Excerpt #5 from
The Underground Empire -
Where Crime and Governments Embrace
by James Mills
Doubleday, New York, 1986

General Noriega himself, anxious for Panama to avoid a drug-banking reputation that might scare off legitimate business, sent his attorney general to Washington with a proposal. Anytime DEA could give Panama hard evidence of drug money in a Panamanian bank, Panama would give DEA the account records. Confident that hard evidence could be presented only rarely, Noriega thus achieved the aboveground appearance of cooperation without significantly diminishing his country's underground reputation as (in the words of a DEA agent) "the drug-money haven of choice."

When Noriega later visited Washington, the CIA tried to prevent his meeting with DEA Administrator Francis Mullen. As Panama's former chief of military intelligence, Noriega's ties to the CIA were long-standing. The CIA finally agreed to the meeting, to be held at DEA headquarters, but Noriega failed to show up. One of his aides telephoned to say that Noriega had suddenly been summoned to the White House. When a DEA official called the White House to arrange a later meeting, he discovered that Noriega wasn't there. After further inquiries it appeared that Noriega had been spirited off to CIA headquarters in Langley. Evidently the CIA did not want Panama's boss establishing direct relations with the leadership of DEA.

"Why not?" I asked an agent familiar with Noriega's visit.

"Because the CIA takes the position that 'We have the total picture. We see things you don't see. You don't know it all.'"

And surely that is true. Only the CIA knows it all.

The traveling Operation Cashflow agent continued to Europe, visiting London, the Channel Islands, Paris, Brussels, Zurich, Rome, Amsterdam, Vienna, and Luxembourg (where he planned an undercover meeting, posing as an executive of a narcotics organization, with a Luxembourg bank official known to instruct criminals in the intricacies of moving, concealing, and investing multimillion-dollar drug profits).

"Few if any European countries were without examples of drug money movements," he reported. Even Austria and Hungary had moved to get in on the bonanza. Luxembourg hotel registration cards were filled with the names of Colombians and Pakistanis -- professional money couriers -- checking in for one or two nights. In Guernsey, one of Great Britain's Channel Islands, the agent stumbled over an American drug organization, unknown to DEA, that owned fifty-four corporations and was doing a $38 million business in hashish smuggled from Pakistan and Thailand. The war on drugs was known to miss most drug loads entering the United States, but to miss an entire organization? I asked the agent how many other major international groups might be unknown to authorities?

"Who knows?" he said. "Hundreds?"

In Zurich, bankers told the agent their country held fifteen times more money from modest sun-and-sand Caribbean nations than from Canada, twice as much as from heavily industralized West Germany. Where was all that money coming from? Why "cocabucks," of course, rapidly becoming as evident in world banking centers as petrodollars. The agent found Liechtenstein to be "the gem in this whole thing. Even the Swiss are using Liechtenstein." In Liechtenstein it was possible to bury money so deeply, to put so many legal fronts -- attorneys, corporations, fiduciaries -- between depositor and cash, that identification of the true owner became utterly impossible.

"We've got to go beyond the border," the agent told me near the end of his trip, "and not let them get away with secreting their profits -- selling the dope in the States and moving the money out. We have to go to where the money is, and if that means political pressure on somebody that doesn't want to cooperate, then that's what it's going to take."

"Despite enormous enforcement efforts," I said, "traffickers have always found new and innovative ways to protect drugs and move drugs. You have never succeeded in interdicting more than 10 percent, roughly."


"So is it reasonable to expect traffickers to be any less resourceful when it comes to moving and protecting funds? Are you ever going to get more than 10 percent of their profits?"

"Probably not. I agree that the only limitations they have are the limitations on their own ingenuity. And that's fairly limitless. Frankly, I think your pessimistic position is probably a well-founded one."

Four months after transmitting its Operation Cashflow cable, DEA produced a twenty-two-page classified document whose contents were blended three months later with material from the CIA's Strategic Narcotics Branch and "coordinated" by the supersecret National Security Agency into a thirty-two-page, numbered-copy classified report (the classification included a category forbidding the sharing of the material with foreign governments). The report paints a picture of international criminal wealth previously unheard of. The profits of drug exports for two countries alone, Mexico and Colombia, "probably," the report says, amount to 75 percent of their total export earnings. So much for Mexico's oil, Colombia's coffee. Yet nowhere do international trade figures list "Narcotics" among those nations' exports. How can international financial planners reach reliable conclusions concerning a country's fiscal condition when its most valuable exports are ignored? "It's like doing a population study of Africa," an analyst said, "and not counting blacks."

The report revealed that drug profits, following paths more twisted and complex than those over which drugs themselves are smuggled, pass through countries whose political and legal systems have been specifically designed to make them "way stations for dirty money." In small amounts of "$2 million or less" the money is smuggled around the world by professional couriers, often salaried employees of supposedly reputable Swiss or Caribbean banks. In far larger amounts, cash in bulk becomes a "commodity" like so many sacks of wheat or barrels of oil, "to be traded for a more easily managed or disguised negotiable instrument."

In Asia, "the lion's share of heroin money probably is handled ... by the Chinese underground banking system." This is the system, pursued in part by Operation Schoolboy and discussed with many a chuckle by Centac-24 informant Robert "The Fatman" Yang, which moves millions of dollars in a few seconds, with little or no telltale documentation, over scrambled telephone lines and clandestine radio networks. A major Thai bank is thought to use the system routinely to move $5 million a day out of the country.

The report charges that the Panamanian banking system, which is to say the Panamanian government itself, makes "an explicit effort ... to attract a narco-dollar flow." Because of that policy a huge amount of drug money "continues to gravitate to Panama." That country "now appears to hold most of the money earned in the cocaine trade...."

The report goes on to outline the finances of Centac targets Alberto Sicilia-Falcon, Donald Steinberg, and Gilberto "The Chessman" Rodriguez. Studying the secret whirls and eddies of multimillion-dollar sums flowing from the streets of the United States to safe harbors around the world, the report sensed "a wide underground network," and looked particularly at a single financial river carrying drug profits of Gilberto Rodriguez and his brother Miguel. Pooled with funds from other secret accounts, the money flowed into the Bank of Miami, mixed with millions of dollars from other sources (including two from Peru and Honduras), then cascaded into the offices of the Donaldson, Lufkin, and Jenrette securities firm. Funds from that company were shown to move on to Morgan Guaranty Trust in New York, from there to Chase Manhattan, then to the Swiss Bank Corporation in Geneva where they landed in secret account number 68156RY and sank permanently from sight.

Where might that money, and other drug profits, finally come to rest? "Serious questions," says the report, "remain unanswered about the ultimate destination of much of it." Serious indeed. The report asks, "Do funds like those deposited in Swiss bank account 68156RY represent a hoard of narco-dollars?" The report says that in many cases drug profits are used to gain control of banks and other financial institutions, to finance "important political groups," to enrich "influential political personalities." Traffickers, the report says, are "known" to bankroll the development of new smuggling routes, new money-laundering facilities, and to assist drug growers fleeing the law, moving from Mexico into Guatemala and starting up new coca fields in Colombia. Some drug money, the report charges, is devoted to "special funding purposes," by which is meant Southeast Asian "quasi-military groups" and Latin American "insurgencies."

Despite all these expenditures, however, the international narcotics industry still retains frighteningly vast hordes of cash. Of the $30 billion in Eurocurrency deposited in Swiss banks, 20 percent "may be drug money." The report estimates that Colombian nationals maintain "several billion dollars" outside their own country, "an enormous sum for a non-oil LDC." Worldwide, "several hundred billion dollars in narco-dollars could be stockpiled, most likely in tax-haven or bank-secrecy countries."

If one takes "several" to mean but three, and assumes interest of 10 percent, this money bomb is swelling at the rate of almost $3.5 million per hour. Not counting the steady, multibillion-dollar additions from continuing narcotics sales.

The report, though it sees the urgent need to evaluate "with more precision" the size of this threatening "narco-dollar fund," is not hopeful of ever being able to do so. "Multilateral cooperation," it says, "is unlikely to be forthcoming until some substitute for drug money can be found for the major laundering centers -- an unlikely prospect, to say the least."

Other classified government documents support the report's findings. When I spoke on the telephone with an agent familiar with secret reports regarding the involvement of foreign governments in the international narcotics industry, he said, "I don't want to give NSA any heart attacks, but -- the field is fertile." The National Security Agency monitors telephone communications.

As far back as 1980 a classified DEA report contained allegations that Colombian military officials "at all levels" were "in collusion with narcotics trafficking groups." A 1982 classified document, citing the "lenient criminal sentences, and corrupt practices" of Belize, a tiny Central American nation once said to have been targeted for takeover by Alberto Sicilia-Falcon, predicted that country's emergence "as a haven for drug smugglers and money-laundering schemes." Charging that "high government officials there have shown a blatant disregard for drug control measures," the report spoke of "high-level corruption" and "the propensity of Belizean officials to facilitate the marijuana trade ... for personal gain as well as the economic rewards it brings the country."

Across the Caribbean in Haiti, the story was much the same. A classified intelligence report said "several large narcotic trafficking organizations," protected by the husband of President Jean-Claude Duvalier's sister, refueled smuggling planes at Duvalier International Airport and maintained a marijuana and cocaine "storage depot" guarded by Haitian army troops. It was not known if the president himself was involved.

As in Latin America, so in Asia. One classified document charges that "High-ranking officials and wealthy Thai citizens are heavily involved in both the heroin traffic and the illegal movement of currency." Some of these people are identified as "pillars of the community." A secret Bangkok source, the document says, claimed that the flow of black money out of Thailand accounted for half of "all Thai international currency transfers." Another classified document maintains that "nearly all [Asian] narcotics-related funds are ending up in Thailand," and that one money laundering specialist alone "reportedly transfers nearly $5 million to Bangkok from Hong Kong every three days."

A syndicate of "legitimate Burmese businessmen and former and current Burmese government officials" is accused in one classified report of smuggling heroin directly from Burma, which produces more opium than a ny other country in the world, to the United States, and moving much of its profits back to Burma. The same report goes on to diagram an immense international network in which a single Hong Kong bank account, associated with the underground Chinese banking system, was used to shuffle drug money between Switzerland, Holland, Thailand, Malaysia, Singapore, Pakistan, Australia, and the United States.

Westward across Asia to Afghanistan, occupying Soviet forces also are involved in the narcotics trade. An intelligence document claims that "the Soviets have made no significant effort to destroy poppy plantings. Indeed, there is information indicating that poppy fields continue to exist undisturbed near Soviet military installations." Soviet troops, said to be "trading arms and ammunition for narcotics," had reportedly "accepted narcotics in return for allowing local trucks to pass checkpoints uninspected." Mujahedin rebel leaders welcomed the practice "as opening up a new way to acquire weapons and ammunition" and "as a means of acquiring arms and revenue and of subverting Soviet personnel, who become dependent on the narcotics.

More information concerning the disturbing power of multibillion-dollar drug profits flowing about the world is available from sources outside the CIA and DEA. Major world banks and brokerage houses, lured by the enormous sums to be made from handling drug profits, often cooperate with traffickers. In 1984, a top official of the Banque Nationale de Paris, the second-largest bank in the world, was quietly informed of the activities of Guy des Longchamps, former manager of the bank's Panama branch, friend and helper of Alfonso "The Man" Rivera, the cocaine trafficker wanted for the torture-murder of a Peruvian police officer. The official's reaction was characterized as "indifferent." A second BNP official similarly informed replied that, well yes, perhaps Mr. des Longchamps had behaved improperly out of a simple desire to enrich himself or "to be a big man." There was no suggestion of discipline. Des Longchamps at the time was in Paris preparing for a high post in Mexico.

During four trips to New York, a Swiss resident deposited so much cash -- $4 million in fives, tens, and twenties -- with Merrill Lynch, Pierce, Fenner & Smith, the largest American stockbroker, that the firm provided armed guards, first from his Waldorf-Astoria Hotel suite to their offices, and finally, fearing holdups, from the Waldorf directly to Bankers Trust. When the Swiss refused to enter the Bankers Trust "money room" because of television surveillance cameras, a nervous brokerage officer checked with Merrill Lynch in Zurich. He was told that the depositor's account there was in order. Nevertheless, Merrill Lynch closed the New York account.

The Swiss depositor then moved his business to E. F. Hutton. With arrangements made by an E. F. Hutton senior vice president, the Swiss walked into Bankers Trust with two gym bags filled with American currency, excused himself, and returned with a third bag. Bankers Trust, claiming it lacked employees to count such mountains of cash, refused to accept further deposits and warned E. F. Hutton that something looked a little fishy. E. F. Hutton told Bankers Trust, in effect, to mind its own business, and made arrangements for the Swiss, protected by E. F. Hutton security guards, to deliver his money to other banks.

When E. F. Hutton officials were later handed a federal subpoena regarding the accounts, they promptly, though requested not to do so, tipped off the Swiss depositor. Five days later the Swiss relocated his Swiss account and halted deposits.

So great are traffickers' needs to dispose of cash they even brave government requirements that banks report large cash transactions. In 1983 an average of 1,500 people a day walked into American banks and dumped down bags and suitcases containing $10,000 or more in cash, though invariably aware the deposits would be reported. Some traffickers, knowing that casinos are exempt from the reporting requirement, ship sacks of cash to Las Vegas and Atlantic City, where the money is exchanged for easily negotiable cashier's checks. In one month, an average of 15 people a day handed over $10,000 or more to tellers in Atlantic City casinos. Some casinos even arrange to have the money credited directly to associated foreign casinos, where a cashier's check can be carried across the street to the secrecy of an offshore bank.

Events since the Operation Cashflow study indicate that the amount of drugs and drug profits threatening the world are even higher than the DEA-CIA report claimed. A single cocaine seizure -- at a three-year-old, thousand-man, thirty-five-mile-radius cocaine industrial park in the Colombian jungle --amounted to a fourth of the cocaine previously thought to enter the United States in a year. A Mexican complex of three farms employing 7,000 slave laborers was found to contain 10,000 tons of marijuana, eight times more than Mexico had been thought to produce in a year. The seized marijuana all by itself had an American port-of-entry wholesale value equal to 6.25 percent of Mexico's gross national product. American analysts took those numbers back to their drawing boards and came up with suggestions that narcotics, whose annual worldwide value was quoted at up to $300 billion in the DEA-CIA report, have in fact an annual sales volume exceeding half a trillion dollars.

All in all, one impression emerges most strongly from a consideration of international drug profits. The offenders at the end of the trafficking route are the same as those at the beginning: governments. A high Bolivian official who permits illegal coca production and a Panamanian official who legally, as a matter of government policy, helps traffickers secrete profits are equally culpable. Neither will stop until forced to do so. This may be an unpleasant fact for United States foreign policy formulators to accept, but it is the truth. If the war on drugs isn't a world war, it's not a war at all.

Excerpt 6 The "War on Drugs"
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