny" was going on at Ilopango. "But he just shook my hand, smiled and walked away from me," Castillo recently recalled in an interview. Later that same day, he says, Bush met with North and Contra leader Adolfo Calero.

Castillo, in-country agent for the DEA, went on to gather evidence that was formally documented in a Feb. 14, 1989, memo to his Guatemala-based DEA supervisor. He detailed how known traffickers with multiple DEA files used Hangars Four and Five in Llopango for drug smuggling. Despite their backgrounds, asserted Castillo in the memo, the traffickers had obtained U.S. visas. Furthermore, said Castillo, "the CIA owned one hangar, and the National Security Council ran the other."

"There is no doubt that they [agents from the U.S. government] were running large quantities of cocaine into the U.S. to support the Contras," Castillo said. "We saw the cocaine and we saw boxes full of money. We're talking about very large quantities of cocaine and millions of dollars."

According to Castillo, "my reports contain not only the names of traffickers, but their destinations, flight paths, tail numbers, and the date and time of each flight." Castillo said that he was told by his supervisor to lay low and that if he did go ahead and disclose the information he had gathered, he might be jeopardizing his career because he had stumbled onto a "White House" operation.

Despite Castillo's impending silence, further evidence of the contra-cocaine connection supporting his accounts was revealed 10 years ago in the form of an internal document of the since-disbanded Select House Committee on Narcotics Abuse and Control.

In a syndicated Newsday article on March 31, 1987, contents of an eight-page June 25, 1986, staff memorandum clearly stated that "a number of individuals who supported the Contras and who participated in Contra activity in Texas, Louisiana, California and Florida, as well as in Honduras, Nicaragua and Costa Rica, have suggested that cocaine is being smuggled in the U.S. through the same infrastructure which is procuring, storing and transporting weapons, explosives, ammunition and military equipment for the Contras from the United States."

Former Congressional counsel termed the combination of Contras and drug dealers "a marriage made in heaven"

Drugs, weapons and money-laundering have always been tools of the trade for U.S. clandestine operations abroad. But never in United States history has the importation of cocaine risen so dramatically as it did during the Reagan administration's clandestine war against the government of Nicaragua. Because the Sandanistas were aligned with Communism, overthrowing them became the centerpiece of the Reagan's administration's foreign policy.

The window of opportunity for the CIA-brokered Contra-drug alliance came in 1984, when Congress passed the Boland Amendment to the War Powers Act. This watershed legislation cut off direct intelligence and financial aid to the Contras. The Reagan administration, however, in direct opposition to the Boland Amendment, continued the clandestine war through the auspices of the National Security Council. Through a legal technicality, the NSC was not considered an "intelligence" agency, and so did not fall under the umbrella of the Boland Amendment.

Enter Colonel Oliver North, then an obscure member of Reagan's National Security Council who directed NSC operations from the basement of the Executive Office Building, which is directly connected to the White House.

Under North's stewardship, the $30 million in aid cut off by the Boland Amendment was made up through covert means. According to at least a dozen former North network operatives, law enforcement officials and congressional investigators, the bulk of the aid was restored via the sale of weapons to Iran and the exchange of CIA allies' drug profits for clandestine sanctions that allowed cocaine to be imported and sold in the U.S. The drugs, according to these various sources, were transported in the very same planes that flew weapons south to the Contras.

This past October, a series of stories in the San Jose Mercury News, alleging a connection between the Contras, the CIA, and crack cocaine in Los Angeles, resulted in a firestorm of negative publicity. The stories led Rep. Maxine Waters of South Central L.A. where the Contras allegedly sold cocaine to gang members, to call for congressional and justice department investigations into the allegations.

In response, Congress called emergency hearings, during which former Narcotics Committee counsel Jack Blum termed the combination of Contras and drug dealers "a marriage made in heaven."

Blum testified that the civil war provided clandestine air strips, cowboy pilots who would fly junker airplanes, people who would make arrangements for the clandestine movement of money -- all of which were "perfect facilities for someone in the drug business. So there were people who were connected very directly to the CIA who had those facilities, and allowed them to be used, and indeed, personally profited from their use."

Blum's charges of links between the CIA and drug traffickers are supported by a former high-level supervisory CIA officer. Alan Fiers, the former chief of the CIA Central American Task Force, stated in a sworn deposition to the Congressional Iran-Contra committees that "we knew everybody around [Contra leader Eden] Pastora was involved in cocaine... His staff and friends... were drug smugglers or involved in drug smuggling."

According to Miami-based John Mattes, a former federal public defender and Iran-Contra investigator for John Kerry, "what we investigated, which is on the record as part of the Kerry committee report, is evidence that narcotics traffickers associated with the Contra leaders were allowed to smuggle over a ton of cocaine into the United States. Those same Contra leaders admitted under oath their association and affiliation with the CIA."

Costa Rica investigated large quantities of drugs frequently passing through CIA land and airstrips

During his recent testimony, Blum also raised the issue of Oliver North's notebooks, which he kept contemporaneously with his contra resupply effort. Even after North's lawyers were allowed to expurgate the notebooks, many of the pages made available to investigators contain numerous references to contra drug trafficking. For instance, on July 9, 1984, North wrote that he "went and talked to [contra leader Frederico] Vaughn, who wanted to go to Bolivia to pick up paste, wanted aircraft to pick up 1,500 kilos." In another notebook entry on July 12, 1985, North writes, "$14 million to finance [arms] came from drugs."

Several other documents and testimony from individuals linked Contras, drug traffickers and American intermediaries. A September 26, 1984, Miami police intelligence report links two Cuban American contra supporters with John Hull, the American owner of a Costa Rican ranch on which planes were seen arriving and leaving. One document verifies that "a load of ammunition" was onloaded on to planes at that airstrip.

In a December 1986 interview, Jesus Garcia, who worked with North's operations, reported: "it is common knowledge here in Miami that this whole Contra operation was paid for with cocaine... I actually saw the cocaine and the weapons together under one roof, weapons that I [later] helped ship to Costa Rica."

On March 16, 1987, U.S. Customs seized a plane from a narcotics trafficker who was involved with the Contras. On that plane they discovered the address book of Robert Owen, North's eyes and ears in Central America. Owen, a former aide to Dan Quayle, had met with Hull and North on many occasions.

In March of 1989, Costa Rican President and Nobel Peace Prize winner Oscar Arias, acting on recommendations by a Costa Rican congressional commission investigating drug trafficking, barred North, John Poindexter, Major Gen. Richard Secord, former U.S. Ambassador Louis Tambs, and former CIA Costa Rican Station Chief Jose Hernandez from entry into Costa Rica. According to documents from the commission, the Costa Rican investigation was triggered by "the quantity and frequency of the shipment of drugs that passed through" land and secret airstrips controlled by "southern front" CIA point man John Hull.

According to the Costa Rican investigation, and bolstered by other North entries and Blum's testimony, more than a half dozen drug pilots were provided by former Panamanian strongman General Manuel Noriega, based on requests from North.

North's own notebooks confirm that the Lt. Colonel met with Noriega twice during a time when the U.S. government had documented evidence that Gen. Noriega was involved in the Colombian drug trade.

According to the Costa Rican congressional commission, "these requests for Contra help were initiated by Col. North to Gen. Noriega. They opened a gate so their henchmen could utilize Costa Rica for trafficking in arms and drugs."

Hull would later be indicted by the Costa Rican Attorney General on drug trafficking charges. Ultimately, he was smuggled out of the country by a DEA agent.

"Policy makers absolutely closed their eyes to the criminal behavior of our allies and supporters in that war"

Testifying in the same room where the Kerry committee hearings were held nearly a decade ago, Blum echoed Wanda Palacio's observation about the way law enforcement and other officials looked the other way when the CIA-backed Contras were involved in drug operations.

"What is true is the policy makers absolutely closed their eyes to the criminal behavior of our allies and supporters in that war. The policymakers ignored their drug dealing, their stealing, and their human rights violations," said Blum. "The policy makers, and I stress policy makers, allowed them to compensate themselves for helping us in that war, by remaining silent in the face of their impropriety, and by quietly undercutting law enforcement and human rights agencies that might have caused them difficulty."

During the heyday of the CIA-Contra-cocaine connection, between the passage and repeal of the Boland Amendment, every market indicator of the cocaine glut in America went off-scale. As Palacio observed in 1986, "Three years ago [before Boland], the price of cocaine was $50,000 per kilo (the cartel price). Today it is $20,000 and sometimes you can get it for $15,000 to $18,000. The market for the cocaine isn't smaller-- so the lower price is a result of having supply increase even more than demand has."

Something happened during the contra period in the Americas, and the evidence of a clandestine program that countenanced the import of drugs to further political agendas is overwhelming, officially, anecdotally and statistically.

Today the CIA is being called on to answer the questions raised by the recent "Dark Alliance" investigative series in the San Jose Mercury News. According to Rep. Waters, without a full investigation into the current allegations, the CIA and other U.S. agencies will continue to feel obliged to carry out foreign policy goals no matter what impact such policies might have on Americans. "The task for all of us," said Waters in a September interview, "is to get to the bottom of this in order to prevent it from happening again. I vow to leave no stone unturned in this pursuit."

Public officials and covert operators collaborate to suppress such serious information

The mainstream press in the U.S. -- including The New York Times and Newsweek magazine -- have leveled searing criticism toward the recent series of reports in the San Jose Mercury News called "Dark Alliance: The Story Behind the Crack Explosion." Those articles, which suggest the Central Intelligence Agency actually helped start the 1980s crack epidemic in the U.S. by condoning drug dealing by Nicaraguan exiles associated with the American-backed Contra rebels, have been called "explosive" and "unsubstantiated."

Yet, even as Mercury News executive editor Jerry Ceppos admitted the articles should have stated that no evidence of CIA complicity has been found, the tentative connections that were uncovered in that series have led to a deeper understanding of the U.S. government's role in fueling the Contra war with drug sales.

As multiple investigations and hearings gear up to answer charges raised by the San Jose Mercury News, it is useful to examine how public officials and covert operators collaborate to suppress such serious information.

Perhaps the central player in the events of a decade ago is now a talk-show host. And on his show, Lt. Col. (retired) Oliver North has boasted that he's "the most investigated man on earth." North appears fond of bragging that the government spent tens of millions of dollars to investigate him on various Iran-Contra charges -- and came up empty handed.

North is half-right. Tens of millions were spent on at least a half-dozen congressional and Justice Department investigations into various illegal Contra activities. But the unfortunate fact remains: a mother lode of evidence was discovered, then dutifully covered-up by Reagan Administration officials, CIA infiltrators and sympathetic pro-Contra members of Congress.

Classic cover-up techniques are old and familiar. For the CIA-Contra-cocaine connection they include the invocation of "national security," the limiting of testimony by narrow questions, limited mandates for investigative bodies and, in the case of the select Iran-Contra Committee hearings, the appointment of a CIA connected lead investigator.

Exactly a decade ago, after months of revelations about secret arms deals, congressional leaders announced an investigation into North's National Security Council network. From its inception, however, the thoroughness of the Iran-Contra Select Committee was suspect.

For starters, the Democratic chairs of both committees -- Sen. Daniel Inoue and Rep. Lee Hamilton -- assured the public that the investigation would not be "another Watergate." Inoue told reporters that the country wasn't "ready" for another government-rattling shake-up. Having thus declared their limits, the committee chairs turned to an investigator who could fulfill that mission.

Investigators careful not to investigate too deeply

As senior investigator, the Democrats hired Thomas Polgar, a former CIA station chief who was stationed in Vietnam during the fall of Saigon. Polgar had been witness to 20 years of covert foreign policy, and in his intelligence reports to Congress on the war, had chronicled a rosy version of activity in Vietnam.

Polgar had also served as a consultant to George Bush's task force on terrorism, which included several figures in the Iran-Contra scandal, including North.

Of the six investigators and 13 lawyers hired by the original Iran-Contra committee, Polgar was the only one with such a prominent CIA background, and it was Polgar who was sent to Costa Rica to investigate CIA involvement in illegal Contra operations.

While in Costa Rica, Polgar neglected to interview key suspects and sources. One of the more extraordinary omissions was his failure to interview CIA and North operative John Hull, who had been identified by numerous U.S. and Costa Rican officials, as well as Contra and drug operatives, as being involved in drug trafficking.

Another key actor in the cover-up was the House Select Committee chair Lee Hamilton. It was Hamilton who drafted a letter to Costa Rican President Oscar Arias, saying he hoped Costa Rica would be handling Hull's case "in a manner that will not complicate U.S.-Costa Rican relations."

Hull was ultimately indicted. North and the U.S. ambassador working with him were deemed "persona non grata" by Costa Rican authorities. However, Hull never appeared before the Iran-Contra committee, and to this day, has never been indicted in this country.

Senator Kerry found significant evidence of Contra-connected drug smuggling

Even before the joint Iran-Contra committees were formed, three other committees were already examining charges that North's secret Contra arms network was funded by illegal drug sales with the knowledge of the Central Intelligence Agency.

The House Select Committee on Narcotics Abuse and Control, chaired by Rep. Charles Rangel (D-N.Y.), had already contacted the U.S. Customs Agency to conduct background checks on several individuals or companies allegedly associated with the Contras.

On June 23, 1986, Customs commissioner William Rosenblatt confirmed in a letter to Rangel that 24 out of the 38 investigations indicated the individuals or organizations showed drug-related connections or activities. Rangel concluded that the findings warranted "further investigation about possible tie-ins between the Contras, the individuals carrying out the Contra supply mission and drug smuggling activities."

The Narcotics committee requested further information from the Justice Department and the DEA, but neither cooperated.

The House Judiciary Subcommittee on Crime had also discovered what chairman William Hughes (D-N.J.) termed evidence of "potential official involvement in...gunrunning and narcotics trafficking between Florida and Central and South America." But like Rangel, Hughes was also stonewalled. "There would appear to be substance to the allegations," Hughes said during a 1987 press conference, "that the Justice Department either attempted to slow down or abort one of the ongoing criminal investigations."

By far the most aggressive of the three congressional committees was John Kerry's Subcommittee on Narcotics, Terrorism and International Operations. His pushing paid off, as Kerry found significant evidence of Contra-connected drug smuggling.

Among the scores of witnesses called to testify before Kerry's subcommittee was convicted drug smuggler George Morales, who gave detailed testimony linking four known Contras and southern front coordinator Hull. Morales also testified that two Contra leaders, Octaviano Cesar and Marcos Aguado, had approached the drug smuggler after his 1983 indictment, identified themselves as representing the CIA and asked his help in arming the Contras.

Head of the Justice Department's criminal division did not prosecute a single Contra-related narcotics trafficker

Before Kerry went public with his findings, he attempted to get the Justice Department to act on evidence of U.S. involvement in Contra drug trafficking. On Sept. 26, 1986, Kerry met with Assistant U.S. Attorney William Weld, the head of the Justice Department's criminal division.

Kerry gave Weld an 11-page sworn statement from FBI informant Wanda Palacio that directly implicated the CIA in drug trafficking. According to the minutes, Kerry asked Weld to read the statement and left the room.

According to Jonathan Winer, a Kerry aide who took minutes of that meeting, Weld "read about a half page and chuckled." Weld never acted on the Palacio statement or on any other evidence gathered by Kerry.

Miami-based attorney John Mattes, a former federal public defender, supplied some of the information discussed at the 1986 meeting with Weld. To this day, Mattes is confounded that Weld chose not to act, noting that "Weld claims he followed up with an investigation. But there is, however, no record that while Weld was the chief prosecutor for the U.S., that so much as one Contra-related narcotics trafficker was brought to justice."

Informant on the grittier aspects of the illegal Contra network called a "terrorist threat" by Poindexter

Despite the Reagan-Bush Justice Department's strategic inaction in prosecuting Contra-connected drug operations, legal actions were taken against some disillusioned Contra supporters who spoke out against the drugs and corruption.

On June 28, 1988 a Federal grand jury in Fort Lauderdale, Florida, handed down indictments against 13 pro-Contra mercenaries for conspiring to violate the Neutrality Act, which prohibits U.S. citizens from direct, private involvement in foreign wars.

A key target of the indictment was former Contra-trainer, Jack Terrell. Months before the Iran-Contra scandal erupted, Terrell, a U.S. citizen, voluntarily provided the Miami U.S. Attorney, the FBI, Congress, and journalists with information about the grittier aspects of the illegal Contra network. As an investigator for the International Center for Development Policy, Terrell had prepared an exhaustive list of the major and minor players in the Contra secret war.

However, after Terrell appeared on a June, 1986, CBS news-magazine show, National Security Advisor John Poindexter wrote a memo to President Ronald Reagan terming Terrell a "terrorist threat" because of his public allegations about the Contra network's alleged human-rights abuses, drug-running and arms smuggling.

Poindexter also suggested that Terrell might be a foreign agent for the Nicaraguan government, threatening to assassinate the President.

"This is the ultimate reward you get for talking," Terrell said in an interview after he was indicted. "When you blow the whistle, when you talk against the policy and start exposing corruption... then the administration's policy starts falling apart and people start falling off the wall like Humpty Dumpty. Then they go after you with everything they got."

It turns out that Terrell had been attracting concern for a while. Eighteen months earlier, Robert Owen, a former aide to then-Senator Dan Quayle, wrote North a memo stating that Terrell "knows too much and it would do no one any good if he went to the press. He has to be finessed out."

He was.

Other "narrow questions" are being applied to discredit the Mercury News series, with official assertions that the intelligence community as a whole did not condone converting drug sales for Contra support.

But the broader evidence of a pattern of Contra-cocaine operations presented above, along with the cover-up methods detailed here, offer a behind the scenes look at the questionable and possibly illegal connections between the CIA, drug traffickers and arms dealers.

The Mercury News series also prompted emergency hearings before the Senate Intelligence Committee. On Oct. 23, 1996, Jack Blum, former Kerry committee counsel, testified that the 1986 investigation headed by Weld put up an "absolute stone wall" between the Justice Department and the Kerry investigation.

"There were stalls, there were refusals to talk to us, refusals to turn over data," said Blum. "Weld put a very serious block on any effort to get information."

During the recent testimony, Blum also described just how common it was to selectively prosecute those who, like Terrell, alleged Contra or CIA involvement in the drug trade.

"One of the favorite techniques of various people in this operation was, whenever there was someone they didn't like, to label him a 'drug trafficker.'"

Today, the Justice Department and the CIA are again investigating the CIA-Contra-cocaine allegations. Yet, on Sept. 13, 1996, the nation's highest law enforcement official, Attorney General Janet Reno, stated flatly that there's "no evidence" at this time to support the charges. And a week earlier, on Sept. 7, director of Central Intelligence, John Deutch, stated his belief that there's "no substance" to allegations of CIA involvement.

Some may remember Deutch as the official who recently testified to Congress that U.S. troops were not exposed to chemical weapons in the Gulf War. Now that it has been disclosed by government officials that at least 15,000 men and women actually may have been exposed to toxins during that war, those who are struggling to prove the government has minimized and denied the CIA-Contra-cocaine connection have evidence of yet another orchestrated cover-up.

Robert Knight was a founding producer, along with Dennis Bernstein, of the Contragate/Undercurrents investigative news program. Dennis Bernstein is the host-producer of a daily public radio news magazine in the San Francisco area. Knight and Bernstein won The Jesse Meriton White Award for International Reporting and the National Federation of Community Broadcasting award for the reporting on the Iran-Contra affair.

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