CIA's Drug Confession
by Robert Parry
The Consortium magazine, Oct. 15, 1998
Cocaine traffickers and money-launderers swarmed through the
Nicaraguan contra movement in the 1980s to a far greater extent
than was ever known, according to a report by the CIA's inspector
One contra trafficker claimed Ronald Reagan's National Security
Council cleared his work. The NSC's favorite covert airline also
was under suspicion for drug connections, the report stated.
In an historic document released on Oct. 8 -- and nearly ignored
by the major news media -- CIA Inspector General Frederick Hitz
confirmed long-standing allegations of cocaine trafficking by
contra forces. Hitz identified more than 50 contras and contra-related
entities implicated in the drug trade.
Hitz detailed, too, how the Reagan administration protected
these drug operations and frustrated federal investigations which
threatened to expose these crimes in the mid-1980s.
In perhaps the most stunning disclosure, Hitz published evidence
that drug trafficking and money laundering tracked directly into
Reagan's National Security Council where Lt. Col. Oliver L. North
oversaw contra operations.
Hitz also revealed that the CIA placed an admitted drug money
launderer in charge of the Southern Front contras in Costa Rica.
Hitz disclosed, too, that the second-in-command of contra forces
on the Northern Front in Honduras had escaped from a Colombian
prison where he was serving time for a drug conviction.
In the lengthy report -- Volume Two of a two-volume set on
contra drug allegations -- Hitz continued to defend the CIA on
one narrow point: that the CIA did not conspire with the contras
to raise money through cocaine trafficking.
But Hitz made clear that the contra war took precedence over
law enforcement and that the CIA withheld evidence of contra crimes
from the Justice Department, the Congress and even the CIA's own
Among Hitz's new disclosures:
The CIA knew the criminal nature of its contra clients from
the start of the war against Nicaragua's leftist Sandinista government.
The earliest contra force, called ADREN or the 15th of September
Legion, had chosen "to stoop to criminal activities in order
to feed and clothe their cadre," according to a June 1981
draft CIA field report.
ADREN employed terrorist methods, including the bombing of
Nicaraguan civilian planes and hijackings, to disrupt the Sandinista
government, the CIA knew. [Graf 180]
Cocaine smuggling was also in the picture. According to a
September 1981 cable to CIA headquarters, ADREN decided to use
drug trafficking as another financing mechanism. Two ADREN members
made the first delivery of drugs to Miami in July 1981, the CIA
cable reported. [Graf 181]
ADREN's leaders included Enrique Bermudez and other early
contras who would later direct the major contra army, the CIA-organized
FDN. Throughout the war, Bermudez remained the top contra military
commander. The CIA later corroborated the allegations about ADREN's
cocaine trafficking, but insisted that Bermudez had opposed the
drug shipments to the United States which went ahead nonetheless.
The truth about Bermudez's claimed opposition to drug trafficking,
however, is less clear. According to Volume One of Hitz's report,
Bermudez enlisted Norwin Meneses, a large-scale Nicaraguan cocaine
smuggler, to raise money and buy supplies for the contras.
The first volume quoted a Meneses associate, another Nicaraguan
trafficker named Danilo Blandon. In an interview with Hitz's investigators,
Blandon said he and Meneses flew to Honduras to meet with Bermudez
At the time, Meneses's criminal activities were well known
in the Nicaraguan exile community. But the FDN commander told
the cocaine smugglers that "the ends justify the means"
in raising money for the contras.
After the Bermudez meeting, contra soldiers helped Meneses
and Blandon get past Honduran police who briefly arrested them
on drug-trafficking suspicions. After their release, Blandon and
Meneses traveled on to Bolivia to complete a cocaine transaction.
[For details, see iF Magazine, Mar-Apr. 1998.]
There were other indications of Bermudez's drug-smuggling
tolerance. In February 1988, another Nicaraguan exile linked to
the drug trade accused Bermudez of narcotics trafficking, according
to Hitz's report. Continuing its long defense of Bermudez, however,
the CIA dismissed the source as "unstable." [Graf 545]
After the contra war ended, Bermudez returned to Managua,
where he was shot to death on Feb. 16, 1991. The murder has never
In the Southern Front, in Costa Rica, the drug evidence centered
on the forces of Eden Pastora, another leading contra commander.
But Hitz discovered that the U.S. government may have contributed
to the problem.
Hitz revealed that the CIA put a now-admitted drug operative
-- known by his CIA pseudonym "Ivan Gomez" -- in a supervisory
position over Pastora.
Hitz reported that the CIA discovered Gomez's drug history
in 1987 when Gomez failed a security review on drug-trafficking
questions. The CIA then hushed up the discovery.
In internal CIA interviews, Gomez admitted that in March or
April 1982, he helped family members who were engaged in drug
trafficking and money laundering. In one case, Gomez said he assisted
his brother and brother-in-law in transporting cash from New York
City to Miami. He admitted that he "knew this act was illegal."
Later, Gomez expanded on his admission, describing how his
family members had slid $2 million into debt and had gone to Miami
to run a money-laundering center for drug traffickers. Gomez said
"his brother had many visitors whom [Gomez] assumed to be
in the drug trafficking business."
Gomez's brother was arrested on drug charges in June 1982.
Three months later, in September 1982, Gomez started his CIA assignment
in Costa Rica.
Years later, convicted drug trafficker Carlos Cabezas charged
that in the early 1980s, Ivan Gomez was the CIA agent in Costa
Rica who was overseeing drug-money donations to the contras.
Gomez "was to make sure the money was given to the right
people [the contras] and nobody was taking ... profit they weren't
supposed to," Cabezas declared publicly. [Graf 678]
But the CIA sought to discredit Cabezas. He did have trouble
identifying Gomez's picture and put Gomez at one meeting in early
1982 -- before Gomez started his CIA assignment.
Still, Hitz's report offers the first official evidence that
Gomez did have a direct role in drug-money laundering, as Cabezas
There also was more about Gomez. In November 1985, the FBI
learned from an informant that Gomez's two brothers had been large-scale
cocaine importers, with one brother arranging shipments from Bolivia's
infamous drug kingpin Roberto Suarez. [Graf 695]
Suarez already was known as a right-wing financier. In 1980,
with Argentine military support, Suarez bankrolled a coup in Bolivia
that ousted the elected government. The violent putsch became
known as the Cocaine Coup because it made Bolivia the region's
Bolivia's protected cocaine shipments helped transform the
Medellin cartel into a corporate-style business for delivering
cocaine to the U.S. market. Some of those profits allegedly found
their way into contra coffers, partly through Suarez.
Flush with cash in the early 1980s, Suarez invested more than
$30 million in various right-wing paramilitary operations, including
the contra forces in Central America, according to U.S. Senate
testimony by an Argentine intelligence officer, Leonardo Sanchez-Reisse.
In 1987, Sanchez-Reisse stated that the Suarez drug money
was laundered through front companies in Miami before going to
Central America. There, other Argentine intelligence officers
-- veterans of the Bolivian coup -- trained the contras. [For
details, see "Nazi Echo" in The Consortium On-line,
Sept. 19, 1998.]
Hitz added another piece to this contra-Bolivian puzzle. One
contra fund-raiser, Jose Orlando Bolanos, boasted that the Argentine
government was supporting his anti-Sandinista activities, according
to a May 1982 cable to CIA headquarters.
Bolanos made the statement during a meeting with undercover
DEA agents in Florida. He offered to introduce them to his Bolivian
cocaine supplier. [Graf 465]
Despite all this suspicious drug activity around the contras,
the CIA insisted that it did not unmask Ivan Gomez until 1987,
when he failed a security check and confessed his role in his
family's drug business.
The CIA official who interviewed Gomez concluded that "Gomez
directly participated in illegal drug transactions, concealed
participation in illegal drug transactions, and concealed information
about involvement in illegal drug activity," Hitz wrote.
But senior CIA officials still chose to protect Ivan Gomez.
They rejected a proposal that the Gomez case be referred to the
Justice Department. Their rationale was a 1982 DOJ-CIA agreement
that spared the CIA from a legal obligation to report narcotics
crimes by non-employees. [Graf 714]
Instead, the CIA eased Gomez, an independent contractor, out
of the agency in February 1988, without alerting law enforcement
or the congressional oversight committees. [Graf 728]
When questioned about the case nearly a decade later, one
senior CIA official who had supported the gentle treatment of
Gomez had second thoughts.
"It is a striking commentary on me and everyone that
this guy's involvement in narcotics didn't weigh more heavily
on me or the system," the official acknowledged. [Graf 711]
As for the decision not to make a criminal referral, the official
added: "That view that Gomez is not technically an employee
and therefore reporting may not be required is slicing it pretty
thin." [Graf 713]
A Medellin drug connection arises in another section of Hitz's
report, whe he revealed evidence suggesting that some contra trafficking
may have been sanctioned by Reagan's National Security Council.
The protagonist for this part of the contra-drug mystery is
Moises Nunez, a Cuban-American who worked for North's NSC operation
and for two drug-connected seafood importers, Ocean Hunter in
Miami and Frigorificos de Puntarenas in Costa Rica.
Frigorificos de Puntarenas was created in the early 1980s
as a cover for drug-money laundering, according to sworn testimony
by two of the firm's principals -- Carlos Soto and Medellin cartel
accountant Ramon Milian Rodriguez.
Drug allegations began swirling around Nunez in the mid-1980s.
Finally, on March 25, 1987, the CIA questioned Nunez about the
cocaine-trafficking suspicions. He responded by pointing the finger
toward his superiors at the NSC.
"Nunez revealed that since 1985, he had engaged in a
clandestine relationship with the National Security Council,"
"Nunez refused to elaborate on the nature of these actions,
but indicated it was difficult to answer questions relating to
his involvement in narcotics trafficking because of the specific
tasks he had performed at the direction of the NSC. Nunez refused
to identify the NSC officials with whom he had been involved."
After this first round of questioning, CIA headquarters authorized
an additional session, but then senior CIA officials reversed
the decision. There would be no further efforts at "debriefing
Hitz noted that "the cable [from headquarters] offered
no explanation for the decision" to stop the Nunez interrogation.
When asked recently about that decision, former Central American
Task Force planning chief Louis Dupart said he did not recall
the reason for halting the Nunez debriefing.
But Dupart added, "the Agency position was not to get
involved in this matter, and to turn it over to others because
'it had nothing to do with the Agency, but with the National Security
Council. We ... told Congress and [Iran-contra special prosecutor
Lawrence] Walsh. That's all we had to do. It was someone else's
problem'." [Graf 492]
Dupart's boss, task force chief Alan Fiers, stated that the
Nunez-NSC drug lead was not pursued "because of the NSC connection
and the possibility that this could be somehow connected to the
Private Benefactor program [the contra money handled by North].
A decision was made not to pursue this matter." [Graf 494]
According to CIA records, the CIA briefed Sens. Warren Rudman
and William Cohen, two Republicans on the Senate Intelligence
Committee, about the Nunez case. Dupart offered to arrange a committee
interview with Nunez but that apparently never happened. [Graf
The CIA did interview Nunez again in September 1987 -- five
months after his admission and at the height of the Iran-contra
scandal. Nunez began insisting that he had no relationship with
the NSC. [Graf 495]
By then, however, Joseph Fernandez, former CIA station chief
in Costa Rica, had confirmed to congressional Iran-contra investigators
that Nunez "was involved in a very sensitive operation"
for North's "Enterprise." The exact nature of that NSC-authorized
activity has never been divulged.
The CIA gave Walsh the material about Nunez's claim of NSC
authorization, but not until February 1988 -- nearly a year after
the admission and then only as part of a large batch of documents
delivered at the end of Walsh's North investigation.
If supplied in a timelier fashion, the Nunez statement and
the other evidence of money laundering might have put into focus
a part of the North case that always remained fuzzy: his personal
handling of dirty money.
According to littled-noticed documents that emerged during
the Iran-contra scandal, North tapped into a money-laundering
network that pulled $2.7 million in untraceable cash off New York
The cash deliveries were arranged through a Republic National
Bank officer named Nan Morabia. She sent bags filled with cash
to North's operatives who took the money to Washington. [For details,
see iF Magazine, July-Aug. 1997]
Mysterious money was showing up elsewhere in the contra operation.
A total of $14 million materialized in 1985 to finance the so-called
Arms Supermarket which supplied weapons to the contras in Honduras.
North's handwritten notes from July 12, 1985, record a warning
from a CIA officer in the field that "$14M [million] to finance
came from drugs."
The Arms Supermarket owner, Ronald Martin, denied the drug
taint, but acknowledged that the financing was handled by a Cuban-American
banker named John Molina, who moved money from wealthy individuals
through Panamanian banks.
In 1987, John Molina told his brother, Pablo, that he had
worked for the CIA from 1980 until April 1987 arranging letters
of credit to purchase arms for the contras and other U.S.-backed
forces in Latin America.
As the money poured in, John Molina confided to his brother
that he suspected that some came from drug trafficking. In an
interview with me, Pablo Molina quoted John as saying, "There's
too much money coming in. ... You can't imagine how much money
A nervous John Molina tried to pull out of the operation in
1987. But he received one last assignment: to close out some contra
front companies in Panama.
On Oct. 2, 1987, after completing that work, John Molina left
the law offices of Sucre y Sucre in Panama City. He walked to
his car and climbed in.
A young man approached from the side and shot Molina in the
head. The assassin was later captured and claimed that he was
dispatched by Colombian kingpins to murder Molina. [For details,
see iF Magazine, July-Sept. 1997]
During the Iran-contra investigation, however, Walsh never
zeroed in on the money laundering or the drug trafficking. In
March 1988, Walsh indicted North for crimes related to false statements,
document destruction and other relatively minor offenses.
While Moises Nunez may have worked for the NSC, the CIA worked
directly with other drug-connected Cuban-Americans on the contra
project, Hitz found.
One of Nunez's Cuban-American associates, Felipe Vidal, had
a criminal record as a narcotics trafficker in the 1970s. But
the CIA still hired him to serve as a logistics coordinator for
the contras, Hitz reported. [Grafs 508-511]
The CIA soon learned that Vidal's drug connections were not
only in the past. A December 1984 cable to CIA headquarters revealed
Vidal's ties to Rene Corvo, another Cuban-American suspected of
drug trafficking. [Graf 512]
Corvo was working with anticommunist Cuban, Frank Castro,
who was viewed as a Medellin cartel representative within the
contra movement. [For details, see sidebar, "Contras' Narco-Terrorist."]
There were other narcotics problems with the CIA's Felipe
Vidal. In January 1986, the Drug Enforcement Administration in
Miami seized 414 pounds of cocaine concealed in a shipment of
yucca that was going from a contra operative in Costa Rica to
Ocean Hunter, where Vidal worked. [Graf 526]
Despite the evidence, Vidal remained a CIA employee as he
collaborated with Frank Castro's assistant, Rene Corvo, in raising
money for the contras, according to a CIA memo in June 1986.
By fall 1986, Sen. John Kerry had heard enough rumors about
Vidal to demand information about him as part of a congressional
inquiry into contra drugs.
But the CIA withheld the derogatory information. On Oct. 15,
1986, Kerry received a briefing from Alan Fiers who didn't mention
Vidal's drug arrests and conviction in the 1970s. [Graf 527]
Vidal was not yet in the clear, however. In 1987, the U.S.
attorney in Miami began investigating Vidal, Ocean Hunter and
other contra-connected entities.
This prosecutorial attention worried the CIA. The CIA's Latin
American division felt it was time for a security review of Vidal.
But on Aug. 5, 1987, the CIA's security office blocked the review
for fear that the Vidal drug information "could be exposed
during any future litigation." [Grafs 520-22]
As expected, the U.S. Attorney did request documents about
"contra-related activities" by Vidal, Ocean Hunter and
16 other entities. The CIA advised the prosecutor that "no
information had been found regarding Ocean Hunter," a statement
that was clearly false. [Graf 528]
The CIA continued Vidal's employment as an advisor to the
contra movement until 1990, virtually the end of the contra war.
Hitz revealed that drugs also tainted the highest levels of
the Honduran-based FDN, the largest contra army.
Hitz found that Juan Rivas, a contra commander who rose to
be chief of staff, admitted that he had been a cocaine trafficker
in Colombia before the war. The CIA asked Rivas, known as El Quiche,
about his background after the DEA began suspecting that Rivas
might be an escaped convict from a Colombian prison. [Graf 562]
In interviews with CIA officers, Rivas acknowledged that he
had been arrested and convicted of packaging and transporting
cocaine for the drug trade in Barranquilla, Colombia. After several
months in prison, Rivas said, he escaped and moved to Central
America where he joined the contras. [Graf 563]
Defending Rivas, CIA officials insisted that there was no
evidence that Rivas engaged in trafficking while with the contras.
But one CIA cable noted that he lived an expensive lifestyle,
even keeping a $100,000 thoroughbred horse at the contra camp.
Contra military commander Bermudez later attributed Rivas's
wealth to his ex-girlfriend's rich family. But a CIA cable in
March 1989 added that "some in the FDN may have suspected
at the time that the father-in-law was engaged in drug trafficking."
Still, the CIA moved quickly to protect Rivas from exposure
and possible extradition to Colombia. In February 1989, CIA headquarters
asked that DEA take no action "in view of the serious political
damage to the U.S. Government that could occur should the information
about Rivas become public." [Graf 569]
In a Feb. 22, 1989, note, the CIA's director of operations,
Richard Stoltz, argued that "what we have here is a single,
relatively petty transgression in a foreign country that occurred
a decade ago and that is apparently of no current interest to
DEA." [Graf 573]
Rivas was phased out of the contra leadership with an explanation
of poor health. With U.S. government help, he was allowed to resettle
in Miami. Colombia was not informed about his fugitive status.
Another senior FDN official implicated in the drug trade was
its chief spokesman in Honduras, Arnoldo Jose "Frank"
The drug allegations against Arana dated back to 1983 when
a federal narcotics task force put him under criminal investigation
because of plans "to smuggle 100 kilograms of cocaine into
the United States from South America."
On Jan. 23, 1986, the FBI reported that Arana and his brothers
were involved in a drug-smuggling enterprise, although Arana was
Arana sought to clear up another set of drug suspicions in
1989 by visiting the DEA in Honduras with a business associate,
Jose Perez. Arana's association with Perez, however, only raised
If "Arana is mixed up with the Perez brothers, he is
probably dirty," the DEA responded.
Through their ownership of an air services company called
SETCO, the Perez brothers were associated with Juan Matta Ballesteros,
a major cocaine kingpin connected to the murder of a DEA agent,
according to reports by the DEA and U.S. Customs.
Hitz reported that someone at the CIA scribbled a note on
the DEA cable about Arana stating: "Arnold Arana ... still
active and working, we [CIA] may have a problem." [Grafs
Despite its drug ties to Matta Ballesteros, SETCO emerged
as the principal company for ferrying supplies to the contras
During congressional Iran-contra hearings, FDN political leader
Adolfo Calero testified that SETCO was paid from bank accounts
controlled by Oliver North. SETCO also received $185,924 from
the State Department for ferrying supplies to the contras in 1986.
Hitz found other air transport companies used by the contras
implicated in the cocaine trade. Even FDN leaders suspected that
they were shipping supplies to Central America aboard planes that
might be returning with drugs.
Mario Calero, Adolfo Calero's brother and the chief of contra
logistics, grew so uneasy about one air-freight company that he
notified U.S. law enforcement that the FDN only chartered the
planes for the flights south, not the return the flights north.
Hitz found that some drug pilots simply rotated from one sector
of the contra operation to another. Donaldo Frixone, who had a
drug record in the Dominican Republic, was hired by the CIA to
fly contra missions from 1983-85.
Frixone then was implicated in September 1986 smuggling 19,000
pounds of marijuana into the United States. In late 1986 or early
1987, he went to work for Vortex, another U.S.-paid contra supply
company linked to the drug trade. [Grafs 996-1000]
One of Hitz's most dramatic findings was evidence implicating
Southern Air Transport, the principal airline of North's Iran-contra
operations and a former CIA-owned airline.
In the mid-1980s, Southern Air flew missiles to Iran as well
as supplies to the contras. SAT crewmen were involved in one flight
that was shot down over Nicaragua on Oct. 5, 1986, exposing part
of North's Iran-contra network.
After that event, Attorney General Edwin Meese III briefly
blocked a federal investigation into Southern Air on national
security grounds. But suspicions about SAT were just starting.
Wanda Palacio, who had ties to the Medellin cartel, told Senate
investigators that she witnessed Ochoa operatives loading cocaine
aboard SAT planes in both 1983 and 1985.
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