Organized Crime, The CIA and the Savings and
The savings and loan scandal of the 1980s has been depicted
in a myriad of ways. To some, it is "the greatest ... scandal
in American history" (Thomas, 1991: 30). To others it is
the single greatest case of fraud in the history of crime (Seattle
Times, June 11, 1991). Some analysts see it as the natural result
of the ethos of greed promulgated by the Reagan administration
(Simon and Eitzen, 1993: 50). And to some it was a premeditated
conspiracy to move covert funds out of the country for use by
the U.S. Intelligence Agency (Bainerman, 1992: 275). All of these
depictions of the S & L scandal contain elements of truth.
But to a large degree, the savings and loan scandal was simply
business as usual. What was unusual about it was not that it happened,
or who was involved, but that it was so blatant and coarse a criminal
act that exposure became inevitable. But with its exposure, three
basic but usually ignored "truths" about organized crime
were once again demonstrated with startlingly clarity:
There is precious little difference between those people who
society designates as respectable and law abiding and those people
society castigates as hoodlums and thugs.
The world of corporate finance and corporate capital is as
criminogenic and probably more criminogenic than any poverty-wracked
The distinctions drawn between business, politics, and organized
crime are at best artificial and in reality irrelevant. Rather
than being dysfunctions, corporate crime, white-collar crime,
organized crime, and political corruption are mainstays of American
It is not our intent to discuss the unethical and even illegal
business practices of the failed savings and loans and their governmental
collaborators. The outlandish salaries paid by S & L executives
to themselves, the subsidies to the thrifts from Congress which
rewarded incompetence and fraud, the land "flips" which
resulted in real estate being sold back and forth in an endless
"kiting" scheme, and the political manipulation designed
to delay the scandal until after the 1988 presidential elections
are all immensely interesting and important. But they are subjects
for others' inquiries. Our interest is in the savings and loans
as living, breathing organisms that fused criminal corporations,
organized crime, and the CIA into a single entity that served
the interests of the political and economic elite in America.
Let us begin by quickly summarizing the most blatant examples
of collaboration between financial institutions, the mob, and
the intelligence community.
First National Bank of Maryland: For two years, 1983-1985,
the First National Bank of Maryland was used by Associated Traders,
a CIA proprietary company, to make payments for covert operations.
Associated traders used its accounts at First National to supply
$23 million in arms for covert operations in Afghanistan, Angola,
Chad, and Nicaragua (Bainerman, 1992; 276-277; Covert Action 35,
The links between the First National Bank of Maryland and
the CIA were exposed in a lawsuit filed in Federal District Court
by Robert Maxwell, a high-ranking bank officer. Maxwell charged
in that suit that he had been asked to commit crimes on behalf
of the CIA. Specifically, he charged that he was asked to conceal
Associated Traders' business activities, which by law he was required
to specify on all letters of credit. Maxwell alleged that he had
been physically threatened and forced to leave his job after asking
that his superiors supply him with a letter stating that the activities
he was being asked to engage in were legal. In responding to Maxwell's
lawsuit, attorneys for the bank state that "a relationship
between First National and the CIA and Associated Traders was
classified information which could neither be confirmed nor denied
(Bainerman, 1992: 276-277; Washington Business Journal, February
Palmer National Bank: The Washington, D.C.-based Palmer National
Bank was founded in 1983 on the basis of a $2.8 million loan from
Herman K. Beebe to Harvey D. McLean, Jr. McLean was a Shreveport
Louisiana businessman who owned Paris (Texas) Savings and Loan.
Herman Beebe played a key role in the savings and loan scandal.
Houston Post reporter Pete Brewton linked Beebe to a dozen failed
S & L's, and Stephen Pizzo, Mary Fricker, and Paul Muolo,
in their investigation of the S & L fiasco, called Beebe's
banks "potentially the most powerful and corrupt banking
network ever seen in the U.S." Altogether, Herman Beebe controlled,
directly or indirectly, at least 55 banks and 29 S & L's in
eight states. What is particularly interesting about Beebe's participation
in these banks and savings and loans is his unique background.
Herman Beebe had served nine months in federal prison for bank
fraud and had impeccable credentials as a financier for New Orleans-based
organized crime figures, including Vincent and Carlos Marcello
(Bainerman, 1992: 277-278; Brewton, 1993: 170- 179).
Harvey McLean's partner in the Palmer National Bank was Stefan
Halper. Halper had served as George Bush's foreign policy director
during the 1980 presidential primaries. During the general election
campaign, Halper was in charge of a highly secretive operations
center, consisting of Halper and several ex- CIA operatives who
kept close tabs on Jimmy Carter's foreign policy activities, particularly
Carter's attempt to free U.S. hostages in Iran. Halper was later
linked both to the "Debategate" scandal, in which it
is alleged that Carter's briefing papers for his debates with
Ronald Reagan were stolen, and with "The October Surprise,"
in which it is alleged that representatives of the Reagan campaign
tried to thwart U.S. efforts to free the Iranian hostages until
after the presidential election. Halper also set up a legal defense
fund for Oliver North.
During the Iran-Contra Affair, Palmer National was the bank
of record for the National Endowment for the Preservation of Liberty,
a front group run by Oliver North and Carl "Spitz" Channell,
which was used to send money and weapons to the contras.
Indian Springs Bank: Another bank with clear connections to
the CIA was the Indian Springs Bank of Kansas City, Kansas (Bainerman,
1992: 279-280; Brewton, 1993: 197-200). The fourth largest stockholder
in Indian Springs was Iranian expatriate Farhad Azima, who was
also the owner of an air charter company called Global International
Air. The Indian Springs bank had made several unsecured loans
to Global International Air, totaling $600,000 in violation of
the bank's $349,00 borrower limit. In 1983 Global International
filed for bankruptcy, and Indian Springs followed suit in 1984.
The president of Indiana Springs was killed in 1983 in a car fire
that started in the vehicle's back seat and was regarded by law
enforcement officials as of suspicious origins.
Global International Air was part of Oliver North's logistical
network which shipped arms for the U.S. government on several
occasions, including a shipment of 23 tons of TOW missiles to
Iran by Race Aviation, another company owned by Azima. Pete Brewton,
in his investigation of the Indian Springs bank collapse was told
that FBI had not followed up on Indian Springs because the CIA
informed them that Azima was "off limits" (Houston Post,
February 8, 1990). Similarly the assistant U.S. Attorney handling
the Indian Springs investigation was told to "back off from
a key figure in the collapse because he had ties to the CIA."
Azima did indeed have ties to the CIA. His relationship with
the agency goes back to the late 1970s when he supplied air and
logistical support to EATSCO (Egyptian American Transport and
Services Corporation), a company owned by former CIA agents Thomas
Clines, Theodore Shackley, and Richard Secord. EATSCO was prominently
involved in the activities of former CIA agent Edwin Wilson, who
shipped arms illegally to Libya. Azima was also closely tied to
the Republican party. He had contributed $81,000 to the Reagan
Global International also had other unsavory connections.
In 1981, Global International made a payment to organized crime
figure Anthony Russo, a convicted felon with a record that included
conspiracy, bribery, and prostitution charges. Russo was the lawyer
of Kansas City organized crime figures, an employee of Indian
Springs, and a member of the board of Global International. Russo
later explained that the money had been used to escort Liberian
dictator Samuel Doe on a "goodwill trip" to the U.S.
Global International's planes based in Miami were maintained
by Southern Air Transport, another CIA proprietary company. According
to Franck Van Geyso, an employee of Global International, pilots
for Global International ferried arms into South and Central America
and returned to Florida with drugs. Indian Springs also made a
loan of $400,000 to Morris Shenker, owner of the Dunes Hotel in
Las Vegas, former attorney for Jimmy Hoffa, and close associate
of Nick Civella and other Kansas City organized crime figures.
At the time the loan to Shenker was made, he, Civella, and other
Kansas City mobsters were under indictment for skimming $280,000
from Las Vegas' Tropicana Casino.
Vision Banc Savings: In March, 1986, Robert L. Corson purchased
the Kleberg County Savings and Loan of Kingsville, Texas, for
$6 million, and changed its name to Vision Banc Savings (Bainerman,
1992: 280-281; Brewton, 1993: 333-351). Harris County, Texas,
judge Jon Lindsey vouched for Corson's character in order to gain
permission from state regulators for the bank purchase. Lindsey
was the chairman of the Bush campaign in 1988 in Harris County
and later received a $10,000 campaign contribution and a free
trip to Las Vegas from Corson (Houston Post, February 11, 1990).
Corson was well-known to federal law enforcement agents as
a "known money launderer" and a "mule for the agency,"
meaning that he moved large amounts of cash from country to country.
When Corson purchased Vision Banc, it had assets in excess of
$70 million. Within four months it was bankrupt. Vision Banc engaged
in a number of questionable deals under Corson leadership, but
none more so that its $20 million loan to Miami Lawyer Lawrence
Freeman to finance a real estate deal (Houston Post, February
4, 1990). Freeman was a convicted money launderer who had cleaned
dirty money for Jack Devoe's Bahamas-to-Florida cocaine smuggling
syndicate and for Santo Trafficante's Florida- based organized
crime syndicate. Freeman was a law partner of CIA-operative and
Bay of Pigs paymaster Paul Helliwell. Corson, in a separate Florida
real estate venture costing $200 million, was indicted on a series
Hill Financial Savings: Vision Banc was not the only financial
institution involved in Freeman's Florida land deals. Hill Financial
Savings of Red Hill, Pennsylvania, put in an additional $80 million
(Brewton, 1993: 346-348) . The Florida land deals were only one
of a series of bad investments by Hill Financial which led to
collapse. The failure of Hill Financial, alone, cost the U.S.
treasury $1.9 billion.
Sunshine State Bank: The cast of characters surrounding the
Sunshine State Bank of Miami also included spies, White House
operatives, and organized criminals (Bainermann, 1992: 281; Brewton,
1993: 310- 312, 320-323). The owner of the Sunshine State Bank,
Ray Corona, was convicted in 1987 of racketeering, conspiracy,
and mail fraud. Corona purchased Sunshine in 1978 with $1.1 million
in drug trafficking profits supplied by Jose Antonio "Tony"
Fernandez, who was subsequently indicted on charges of smuggling
1.5 million pounds of marijuana into the U.S.
Among Corona's customers and business associates were Leonard
Pelullo, Steve Samos, and Guillermo Hernandez-Cartaya. Pelullo
was a well-known associate of organized crime figures in Philadelphia,
who had attempted to use S & L money to broker a major purchase
of an Atlantic City Casino as a mob frontman. Pelullo was charged
with fraud for his activities at American Savings in California.
Steve Samos was a convicted drug trafficker who helped Corona
to set up Sunshine State Bank as a drug money laundry. Samos also
helped set up front companies that funneled money and weapons
to the Contras. Guillermo Hernandez-Cartaya was a veteran CIA
operative who had played a key role in the Bay of Pigs of invasion.
He also had a long career as a money launderer in the Caribbean
and in Texas on behalf of both the CIA and major drug trafficking
Mario Renda, Lender to the Mob: Mario Renda was a Long Island
money broker who brokered deposits to various savings and loans
in return for their agreement to loan money to phony companies
(Brewton, 1993: 45-47; 188-190; Pizzo et al. 1989: 466-471). Renda
and his associates received finders fees of 2 to 6 percent on
the loans, most of which went to individuals with strong organized
crime connections who subsequently defaulted on them. Renda brokered
deals to 160 Savings and Loans throughout the country, 104 of
which eventually failed. Renda was convicted of $16 million from
an S & L and for tax fraud.
Renda also served CIA and National Security Council interests
as a money broker helping arrange for the laundering of drug money
through various savings and loans on behalf of the CIA. He then
obtained loans from the same S & L's, which were funneled
to the Contras. An organized crime-related stockbroker, a drug
pilot, and Renda were all convicted in the drug money laundering
Full-Service Banking: All told at least twenty-two of the
failed S & L's can be tied to joint money laundering ventures
by the CIA and organized crime figures (Glassman, 1990: 16-21;
Farnham, 1990: 90-108; Weinberg, 1990: 33; Pizzo, et al., 1989:
466-471). If the savings and loan scandals of the 1980s reveal
anything, they demonstrate what has often been stated as a maxim
in organized crime research: that corruption linking government,
business, and syndicates is the reality of the day-to-day organization
of crime. Investigations of organized crime in the United States,
Europe, and Asia have all uncovered organized crime networks operating
with virtual immunity from law enforcement and prosecution. Chambliss'
study of organized crime in Seattle exposed a syndicate that involved
participation by a former governor of the state, the county prosecutor,
the police chief, the sheriff, at least 50 law enforcement officers,
leading business people, including contractors, realtors, banks,
and corporation executives, and, of course, a supporting cast
of drug pushers, pimps, gamblers, and racketeers (Chambliss, 1978).
The Chambliss study is not the exception but the rule. Other sociological
inquires in Detroit, Texas, Pennsylvania, New Jersey, and New
York have all revealed similar patterns (Albini, 1971; Block,
1984; Block and Chambliss, 1981; Block and Scarpitti,1985; Jenkins
and Potter, 1989; 1986; Potter and Jenkins, 1985; Potter, 1994).
As Chambliss comments:
In the everyday language of the police, the press, and popular
opinion, "organized crime" refers to a tightly knit
group of people, usually alien and often Italian, that run a crime
business structured along the lines of feudal relationships. This
conception bears little relationship to the reality of organized
crime today. Nonetheless, criminologists have discovered the existence
of organizations whose activities focus on the smuggling of illegal
commodities into and out of countries (cocaine out of Colombia
and into the United States and guns and arms out of the United
States and into the Middle East, for example); other organizations,
sometimes employing some of the same people, are organized to
provide services such as gambling, prostitution, illegal dumping
of toxic wastes, arson, usury, and occasionally murder. These
organizations typically cut across ethnic and cultural lines,
are run like businesses, and consist of networks of people including
police, politicians, and ordinary citizens investing in illegal
enterprises for a high return on their money.
Gary W. Potter Eastern Kentucky University firstname.lastname@example.org
and Third World