The cover-up of Communist China's drug and narcotics trafficking appears to have started in the early 1960s. It took on greatly increased scope during the Nixon Administra- tion, and it appears to be continuing today.
Never in reports from the State Department, Customs, or the DEA is China included in the Golden Triangle. About the only mention of Communist China in Congressional hearings on drug-trafficking over the decade to 1990 occurred in the testimony of Dr Ray Cline, the CIA's former Deputy Director for Intelligence. Discussing the combination of rev- olutionaries (mostly Marxist-Leninists), drug-traffickers, and gun runners, Cline explained:
'I became familiar with it [the combination] in Southeast Asia because, back in the
1950s and 1960s, we observed that most drugs, most opium, was coming from that triangle which is the southern part of Communist China, Burma, where the Communist Party of Burma controls most of the drug-growing area, and some parts of Laos and Thailand'13.
Dr Cline's assertions parallel testimony in 1972 given by General Lewis Walt, who also recognised the important role of China in global drug operations:
'I have used the expression the 'Golden Triangle' because it has been used for many years, but I cannot help wondering, Mr. Chairman, whether it would not be more accurate to speak of the 'Golden Quadrangle', in view of the fact that the contiguous province of Yunnan in China is the site of a very substantial opium agriculture.... Yunnan might con- ceivably be responsible for a production in excess of the combined production of Burma, Thailand and Laos'14.
While China has been, and probably remains, the most important producer and organiser in the Golden Triangle, China is rarely listed as a producing country in any of the reports issued by the State Department, the Drug Enforcement Administration, or US Customs'5. Moreover, China is not the only country that is generally omitted from reports on drug- and narcotics-producing countries: most Communist countries are conveniently excluded, as well16.
Another curiosity with respect to China involves the US Presidential commission directed to examine the trafficking into Vietnam which had emerged in the summer of
1970, and had caused narcotics addiction to grow like the plague among the US military. As indicated earlier, the primary source identified by the commission was China. But the commission's report was classified and suppressed17. As one member of the commission, General Lewis Walt, later confided to a close friend, keeping silent about the role of China was the most damnable order he had ever received.
Nor does this appear to have been the only such directive. On May 26, 1972, Jack Anderson reported on a White House document that had been making the rounds of the State, Defence and Treasury Departments and the US Information Agency. The confidential document referred to stories about Communist China's role in the world drug trade as
'arrant nonsense' and ordered US Government officials to cease making derogatory state- ments about the People's Republic of China. There was, the document stated, no evidence that Peking was bringing opium and heroin into Vietnam18.
During the 1970s, the drug and narcotics problem continued to grow, notwithstanding the priority President Nixon had placed on addressing it. In retrospect, while the President
may have been sincere in his statements about the need to wage war on illegal drug
and narcotics trafficking, Epstein, in his analysis of US anti-narcotics trafficking activities during the Nixon Administration, was highly suspicious of the motivations of the bureau- cracy and senior-level officials19. Following extensive research, he concluded that the drug issue was typically used to build empires, garner political headlines in the news media, and provide the rationale for the development of a national, White House-directed police force to be used for political tasks. No real interest in either understanding or combating the drug and narcotics problem during the Nixon Administration's war on drugs was discovered by Epstein. Moreover, he added, high-level officials involved with the war on drugs had a prior history of using the drug problem for personal political gain20.
Meanwhile, the difficulties that the US Government encounters dealing with coun- tries whose governments are involved with drug-trafficking seem to be almost independent of who is in office. Consider, for example, the strange case of Bulgaria. The Bulgarian intelligence (KDS) defector, Colonel Stefan Sverdlev, had been directly involved in drug- trafficking and, when he defected in 1970, brought with him official Bulgarian State Security documentation dealing with Sofia's narcotics trafficking activities.
Other US intelligence sources also identified the role of Bulgaria in drug-trafficking and explained how the company KINTEX was formed as a front for Bulgarian State Security to assist in narcotics trafficking and the flow of illicit arms and ammunition throughout Europe and the Middle East. Numerous sources also identified the Bulgarian plan to import large amounts of opium for conversion into heroin for trafficking. There was also a CIA study identifying Bulgaria as a new centre for directing narcotics and arms trafficking between Europe and the Near East21. Nonetheless, in June 1971 US Customs and the Bureau of Narcotics and Dangerous Drugs officials went to Sofia and proposed that the United States should train Bulgarian customs officials (who belong to State Security) on how to combat the drug-trafficking that was taking place across Bulgarian borders.
Even the Bulgarians must have been surprised22, which may have accounted for their hosting a conference of customs directors from the Soviet Bloc nations in October 1971. A US-Bulgarian agreement was reached in November 1971, and in 1973 US Customs began holding training seminars in Varna, Bulgaria. They taught the Bulgarians US customs techniques and identified to Bulgarian officials23 those individuals living in Bulgaria whom US officials believed were involved in drug-trafficking.
Not until 1981 did US officials decide they were not obtaining full cooperation from the
Government of Bulgaria in combating the drug-trafficking problem, temporarily stopping the training seminars and the associated oneway exchange of intelligence information. From
1970 until 1984, the date of a DEA report to Congress on Bulgaria's lack of cooperation, DEA identified numerous source reports on the official involvement of Bulgaria. The reports identified KINTEX and other companies (TEXIM and CORECOM) as State Security front operations which managed drug production and trafficking. Officials of the Communist Party of Bulgaria were involved in organising coordination meetings in Sofia for traffickers. Bulgarian customs (State Security) was also involved in the operation. Nor does this recital take account of additional CIA data on the Bulgarian drug program.
Yet, notwithstanding this continuous and consistent flow of information over fourteen years, the best the DEA could conclude in 1984 was that the Government of Bulgaria 'appears to have established a policy of encouraging and facilitating the trafficking of narcotics under the corporate veil of KINTEX'24 [emphasis added]. Moreover, notwithstanding direct source statements and Bulgarian State Security documentation to the effect that political destabilisation is the objective of narcotics trafficking, all the DEA could do was to admit
that 'the use of drugs as a political weapon may be inferred' and then to state with assurance that more immediate motives were to obtain hard currency and to support dissident groups in the Middle East25. To this day, the US Government continues to try to convince the Bulgarians to cooperate with the United States in curtailing drug-trafficking, In 1986, asserted that there were increasing prospects for Bulgarian cooperation26.
In an apparent attempt to 'have it their way', the State Department's International Narcotics Control Strategy Report to Congress (March 1989) denied that traffickers operated openly any longer in Bulgaria and stated that there was 'no indication that either licit or
illicit production of opiates is occurring in Bulgaria, nor is there evidence that illicit drugs are refined' and that money-laundering was not a factor27.
But during the final week in March 1989, the true story became evident - when DEA agent reports, embassy wires, and DEA-CIA correspondence28 showing that the State Department report was a combination of misrepresentations and lies, were leaked to selected news reporters, who then wrote detailed articles for the New York Tribune, News- day and the Washington Times29. The reports provided official details on a joint DEA-Swiss action against Turkish money-launderers operating out of Sofia, Bulgaria. They clearly identified the continued production of opiate products in Bulgaria and that official Bul- garian money-laundering assistance was being provided by GLOBUS, described as a suc- cessor to KINTEX.
Four days after the reports hit the press, the State Department confirmed that officials of a Bulgarian trading company had been linked to an international narcotics money-laundering operation, but added that 'there is no evidence of complicity of high-ranking Bulgarian Government officials'30 - which was another misrepresentation. Furthermore, the State Department misrepresented the situation by stating that Bulgaria had clamped down on KINTEX and that Bulgarian involvement in narcotics and money-laundering was a phenomenon that had only surfaced in the 'early 1980s'. This was, of course, not true.
The Bulgarian story was also reported in Forbes, which identified the Swiss banks, Credit Suisse and the Union Bank of Switzerland, as the primary Swiss facilitators in this money-laundering operation. In Bulgaria, not only was GLOBUS involved, but so were Bulgarian customs, Balkan Air - the Bulgarian national carrier - and Bulgarian officials concerned with handling security and money exchange.
As one of the money dealers in Zurich who has been shipping gold to Sofia for over
fifteen years explains: 'Not one suitcase of gold or dollars can move through Bulgaria without the direct involvement of the Bulgarian Government'31. Like the Cubans, the Bul- garians secure a cut of everything that moves through their country. It is curious indeed that everyone except the US State Department seems to know about all this.
At one time, it looked as though the head of US Customs, William von Raab, might put an end to this nonsense. In 1986, he refused to attend international narcotics-control meetings with Bulgaria and was reportedly 'furious' when told that the State Department had invited Bulgaria to a meeting in Madrid. T have heard of the bias of some in the Department in being soft on Communists, but this is too much', he wrote to Ann Wrobleski, then Acting Assistant Secretary of the Department's Bureau of International Narcotics Matters.
'Has the State Department developed an institutional form of Alzheimer's disease or just plain taken leave of its senses'? he asked32. Unfortunately, von Raab appears to have been no more successful in controlling the actions of his own department, which helped to train the Hungarians and Chinese during his tenure.
Nor was this by any means the end of the story. In March 1988, the State Department indicated that cooperative measures with the Soviet Union were brewing33. Two months later, immediately prior to the May summit in Moscow, the evening news reported that the United States was planning to share narcotics trafficking intelligence with the Soviet Union and to arrange for US Customs to train Soviet and East European customs (intelli- gence) agents on US techniques for stopping illegal drug and narcotics trafficking.
Then in July, the DEA Administrator, John C. Lawn, announced that the Soviet Union had proposed to him and to the Assistant Secretary of State for International Nar- cotics Matters, Ann B. Wrobleski [see preceding page] that the Soviets and the DEA should swap intelligence on international narcotics smuggling and suspected drug-traffickers, as well as exchange samples of seized narcotics, which have been used to identify sources (or alternatively could be used to thwart34 such identification)35.
In 1989 edition of the National Drug Control Strategy, President Bush made it official:
'We must be prepared to share our knowledge and our concern with the Soviet Union and Eastern European nations and be willing to engage them in cooperative counter-drug activities'36. In this strategy document, there was no recognition of the role of the Soviet Union and Eastern Europe countries in drug-trafficking and in creating the very sickness the strategy was designed to cure.
Towards the end of 1989, the DEA made a formal proposal to the Soviets for the DEA to conduct 'advanced narcotics investigations' for about 30 anti-narcotics professionals from Soviet customs, the Ministry of Interior and the KGB. As one DEA official, Paul Hig-don, explained: 'We're looking at them as policemen - these guys are cops with a mission similar to ours'. Not to be outdone, US Customs is proposing a formal information-sharing agreement, similar to the ones we have with most of our Western allies'37.
Another example of US official denial or collective amnesia over the drugs scourge concerns that of Panama. When General Manuel Antonio Noriega was indicted by the US Attorney in Miami in 1988, it rapidly became known that Panamanian officials had a rich tradition of trafficking in drugs and providing arms to revolutionaries. The problems in Panama surfaced in the early 1960s with riots directed against the US presence, most notably attacks on the Canal Zone which had taken place on January 9-14, 1964. In 1968, the Panamanian National Guard deposed the newly-elected President Arnulfo Arias Madrid. Several months later, General Omar Torrijos Herrera took command. Torrijos was credited with having opened Panama to foreign economic penetration by means of a new banking law with favourable bank secrecy provisions, which were reported to have been
welcomed by American and other foreign banks38, and which may have been the quid pro quo for the Panama Canal Treaties.
At least some US officials were aware of Panamanian military involvement in drugs and arms deals in the early 1970s. The data extends back at least to 1972 or 197039, or possibly earlier insofar as Major Noriega had reportedly been providing the CIA with 'intelligence' at least since late 196740. The arms aspect was confirmed by Jose de Jesus Martinez, a former professor who became Torrijos's bodyguard: he reported that Torrijos decided at least by
1975 to 'convert our country into a rear base for regional revolution'. Thus, with effect from 1968, Panama has been an active participant in drug-trafficking, providing arms to revolutionaries throughout Latin America, providing a safe haven for drug money- laundering, and serving as a willing host for numerous foreign intelligence operations; for example, technology theft and espionage. It would seem to be no accident that Torrijos was listed as one of the Soviet 'gold reserve' agents (Chapter 7).
Nonetheless, the United States seems to have ignored what was happening, for various
'strategic reasons', until 1988. Not only was Noriega's drug-trafficking ignored, but at the same time the DEA administrators (Peter Bensinger, Francis M. Mullen Jr. and Jack Lawn) and other US Government officials (for example, Attorney General William French Smith) sent letters of commendation to Noriega - praising him for his work to curtail the flow of drugs41! All agencies of the US Government were guilty of ignoring what was hap pening, although the Department of State and the White House were the most active42.
An attempt to indict Omar's brother, Moises (a.k.a. Monchi) Torrijos in 1972 for heroin trafficking was blocked and the indictment remained sealed until after the Panama
Canal Tries had been signed in 1978. State Department officials, including the US Ambas- sador, William J. Jorden, attempted to pass off reports of the indictment as false rumours, spread in order to dirty Torrijos' name. Torrijos' point of view was recorded by Ambassador Jack Hood Vaughn: 'What bothers me the most', Torrijos told Vaughn, 'is that Monchi is only shipping five kilos a week. Why make a big deal of that'43?
One widely advertised factor behind this strange behaviour was indeed the negotia- tions over the Panama Canal. But this does not seem to explain why complaints to Pana- manian military leaders about drugs and arms dealing continued to be conducted only as a charade or why an attempt to indict Noriega in 1980, three years before Noriega was to become military commander, was again stalled by the State Department because of
'administration fears about upsetting Panama'44. What really motivated the United States finally to go after Noriega in 1989?
The behind-the-scenes role of US banks and other financial institutions, as well as those of the United States' allies and enemies alike, is another aspect of international narcotics trafficking that has led a sheltered life. These centres of power are believed to be among the two primary forces behind detente, the other being Soviet strategy45.
Estimates of the money that US citizens paid for illegal drugs in the early 1980s ranged from $80 to $110 billion per year, with another $60 billion expended on associated health
costs. Since those calculations were made, the estimates have doubled; the total annual cost [by 1989] within the United States may have rivalled the $300 billion annual budget of the Department of Defence46. The global cost of drug-trafficking may exceed $500 billion per year. Some estimates run as high as $1 trillion per year. [The reader is, however, directed to Chapter 12, completed in December 1998, in which these estimates are revised sharply upwards - Ed.].
There have been some modest attempts to track this money, most notably imposition of the requirement for US banks to report on cash withdrawals and deposits in excess of
$10,000. In the second half of the 1980s alone, numerous banks and financial institutions in the United States were charged with illegal financial operations - for example, drug- money-laundering - and still more remain under investigation. One bank was charged with
17,000 violations of the federal cash transactions law47. Yet few real indictments or serious fines have been assessed; nor has much publicity been focused on drug-money-laundering or on investments of laundered money. Yet what is happening has to be obvious. No $500 billion per year business can exist without the active and knowledgeable assistance of many banks and financial institutions48 [see also Chapter 12].
Ramon Milian Rodriguez [see page 28], a Certified Public Accountant [CPA] who handled money-laundering and investments for the Medellin Cartel, was arrested in May 1983, while
attempting to leave the United States with $5.3 million in cash. In February 1988 he
described his activities to Senators John Kerry (D-MA) and Alfonse D'Amato (R-NY). He explained how, with the assistance of Panama's National Defence Forces, he routed enor- mous amounts of cash through all the banks in Panama and how he was courted by the US banks to handle the Cartel's investments. 'In every instance', he testified, 'the banks knew who they were dealing with.... They were dealing with Milian Rodriguez, who represented money from South America, and their corresponding banks in Panama knew where the money came from because we required certain things from them.... We were breaking the laws in a very big manner and you always have to have plausible deniability'.
'And the New York banks are no fools'49. The banks implicated by Rodriguez read like a 'who's who' in US finance: Citibank, Citicorp, Bank of America and First National Bank of Boston50. Banks identified in 1983 in an ABC News 'Close up' on drugs and money- laundering, included Citibank, Marine Midland, Chase Manhattan, Irving Trust, the foreign currency exchange house of Deak-Perera [since defunct following a drug-related murder and
scandal] and 'most of the 250 banks and branches in Miami'51.
'Focusing on Florida, James Ring Adams has written that corruption in the banking industry is now endemic. 'The narcotics traffic flourishes not only because of demand, but because of tacit acceptance by elements of the political structure... money-laundering has become an entrenched feature of the state's economy'52. Adams describes how banks have been organised specifically for money-laundering. Evidently the Florida banking authorities could not care less.
When one illicit bank goes out of business, another immediately appears, Adams laments: 'Drug dealers flourish and get busted, or murdered, but the morality play never seems to extend to the financial and political infrastructure'53. Adams' conclusions were echoed by the US Attorney for South Florida, Dexter Lehtinen: T know names of banks that are crooked, public officials who are corrupt, zoning regulations changed for drug dealers, [but] we can't pursue these investigations [due to a lack of manpower]'. Sophisticated drug organisations, which thrive on corrupting officials and using tainted banks to hide their cash, are flourishing, he added54.
Senator D'Amato's comments on difficulties encountered in obtaining a strict money- laundering bill during the Rodriguez hearings presented the problem from a legislative perspective: 'And let me tell you that we face tremendous, tremendous opposition, and we only explored very superficially some of the violations'. His frustration is understandable55. In
1984 and 1985, the Boston Globe published a series of studies on the money-laundering problem, which they turned into a separate report entitled Money-laundering.
The Boston Globe looked at the banks, money-laundering centres, several money-laun- dering techniques, the acceptance of cash with no questions asked by car dealers, real estate firms, lawyers, and the failure of the US Government to crack down. The newspaper also identified some of the opposition to improved laws and their enforcement: specifically, the bank lobby and the American Civil Liberties Union [ACLU]56. Brokerage firms are also involved. Two firms, officials of which were identified in Senate hearings as having assisted in money-laundering operations, were Merrill Lynch and E. F. Hutton57.
Rodriguez's testimony also raised questions of a related but somewhat different nature. As he explained, Rodriguez handled money-laundering and investments for the Medellin Cartel in the United States. His financial records were maintained on his personal computer. Apparently the agents who arrested Rodriguez moved his computer as though it were just another piece of furniture, and damaged the hard disk. The informa-
tion was lost, even though 'they tried their darndest to put it together'58. It is indeed unfor- tunate that the arresting agents were so careless - if in fact that is what they were. The finan- cial records would have been invaluable in showing how drug cartel money flowed and in leading US authorities to perhaps many billions of dollars of drug-money investments that could have been seized.