CIA Involvement in Drug Smuggling Part 2


During the heated cold war in Southeast Asia in the 1950s, large scale decisions were made by the CIA in its Langley, Virginia headquarters. The agency's operants were given a large scale of autonomy in the field. The agency did not ask questions as long as those on the payroll produced results. One of the major objectives of these factions was to gain control of opium trade in their regions. A large amount of duplicity, which included tortures and murders, occurred among various groups: CIA headquarters, its operants in the field, and drug lords.

After World War II the French returned to Indo-China and became directly involved in drug trade with the Hmong tribesmen in the highlands of Laos. At first, the French attempted to eliminate opium addiction in 1946. However, desperately short on funds, French intelligence and paramilitary organizations became involved in opium trafficking in order to finance their covert operations against Ho Chi Minh in the north. By 1951, French intelligence controlled most of the opium trade in the region. The French started top secret Operation X which resulted in a steady supply of Hmong opium into the dens of cities such as Saigon and Danang.

In 1950 President Truman implemented the Office of Policy Coordination (OPC) which approved a CIA invasion into southern China. This meant that CIA operants need to infiltrate various local tribal units particularly in the Golden Triangle -- Burma, Laos, and Thailand. The CIA recruited agents

such as William Colby who years later was elevated to CIA director. When CIA operants moved into the Shan states in the Golden Triangle region of northern Burma, opium growers operated only randomly. However, the region soon was transformed into one of the largest growing opium regions in the world. The CIA needed an alliance with the KMT, which had just been driven out of China by Mao Tse-tung a year before, and the Thai police in order to bolster its position in the region.

The KMT exported their opium harvests usually by mule train across the mountains or by unmarked American C-47 transportation planes to Thailand for processing. Some was flown on to Taiwan. In 1950 the CIA purchased bankrupt Civil Air Transport (CAT) for $950,000 and used their fleet of planes to run weapons to KMT General Li Mi in Shan province, and the planes returned to Bangkok filled with opium. Shortly afterwards, CAT was renamed Air America. General Phao Siyanan, head of the Thai police since a CIA orchestrated coup overthrew General Phin Choohannan in 1948, purchased most of this opium. Thus, the KMT became a pivotal force in opium trade in Southeast Asia. With CIA support, the KMT remained in northern Burma until 1961 when the Burmese army finally drove the right wing army into Laos and Thailand.

In 1951, Operation Paperclip, a joint CIA-KMT effort to reconquer China's Yunnan province, was approved. The CIA's first objective was to accomplish an intelligence-gathering mission inside China. In addition, the CIA trained and funded 10,000 KMT forces. Unmarked C-46 and C-47 transport planes began making supply drops into northern Burma. The next year KMT troops and some CIA operants crossed 60 miles into China but were forced to turn back after facing fierce resistance. The CIA also realized the importance of funding other smaller factions in the Shan states, so that no one element could consolidate absolute power in that region. Maintaining instability in the Golden Triangle prevented any one group from controlling and regulating opium trade.

However, American aid to the KMT soon dropped off significantly when drug lord Khun Sa began to extend his influence in the mountainous region of the Shan states just south of China. Khun Sa began his military career with the KMT when he was 18 years old and was trained in both arms and opium by the CIA-supported army. As Khun Sa extended his influence into the Shan states, the CIA was slowly edged out along the Burma-China border, and were no longer able to use that area too stage subsequent attacks into Yunnan province.

In the 1960s, thousands of KMT mercenaries made their way across the mountains of the Golden Triangle to eastern Burma. Khun Sa's army was defeated by KMT General Ouane Rattikone in the 1967 Opium War, and his troops fled into central Laos. Khun Sa was arrested and released at a later date, but by that time the size of his army had dwindled to about one thousand. Khun Sa not only lost major casualties among his troops, but he also lost his monopoly on opium trade in the Shan states.

The Opium War left Rattikone and the KMT in control of 80 percent of the opium trade in Burma.

During the duration of the KMT's dominance in northern Burma -- from the end of World War II to 1960s -- his CIA subsidized army increased opium production by nearly 500 percent from 80 tons to 500 tons annually. The Golden Triangle provided approximately 33 percent of the world's illicit opium trade.

The severe drought of 1978-80 took a heavy toll on illicit drug trafficking in the Golden Triangle. However, by the 1980s, opium trade became the most prosperous ever in that region. Even though Thai and Burmese military operations increased, heroin laboratories in the mountains in the two countries managed to operate without serious incidents. The Shan leaders became more splintered, and the Burmese Communist Party (BCP) collapsed. This opened the door for Khun Sa to return to the Shan states.

By the early 1970s, he recovered his lost territory in the central Shan states, but the BCP quickly moved into the mountain areas just south of the China border, posing a large threat to Khun Sa expansionist policy. Three factions began to position themselves: Khun Sa, Chinese warlord Lo Hsing-han, and the Shan State Army (SSA). Like Khun Sa, Lo Hsing-han began his army career in the KMT and emerged as one of the principle opium dealers in Shan province. In 1972, the Nixon administration branded him the "kingpin of the heroin traffic in Southeast Asia." After Khun Sa was defeated in the 1967 Opium War, Lo Hsing-han became the largest single opium merchant in the province.

The SSA was founded in 1958 and was political in nature. Its chief concern was to regain Ragoon and to abolish Shan authority in that region. It was not directly involved in opium trade. The size of its army was 2,700 and the troops were armed with American weapons which were purchased on the black market.

In 1973, the Burmese government disbanded its militia groups in Shan province. In an effort to consolidate his power in the region, Lo Hsing-han turned to moderate elements in the SSA for support in controlling. The two groups proposed that officials at the American embassy in Bangkok be informed that they intended to sell 400 tons of Shan opium for $20 million. The two groups also requested American support for the purchase of all opium controlled by smaller Shan factions in the Golden Triangle at a fixed price. They insisted that this would eliminate all heroin trade in the area.

However, Lo Hsing-han was arrested in 1973 by Burmese officials and charged him with -- not drug trafficking -- but high treason and rebellion. The following year, the Burmese government released Khun Sa, who had spent five years in solitary confinement, and returned him to his troops in Shan province. Now Khun Sa easily replaced Lo Hsing-han as the drug kingpin in the Golden Triangle.

Khun Sa forged ahead by forming an alliance with the conservative factions of the SSA and was involved in skirmishes with the revitalized KKT. Khun Sa once again he proposed that he purchase the entire Shan province opium crop. This request was rejected by the State Department after Congressional hearings took place in 1975.

In 1975, the SSA broke into two factions. The larger and more moderate group broke away from the conservative faction and joined the BCP. The other faction joined forces with fragments of the KMT and formed the Tai-Land Revolutionary Council. Furthermore, to complicate issues, several rightist independent armies combined to form the National Democratic Front (NDF), an anti-communist coalition which was made up of 13 groups.

In 1977, an agreement regarding the division of opium trade in the Golden Triangle was reached between Khun Sa and the leader of the revitalized KMT. Khun Sa was allowed to maintain a base inside Thailand, and this served as his headquarters for control of 40 percent of Burma's opium exports and the annual collection of $850,000 in transit fees from others who crossed through the region.

Between 1976 and 1978, the Burmese government, using American helicopters, began a series of military operations aimed at destroying the Shan armies and their opium operations. Government forces were able to destroy some poppy fields, but they did not enter BCP-controlled regions. The BCP controlled one-third of the area, and even though they were not involved in opium trade, they did allow private dealers to cultivate opium.

Opium production plummeted after 1975. After the United States withdrew from Vietnam, black market operations dwindled, making it difficult for Shan rebels to purchase weapons. In addition, between 1978 and 1980 the Golden Triangle was hit with two droughts. This was followed by two seasons of intense monsoon rains, reducing the region's opium production to a record low. The usual 600 ton opium harvests were cut to 160 tons in 1978 and 240 tons in 1979. Recovering from this two year failure, the region began to produce a bumper crop in the 1980s.

Khun Sa stated that Richard Armitage, at that time an envoy in the American embassy, financed drug smuggling in Vietnam and Bangkok from 1975 to 1979. CIA agents Daniel Arnold and Jerry Daniel trafficked weapons and drugs with Khun Sa. The operation was believed to be at its peak in 1975 and 1976 under George Bush. In a letter to George Bush, Gritz maintained that Khun Sa claimed that he had once engaged in narcotics transactions with Richard Armitage, who later became the Assistant Secretary of Defense, Shackley, as well as other American officials. Bush was head of the CIA in 1976 when Khun Sa said that he was selling drugs to top CIA officials. Gritz says that, strangely, nobody in the American government was interested in an investigation. Gritz later testified before the House Foreign Affairs Committee's International Narcotics Control Task Force.

By 1983, Khun Sa strengthened his forces, and opium production was on the rebound. With Hong Kong chemists and over ten refineries, Khun Sa increased his holdings, controlling 75 percent of Golden Triangle opium production. Khun Sa was able to defeat KMT forces, and he destroyed numerous heroin facilities. With a virtual monopoly on opium trade in the Golden Triangle, Khun Sa was only briefly attacked by Thai and Burmese government forces which were able to secure a small area. Khun Sa was forced to evacuate some of his heroin laboratories, but he merely moved them into Laos.

Khun Sa had eliminated all his rebel rivals, and by 1986 he was refining 80 percent of the opium harvest in the Golden Triangle. The king of opium trade, Khun Sa had risen to become the world's largest single heroin trafficker by controlling 60 percent of the world's illicit opium supply.

In 1986, Bo Gritz went to Burma with White House approval to meet with Khun Sa who supposedly had information on American MIAs. Khun Sa said that he wanted to end the opium and heroin traffic in his territory and to expose American officials involved in the drug smuggling. Gritz claimed that he took this message to the United States government and was told by Tom Harvey of the National Security Council that "there is no interest here" in the Khun Sa overture. Gritz had in his possession 40 hours of video tape of Khun Sa who "charged American officials, both past and present, with being the chief buyers of drugs produced in that part of the world." He also claimed that he wanted to stop drug trafficking, but that the United States government would not let him. Khun Sa said that the CIA were some of his best customers. He offered support to the DEA to alert them of drug movements, but this was rejected at the headquarters level.

In 1988, the government of Burma fell into the hands of the State Law and Order Restoration Council (SLORC). Its goal was to bolster the nation's economy by doubling opium exports, and within two years 60 percent of the world's heroin -- valued at $40 billion a year -- was exported from Burma.

Also in 1988, the single largest heroin seizure was made in Bangkok. The 2,400-pound shipment of heroin, en route to New York City, originated from Khun Sa in the Golden Triangle. Two years later in a meaningless gesture an American court indicted Khun Sa in absentia on heroin trafficking. He was charged with importing 3,500 pounds of heroin into New York City over the course of 18 months, as well as holding him responsible for the source of the heroin seized in Bangkok. Specifically, he was charged with being the owner of a 2,400 pound shipment which was intercepted in Bangkok en route to New York City in 1988. This was the largest single heroin seizure ever.

In 1990, Lo Hsing-han was released from prison and was welcomed back by the same factions which had driven him out. He met with Burmese government officials and soon thereafter opened 17 new heroin factories in the Golden Triangle.

By 1995, the Golden Triangle region of Southeast Asia remained the leader in opium production, yielding 2,500 tons annually. According to American drug experts, new drug trafficking routes from Burma through Laos, to southern China, Cambodia and Vietnam were drawn up.

In 1996, the SLORC cut a deal with Khun Sa. He had been indicted by the United States Justice Department six years before, but SLORC refused to extradite him. Instead, he was given the Burma-to-Thailand taxi concession and a 44 acre ranch where his son plans to build a gambling and shopping complex. The agreement also reportedly included a deal allowing him to retain control of his opium trade in exchange for ending his 30 year old war against the government. Underground activist groups, operating along the Indo-Burma border, have continued to purchase arms and ammunition from Khun Sa's soldiers.


In Laos the CIA's complicity in drug trafficking resulted from its alliance with the Hmong tribes who, since the 1950s, had been used by the French to fight Vietnamese leftists. As early as 1959, CIA operative Lucien Conein stated that eight teams were training Hmong tribesmen on the Plain of Jars. In 1960 the CIA began recruiting units to patrol the border with China and even to send Yao and Lahu tribesmen into Yunnan province to monitor traffic and to tap telephone lines. Operating out of Vientiane, the CIA also sent recruits to the patrol the Vietnam border as well as to send Green Beret commando units into North Vietnam to sabotage the Ho Chi Minh Trail.

By far the largest goal of the CIA was to wage its secret war against the Pathet Lao in northern Laos. From 1960 to 1974, the CIA maintained a secret army of approximately 30,000 tribesmen in the mountains of northern Laos. This originated with Vientiane CIA station chief Shackley and his Clines, his assistant.

The first mission of the CIA was to place a puppet in power. The CIA needed to forge alliances with tribes and warlords inhabiting the northern Laos. In order to maintain its relationship with the warlords while continuing to fund the struggle against nationalistic Marxist movements in Laos and North Vietnam, the CIA first had to choose a career military official. The agency decided upon a career military leader, Lieutenant Vang Pao. Next, the CIA used several tactics to gain respect and support among the Hmong. Immediately elevated to a general, Vang Pao's power had to be solidified in order for him to gain political support among the tribesmen in Laos' scattered villages. First, the agency found a way for Vang Pao's son and daughter to marry the children of Touby Lyfoung, a prominent and popular Hmong cabinet member. Second, the CIA usually chose a popular Hmong leader, with whom the agency could work, for every tribal area as its commander.

To gain support from the Hmong, the CIA supplied the tribesmen with rice. This enabled them to concentrate on growing the cash crop of opium. The Hmong relied on support from Air America for their rice supplies. Thus, the air power became the essential factor which allowed the CIA to keep Vang Pao in power. After Vang Pao was able to consolidate his power, the CIA helped him to sustain an army of 30,000 men from a tribe of only 250,000 people. The CIA relied on the villagers to supply the manpower to continue to replace the wounded and killed. By the early 1970s 30 percent of the Hmong recruits were 14 years old; another 30 percent were 15 and 16; and the remaining 40 percent were over 45.

In return for providing recruits, the Hmong opium growers received CIA support and their economy flourished. Also, Vang Pao's control over the opium industry gave him more authority, especially when he needed to recruit young soldiers. Thus, the CIA relied on Vang Pao to supply soldiers in its secret war, and the CIA supplied his tribesmen with rice while opium was grown and frequently flown on CIA planes.

CIA operant Tony Poe was assigned as the chief adviser to Vang Pao and to supervise his secret army's operations. Poe promised Hmong soldiers one dollar for a Pathet Lao's ear and ten dollars for a severed head. On the one hand, Poe frequently refused to allow opium to be transported on Air American planes. On the other hand, he ignored the prospering heroin factories and never stopped any of Vang Pao's officers from using American facilities to manage illicit drugs.

Another CIA operant, Edgar Buell, was assigned to the Plain of Jars where a large portion of the secret army was trained. Buell became in charge of dispatching Air America planes to drop rice and other necessities to the Hmong. In addition Buell used his expertise in agriculture to improve the Hmongs' skills in the cultivation and production of opium.

While the United States was at its peak involvement in the Vietnam War, morphine base was being processed in the Golden Triangle and then exported to Hong Kong and Europe. In 1968 Shackley met in Saigon with Trafficante, Clines, and warlord Vang Pao, setting up a heroin smuggling ring to the United States. A Green Beret official speaking to Green Beret officers stated that "Shackley had been responsible for 250 political killings in Laos."

None of the opium refineries mastered the technique to produce high-grade number four heroin which is 90 to 99 percent pure. By 1969 expert chemists from Hong Kong were imported into the Golden Triangle region, and they produced limited amounts of high grade heroin for tens of thousands of American GIs in South Vietnam. By 1970 the amount of heroin available to Americans was unlimited. The opium harvests were transported by Vang Pao's officers and then flown on Air America UH-1H helicopters to processing plants in Vientiane and Long Tieng.

However, with the beginning of Nixon's Vietnamization policy in the months to follow, the market for heroin drastically dropped. Then Chinese, Corsican, and American syndicates began sending large shipments of number four heroin directly to the United States. As a result of these massive exports to the United States, the wholesale price for a kilogram of number four heroin in the processing plants in the Golden Triangle actually increased by 44 percent -- from $1,240 to $1,780 -- in less than one year. At the same time, the price of raw opium in the villages jumped from $24 to $45 per kilogram. In 1970 the number of heroin addicts in the United States reached 750,000. More than a thousand tons of opium was being raised in the Golden Triangle.

By 1973, the United States was losing in Vietnam and in Laos as well. The CIA was forced to import approximately 20,000 Thai mercenaries in order to replenish the exhausted Hmong troops who could not provide additional recruits. That yea,r the Laotian government signed a truce with the Pathet Lao, ostensibly ending the CIA's secret war. Slowly, the CIA abandoned over 300 landing strips and turned over its aircraft to the Laotian government. In 1974 on orders from the Laotian government, Air America abandoned its facilities. As Pathet Lao soldiers increased their presence in Laos, Vang Pao's military and dwindled to 6,000 troops. Usually, Vang Pao retreated rather than to fight, and eventually the Pathet Lao marched into Vientiane. Vang Pao finally agreed to flee to Thailand, and the CIA provided transportation for him and his top officers.


After World War II, very little opium was being produced in Afghanistan. However, right wing dictatorships in neighboring countries thrived on opium production. In neighboring Iran, the powerful American and Anglo oil companies and drug dealers shared many of the country's resources. Intelligence agencies estimated that Iran was producing 600 tons of opium a year and had 1.3 million opium addicts. When Mohammed Mossadegh was elected prime minister and the shah was forced to flee, the new populist government moved to suppress opium trade. However, after a CIA coup placed the shah back on the throne, drug trafficking once again prospered until 1979 when an Islamic revolution brought Ayatollah Khomeini into power.

In Pakistan under King Mohammed Zahir, feudal estates scattered throughout the country maintained small opium fields. However, after a 1978 coup Mohammed Daoud seized power, and opium traffic began to expand rapidly. He was followed by Noor Mohammed Taraki, a reformer who worked to phase out the poppy fields and replace them with consumption crops. Opium production began to plummet, but Taraki was killed in a military coup in 1979. General Zia ul-Haq ascended to power, and he created the Inter-Service Intelligence (ISI) to oversee intelligence on the Afghan-Pakistani border.

The ISI pressured the CIA into accepting Zia's policies with the Mujaheddin across his border in Afghanistan. The ISI brokered a deal which brought about an alliance between the CIA and Gulbuddin Hekmatyar, the leader of a small guerrilla unit in Afghanistan with close ties to the Pakistani government. In the next ten years half of American aid to Afghanistan went to this group. Hekmatyar eventually proved himself brutal and corrupt, becoming one of the premier drug dealers in that region.

Islamabad CIA station chief John Reagan met with Hekmatyar in May 1979, seven months before the Soviets moved into Kabul, and agreed to make the first of many shipments of arms to the rebel army. Over the next two years, CIA covert aid increased tremendously. Islamabad soon became the largest foreign CIA station to run a covert war. Within ten years the United States had funneled in $3 billion in aid to the Mujaheddin, and the CIA had provided the rebels with $2 billion in covert aid. Sixty percent of those funds were given directly to Hekmatyar who purchased weapons in order to protect his opium fields. Pakistani General Fazle Huq was assigned to overlook military operations near the Afghan border. Huq ensured that Hekmatyar received the bulk of CIA arms shipments, and he also protected his 200 heroin laboratories. In 1982 Interpol identified Huq as a principal catalyst in Afghan-Pakistani opium trade.

Very little heroin was refined in Pakistan before the rise of the Mujaheddin emerged in 1979. Then the guerrillas began to expand their opium production and shipped the raw drug to Pakistan border refineries for processing into heroin. They sold it to Pakistani refiners who operated under the protection of General Fazle Hug, the governor of the province near the Khyber Pass and adjacent to Afghanistan. Trucks from the Pakistan arm's National Logistics Cell (NLC) arrived with CIA arms from Karachi and returned loaded with heroin. They were protected by the ISI and therefore protected from vehicle searches.

The Reagan and Bush administrations frequently placed the blame for opium trade on the Soviets. However, it was the Mujaheddin and Pakistanis who were directly involved in trafficking drugs. Zia's personal physician, Dr. Hisayoshi Maruyama, was arrested in Holland with 17.5 kilos of high grade heroin. Haji Ayub Afridi, one of Zia's associates who had served in the Pakistani General Assembly, purchased large quantities of opium from the Mujaheddin. Another Zia ally, Hamid Hasnain, vice president of one of Pakistan's largest banks, also ran a drug ring.

By the 1980s, American aid to Afghan rebels declined, so their leaders expanded opium production in order to maintain their armies. In southern Afghanistan, Nasim Akhundzada controlled the most fertile and irrigated areas. He became known as the "King of Heroin" and controlled most of the 250 tons of opium in his province. Meanwhile, Pakistan became one of the world's largest addict populations in the 1980s.

When the Mujaheddin first emerged in Afghanistan in 1979, there were about 200,000 drug addicts in the United States. As poppy fields quickly expanded in the areas which they controlled, that number had jumped to 450,000 by 1981. In 1989 Afghanistan and Pakistan produced and shipped 50 percent of all the heroin in the world. Between one-third and one-half of the heroin used by addicts in the United States was imported from heroin growers in Mujaheddin controlled areas. The annual consumption of these Afghan narcotics amounted to roughly three tons, and it was valued in the billions of dollars.

Hekmatyar's chief rival in the opium business was a fellow Mujaheddin, Mullah Nassim. In 1989, Hekmatyar successfully plotted his assassination and consolidated his position as the principal Afghan drug lord.

In 1990 Time magazine ran a story claiming that the United States "was embarrassed by the widely bruited connections between the drug trade and the elements of the insurgents, including such fundamentalist Islamic groups as Gulbuddin Hekmatyar Hezbi-I Islami." Then the Washington Post printed a story charging that American officials had refused to investigate charges against Hekmatyar and Pakistan's ISI. Yet the CIA ignored the allegations since it would have diminished their effectiveness in running covert operations in the region.

Civil war has raged since the 1989 withdrawal of Soviet forces. Although the United States government withdrew military support for the Mujaheddin, various Afghan ethnic and political factions have competed for power. In 1994 the extreme fundamentalist Sunni sect known as Taliban emigrated from Pakistan and settled in Afghanistan's outlying mountains around Kabul. Supported by the United States, Taliban captured the capitol and declared Afghanistan an Islamic state in September 1996. The Taliban sect under Mullah Omar immediately imposed a campaign of tyranny in the areas under its control. The Taliban continued to thrive on the opium business which amounted to twice the size of the government's budget.

In addition to Taliban's influence in Afghanistan, large areas of the north were controlled by another warlord, Abdurashid Dostum. In May 1997, a coup within Dostum's forces led by General Abdul Malik led to Dostum fleeing the country. They immediately announced a peace agreement had been reached to reunify Afghanistan under Taliban control, and a delegation of 60 Taliban leaders arrived to sign a peace treaty. The Taliban victory was celebrated by Pakistan. In addition, corrupt factions within Pakistan's security forces benefitted by the opium trade which increased under Taliban rule.

Taliban has been hostile to Russia, Shiite Muslim Iran, the moderate Sunni Islamic republics of Turkmenistan, Uzbekistan, and Tajikistan, and Turkey.


In the 1970,s drug profits from the secret war in Laos were funneled into the Nugan Hand Bank. Shackley denied that he maintained a secret account in this Australia-based bank, which was founded Michael John Hand and four officials from CIA-owned Air America. In Chiang Mai Thailand's branch office, the director of the bank claimed that he handled $2.6 million in drug revenues in less than six months. He maintained that the money was laundered for Laotian Meo tribesman and other heroin dealers. According to the Australian Royal Commission, Nugan Hand was the principle conduit for laundering the money for major narcotics transactions from the Golden Triangle and importing heroin into Australia in the 1970s. The Nugan Hand bank also moved money globally for the CIA. In 1980 the Nugan Hand Bank collapsed, $5 billion in debt.

The Nugan Hand Bank had several branches in Saudi Arabia, Europe, Thailand, and South America. Several of the bank's officials had CIA connections. The larger Bangkok office was run by the former CIA chief of that city. In Sydney it was a CIA bank in all but name. Among its officers were a network of United States generals, admirals and CIA employees, including former CIA Director William Colby, who served as one of its attorneys. Some of its branch managers included Air Force General LeRoy Manor, who later corroborated with Air Force General Richard Secord and Colonel Oliver North on covert actions to liberate the 52 American hostages taken in Iran in 1979. In addition Patry Loomis, a CIA operative who worked under CIA station chief Shackley in Saigon, was a close associate of Nugan Hand's representative to Saudi Arabia, Bernie Houghton. Loomis also helped Ed Wilson, later to be implicated in Iran-Contra, recruit Green Berets to train Libyans. Wilson was also an associate of Houghton. In the mid-1970s Wilson used the Nugan Hand Bank and worked with Houghton to supply 3,000 weapons and 10 million rounds of ammunition to the CIA-backed rebels in Angola.

In 1975, Wilson went to work for Task Force 157 was set up to attempt to topple the left-leaning Labour government of Gough Whitlam. Task Force 157 was set up by Henry Kissinger as a mini-CIA. It was actually separate from the CIA and probably was set up by Kissinger so he could deny any connection between what the Task Force 157 was doing and the CIA. The personnel of Task Force 157 included Wilson with his numerous connections to Nugan Hand Bank officials and Shackley. Michael Hand, an ex-American Green Beret, went on from the Green Berets to work in intelligence work for the United States government.

The concept of Task Force 157 were two-fold: first, to set up operations against the Whitlam government. Second, to go ahead with using Australia as a base for certain clandestine United States operations such as arms dealing and smuggling of contraband goods and using the Nugan Hand Bank as the cover.

On two occasions Admiral Bobby Inman, former deputy director of the National Security Agency and deputy director of the CIA, said on that he expressed deep concern that investigations of Nugan-Hand would lead to disclosure of a range of dirty tricks played against the Whitlam government. CIA operant Christopher Boyce said: "If you think what the agency did in Chile was bad, in which they spent 80 million dollars overturning the government of Chile there, the Allende government, you should see what they are doing in Australia."

In April 1982, Bush met with Australian Labor leader Hayden to discuss the CIA's role in the Nugan Hand Bank. Many Australians could not understand why the CIA wanted to bring down the government of a loyal ally, whose Labour party was striving to make social reforms, especially since it was the war-time Labour administrations which had built up the special relationship with America.


The Pegasus program, initiated by President Harry Truman to spy on other CIA units, revealed numerous illegal activities within the agency. Since the time of its inception, the role of Pegasus substantially changed. Pegasus became an integral part of a drug trafficking operation.

Gene "Chip" Tatum was initially recruited as a member of the top secret Pegasus unit during the Vietnam War. He and 13 others were assigned to Operation Rock, a covert action to secretly enter Phnom Penh, Cambodia in January 1971. The unit received its briefings from various CIA operatives as well as from General Alexander Haig and CIA Saigon Chief William Colby. The objective of Pegasus was to destabilize the Cambodian government by sabotaging the city's airport. They captured and murdered some unarmed North Vietnamese military personnel.

Tatum claimed that he and the other 13 members of Operation Red Rock were also to be killed by Montagnard tribesmen under orders of the CIA. Then their bodies were to be "disappeared." Thus, American involvement in Cambodia could be denied. However, this CIA plot was not carried out, and the members of Operation Red Rock survived.

A copy of the "Pegasus files" was given to Congressman Larry McDonald, a member of the Joint Armed Services Committee between 1976 and 1982. McDonald stated that he would reveal startling evidence about the CIA, but ironically, he was killed when KAL 007 was shot down over the Sakhalin Islands.

Tatum continued to serve as a CIA operative for the next 20 years. He continued as a member of Pegasus, becoming a deep-cover CIA pilot involved in covert operations, trafficking cocaine during the contra war. Between the early 1980s and 1990 Tatum became directly involved in the drugs-for-arms scam. He claimed that the marked-up arms, which were sold to Iran, were traded for cocaine which was flown back to American bases, especially to Arkansas, Ohio and Colorado.

As a CIA pilot, he was told that he would be contacted by "a man called North." North, who covertly helped to arm the Contras as well as being one of the principle conduits for drug trafficking. Tatum claimed that North's operation not only involved the Colombian cartels, but it also involved the shipments of cocaine into the United States. In 1985 Tatum flew out of Palmerola Air Base in

Honduras. On one flight in February, he was instructed to contact Felix Rodriguez who was a pivotal player in Iran-Contra. Rodriguez informed Tatum that he was to support covert Pegasus missions.

When Tatum returned to his home base, he contacted North to advise him of the cocaine. North replied that it was "a trophy of war" and that it was not the Contras -- but the "Sandinistas ... selling it to fund the military." North added by stating that "the cocaine was bound for the world courts as evidence" against the Sandinistas. Two years earlier, Tatum had flown similar containers, which were labeled "Medical Supplies," into Little Rock Air Force Base, and the crates were picked up by Dan Lasater, a close friend of the Governor Clinton. Tatum admitted that he flew several missions out of the American base in Honduras and picked up cocaine containers regularly, sometimes violating Nicaraguan airspace. At this time Tatum began to document all Pegasus trips on the back of his flight logs.

Not long after his association with North, Tatum was transferred to New York to set up a money-laundering operation for funds from the Iran-Contra cocaine pipeline. He was named president of three proprietary construction companies: American National Home Builders, American Constructors, and American Homes.

In addition to North and Rodriguez, Tatum was to take orders from Amiram Nir, a former Mossad agent and advisor to Vice President Bush. Tatum was ordered to fly a 200 pound sealed cooler, marked "Vaccine," to a Contra camp on the Honduran border. When the cooler was being transferred to an Air Force C-130 transport plane, it accidentally broke and 100 bags of cocaine were exposed. Not surprised by this discovery, Tatum stated that he had suspected that the CIA was involved in trafficking cocaine two years earlier.

Pegasus also involved the "neutralizing" of pivotal government leaders during the Contra war. For example, a struggle for power emerged among some Contra leaders. The United States supported Adolfo Calero, while Enrique Bermudez also sought a prominent position in the Contra hierarchy. When Bermudez threatened to expose the role of Vice President Bush in drug trafficking, Tatum claimed that Bush ordered Bermudez assassinated.

Another assassination was carried out by Pegasus against Honduran General Gustavo Alvarez Martinez, the commander-in-chief of the armed forces. When Alvarez demanded a bigger split of the cocaine profits, he was murdered in 1989. Tatum also admitted his involvement in the assassination of Amiram Nir, a former Israeli Mossad agent. After Nir was called to testify before a Senate subcommittee, his plane was shot down by missiles from Tatum's helicopter.

Another Pegasus operation occurred soon after the 1990 Nicaraguan elections. President Bush hand-picked Violetta Chamorro to be the new "president," and it took a 15 party coalition and $12 million from the Bush administration to defeat Sandinista president Daniel Ortega. After Chamorro's victory, Tatum stated that another Contra leader, whom he would not name, requested that Bush give him a key position in the new government. By refusing to place him in the Chamorro government, Bush put himself in a vulnerable position. This Contra leader could expose Bush's involvement in drug trafficking. Thus, a Pegasus unit was assigned to disgrace him in early 1990. Pegasus used the odorless and tasteless drug scopolaphine, which would prevents one from recalling anything which occurred while under its spell. Tatum stated that the former Contra leader was invited to a luxury hotel as a guest of Bush. After the CIA administered the drug, the Contra leader was introduced to an attractive "blonde," and the two went into a bedroom where a hidden video camera recorded their sexual activity. It turned out that the "blonde" was a male prostitute from New York, and he was later killed that evening. According to Tatum, the scopolaphine worked. Weeks later, the Contra leader was given a copy of the video tape which revealed his homosexual acts.

Tatum claimed that in 1992 Bush instructed him to "neutralize," presidential contender Ross Perot, but he refused to do so. Tatum turned over a copy of an incriminating tape to Bush, explaining that it would not be publicized as long as the plot was not carried out.

As recently as 1994, Tatum was contacted by North, Felix Rodriquez, and CIA director William Colby and was told to surrender all documents and tapes. Tatum refused to do so. Tatum had turned whistle blower. The next year, he was charged with treason. At his trial his attorney refused to call even one of the 80 witnesses Tatum had requested. Later, the attorney admitted that he had been pressured by the Department of Defense. The charge of treason was subsequently changed to that of fraud. Tatum was found guilty and was sentenced to serve a 15 month sentence. In March 1996, an additional charge - conspiring to embezzle - was brought against him. Found guilty once again, Tatum was sentenced to a 27 month concurrent sentence.


After George Bush succeeded William Colby as the head of the CIA under President Ford, Bush appointed Shackley to be his "Chief of Covert Operations Worldwide." As the Vietnam War was ending Shackley left Southeast Asia in 1972 to head CIA activities in the Western Hemisphere. One of Shackley's first assignments was to sent Ed Wilson and Manuel Artime to meet with right-wing dictator Anastasio Somoza of Nicaragua. However, Somoza's totalitarian regime lasted only another seven years before being overthrown by the Sandinistas.

In the 1980s, 150 tons of cocaine a year were flowing through Latin America. That generated a business of $29 billion a year and was 12 to 13 times more than America's largest corporations. Prior to the creation of the Contra drug pipeline, the first to profit from drug trafficking were Bolivia's "cocaine coup" government of 1980-82. They werte followed by the Medellin cartel, the Panamanian government, the Honduran military and Miami-based anti-Castro Cubans.

Two months after Reagan's inauguration in 1981 the CIA launched its secret war in an attempt to overthrow the Sandinista government. Soon thereafter, the arms-drug caper began. The drug of choice in the 1960s and 1970s was heroin -- imported from Southeast Asia. Then in the 1980s, the primary addicting drug became cocaine, and its source was Latin America, the new hub of CIA activities.

In December 1981, Vice President Bush met with the National Security Planning Group in the White House. They discussed and approved a $19 million expenditure to Argentina for the creation of a 500 man anti-Sandinista Contra force. In April 1982, Bush met with Australian Labor leader Hayden to discuss the CIA's involvement with the Nugan Hand Bank in Australia. Nugan Hand was a money-laundering machine for the Southeast Asia heroin operation that began during the Vietnam War. Defense Department spokesman Richard Armitage acted as bagman, carrying cash from Bangkok, Thailand, to Australia.

The first publicly known case of contra cocaine shipments appeared in government files in an October 22, 1982 cable from the CIA's Directorate of Operations. The cable passed on word that American law enforcement agencies were aware of "links between (a United States religious organization) and two Nicaraguan counter-revolutionary groups (which) involve an exchange in (the United States) of narcotics for arms." The material in parentheses was inserted by the CIA as part of its declassification of the cable. The name of the religious group remained secret.

Over the next several years of the Reagan administration, the CIA learned of other suspected links between the Contras and drug trafficking. Ironically, "the war on drugs" became an important part of Reagan's domestic agenda. While the United States sent military aid southward to its surrogates fighting the Sandinista government, the rate of cocaine being transported northward into the states quickly escalated. The CIA was involved in a variety of ways -- by air, land, and sea -- in bringing cocaine into the United States.

CIA operative Gunther Russbacher, who was highly opposed to drug capers, stated that he was at high level meetings which involved drug dealers in Colombia. Russbacher stated that drug kingpins divided their territory into two large groups, the Cali and Medellin cartels. Operation Snow Cone was the CIA's primary trafficking operation in Latin America. Under this umbrella, Operation Watch Tower was formed. This consisted of low frequency radio beacons which allowed aircraft, loaded with cocaine, to navigate undetected at low altitudes between Colombia and Panama. The CIA used both Boeing 727s and C-130s which were flown by CIA or commercial pilots. According to Russbacher, two captains from United Airlines and one Pan American pilot supplemented their base salaries by flying drugs into the United States.

In 1984, CIA Inspector General Richard Hitz reported that the CIA even intervened with the Justice Department to block a criminal investigation into a suspected Contra role in a San Francisco-based drug ring. In December 1985, Robert Parry and Brian Barger wrote the first news article disclosing that virtually every Nicaraguan contra group had links to drug trafficking. In that Associated Press dispatch they noted that the CIA knew of at least one case of cocaine profits filtering into the Contra war effort, but that DEA officials in Washington claimed they had never been told of any Contra tie-in.

After the AP story was released, the Reagan administration attacked it as unfounded and the article was largely ignored by the rest of the Washington press corps. However, it did help spark an investigation by Kerry. Years later in 1995 the Clinton administration quietly rescinded Casey's narcotics exemption.


In 1987, a year after the Iran-Contra scandal broke, two committees convened on Capitol Hill. In February John Kerry of Massachusetts persuaded the Senate Foreign Relations Committee, of which he was a member, to launch an official investigation under the auspices of the Subcommittee on Terrorism, Narcotics, and International Operations which came to be known as the Kerry committee. Kerry also was able to expand the probe to include the possible role of foreign governments in drug trafficking.

In addition the Senate Select Committee, chaired by Senator Daniel Inouye of Hawaii, also investigated alleged illegalities during the Contra War. The committee called very few witnesses, and those who were called were usually asked superficial questions.

American military personnel, business people, and mercenaries kept the Contras supplied while the Boland Amendment forbade military assistance after 1984. However, many of these important players never testified before the Iran-Contra committee.

According to Florida federal public defender John Mattes, who investigated the resupply network, the Iran-Contra committee made a mistake in questioning only the high officials and did not talk to the lower echelon personnel who aided in the resupply effort. Mattes said that the Congressional committees went to the conspirators North and Poindexter and merely asked if they did anything wrong or if they were guilty of a crime. They never interviewed any mercenaries to question them whom they worked for.

Continue to part 3 of the history of CIA involvement in Drug Smuggling

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