October 23, 1996

My name is Jack A. Blum. I am a partner in the Washington D.C. law firm of Lobel, Novins & Lamont. From January of 1987 to May 1989 I served as the Special Counsel to the Senate Foreign Relations Committee. In that capacity I staffed the investigation by the Subcommittee on Narcotics, Terrorism, and International Operations into whether the effort to achieve foreign policy objectives had interfered with law enforcement efforts to control the flow of narcotics into the United States.

I deeply appreciate the Committee's invitation to appear here this morning. The issues before the Committee are at the heart of the unfinished work of post cold war intelligence reform. I hope that there will be a serious public discussion of these issues and that the discussion will lead to a fundamental change in the way the United States deals with covert operations. That change is essential if public confidence in the integrity of the confidential international dealings of the United States government is to be restored.

I will begin by discussing the subcommittee's findings. Then, I will review briefly the history of the relationship between drug trafficking and intelligence operations and finally, I will make some suggestions for further investigation oversight and reform.

The subcommittee's investigation had bipartisan support and could not have been completed without that support. The Subcommittee concluded that the Reagan administration repeatedly subordinated narcotics law enforcement to its anti-communist crusade in Nicaragua which it considered to be more important.

Our investigation focused on the question of whether the Nicaraguan resistance movement - the Contras- were involved in drug trafficking and whether some portion of the United States government was ignoring, or possibly assisting, their trafficking activities. When the public outcry for a Congressional investigation of CIA involvement in drug trafficking arose in response to Gary Webb's articles in the San Jose Mercury, I wanted to say I had been there and done that. There is a detailed Senate report on the subject. It followed a two year investigation which included both open and closed hearings, and depositions.

Before I begin a discussion of the very serious problems we encountered as we tried to investigate and before I discuss the report's conclusions, it is important to make two points.

We found no evidence whatsoever that the African American community was the particular target of a plot to sell crack cocaine. Cocaine has been and continues to be an equal opportunity destroyer. The flood of cocaine that hit the United States in the mid 1980's ruined whites, Latinos, and African-Americans with appalling equality.

In my opinion, the African American community believes that it has been selected as a target of the cocaine plague because of the way we define the drug problem. In our society a problem addict who merits public attention is an addict who has run out of money. People in the inner city run out of money much more quickly than the stock brokers, entertainers and lawyers who have the income and the standing to conceal their narcotics habits. Because the "problem addicts" have been in the inner city, the focus of law enforcement has been on the inner city. By definition, wherever police concentrate their efforts there is a crime wave. Police statistics reflect police activity not the objective reality of where the crimes are occurring.
 
 
 

 We found no evidence to suggest that people at the highest level of the United States government adopted a policy of supporting the Contras by encouraging drug sales. For the most part the Contras on the ground were forgotten men, short on both supplies and money. The drug trafficking some Contras engaged in went to line their pockets not to help their political cause. In one case Jorge Morales, a drug trafficker, gave money to the Southern front Contras. They knew that the money was drug money and had no qualms about taking it. On another occasion an emissary for the drug cartel offered the United States government $10,000,000 for the Contras in exchange for amnesty for the Colombian traffickers. The approach, which we investigated to the best of our ability, was turned down.

There was, however, plenty of evidence that policy makers closed their eyes to the criminal behavior of some of America's allies and supporters in the Contra war. The policy makers ignored their drug dealing, their stealing, their human rights violations. The policy makers allowed them to compensate themselves for helping us by remaining silent in the face of their impropriety and by quietly undercutting the law enforcement and human right agencies that might have caused them difficulty.

 We were aware of the Contra connection to the West Coast cocaine trade. When we tried to pursue the investigation, the Justice Department Criminal Division, then headed by Bill Weld, fought giving us access to essential records and to witnesses in government custody. I remember a telephone conversation in which the United States Attorney for Northern California shouted at us and accused us of being subversive for wanting the information. The Blandon-Meneses ring was just part of a larger picture. It was not the sole or even the most import source of cocaine in Los Angeles. I might add that the Justice Department did everything possible to block our investigation. It moved prisoners to make them inaccessable, instructed Justice employees not to talk to us, punished an assistant U.S. Attorney for passing information to the Subcommittee.
 

Since Gary Webb's stories in the San Jose Mercury many people have asked why they never heard about our investigation. The reason is that we were the target of a systematic campaign to discredit our witnesses and the quality of our work. Justice Department officials called the press that covered our hearings and told them our witnesses were lying. The White House staff described our work as a "politically motivated attack." Once we were attacked the press treated the conclusions with caution and downplayed the testimony of our witnesses.
 

Our findings raised issues that needed extensive public discussion. The involvement of the covert operations side of the intelligence community with drug traffickers and criminals is a longstanding problem. The willingness of the foreign policy establishment to subordinate every other priority in international relations to the crusade against Communism was also a longstanding problem. We have lived through a period during which priorities were set on an ideological basis that verged on religious belief rather than on a genuine assessment of threat. During the same period covert actions were taken with an eye to short terms results without regard to long term consequences. We must never let that kind of ideological blindness and short term vision infect intelligence assessments again.
 

During the 1980's, I could count in the hundreds the number of dead from drug overdoses and drug wars on the streets of American cities. I could not find a report of a single death in the United States linked to hostile action by a Sandinista. During that period I often joked that if the packages of cocaine had been marked with a hammer and sickle the drug problem would have been the top priority and might have been solved.
 

 A discussion of the relationship between covert operations and criminal organizations should have been at the heart of the debate on post cold war reform of intelligence operations. A careful review of the history of covert operations in the Caribbean and South and Central America shows a forty year connection between crime and covert operations that has repeated blown back on the United States. The same history will show that the operations in the region were, for the most, part moral and political failures. Other operations in Asia and Europe have had similar consequences - the worst in the narcotics area.
 

 Before turning to the history it is important to understand why criminals have played such a large role in covert activity. Contrary to popular literature and belief, the best covert operators do not lead revolutions or play a direct role in the societies they seek to influence. Rather covert operations depend on building up the role of the elements of the society that support the objectives we want to achieve. We look on the elements that support us as assets.

As a rule, criminal organizations offer covert operations many advantages. Criminals are used to staying out of the reach of the law. They have identified the corrupt elements of the government and suborn them. They know the territory. They are disciplined, flexible, and open to the profit motive. If you want a illegal job done, and are willing to pay, they are ready to go to work.

For criminal organizations, participating in covert operations offers much more than money. They may get a voice in selecting the new government. They may get a government that owes them for help in coming to power, They may be able to use their connections with the United States government to enhance their political power at home and to wave off the efforts of the American law enforcement community.
 

Given the talents criminals offer and the natural incentives they have for helping, I can understand why people in covert operations would be tempted to enlist their assistance. If I were sent overseas to risk my life doing things illegal in the country I was sent to, I would want skilled criminals to help me do my job.

The problem is how to prevent criminal allies from becoming an albatross. How can they be kept from becoming a permanent fixture once the need for them has passed? I believe that if they cannot be neutralized the people planning the operation have the obligation to consider the long term consequences empowering criminals.
 

Frequently, we have had to train sympathetic people in countries which are the target of our actions, the techniques of clandestine operation. The textbook for a good covert operator is, by definition, the textbook for a first class criminal. Spies learn to take on new identities, shake tails, launder money and blend into the landscape. Participants in covert paramilitary operations have to smuggle weapons and supplies, communicate clandestinely, handle explosives and to conceal the structure of the covert organization. These skills are identical to the skills needed by large scale criminal and terrorist organizations.

From time to time we have trained groups to run a covert  operation. When the operation is over we have had a "disposal" problem. The difficulty has been finding safe and useful work for people trained in the arts of killing, smuggling, and bomb making. Our disposal efforts have been only marginally successful and covert operations alumni have peopled the ranks of criminal organizations for decades.
 

The first marriage of obvious marriage of convenience was the Lansky-Luciano cooperation with the Office of Naval Intelligence during World War II. Meyer Lansky brokered a deal for Lucky Luciano that allowed Luciano to be freed on parole and deported to Italy in exchange for intelligence information and protection against axis spies on the docks of New York. Luciano delivered and he was freed to resume his criminal career in Sicily. Part of that career included the post war reintroduction of heroin to the United States.
 

That was followed by covert assistance to the organized criminal gangs in the port of Marseilles. The gangs opposed the Communist unions and helped ensure that France stayed in the non-communist world. The gangs also went on to become the "French connection" in the heroin trade. We worked with the Japanese Yakuza to contain the communists in Japan after World War II. The Yakuza became a major source of methamphetamine in Hawaii.

Khun Sa, the well known leader of the heroin business in the golden triangle succeeded in the heroin business because of American and French support for remnants of the defeated Kuomintang Chinese army that fled across the border to Burma when Mao took over and the rest of the nationalists went to Taiwan. We are still living with the resulting heroin problem even though our ally has just retired from the trade.

To quote Al McCoy:

In retrospect, the entire Burma operation of the 1950s appears as one of the most dismal episodes in the history of the CIA. At the most basic level, the KMT's rag-tag invasion was easily repulsed by Yunnan provincial militia after an advance of only sixty miles, thus failing in its main mission of drawing regular Chinese forces away from the Korean front. Although this disaster contributed to the abolition of the responsible CIA affiliate, the Office of Policy Coordination, the agency's internal review failed to grasp the full implications of the Burma operation. Drawing upon an interview with  CIA veteran Tom Braden, one historian explained that the CIA would not admit that the KMT campaign had become "a drug producing operation" and later "hatched elaborate plans for the army, knowing full well they were engaged in nonsense but not prepared to jeopardize careers ... by admitting to so monumental a mistake." By failing to repudiate the KMT and its involvement in the opium trade, the CIA had, in effect, created precedent that would allow later covert operations to become similarly compromised. [1]

The story of the connection between our covert allies in the Vietnam war especially the hill tribes in Laos -- and the drug trade, has been documented in Al McCoy's book "The politics of Heroin in Southeast Asia." It has also been mocked in the movie "Air America". Returning Vietnam veterans brought a heroin epidemic home with them.

More recently our efforts in Afghanistan have helped turn the region into one of the world's largest producers and exporters of heroin. The war focused the Afghan farmers on their best crop - opium poppy. The poppy requires little attention. Opium paste is light weight is very valuable and can be moved to market over high mountains on the backs of donkeys. It is the perfect crop for people fighting a guerrilla war. That covert" operation has also produced a bumper crop of terrorists trained by us. They turned against us and everything Western the minute the Russians left Afghanistan. These folks brought us the World Trade Center, bombings in Paris, Cairo, Bombay, Saudi Arabia, and on two Air India flights. There have been assassinations of Americans here and in Karachi. If there was a "disposal" effort in Afghanistan it was pretty dismal.

The Latin American story is equally depressing. The Bay of Pigs left the United States with both a disposal problem and with criminal organizations that thought they had enhanced their power by "helping" with the problem of Fidel Castro. The CIA ran an enormous operation in Miami, JMWave, to keep the Bay of Pigs veterans busy. Despite that effort Bay of Pigs veterans turned up in affairs such as the Watergate burglary and the murder of Orlando Letelier on the streets of Washington.

During the Carter administration, when human rights became a public priority, we quietly encouraged other countries to act as our proxy. The Subcommittee took remarkable testimony from a former civilian employee of the Argentine military government, Leandro Sanchez-Reisse who described their anti-communist efforts in detail. He told the Subcommittee that the Argentine military was responsible for the so called cocaine coup in Bolivia. He said the Argentine military intelligence people used the profits from their control of the Bolivian cocaine market to finance an anticommunist "battalion" which operated all over the continent. He told the Subcommittee that he set up a money laundering operation in Fort Lauderdale to provide funds for the covert battalion. He claimed that our government assisted his efforts.
 

I should remind this Committee that the Argentines were the ones who first trained and supported the Contra resistance movement.

Sanchez-Reisse said that he believed that one of the reasons the Argentine generals launched the Falklands war was because they believed were would support their cause in return for all the help they had given us. If that was what they thought the consequences were tragic..
 

General Noriega was on our payroll even though it seems almost everyone knew he was in the drug business. According to published accounts he was paid roughly $200,000 a year by the CIA. When efforts were made to seize his funds at BCCI as proceeds of criminal transactions he argued all he wanted back was his CIA pay. For four long years we ignored his drug trafficking because he was helping us with our Nicaraguan problem. The high-or low-point of the relationship is memorialized by Ollie North in his notebooks. The General, Ollie recorded, was willing to assassinate the entire Sandinista leadership, if the U.S. would only help him clean up his drug burdened image. Col. North's response was not to call the police. Instead he reported to Admiral Poindexter who ask North if he could tone down the offer of help.

We had similar problems in Haiti where intelligence "sources" of ours in the Haitian military had turned their facilities over to the drug cartels. Instead of putting pressure on the rotten leadership of the military, we defended them. We held our noses and looked the other way as they and their criminal friends in the United States distributed cocaine in Miami, Philadelphia and New, York.
 

Honduras was a key country for the Contras. Their base of operation was in Honduras and most of their supplies came through the country. When Ramon Matta Ballesteros, a notorious drug trafficker, associated with the gang that killed DEA agent Camerana, took refuge in Honduras, our response was to close the DEA office there. The Subcommittee took testimony from the head of the Honduran DEA office who was shifted to Guatemala. He told us the move was inexplicable because all the real drug problems were in Honduras. He believed the office was closed to protect the corrupt officers who were helping us.
 

In sum, we "paid" our friends in Central and South America by not interfering with their criminal business. The long term price in my view was the solidification of the power of the drug cartels and their transformation into wealthy sophisticated international business organizations. I seriously doubt that this consequence was considered or whether the policy was debated in these terms at any level of government.
 

As our investigation progressed we became aware of the connections between the intelligence community and the law enforcement agencies. We heard that CIA people insisted on screening all of DEA's informants. We heard that CIA people sat in on witness interviews and trial preparations in important drug cases. We were told there was machinery through which the intelligence community could get the Customs Service to pass on inspecting both in and outbound flights. On several occasions we documented Ollie North's intervention in pending court matters to help our "friends".
 

At the same time the charge that someone was a drug trafficker was used to ruin people who were in disfavor. Ron Martin, former head of the U.S. Mil Group in Nicaragua, was called a drug trafficker. North told people his arms warehouse had been funded by cocaine money. In fact Martin's problem was that he was prepared to sell weapons to the Contras at a much lower price than the Secord supply system. The attack on Martin worked and he was forced out of the arms business with a severe loss.
 

This committee should now do what we could not get done. You should get clean copy of Ollie North's Notebooks and make the whole thing public. You should get the complete record of intelligence interference with drug cases during the period of the war and make it public.

You should also consider the alternatives to covert action. As a nation we should be doing much more on the affirmative side. More foreign assistance, more public diplomacy, more support for the education of future foreign political leaders and more public support for the people who support us. Covert operations, especially those that require the services of drug dealers, should be a matter of absolute last resort in moments of national desperation if they are to be used at all.

After all I have said it should be clear that oversight has been hopelessly inadequate. When the CIA was asked about this in the past they produced lame denials and examples of bad apples they cut loose. That is not enough. The responsible committees must look at the whole policy and ask whether the people who proposed the operation fairly described the potential harmful impact of their plans. If they did not they should be held accountable.

If you go to bed with dogs you are likely to get up with fleas. If you empower criminals because empowering them is helpful, the criminals are sure to turn on you next. The people who planned covert operations should have known that and should have warned the people who approve covert operations.
 

The most important loss which came as a result of the Central American "overt/covert" war was a loss of public trust in the honesty and integrity of the people who run the country's clandestine operations. The measure of that is how ready the public is to believe Freeway Ricky's fable about his role as an arm of the CIA in promoting crack in Los Angeles. Ricky deserves life in prison for what he did to his own community. The CIA did not make him do it and the profits from his deals went into his pocket.
 

[End of Statement]

 [1] War on Drugs; Studies in the Failure of U.S. Narcotics Policy, Edited by Alfred W. McCoy & Alan A. Block, Westview Press, Boulder, San Francisco & Oxford, 1992, at pg. 259.