OFFICE OF INSPECTOR GENERAL INVESTIGATIONS STAFF REPORT OF I

Your relationship with government is simple: government knows everything about you, and you know nothing about government. In practice this means government can do whatever it wants to you before you know it's going to happen. Government policy makers think this is a good way of ensuring citizen compliance. Thus, all of these investigations are retrospective -- they look back at the squirrely shit that government has pulled, and occasionally wring their hands about trying to avoid it happening in the future. Not inspiring reading, but necessary if you are to face the cold reality that Big Brother is more than watching.

Re: OFFICE OF INSPECTOR GENERAL INVESTIGATIONS STAFF REPORT

Postby admin » Sun Jun 14, 2015 7:56 pm

PART 4 OF 5

CONCLUSION

Was CIA involved in the investigation of The Frogman Case? No information has been found to indicate that CIA or anyone acting on behalf of CIA was involved in the criminal investigation of Julio Zavala and his associates, though a relative of one of those arrested or charged did have a relationship with CIA until mid-1982.

To what extent, and why, did CIA become involved in the prosecution of The Frogman Case? What was the effect of CIA involvement in the prosecution?

CIA Records. CIA records indicate that the Agency first learned of The Frogman Case on July 30, 1984 when a cable from an LA Division Station informed Headquarters that the local representative of a U.S. law enforcement entity had brought a DoS telegram to its attention. The DoS telegram indicated that an AUSA for the Northern District of California and an FBI Special Agent were requesting permission to travel to San Jose to question two "anti-Sandinistas" in connection with the prosecution of a cocaine trafficking case identified as U.S. v Zavala.

Although the AUSA and the FBI Special Agent were not identified by name in the LA Division cable, the DoS telegram did identify them. Further the DoS telegram stated that AUSA Zanides and the FBI Special Agent would be attending "court-ordered depositions on Francisco Aviles Saenz and Vincente [sic] Rappaccioli Marquis."

Vicente Rappaccioli Marquis, who was proposed to be deposed, is identified in CIA records as having been a member of the board of directors of the PCNE. No information has been found to indicate that CIA ever had any relationship with this individual. However, CIA personnel in the LA Division Station apparently misidentified him as a former Agency asset.

In its July 30, 1984 cable informing Headquarters of the planned depositions in San Jose, the LA Division Station identified Francisco Aviles Saenz by name. However, the LA Division Station cable did not provide Headquarters with the name of the second individual. Instead, the Station cable referred to this second individual by a CIA cryptonym that had been assigned in 1980 to the misidentified former asset. According to the Station cable, the misidentified former asset had also been associated with the Contra movement.

The Station also reported that both Francisco Aviles and the misidentified former asset had been members of a Nicaraguan exile group. Although that group is not further discussed in the Station cable, Agency records indicate that the group unwittingly received CIA support.

The July 30, 1984 cable from the LA Division Station also asked Headquarters and several other field stations for any additional information that might be available in their files concerning Aviles and the misidentified former asset. The cable also asked for information regarding who Zavala was, the charges against him and whether there was any connection between Zavala, Aviles and the misidentified former asset. In closing, the LA Division Station noted that it was "concerned that this kind of uncoordinated activity [i.e., the AUSA and FBI visit and depositions] could have serious implications for anti-Sandinista activities in Costa Rica and elsewhere."

Agency records indicate that Vicente Rappaccioli Marquis--who was to be deposed and with whom the Agency had no relationship--was born on July 15, 1928. The misidentified former Agency asset differed in age from Rappaccioli by more than 10 years. By mid-1981, regular CIA contact with the misidentified former asset had ceased, and all contact appears to have ended sometime in 1982.

A Headquarters desk officer assigned to the DO/Central America Task Force (CATF) preliminarily responded to the LA Division Station in an August 1, 1984 cable. The CATF cable cited a 1983 media report that identified Zavala as a 39-year-old illegal alien from South San Francisco named Julio C. Zavala Moreno. The cable also reported that CIA had no information in its records concerning Zavala.

With respect to Aviles, the August 1, 1984 CATF cable stated that CIA records indicated that Aviles, a member of the Nicaraguan Democratic Conservative Party (PCN), had attended an August 1982 conference in Miami in which senior members of the PCN had created a faction of the party in exile--the PCNE. At that conference, according to CIA records, Aviles had been elected to be the secretary of the PCNE's board of directors. The August 1, 1984 cable also stated that the Agency had no information to indicate any connection between Aviles, Zavala and the misidentified former asset. Finally, the cable stated that the Agency was contacting the FBI for information regarding Zavala.

CIA records also show that the CATF desk officer sent a brief note and a copy of the July 30, 1983 LA Division Station cable to the Freedom, Privacy and Litigation Group (FPLG) of the DO's Information Management Staff (IMS). At that time, FPLG was the DO's focal point for matters relating to litigation that involved DO information.

An August 2, 1984 memorandum from FPLG to the CATF desk officer in CIA records indicated that the Agency's Office of General Counsel (OGC) had been made aware of the case, probably by FPLG, by that date. The memorandum stated that the proposed depositions of Aviles and the misidentified former asset would relate to whether approximately $30,000 that was seized from Zavala at the time of his arrest was acquired through business transactions, rather than cocaine trafficking. Further, the memorandum indicated that FPLG and OGC representatives were planning to meet with "the AUSA" on August 7, 1984, following which "the AUSA" would go to Costa Rica to take the depositions later in August. The FPLG memorandum did not specify the identities of the Agency's representatives or the location of the planned meeting with the AUSA.

The August 2, 1984 FPLG memorandum also asked that the CATF desk officer provide a "summary" of the activities of Aviles and the misidentified former asset in preparation for the FPLG and OGC meeting with the AUSA. Finally, the FPLG memorandum indicated that, once "the AUSA" provided further details, the Agency could "determine whether our equities will be affected." No information has been found to indicate any CATF response to this memorandum's commentary or request for a summary of the activities of Aviles and the misidentified former asset.

On August 3, 1984, Headquarters advised the LA Division Station of what had been learned about the Zavala case. The cable, originated by FPLG, indicated that the depositions that were scheduled for August 16, 1984 in Costa Rica were in response to a motion by Zavala's attorney and are "subject to court order that [the U.S.] Government not interfere or discourage compliance." The genesis for this statement may have been a recently unsealed transcript of a June 12, 1984 in camera proceeding relating to a motion by Zavala's attorney under Rule 15 of the Federal Criminal Code and Rules which pertains to depositions. The transcript of that proceeding indicated that the late Robert Peckham, the presiding U.S. District Court Judge, stated at that time, in part:

Now, there is a serious problem, though, that perhaps we should mention now, and perhaps even address first, and that is, that in the papers Mr. Zavala, through his counsel, indicates that the deponent's identify [sic] must remain secret to prevent the CIA from coercing the witnesses and to altering their proffered testimony.

The August 3, 1984 Headquarters cable to the LA Division Station also indicated that testimony in the Zavala case would concern the "source of money confiscated in cocaine raid in San Francisco." The Station was advised that--to avoid giving Zavala's defense attorneys a "possible issue"--the Station should make no effort to contact the two individuals who were to be deposed. Further, Headquarters advised the LA Division Station that there was no reason to believe that Zavala's attorneys were aware that the misidentified former asset had any association with CIA. The Headquarters cable also stated, without further explanation, that the depositions "may be avoided if planned legal action is successful." Finally, the Station was informed that FPLG and OGC representatives "will meet 7 August with Assistant U.S. Attorney to draft [a] course of action."

On August 3, another LA Division Station responded to the request for information about Aviles and informed Headquarters that Aviles was not well regarded. The Station further reported that Aviles had been asked to leave a Contra support group in Costa Rica around August 1983 when questions were raised regarding his handling of the group's funds.

The exact date of the FPLG and OGC meeting with the AUSA has not been determined although, as indicated earlier, the meeting was scheduled for August 7, 1984. On August 16, 1984, the U.S. Embassy in San Jose informed the LA Division Station that the planned visit of AUSA Zanides and an FBI Special Agent had been canceled. The Station informed Headquarters of this development on August 17, 1984 and indicated that an Embassy official had said that the visit of the "U.S. Attorney" had been canceled by the "Funny Farm," a term that the LA Division Station took to mean CIA. The LA Division Station went on to say that it had told the Embassy official that CIA had no interest in the case following receipt of the August 1, 1984 cable from the CATF branch. The Station also suggested that Headquarters might "wish [to] ascertain if [the "Funny Farm"] reference was indeed to [CIA] and, if so, correct the misunderstanding." Additionally, Headquarters was asked to inform the LA Division Station of any actions it had taken in regard to the depositions so that "we may reassure the [Embassy official] that [CIA] had no hand in cancellation of trip."

On August 14, 1984, a memorandum to FPLG from another IMS entity provided additional information concerning the results of the review of CIA records for any information regarding Zavala. The memorandum stated that there was no indication that Zavala was in the United States illegally or that he had he ever been the subject of any request for CIA records under the Privacy Act or Freedom of Information Act. On September 28, 1984, Chief/FPLG forwarded the memorandum to OGC for information.

On August 24, 1984, Headquarters sent a cable to three LA Division Stations informing them that CIA had indeed been a factor in the decision of the San Francisco United States Attorney's Office to return the money to Zavala and cancel the deposition trip to Costa Rica. This cable stated:

Following discreet approach to senior Department of Justice official, [OGC] personally contacted the Chief of Criminal Division and Chief of Drug Task Force in U.S. Attorney's Office in San Francisco to ascertain details of the subject prosecution and to avoid inquiry into activities or other [CIA] interests.

We were advised that Zavala had been arrested on 13 February 1983 in San Francisco and subsequently indicted on charges of "possession with intent to distribute" and "continuing criminal enterprise (CCE)." At the time of his arrest, a substantial quantity of cocaine was seized in addition to approximately $36,000 in U.S. currency. Although Zavala has pleaded guilty to "possession," he will require the U.S. to go to trial on the CCE charge which carries a minimum sentence of 80 months. Prior to Zavala's arrest, he had been the subject of a wiretap for some four months. During this period he and certain family members had inexplicably traveled to San Jose.

On the day of the [OGC] visit to San Francisco, the U.S. Attorney learned that one Francisco Aviles Saenz had executed an affidavit in San Jose which claimed that the money seized from Zavala belonged to [a Contra support group], that it had been collected from supporters of the party, and that these supporters included certain unnamed but official United States "organs." The copy which we saw, but could not retain pending authorization from the Court, was an official English translation and appeared to be one of many that had been made by defendant or his attorneys.

With a general briefing concerning the background of and relationship between [the misidentified former asset], Aviles and [CIA] interests, it was agreed by all that any litigation concerning the currency seizure would be fruitless. In essence the United States Attorney could never disprove the defendant's allegation that his was [a Contra support group] or [CIA] money, especially in light of the roles which [the misidentified former asset] and Aviles have played in the anti-Sandinista community. Accordingly, at [OGC's] request the U.S. Attorney has agreed to return the money to Zavala and to make no use of it during the trial of Zavala on the CCE charge.

It was for this reason that the scheduled depositions in San Jose have been canceled. Notably, [OGC] also learned that both [the misidentified former asset] and Aviles were volunteer witnesses for the defendant and planned to testify at their deposition as to the source of the money in question. We can only guess at what other testimony may have been forthcoming. As matter now stands, [CIA] equities are fully protected, but [OGC] will continue to monitor the prosecution closely so that any further disclosures or allegations by defendant or his confidants can be deflected.

While this particular aspect was successfully resolved, the possibility of potential damage to [CIA] interests was not lost on the U.S. Attorney or [Headquarters]. By virtue of [the misidentified former asset's] relationship as former [covert action] asset and member of board of directors of [a Contra organization], Aviles role as director of the [Contra support group] office in San Jose, and their formal claim of drug-tainted money, case could be made that [CIA] funds are being diverted by [CIA] assets into the drug trade. Indeed, close relationship between Zavala, a convicted drug dealer, and [the misidentified former asset] and Aviles could prove most damaging especially if any relationship, no matter how indirect, were to continue. As long as [the misidentified former asset] and Aviles continue to play any role in the anti-Sandinista movement, any public disclosure of the foregoing would have as a certain element the fact that they were "linked to" or "assets of" [CIA].

While the United States Attorney was most deferential to our interests, it was strongly suggested that we take every measure possible to ascertain any involvement by [the misidentified former asset] or Aviles in narcotics trade and/or the possibility as to whether [CIA] funds given to [a Contra support group] might arguably have been diverted. No action other than discreet inquiries should be undertaken without [Headquarters] approval and no discussion of U.S. vs. Zavala issue with Aviles or [the misidentified former asset] may take place without U.S. Attorney approval. We would appreciate any information [twoLA Division Stations] can provide to clarify these issues.
8. . . .

9. . . .

10. . . .

(Emphasis added.)

No further information has been found in CIA files regarding the precise nature of the "discreet approach" to DoJ that was referred to in the first sentence of this cable. It also has not been possible to identify with any degree of certainty the senior DoJ official who reportedly discussed the Zavala case with an OGC attorney. A number of former OGC officials believe that Criminal Division Deputy Assistant Attorney General Mark Richard was the person most likely to have represented DoJ in such a discussion, but he has no recollection of the matter.

Information in the OGC file regarding the Zavala case appears to indicate that the majority of the text of the August 24, 1984 cable was originally written by OGC, although the Chief of the CATF branch concerned was indicated as the originator of the cable. The OGC file contains eight documents, including handwritten notes. One of the documents is a draft of the August 24, 1984 cable to the three LA Division Stations. With the exception of minor revisions and the addition of operational information in paragraphs 8, 9 and 10, the text of the cable sent to the three LA Division Stations on August 24, 1984 is the same as that contained in draft form in the OGC file.

An August 22, 1984 OGC cover note to FPLG, subject "United States v. Zavales [sic]" and signed by OGC Assistant General Counsel Lee S. Strickland, stated:

Please find attached a proposed draft cable for [the LA Division] station concerning the subject prosecution. While paragraphs 6 and 7 are rather strong, I believe the station must be made aware of the potential for disaster. While the allegations might be entirely false, there are sufficient factual details which would cause certain damage to our image and program in Central America.

OGC travel records for the period have been destroyed in accordance with routine U.S. Government records management schedules. A surviving abstract summary of those records is of insufficient detail to establish whether it was in fact Strickland who traveled to San Francisco on behalf of OGC during the relevant time period. Entries in the abstract summary indicate that a number of OGC personnel traveled during the general time period but the name of the traveler, the specific dates of such travel and the destination are, in many cases, not specified. Several entries in the abstract summary list San Francisco as one such destination, but the name of the traveler is not specified.

The LA Division Station, in a September 8, 1984 response to the August 24, 1984 Headquarters cable, reported that it had additional information pertaining to the misidentified former asset. According to the report, the misidentified former asset had last been seen about March 1982 in Managua, Nicaragua. Since that contact, the misidentified former asset had reportedly married and was currently living somewhere in a foreign country. According to the report, the misidentified former asset was a "good man."

An OGC weekly report regularly prepared by General Counsel Stanley Sporkin for senior CIA officials made reference to the Zavala case. The October 26, 1984 report contained several factual errors, including mischaracterizing Aviles as a CIA assettating his position with the Contra support group. The relevant portion of the weekly report, which closely approximated the wording of the August 24, 1984 Headquarters cable to the LA Division Station in many respects, stated:

U.S. v. Zavala: During our quarterly review of Agency litigations, we decided to provide summaries of cases which the Director might find interesting. This is such a case. Several months ago, the [the LA Division] station queried Headquarters concerning a proposed visit by two U.S. Attorneys from San Francisco to interview two individuals who were assets--one [the misidentified former asset] and one the Chairman of the Board of Directors of a [Contra support group] funding mechanism (Francisco Aviles). Following a discreet approach to a senior Department of Justice official, we contacted the Chief of Criminal Division and Chief of Drug Task Force in U.S. Attorney's Office in San Francisco to ascertain details of the subject prosecution.

We were advised that Zavala had been arrested on 13 February 1983 in San Francisco and subsequently indicted on charges of "possession with intent to distribute" and "continuing criminal enterprise" (CCE). At the time of his arrest, a substantial quantity of cocaine was seized in addition to approximately $36,000 in U.S. currency. Although Zavala has pleaded guilty to "possession," he will require the U.S. to go to trial on the CCE charge which carries a minimum sentence of 80 months. Prior to Zavala's arrest, he had been the subject of a wiretap for some four months. During this period, he and certain family members had inexplicably traveled to San Jose.

Contemporary with our visit to San Francisco, the U.S. Attorney learned that Aviles, one of our assets,uted an affidavit in San Jose which claimed that the money seized from Zavala belonged to [a] political exile party . . . , that it had been collected from supporters of the party, and that these supporters included certain unnamed but official United States "organ[ization]s." The copy which we saw was an official English translation and appeared to be one of many that had been made by defendant or his attorneys.

This matter raises obvious questions concerning the people we are supporting in Central America and we are continuing our inquiry into this matter internally in conjunction with all concerned components.

Then-Counsel to the DO Ernest Mayerfeld forwarded the OGC weekly report to the Deputy Director for Operations with a brief memorandum on October 30, 1984. Mayerfeld's memorandum suggested the Zavala case was not as serious as portrayed in OGC's weekly report:

This is an item taken from weekly news sheet put out by Stan Sporkin. This one covers last week's events. I don't know whether you had heard about this case - I had not. I talked to the lawyer that is handling this case, who tells me that the graymail aspects of this case are quite routine and he has every reason to believe that he can avoid, with the excellent cooperation of the San Francisco prosecutor, any public disclosure of our involvement. I do not think this is a big flap and ought not to be made into one. On the basis of what I know so far, I feel the final paragraph of the attached [weekly report] overstates things.

On November 2, 1984, Headquarters sent a cable to two LA Division Stations asking for information regarding Aviles and his role in Contra support groups. The Stations both responded on November 5, and one of them suggested that Headquarters contact a CIA officer who had formerly been assigned to that Station and might possess relevant background information. On November 7, 1984, Headquarters sent a cable to that officer explaining that certain information was needed by Headquarters "to prepare a report regarding the involvement of . . . Francisco Aviles in U.S. v. Zavala case now in litigation in San Francisco." In a November 8 response to Headquarters, the CIA officer said he had no information to offer.

U.S. District Court/U.S. Attorney's Office Records. During the prosecution of Zavala, the defense attorneys filed a motion in June 1984 to place under seal the Aviles and Rappaccioli letters and other related documents that claimed that the money seized from Zavala's home belonged to the Contras. The motion was granted by the Court. On August 8, 1984, the U.S. Attorney's Office's motion to remove the documents from under seal was granted by the Court. However, the next day, the Court vacated the unsealing order. AUSA Zanides recalls that, upon learning of the contents of the letters when they were unsealed, the U.S. Attorney immediately moved to re-seal the materials pending a further review. This was done because the U.S. Attorney did not know whether the persons named in the letters were assets of CIA.

The documents that had been sealed have now been removed from seal by the U.S. District Court for the Northern District of California after CIA and DoJ asked the U.S. Attorney's Office to file a motion requesting that this be done. The documents that were formerly under seal include:

Document number 639--a Supplemental Declaration of Judd C. Iversen in Support of Deposition that was filed with the Court on June 18, 1984;

Document number 730--a transcript of a June 12, 1984 in camera proceeding involving arguments by the defense and the prosecution relating to the Rule 15 motion;

Document number 745--a Declaration of Judd C. Iversen in Support of Motion for Order Granting Leave to Take Deposition dated June 4, 1984 and filed with the Court on August 28, 1984. This document included as attachments:

An unsigned receipt for $45,000 in Spanish on PCNE letterhead that is dated January 24, 1983 and with an English translation of the Spanish text typed above the PCNE letterhead. A forensic analysis requested by CIA/OIG from DoJ's INS Forensic Document Laboratory indicates that the receipt is a composite document, i.e., it is a photocopy of two documents butted together;

A photocopied document--in Spanish--titled TESORERIA ("Treasury"), signed by Vicente Rappaccioli, on PCNE letterhead. In the document, Zavala is identified as having been named "ASISTENTE DE ESTA TESORERIA GENERAL DEL PARTIDO CONSERVADOR, AUTHORIZADO PARA COLECTAR DENTRO DE LOS ESTADOS UNIDOS DINERO PARA LA LIBERACION DE NICARAGUA DEL COMUNISMO INTERNACIONAL." ("Assistant to the General Treasury of the Conservative Party, authorized to collect within the United States money for the liberalization [sic] of Nicaragua from international communism.");

An unsigned photocopy of an English translation of document (b) but with different type face and on plain bond paper;

A photocopied document--in Spanish--addressed A QUIEN CONCIERNE ("To Whom It May Concern") on PCNE letterhead. The document is signed by Aviles as the "SECRETARIO POLITICO" ("Political Secretary") and by Rappaccioli as the "TESORERO" ("Treasurer"). Following a brief description of the PCNE's goals and objectives, the document continues that Zavala:

". . . . ES MIEMBRO DEL PARTIDO CONSERVADOR COMO ASISTENTE DE TESORERIA Y SE ENCUENTRA EN LOS ESTADOS UNIDOS DE NORTE AMERICA PROMOVIENDO LA REINSTAURACION DE LA DEMOCRACIA EN NICARAGUA, PARA DICHA MISION LE FUE ENTREGADA LA CANTIDAD DE CUARENTA Y CINCO MIL DOLARES EN EFECTIVO, EN LA ULTIMA SEMANA DE ENERO DE MIL NOVECIENTOS OCHENTA Y TRES EN SAN JOSE, COSTA RICA. LA RETENCION DE ESTE DINERO PERJUDICANDO EL PROCESO DE LIBERACION, CON SUS CONSECUENCIAS NATURALES. (". . . is a member of the Conservative Party as assistant treasurer and is located in the United States of America promoting the reinstatement of democracy in Nicaragua, for which mission he received forty five thousand dollars in cash, on the last week of January, 1983 in San Jose, Costa Rica. The retention of this money is prejudicing the progress of liberation, with natural consequences.")

ROGAMOSLE MUY ENGARECIDAMENTE A LAS AUTORIDADES CORRESPONDIENTES DEVOLVERNOS DICHO DINERO." ("We dearly implore that the corresponding authorities return said money.");

An unsigned photocopy of an English translation of document (d) on plain bond paper;

Several photocopies of newspaper clippings. One of the clippings was of a front page article from the July 14, 1983 edition of the San Francisco Examiner titled "CIA Buildup in Nicaragua." The other article was from an unidentified Spanish-language newspaper pertaining to The Frogman Case and was titled "Somocistas en Trafico de Drogas." ("[Counterrevolutionary] Drug Trafficking");

Document 684--a notarized letter in Spanish, signed by Aviles, on UDN letterhead. It appears to be an original and is dated May 15, 1984. In addition, it has attached to it a separate English language "official translation" notarized on May 29, 1984 by an officer of the U. S. Embassy in San Jose. Following a brief introductory paragraph regarding the goals and objectives of the UDN, the letter--and its "official translation"--includes the following statements by Aviles:

"Qué el señor Julio Cesar Zavala Moreno es miembro de esta organización desde hace varios anos." ("That Mrs. Julio Cesar Zavala Moreno [sic] is a member of this organization since several years ago.")

"Antes de la última semana de enero de 1983 hizo varios viajes a Costa Rica trabajando para ésta organización." ("That before the last week of January, 1983 he made several trips to Costa Rica, working for this organization.")

"En su último viaje se le entrego la suma de cuarenta y cinco mil dólares en efectivo para compras propias de nuestra actividad." ("That on his last trip the amount of forty-five thousand dollars in cash was given to him for purchases characteristic to this organization.")

"Dicho dinero fué recaudado entre nuestros coloboradores aquí en Costa Rica." ("That said money was collected amongst our collaborators, here in Costa Rica.")

"El Organismo del Gobierno Americano, varias veces nos ha prestado ayuda para la lucha anticomunista que se realiza en Nicaragua." ("That the American Government Organism [sic] has assisted us many times in the anticommunist fight which is taken [sic] place in Nicaragua.")

"La retención de dicho dinero esta perjudicandonos el proceso de liberación que ya estamos en la etapa final." ("That the retention of said money is damaging the freeding [sic] process which is in its last stage.")

"El suscrito firmante esta dispuesto de ofrecer testimonio de lo anteriormente relacionado ante la Embajada Americana en San José, Costa Rica, si fuese necesario." ("That the undersigned is willing to offer evidence with regard to what has been stated above before the American Embassy in San Jose, Costa Rica, if necessary.")

Other documents relating to the Rule 15 motion found in U.S. Attorney's Office records may have been subject to the original sealing order. However, the documents described above are the totality of documents that the U.S. District Clerk's Office identified as removed from seal by virtue of the August 6, 1997 U.S. District Court order.

A September 25, 1984 memorandum from OGC Attorney Strickland to FPLG indicated that the U.S. Attorney's Office consulted with CIA on September 24 regarding the sealing of documents relating to the letters. In discussing a declaration in which defense attorney Iversen alleged, among other things, "that the CIA has engaged in the cocaine trade," the Strickland memorandum stated:

The U.S. Attorney, as he did in the previous instances, asked if there was any reason to seal this declaration. For the same reasons as with the Avilies [sic] affidavit, I indicated there were none but that I would check with the Directorate of Operations.

Please advise me by telephone if you agree with our assessment.

No information has been found to indicate that FPLG responded--by telephone or otherwise--to Strickland's memorandum.

The declaration that Strickland referred to in his September 25, 1984 memorandum may be document number 745--Declaration of Judd C. Iversen in Support of Motion for Order Granting Leave to Take Deposition. That declaration by defense attorney Iversen stated, in part:
. . . .

Based on the information I have received, I am informed and believe that agents of the United States government were intricately involved in the alleged conspiracy and either sanctioned the use of cocaine trafficking to raise funds for contra revolutionary activity and/or entrapped Defendant into participating under the belief that such activity was sanctioned.

I am informed and believe that the depositions of the Secretary and Treasurer of the Conservative Party of Nicaraguans (Francisco Avilessanez [sic], Esq. and Vicente Rappaccioli Marquis) are necessary testimony to present the defense of entrapment and/or outrageous Government conduct on behalf of Defendant Zavala.

I am informed and believe that the CIA engaged in drug trafficking during the Viet Nam War [sic] as a means to fund covert operations.
. . . .

The Zavala case files in the U.S. Attorney's Office include an August 6, 1984 memorandum concerning an August 3 telephone conversation between AUSA Zanides and Marvin Cahn, one of Zavala's two defense attorneys. This conversation occurred at least four days prior to any visit by OGC attorney Strickland with Zanides. The memorandum indicated that the seized money and proposed depositions in Costa Rica were among several matters that were discussed. It noted that Zanides told Cahn that "Washington was having fits with the money situation with regard to the trip to Costa Rica."

According to the memorandum, Zanides asked Cahn "what it was that [the Zavala defense attorneys] really wanted from the depositions and if an explanation of the source of the money" was the main issue. Cahn was noted to have said that the money was the major issue, and Zanides wrote that he then asked "Would it be necessary to go to Costa Rica if I decided to forget the money." According to Zanides' memorandum, Cahn "thought that would be okay, but he would have to talk to Judd Iversen and get back to [Zanides]."

The Zavala case files in the U.S. Attorney's Office also contain an August 27, 1984 memorandum concerning an August 20 telephone conversation between Zanides and OGC attorney Strickland regarding information in CIA files pertaining to Zavala.rd to this information, this memorandum noted that:

On August 20, 1984, I returned the call of Strickland . . . .

In sum, Strickland advised that all traces with respect to Julio Zavala had come back totally negative. Strickland advised that he had not merely requested the so-called 201 trace, but a trace for any information whatsoever. It was all negative.

He asked whether or not he could get a copy of the documents currently under seal, and I told him the Court would have to remove the seal before we could obtain any copies.

Subsequently, the U.S. Attorney's Office and Zavala's attorneys agreed in an October 1984 "Stipulation Regarding Disposition of Funds" that:

The U.S. would not introduce the "sum of $36,800" it seized from Zavala's home as evidence; and

A cashier's check for $36,800 would be made payable to Zavala and Aviles "and presented to Julio Zavala through his undersigned counsel in San Francisco."

Relevant U.S. District Court records indicate that the Stipulation was signed by Zavala's defense attorneys Judd Iversen and Marvin Cahn on October 1, by AUSA Mark Zanides on October 2, and by Zavala on October 4, 1984.

Records of the U.S. Attorney's Office indicate that a cashier's check for $36,800, dated September 27, 1984 and identifying Aviles and Zavala as the payees, was hand delivered to defense attorney Iversen in early October 1984. Records of the U.S. Attorney's Office also indicate that AUSA Zanides signed for the check from the FBI on September 27, 1984. A letter transmitting the check from Zanides to defense attorney Iversen is dated October 2, 1984.

The cashier's check was for a total of $36,800, not the $36,020 amount that was reportedly seized from Zavala at the time of his arrest. Although the reason for the discrepancy is unclear, one possible explanation is that the additional $780 represents interest accrued while the money was in the possession of the U.S. Government.

Individual Statements: Aviles. Aviles initially questioned whether the letters he had provided the Court and that had been placed under seal in 1984 had been altered. Aviles examined a photocopy of the May 15, 1984 letter he had sent and questioned whether various paragraphs had been "cut and pasted." Subsequently, Aviles conceded that his earlier statements were not correct and that the letter appeared to be genuine. A forensic analysis of the original letter conducted by the DoJ's INS Forensic Document Laboratory at the request of CIA/OIG found no apparent evidence of tampering.

Individual Statements: Zavala. Zavala recalls that, after the Aviles and Rappaccioli letters arrived from Costa Rica claiming that the money belonged to the Contras, defense attorney Iversen wanted to go to Costa Rica and get depositions from Aviles and Rappaccioli. Zavala also recalls that AUSA Zanides made clear that he did not want to go to Costa Rica to take the depositions, but did not explain why. In any event, Zavala says that Zanides approached Zavala or Iversen with an offer to forego introducing the seized money into evidence if the defense request for the depositions was dropped. Zavala says the money was not his to begin with and that he insisted the money be returned to its rightful owner. Zanides agreed to return the money several days later, according to Zavala.

Zavala recalls that two checks were actually issued. The first was made out to both him and Aviles and was given to defense attorney Iversen by Zanides. Iversen then reportedly turned the check over to Zavala's mother-in-law who had been given limited power of attorney by both Zavala and Aviles. Zavala's mother-in-law's name is the same as that of her daughter, Doris Salomon. Zavala says that his mother-in-law told him that, when she tried to cash the check, the FBI was notified and--apparently believing that Zavala's fugitive wife Salomon was attempting to cash the check--raced to the bank, confiscated the cashier's check and temporarily detained his mother-in-law.

Zavala says he became quite angry at what he perceived to be the U.S. Government's reneging on the agreement to return the money. Zavala says he was also angry that Aviles was made a co-payee on the check. Zavala argues that, since the money was seized from him, the check should have been made out to him exclusively. Zavala claims that, following further negotiations between his attorneys and the U.S. Attorney's Office, a second check was made out to him exclusively. It was cashed at a local savings and loan by his mother-in-law, using the limited power of attorney she had received from Zavala. Zavala recalls that some of the money was returned to Aviles by Zavala's mother-in-law, but does not know the exact amount Aviles received.

Individual Statements: U.S. Attorney's Office Personnel. Joseph Russoniello, the former U.S. Attorney in San Francisco during whose tenure The Frogman Case was prosecuted, says that he was not much involved in The Frogman Case and does not recall many details. Russoniello says that he has no recollection of ever discussing the case with a CIA representative and has no knowledge of anyone in his office being contacted by CIA concerning the Zavala case. Regarding the proposed depositions in Costa Rica, Russoniello recalls that, when he heard that the amount of money in dispute was about $36,000, his "first and last reaction" was that it would cost a great deal to take the depositions and that "it wasn't worth it."
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Re: OFFICE OF INSPECTOR GENERAL INVESTIGATIONS STAFF REPORT

Postby admin » Sun Jun 14, 2015 7:56 pm

PART 5 OF 5

In a March 19, 1986 letter that he wrote in response to the March 16, 1986 article in the San Francisco Examiner, Russoniello took issue with the newspaper's inference that Zavala and other defendants in The Frogman Case may have been given preferential treatment by his office because of their association with the Contras. The text of Russoniello's letter is as follows:

Gentlemen:

I was at first surprised and then mildly amused as I read your Sunday, March 16, front page story "linking" a Bay Area cocaine ring with the Nicaraguan contras. My amusement turned to outrage, however, when I reflected on what the story said or intimated about the role the U.S. Attorney's office played in this drama.

The story gave the clear impression to those who read it, including at least three Congresspersons whose views you reported as front page "news" the following day, that Julio Zavala had been given preferential treatment by the U.S. Attorney's office because of his association with the contras and that we had covered up the proof of this treatment and the truth of the matter of his contra connection. Both impressions are wrong and you were outfitted with enough of the facts to dispel this impression but did not print them, for whatever reason . . . . the least of which must have been space constraints since you did find room to print a five column photograph taken perhaps as long as 24 hours after the pre-dawn arrests and seizures of January 17, 1983.

Zavala was not given special treatment, unless you consider "special treatment" to be our best efforts to get him sentenced to fifteen years in prison rather than the ten years the Court imposed. He pleaded guilty to one Conspiracy and one Possession with Intent to Distribute Cocaine count which left the charge of conducting a Continuing Criminal Enterprise carrying a minimum of ten years and life top [sic] sentence unresolved. Despite pressure from the Court to dismiss the charge (a page from the Court transcript is enclosed for your perusal) we insisted and got a trial at which Zavala had the right to present whatever evidence he chose in mitigation or explanation of his conduct. He was convicted. We recommended fifteen years. As is its prerogative in the federal system, the Court sentenced him to serve a mandatory minimum ten years. Zavala offered no evidence of U.S. Government complicity or CIA sponsorship at trial and no evidence of humanitarian purpose or patriotic overzealousness at sentencing.

We did no favors for Zavala's then-girlfriend, now his wife, Doris Salomon. Whatever may have been her past political interests, she was convicted on drug trafficking in 1981 and fled from the United States. We did not oblige her efforts to hide in Costa Rica but extradited her to San Francisco where she was sentenced to three years in prison on March 5, 1985. We had recommended a substantial prison term because of her "lack of contrition and continuing deceitful conduct."

We did return $36,020 to Zavala. It had nothing to do with any claim that the funds came from the contras or belonged to the contras. It had to do with the fact that it would have cost the taxpayers who were expected by the Court to pay for all travel by all counsel at least that much to fund the excursion to Costa Rica to take the necessary depositions for the problematical result we might be permitted to keep the seized funds. It made no economic sense to me to do this. No "higher ups" were involved, as Congresswoman Boxer wrongfully surmises. The U.S. Attorney had the authority then to compromise claims up to a $100,000 ceiling and I exercised that authority. The authority has since been increased to $200,000. While $36,000 may seem like a significant sum and people might disagree with our decision to return it, against the background that the cocaine seized had a value of $100 million and that we have millions of dollars in property and currency subject to forfeiture in this district at any given time ($20 million at present) and that little was to be gained from expending valuable agent and attorney time in further quest of what were by comparison "nickels and dimes," the decision was reasonable, justifiable and I make no apology for having made it.

Regarding the alleged coverup, it must be borne in mind that most of the information concerning the Court-approved wiretaps, the Cabezas trial testimony and the like is in the public record of the Court and has been for at least one year. Only the declarations of certain persons who made claim to the money were sealed at the government's request and then, not because of the truth of what was stated but because the mere allegations, true or not, related to national security as that term is defined by the Classified Information Procedures Act. We were duty bound, not by fiat but by an Act of Congress, to protect that information from unauthorized disclosure and we did. There is no more to it.

As to the contention that defendants Zavala and Cabejas' [sic] drug dealings were tied to the contras and inspired or supported, perhaps by the CIA, while the accusation is scintillating, I remind you that there is absolutely no evidence of CIA involvement and there is absolutely no evidence to warrant the insinuation the defendants were connected to the contras except that their own statements they offered after the fact of arrest and in a futile attempt to explain away their own conduct claim so. Such alibiing is not uncommon among the criminally accused and its validity is usually suspect for that reason. Even if some inference could have been drawn from their own statement that might have otherwise raised a suspicion of "contra" connection, going to print eighteen months after the events reported (the declarations were unsealed August 8, 1984) but coincident with the President's well publicized speech to the Nation in which he sought support for aid to the contras removed any doubt but that this story was one of the most blatant attempts at contrived news-making we have witnessed in recent years.

We examined 11,000 intercepted telephone calls covering the period August 22, 1982 to February 26, 1983 and have reviewed them again to be certain of the facts. There is no reference to any contra activity; no known contra leaders are identified by name or by inference. Given that wiretaps disclosed the most intimate details of drug trafficking, one would have expected some reference to the contras . . . . there was none.

What is really shameful about this story, though, is that it has taken the hint of scandal to arouse certain members of Congress to the issue of drug trafficking and its impact on the Bay Area. Were it not for the opportunity your story provided we might never have heard them speak out on the subject at all. I hope they'll be as quick to apologize when they have all the facts as they were to condemn when they had read only a part of the full story.

Moreover, lost in the shuffle is the fact that literally dozens of federal agents from several agencies worked together tirelessly to develop and successfully prosecute the cases that led to the conviction of thirty-two members of a sophisticated, well-established international drug smuggling ring. It does a disservice to them to permit the hint of scandal to linger

. . . .

Very truly yours,

S/

JOSEPH P. RUSSONIELLO

United States Attorney

(Emphasis added.)

AUSA Zanides says he was assigned as lead attorney in the Zavala case on the day the arrest warrant regarding Zavala was executed. This was probably, he recalls, on or about February 15, 1983. Zanides recalls that Zavala's indictment did not identify any specific amount of cash to be forfeited because it was not known with any certainty at the time of the indictment that Zavala had large amounts of cash in his residence. According to Zanides, any cash seized was forfeitable if it constituted proceeds from criminal activity.

Although the August 24, 1984 cable from Headquarters to the three LA Division Stations indicated that OGC initiated contact with the United States Attorney's Office, Zanides recalls that it was he who first "reached out" to advise CIA of the Zavala matter and to determine what information CIA could provide. CIA, according to Zanides, reported back to him that it had found no information in its files pertaining to Zavala. In any event, Zanides says he received a visit from a CIA attorney to discuss the Zavala case. Zanides says he does not recall the name of the CIA attorney who visited him at the time. After examining eight photographs, Zanides selected a photograph of Lee Strickland as closely resembling the CIA attorney with whom he met. Zanides says he is not sure of the timing of the visit, but estimates that it was the summer of 1984.

Zanides says that he and the CIA attorney engaged in an "opaque conversation" and that the CIA attorney provided little or no explanation regarding what the CIA's interests were in the case. Nevertheless, Zanides recalls the CIA attorney stressing to him that the CIA would be "immensely grateful if these depositions did not go forward." He says he cannot recall whether the CIA attorney told him that CIA had any connection with the two individuals who were to be deposed, but he "did not infer they were CIA assets." Zanides recalls, however, that the CIA attorney was "very concerned about the public identification" of the individuals who were to be deposed.

Zanides' recollection of the meeting is that the CIA attorney was only interested in the persons who were to be deposed and that the CIA attorney did not indicate to him that there was any CIA interest in Zavala or the seized money. Zanides also says that CIA "never asked for special favor [in the case], no one from CIA asked me to give the money back to Zavala in so many words."

Zanides says he recalls making handwritten notes at the time of his meeting with the CIA attorney. However, no such notes could be located in the files of the U.S. Attorney's Office. Zanides is also confident that he advised James Lassart, then-Chief of the Organized Crime Drug Enforcement Task Force in the U.S. Attorney's Office in San Francisco, and possibly even Russoniello, of the meeting with the CIA lawyer.

Zanides states that "we did not need the money [as evidence] for the case." Zanides is adamant that the money would have been introduced as evidence and not given back to Zavala had there been any question regarding the need to use the money in the case against Zavala. As Zanides recalls, the seized money did not become an issue until June 1984, long after Zavala's arrest, when defense attorney Judd Iversen unexpectedly submitted a Rule 15 motion to the court.

Zanides says he has no recollection of being directly involved in the preparations to go to Costa Rica to take the depositions, although he does recall that he may have had concerns regarding where the depositions were to be conducted. Zanides says his preference was to use the U.S. Embassy in San Jose. In any event, Zanides is confident that Russoniello made the decision to return the money to Zavala, thus negating the need to take any depositions in Costa Rica.

Zanides recalls that Russoniello believed that the trip to Costa Rica was too expensive. In explaining why the trip would have been so expensive, Zanides says that the traveling party had expanded to include himself, an FBI Special Agent, a court reporter, Zavala's two defense attorneys, and possibly a translator. Zanides says he was not disappointed that the trip was canceled since it would have entailed another week of trial preparation. In any event, Zanides says that the trip to Costa Rica "was never on as far as I was concerned."

Zanides recalls believing at the time that Zavala's defense attorneys wanted to accompany the prosecuting attorneys to Costa Rica so they could use the opportunity to try to impeach a confidential informant. As recalled by Zanides, defense attorney Iversen wanted the Zavala defense team to go to Costa Rica "so they could mess with" this confidential informant.

James Lassart, then-Chief of the Organized Crime Drug Enforcement Task Force in the San Francisco United States Attorney's Office, recalls some sort of civil action involving the forfeiture of the seized money in the Zavala case and that the government faced a choice between chasing witnesses in Central America or giving the money back. Lassart says a decision of that nature would have been made--if not by Russoniello personally--at least with direct participation of Russoniello. He recalls that Russoniello made the decision--based on cost effectiveness--not to take the depositions in Costa Rica. Thus, the matter was "resolved." Lassart says he does not recall why the depositions were needed in the first place. Lassart says, "It would have had to be the idea of the defense attorney. We would have had to be driven down there kicking and screaming."

John Gibbons, then-Chief of the Criminal Division for the San Francisco United States Attorney's Office, is identified by name in notes found in OGC's Zavala case file. However, Gibbons says he does not recall discussing the Zavala case with a CIA attorney, and he is not able to offer any insights into the trip to Costa Rica or the return of the seized money to Zavala.

Individual Statements: CIA Personnel. The now-retired FPLG representative says that she has no specific recollection of the events relating to the Zavala case. The CATF desk officer says he also has no recollection of his interactions with the FPLG representative or of the August 1, 1984 cable to an LA Division Station that identified him as the originator and stated that the Agency had no information relating to Zavala. The CATF desk officer says his responsibilities included file searches, preparing cables and other correspondence. He recalls that inquiries to the FBI were invariably via cable, and not in person.

Former OGC attorney Strickland says he has no recollection of the Zavala case. He recalls traveling to San Francisco on behalf of CIA on several occasions, but does not recall whether these trips were related to the Zavala prosecution. After reviewing relevant documents, Strickland says he has no doubt that he did go to San Francisco to meet with representatives of the U.S. Attorney's Office in connection with the Zavala case.

Strickland says he has no recollection of the circumstances under which he became involved, but observes that the small number of documents in the OGC file regarding the Zavala case suggests that the case was "not a big deal" at the time. The Zavala case file is marked with the handwritten notation "closed-confirmed by [telephone conversation] with AUSA-LSS 1-5-86." Strickland recognizes the handwriting and the "LSS" initials as his own and speculates he probably contacted AUSA Zanides to determine the final resolution of the case. Strickland says the meeting referred to in the August 24, 1984 Headquarters cable between OGC and the chiefs of the Criminal Division and Drug Task Force indicates to him that CIA had "gone in at the top" in its contacts with the San Francisco U.S. Attorney's Office regarding the case.

Strickland says his duties in OGC were in the Litigation Division and focused primarily on civil cases. A criminal case such as the Zavala prosecution that possibly involved CIA assets or operations would more typically have been handled by OGC's Operational Support Division, or possibly by the OGC Counsel for the DO. Strickland says that he recalls working on about a half dozen criminal cases at most while he was in OGC. To place this number in perspective, Strickland says that he carried a case load that could have been as high as 200 cases at any particular time. Strickland's 1984 Performance Appraisal Report (PAR) notes that the majority of his work was on matters unrelated to criminal prosecutions and says that Strickland "carries one of the heaviest workloads in the Office."

Strickland states that the sentence in the August 24, 1984 Headquarters cable to the three LA Division Stations that pertains to the return of the money to Zavala--i.e., "Accordingly, at [OGC] request the U.S. Attorney has agreed to return the money to Zavala and to make no use of it during the trial of Zavala on the CCE charge"--may have been "inartfully worded," i.e., it gives too much credit to OGC's influence on the decision. Strickland observes that there may have been a fear at the time that, if the money were not returned, Aviles might have instituted some type of judicial action in an effort to have the money returned on behalf of the Contras. The publicity resulting from such an action would have been of concern to CIA.

Strickland speculates that it is possible that AUSA Zanides or others at the U.S. Attorney's Office were not pursuing the money aspect of the case for their own reasons, and that Strickland--in response to that information--may have suggested that the money be given back to Zavala. This would have eliminated the need to take the depositions in Costa Rica, and prevented any further attention to the matter by the Zavala defense. Strickland notes that, if the money were not to be used to support criminal charges and were not to be subject to a civil forfeiture proceeding, the remaining option was to return it.

In this context, Strickland suggests that his presentation to AUSA Zanides when he traveled to San Francisco may not have been a "hard sell." Strickland makes clear that he would no doubt remember if the United States Attorney's Office had opposed the idea of returning the money and engaged in a "knock down and drag out fight" over the matter.

Former CIA General Counsel and current U.S. Federal District Court Judge Stanley Sporkin says he has no recollection of The Frogman Case. Sporkin says that the relevant CIA records suggest to him that the Agency clearly did not want this information on the front page of the newspapers.

Sporkin notes that OGC representatives kept him and other Agency officials properly advised as is evidenced by OGC's weekly report for the period ending October 26, 1984, a report that Sporkin personally signed. Sporkin adds that "we clearly were not trying to help [Zavala] keep drug money." In explaining the purpose for discussing the Zavala case in OGC's weekly report to senior CIA managers, Sporkin says, "I did what a lawyer is required to do, send [relevant material] to the client."

Although Sporkin has no current recollection of the Zavala case, he says:

Maybe we should have found out more whether [sic] or not the money was drug proceeds, but the U.S. Attorney would not want any other agency to be involved in investigating a case he was prosecuting.

In any event, Sporkin adds, "Under my regime [as General Counsel], it was my policy not to succumb to graymail and a person who violated the law would be vigorously prosecuted as the law required."

Former Deputy General Counsel Edward Dietel comments that the Zavala case "wasn't explosive except for the money part." Dietel says that there would have been no violation of any OGC procedure at that time if Sporkin was kept informed of the case by the responsible lawyer. In any event, "a request like that would have had to have had [Sporkin's] blessing."

Dietel recalls that OGC had a "lot of dealings" with the United States Attorney's Office in San Francisco in the 1980s relating to a "steady flow" of cases. These cases typically were handled by a small group of about ten OGC attorneys. He does not recall whether Strickland was a member of this small group. Moreover, Dietel says there were regular case review meetings in which General Counsel Sporkin would meet with a representative of each OGC division to review each case. There were also oral briefings of Sporkin on an ad hoc basis, as well as memoranda and other means by which Sporkin was kept informed of significant events. How each case was documented in OGC records, however, was not always consistent since "we had more work than time to do it."

George Clarke, then-Chief of OGC's Litigation Division and Strickland's immediate supervisor, says he has no recollection of The Frogman Case although "it has a vague ring to it." He recalls that OGC's Operational Support Division typically handled criminal cases, but that the Operational Support Division would use Litigation Division attorneys to assist it as necessary. The OGC files pertaining to the Zavala case do not indicate whether Operational Support Division asked for Litigation Division assistance with respect to the Zavala case. Clarke notes, however, that a copy of the August 3, 1984 Headquarters cable appears to have been routed to the then-Chief of the Operational Support Division, Litigation Division attorneys sometimes handled some cases under the supervision of the Chief of the Operational Support Division and that over time Clarke worked to end this practice and have all litigation handled by the Litigation Division. The former Chief of Operational Support--who no longer works for CIA--says he has no specific recollection of this case nor does he recall any case in which he asked Lee Strickland to represent CIA as the case attorney.

Then-Deputy Chief of OGC's Litigation Division Page Moffett says he has no recollection of The Frogman Case. He says, "We would not have just called up the AUSA and dealt with him; for a variety of reasons, we would have contacted [the Department of Justice] first." Moffett believes the sentence in the August 24, 1984 Headquarters cable to the three LA Division Stations that pertains to the return of the money to Zavala--i.e., "Accordingly, at [OGC] request the U.S. Attorney has agreed to return the money to Zavala and to make no use of it during the trial of Zavala on the CCE charge"--might have been hyperbole. Moffett adds, "We never asked [an AUSA] to drop a prosecution," and "We tried not to intrude in a prosecutor's decision." Additionally, "If [John] Gibbons [Chief of the Criminal Division at the San Francisco U.S. Attorney's Office] thought it was not appropriate, then he would not have returned the money."

Individual Statements: Zavala's Defense Attorneys. Judd Iversen, one of Zavala's two defense attorneys, says that Russoniello described the money that was refunded to Zavala as "chump change." Iversen agrees that, in terms of the expense necessary to obtain the depositions in San Jose, the prosecution's decision to return the money was a "practical move." Iversen adds that it would have been evident to him if there were other motivating factors that influenced the decision to return the money. His sense is that Lassart is a man of integrity and that "if the CIA was involved, the prosecution would not have handled the case as they did." Iversen further observes that it "probably made no sense from the U.S. Attorney's perspective" to travel all the way to Costa Rica for the depositions.

Iversen says the cost of travel by members of the defense team to Costa Rica would have been paid from funds provided by the Criminal Justice Act. The funds for the expenses of such travel by U.S. Attorney's Office representatives, on the other hand, would have come from the U.S. Attorney's budget.

Iversen says he remembers it was a "nightmare" to cash the check that returned Zavala's money since one of the payees was in "South America." Although he has no specific recollection of Zavala's mother-in-law's role regarding the check, Iversen says he may have said something to Zavala about a power of attorney in relation to the check, but "it was not my task to cash the check." The check could have been mailed or delivered to Iversen by the U.S. Marshals for Zavala. Iversen has no recollection of a second, replacement check being provided, although he believes Zavala's wife Doris Salomon may have had some involvement in the cashing of the check.

Iversen also claims that Marvin Cahn, Zavala's other defense attorney, was called by someone from DoS who reportedly said that the defense attorneys should not travel to Costa Rica and threatened to pull their passports if they did. Cahn recalls having had telephone discussions with DoS officials regarding Embassy support to the depositions trip. However, he recalls absolutely no threat, explicit or implicit, regarding his passport should he have gone to Costa Rica. Cahn makes clear that, had such threats been made, he would have protested this both in Court and in the media.

Cahn does not accept the contention of Zanides, Lassart and Russoniello that the money was given back to Zavala to avoid the cost of taking the depositions. He recalls that the prosecution initially argued that going to Costa Rica to take depositions might involve some element of personal risk, possibly because of the general turmoil in the region. Cahn calls this argument "ridiculous."

Cahn also recalls that Russoniello, in justifying the return of the money, claimed that the amount of money involved was not worth contesting. Cahn characterizes Russoniello's assertion as "absolutely ridiculous," noting that he recalls that the U.S. Attorney's Office fought hard in other cases to retain seized assets of even lesser value than the money seized from Zavala.

When the money was returned, Cahn recalls having thought that "something is going on." Moreover, Cahn suspects that the prosecution did not want the two individuals in Costa Rica to be deposed because that could have led to the disclosure of some type of U.S. Government activity in Central America. Cahn speculates that this was the reason Russoniello chose to return the money and forego using it as evidence against Zavala.

CONCLUSION

To what extent and why did CIA become involved in the prosecution of The Frogman Case? CIA did make contact with prosecutors in the Zavala prosecution in order to protect what CIA believed was an operational equity, i.e., a Contra support group in which it had an operational interest. A CIA cable indicates that approximately $36,000 seized from Zavala at the time of his arrest was returned to Zavala--based on the claim they were Contra funds--by the prosecutors at CIA's request. However, the prosecutors state that the decision to return Zavala's money was based on other considerations, not CIA's representations, and that there was no evidentiary value to retaining the money. In any event, the actions taken by CIA to have the cash returned did not appear to be intended to influence the outcome of Zavala's trial, which resulted in his conviction.

To what extent did CIA respond to congressional inquiries regarding The Frogman Case?

A June 12, 1985 routing slip from the DO transmitted to CIA's Comptroller, as an attachment, proposed DO responses to May 2, 1985 questions from the House Appropriations Committee (HAC) regarding the Contras. One question related to allegations of corruption by Contra officials. Included in the lengthy DO response to that particular question was the statement that there was, "according to the FBI, no obvious connection between Zavala and Cabezas and the Nicaraguan resistance." No information has been found to indicate whether or how CIA conveyed this information to the HAC.

In the late 1980s, as part of an investigation into matters related to the Contra war, a subcommittee of the Senate Foreign Relations Committee (SFRC) examined alleged Contra links to drug trafficking. CIA records indicate that CIA officials met with the Chief Counsel of the SFRC on May 8, 1986 to discuss the SFRC's investigation. A May 8, 1986 CIA memorandum for the record regarding this meeting noted that the SFRC "had received a letter written by the U.S. Attorney in San Francisco that refuted the charges that members of the democratic resistance had been involved in drug smuggling." Attached to the memorandum was a copy of the March 19, 1986 letter from United States Attorney Russoniello to the San Francisco Examiner responding, among other things, to charges that The Frogman Case defendants were in any way connected to the Contras.

As part of its investigation, the SFRC asked the FBI to provide the Committee with documents relating to the "San Francisco narcotics investigation on Julio Zavala." As a result of the SFRC request, the FBI asked CIA on February 20, 1987 to review three of the FBI documents that referred to CIA.

On April 17, 1987, following a review of the FBI documents, CIA informed the FBI that it could not "consent to the FBI providing the SFRC with this information. The documents reveal an Agency source, and it is our policy not to provide such information to a committee which is not charged with the oversight of intelligence agencies."

Chronology of Key Developments Related to The Frogman Case

1980

July 11 -- CIA cable makes reference to Julio Zavala as source of drugs for Nicaraguan Government official.

1982

June 17 -- CIA terminates relationship with the relative of one of the individuals arrested or convicted in connection with The Frogman Case.

1983

January 17 -- Law enforcement authorities arrest 12 individuals and seize 430 pounds of cocaine in San Francisco.

February 15 -- Arrest of Julio Zavala, Carlos Cabezas and others. Cocaine, cash and other items seized from Zavala's home.

1984

July 6 -- Zavala enters guilty plea to conspiracy to import cocaine and possession with intent to distribute cocaine.

July 27 -- DoS telegram requests U.S. Embassy, San Jose permission for AUSA Zanides and FBI Special Agent to visit San Jose for "court-ordered depositions" of Francisco Aviles and Vicente Rappaccioli.

July 30 -- LA Division Station informs CIA Headquarters of the DoS telegram. Station misidentifies Rappaccioli as a former asset and Aviles as former San Jose office manager for a Contra support group.

August 1 -- CIA Headquarters informs LA Division Station no CIA records exist concerning Zavala and there is no known connection between the misidentified former asset, Aviles and Zavala.

August 2 -- FPLG memorandum indicates CIA representatives are to meet with "the AUSA" on August 7.

August 3 --

CIA Headquarters informs LA Division Station that the misidentified former asset and Aviles "will testify as to source of money confiscated in cocaine raid in San Francisco" and that CIA representatives will meet with AUSA on August 7 "to draft course of action."

Telephone conversation between AUSA Zanides and Zavala defense attorney Cahn regarding whether depositions would be necessary if AUSA Zanides "decided to forget the money."

August 7 -- Date FPLG memorandum indicates CIA representatives are to meet with AUSA.

August 17 -- LA Division Station reports "U.S. Attorney" visit canceled.

August 20 -- OGC attorney Strickland informs AUSA Zanides in telephone conversation that CIA has no information in its files pertaining to Zavala.

August 24 -- CIA Headquarters informs LA Division Station that U.S. Attorney's Office, at OGC request, returned money that had been seized in Zavala's home, thus negating need for Aviles and the misidentified former asset depositions.

September 8 -- LA Division Station reports that the misidentified former asset had married and was believed to be living in a foreign country.

September 24 -- U.S. Attorney's Office asks OGC attorney Strickland if there is any reason to seal Iversen declaration that alleges that "CIA has engaged in the cocaine trade."

September 27 -- Date of cashier's check that returned $36,800 to Zavala.

October 1-4 -- AUSA Zanides, defense attorneys Iversen and Cahn, and Zavala sign Stipulation Regarding Disposition of Funds" pertaining to "sum of $36,800."

October 2 -- Date of transmittal letter for cashier's check from AUSA Zanides to defense attorney Iversen.

October 26 -- OGC weekly report to senior CIA officials makes reference to Zavala case and "raises obvious questions concerning the people we are supporting . . . . "

October 30 -- Memorandum to Deputy Director for Operations from Counsel to DO downplays concerns expressed in OGC weekly report.

November -- Series of CIA cables asking LA Division Stations for information pertaining to Contra support groups and Aviles.

1985

March 19 -- Zavala found guilty of operating a Continuous Criminal Enterprise and other related charges.

March 29 -- Zavala sentenced to 10 years confinement.

June -- House Appropriations Committee response prepared by CIA that there was, "according to the FBI no obvious connection between Zavala and Cabezas and the Nicaraguan Resistance."

September -- Aviles polygraphed during security processing for position with UNO/FARN General Staff.

1986

March 16 -- San Francisco Examiner publishes article linking Contras with drug trafficking activities of Zavala and Cabezas.

March 19 -- Date of U.S. Attorney Russoniello's letter to the editors of the San Francisco Examiner refuting many aspects of the March 16 article.

April 9 -- CIA Headquarters asks two LA Division Stations and an FR Division Station for information pertinent to the San Francisco Examiner article.

April 10 --

FR Division Station reports that FBI treated The Frogman Case as purely criminal matter with no known link between Zavala, Cabezas and the Contras.

LA Division Station reports that allegations linking Fernando Chamorro to California drug traffickers are "completely false." Aviles reportedly dismissed from UNO/FARN as a result of the article.

April 11 --

LA Division Station reports that Aviles acted independently, possibly in exchange for money.

LA Division Station reports that Fernando Chamorro denied having knowledge or involvement with Zavala and others named in the San Francisco Examiner article.

CIA Headquarters reports that Aviles and Rappaccioli had acted purely on their own authority when they provided letters on behalf of Zavala to the U.S. District Court.

May 8 -- In meeting with CIA officials, Chief Counsel for the Senate Foreign Relations Committee (SFRC) indicates that he had "received a letter written by the U.S. Attorney in San Francisco that refuted the charges that members of the democratic resistance had been involved in drug smuggling."

1987

February 20 -- In response to a SFRC request for FBI documents pertaining to The Frogman Case, FBI asks CIA to review documents that contain CIA information.

April 17 -- Following internal review, CIA informs FBI that it could not "consent to your providing the Senate Foreign Relations Committee with this information . . . . "
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CONCLUSIONS

Did CIA have any relationship or dealings with Ross, Blandon or Meneses? No information has been found to indicate that any past or present employee of CIA, or anyone acting on behalf of CIA, had any direct or indirect dealing with Ricky Ross, Oscar Danilo Blandon or Juan Norwin Meneses. Additionally, no information has been found to indicate that CIA had any relationship or contact with Ronald J. Lister or David Scott Weekly. No information has been found to indicate that any of these individuals was ever employed by CIA, or met by CIA employees or anyone acting on CIA's behalf.

Was the drug trafficking of Ross, Blandon or Meneses linked to CIA or Contra activities? No information has been found to indicate that Ross provided any money to any Contra group at any time, or that he had any contact or connection to the Contras or CIA.

No information has been found to indicate that the drug trafficking activities of Blandon and Meneses were motivated by any commitment to support the Contra cause or Contra activities undertaken by CIA.

Blandon and Meneses claim that they each donated between $3,000 and $40,000 to Contra sympathizers in Los Angeles. No information has been found to substantiate these claims. Moreover, no information has been found to indicate that Meneses or Blandon received any CIA or Contra support for their drug trafficking activities.

Blandon did have a personal relationship with Eden Pastora and provided him with financial assistance in the form of rent-free housing and two vehicles. Much of this assistance was provided to Pastora after he left the Contra movement.

Did CIA intervene or otherwise play a role in any investigative and judicial processes involving the drug trafficking activities of Ross, Blandon or Meneses? No information has been found to indicate that CIA hindered, or otherwise intervened in, the investigation, arrest, prosecution, or conviction of Ross, Blandon, or Meneses. CIA shared what information it had--specifically on Meneses' 1979 drug trafficking in Nicaragua--with U.S. law enforcement entities when it was received and again when subsequently requested by the FBI.

Did any of the individuals who were arrested in "The Frogman Case" have any relationship with CIA? Were the drug trafficking activities of any of those individuals linked to the Contras? No information has been found to indicate that CIA or individuals acting on behalf of CIA had any relationship with Julio Zavala, Carlos Cabezas or others who were arrested or charged in connection with the 1983 Frogman Case, though a relative of one of them did have a relationship with CIA until mid-1982.

No information has been found to indicate that Julio Zavala, Carlos Cabezas or other Frogman Case defendants were connected to the Contras or that the Contras benefited from their drug trafficking activities. No information has been found to support Cabezas' claim that he provided financial assistance to the Contras from his drug trafficking activities. While two individuals who were active in the Contra movement wrote letters indicating that the money seized from Zavala belonged to the Contras, it appears this was done though Zavala's wife's connections with old family friends and not because Zavala was active in the Contra movement.

Was CIA involved in the investigation of The Frogman Case? No information has been found to indicate that CIA or anyone acting on behalf of CIA was involved in the criminal investigation of Julio Zavala and his associates, though a relative of one of those who were arrested or charged did have a relationship with CIA until mid-1982.

To what extent and why did CIA become involved in the prosecution of The Frogman Case? CIA did make contact with prosecutors in the Zavala prosecution in order to protect what CIA believed was an operational equity, i.e., a Contra support group in which it had an operational interest. A CIA cable indicates that approximately $36,000 seized from Zavala at the time of his arrest was returned to Zavala--based on the claim they were Contra funds--by the prosecutors at CIA's request. However, the prosecutors state that the decision to return Zavala's money was based on other considerations, not CIA's representations, and that there was no evidentiary value to retaining the money. In any event, the actions taken by CIA to have the cash returned did not appear to be intended to influence the outcome of Zavala's trial, which resulted in his conviction.
A. R. Cinquegrana

CONCUR:

Frederick P. Hitz Date

Inspector General
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ALLEGATIONS OF CONNECTIONS BETWEEN CIA AND THE CONTRAS IN COCAINE TRAFFICKING TO THE UNITED STATES (1)
(96-0143-IG)

Volume II: The Contra Story

GLOSSARY OF TERMS

INTRODUCTION

QUESTIONS PRESENTED

FINDINGS

What were CIA's legal and regulatory responsibilities during the Contra program regarding the reporting of potential drug trafficking crimes?

What policies and guidelines governed CIA's contacts during the Contra program with persons and organizations alleged to be involved in drug trafficking?

What do CIA Headquarters and field personnel recall regarding alleged drug trafficking by the Contras?

CONTRA ORGANIZATIONS

What drug trafficking allegations was CIA aware of, and when, involving Contra organizations? How did CIA respond to this information, and how was this information shared with other U.S. Government entities? 15th of September Legion--Justiniano Perez/Manuel Porro/Juan Francisco Rivera/Hugo Villagra/Fernando Brautigan/Felix Alcides Espinoza/Edwin Hoocker

SOUTHERN FRONT CONTRAS

Central America and the Caribbean Map
What drug trafficking allegations was CIA aware of, and when, involving Southern Front Contras? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?
The Southern Front Trafficking Reports
Adolfo Jose Chamorro
Roberto Jose Chamorro
Marcos Antonio Aguado
Gerardo Duran
Alfonso Robelo
Octaviano Cesar
Edmundo Jose Chamorro
Fernando Jose Chamorro
Sebastian Gonzalez
Carol Prado
Jenelee Hodgson
Alfredo Cesar
Jose Davila
Harold Martinez
Rene Corvo
Carlos Alberto Amador
Jose Orlando Bolanos
Moises Nunez
Gustavo Quezada
Felipe Vidal

NORTHERN FRONT CONTRAS

What drug trafficking allegations was CIA aware of, and when, involving Northern Front Contras? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?
Adolfo Calero
Enrique Bermudez
Mario Jose Calero
Juan Ramon Rivas
Stedman Fagoth
Roger Herman
Sebastian Pinel
Arnoldo Jose Arana
Jose Francisco Cardenal/Bergman Arguello/Eduard Jose Sacasa-Urouyo/Rolando Murillo/Juan Savala (or Zavala)/Renato Pena/Roger J. Ramiro

OTHER INDIVIDUALS INVOLVED IN THE CONTRA PROGRAM

What drug trafficking allegations was CIA aware of, and when, involving other individuals supporting the Contra program? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?
Ivan Gomez
A CIA Independent Contractor
A Second CIA Independent Contractor
A Third CIA Independent Contractor
John Floyd Hull

PILOTS, COMPANIES, AND OTHER INDIVIDUALS WORKING FOR COMPANIES USED TO SUPPORT THE CONTRA PROGRAM

What drug trafficking allegations was CIA aware of, and when, involving pilots and companies supporting the Contra program? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?
Frigorificos De Puntarenas/Ocean Hunter
SETCO
DIACSA
Vortex/Universal
Hondu Carib
Allegations Involving Other Companies Associated With the Contras
Southern Air Transport
Markair
[deleted]
Allegations Involving Air Crew Members of Companies that Provided Services to the Contras Under Contract or Subcontract with CIA
What was the nature and extent of CIA's knowledge of allegations of Contra drug trafficking at the Ilopango Air Base?
To what extent did CIA disseminate "finished intelligence products" that included information about drug trafficking on the part of individuals, organizations, and independent contractors associated with the Contras?
To what extent did CIA share information with Congress regarding allegations of drug trafficking on the part of individuals, organizations, and independent contractors associated with the Contras?

APPENDICES

Appendix A -- Jack Terrell
Appendix B -- Frank Castro
Appendix C -- To what extent did CIA have information indicating that the Government of Nicaragua, the Government of Cuba, or Nicaraguan- or Cuban-sponsored individuals were involved in alleged drug trafficking activities of individuals associated with the Contras?
Appendix D -- Potential Disinformation and CIA-Contra Drug Allegations
Appendix E -- Allegations by Tony Avirgan and Martha Honey of CIA and Contra Involvement in Drug Smuggling

EXHIBITS

March 2, 1982 DoJ-CIA Memorandum of Understanding regarding "Reporting and Use of Information Concerning Federal Crimes"
February 11, 1982 Letter to DCI William Casey from Attorney General William French Smith regarding DoJ-CIA Memorandum of Understanding
February 8, 1985 DoJ Memorandum to Mark Richard from A. R. Cinquegrana, "CIA Reporting of Drug Offenses"
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GLOSSARY OF TERMS

ADCI Acting Director of Central Intelligence
ADDO Associate Deputy Director for Operations
ADREN Nicaraguan Democratic Revolutionary Alliance, an anti-Sandinista group formed in 1980 and disbanded in 1982
A.K.A. Also Known As
ALA Directorate of Intelligence/Office of African and Latin American Analysis
ARDE Democratic Revolutionary Alliance, an anti-Sandinista, political-military organization founded in Costa Rica in 1982
ATF Department of Justice, Bureau of Alcohol, Tobacco and Firearms
AUSA Assistant United States Attorney
BOS Southern Opposition Bloc, an anti-Sandinista group founded in Costa Rica in 1985
CATF Directorate of Operations/Latin America Division/Central America Task Force
CGT French General Confederation of Labor
CIA Central Intelligence Agency
CMA Civilian Military Assistance
CMS Directorate of Operations/Career Management Staff
COPS Chief of Operations
CONDOR Nicaraguan Coalition of Opposition to the Regime, an anti-Sandinista group based in Miami, Florida, and formed in 1985
COS Chief of Station
DCI Director of Central Intelligence
DCOS Deputy Chief of Station
DDCI Deputy Director of Central Intelligence
DEA Department of Justice, Drug Enforcement Administration
DGSE General Directorate of State Security, the Sandinista secret police and Ministry of Interior special forces
DI Directorate of Intelligence
DIA Defense Intelligence Agency
DO Directorate of Operations
DDO Deputy Director for Operations
DoD Department of Defense
DoJ Department of Justice
DoS Department of State
E.O. Executive Order
EPS DO/Special Activities Staff/Special Operations Group/Evaluation and Plans Staff
ERN Army of the Nicaraguan Resistance, a Contra organization formed in 1987 consisting of the ERN/North front and the ERN/South front
ERP Employee Review Panel
FARN Nicaraguan Revolutionary Armed Force, the military arm of the anti-Sandinista Nicaraguan Democratic Union founded in 1980
FBI DoJ, Federal Bureau of Investigation
FDN Nicaraguan Democratic Force, an armed anti-Sandinista organization founded in 1982
FRS Sandino Revolutionary Front, an anti-Sandinista, political-military organization founded in 1982
FSLN Sandinista National Liberation Front, Marxist organization founded with Cuban help in 1961
FY Fiscal Year
GOC Government of Cuba
GRN Government of National Reconstruction, official designation of the government of Nicaragua from July 1979 until January 1985
HAC House Appropriations Committee
HN Headquarters Notice
HR Headquarters Regulation
HPSCI House Permanent Select Committee on Intelligence
IG Inspector General
IMS DO/Information Management Staff
INS DoJ, Immigration and Naturalization Service
KISAN United Indigenous Peoples of Nicaragua, Atlantic Coast Indian organization established in 1985
MDN Nicaraguan Democratic Movement, a social democratic party
MFR Memorandum for the Record
MINT GRN, Ministry of the Interior
MISURASATA Miskito, Sumo, Rama, Sandinista All Together, an Atlantic Coast Indian organization formed in 1979
MOU Memorandum of Understanding
NHAO DoS, Nicaraguan Humanitarian Assistance Office
NIE National Intelligence Estimate
NIO National Intelligence Officer
NOG DO/LA Division/CATF/Nicaraguan Operations Group
NSC National Security Council
OCA DCI/Office of Congressional Affairs
OES Special Secret Operations Command of the 15th of September Legion
OGC DCI/Office of General Counsel
OGI DI/Office of Global Issues
OIC Office of Independent Counsel
OIG DCI/Office of Inspector General
OIJ Costa Rican Office of Judicial Investigation
OIPR DoJ, Office of Intelligence Policy and Review
OMS DA/Office of Medical Services
OS DA/Office of Security
PAR Performance Appraisal Report
PDF Panamanian Defense Forces
PRA Permanent Resident Alien
RN Nicaraguan Resistance, formed in 1987 by unification of BOS and the Unified Nicaraguan Opposition
SAS DO/Special Activities Staff
SAT Southern Air Transport
SFRC Senate Foreign Relations Committee
SICC Southern Indigenous Creole Community
SOG DO/LA Division/CATF/Special Operations Group
SOG DO/SAS/Special Operations Group
SSCI Senate Select Committee on Intelligence
UDN Nicaraguan Democratic Union, Southern Front Contra organization founded in 1980
UNO Unified Nicaraguan Opposition in 1985-1987, joined with BOS in 1987 to form the RN
USDAO U.S. Defense Attaché Office
YATAMA The United Nations of Yapti Tasba--the Sacred Motherland, a Miskito Indian group formed by the 1987 merger of the anti-Sandinista forces of KISAN, MISURA, and MISURASATA
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Re: OFFICE OF INSPECTOR GENERAL INVESTIGATIONS STAFF REPORT

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INTRODUCTION

Scope of IG Investigation. In August 1996, the San Jose Mercury News published a three-part series of articles entitled "Dark Alliance." The series discussed drug rings in California and their alleged connections to the Central Intelligence Agency (CIA)-backed Nicaraguan Contra resistance in the 1980s. On September 3, 1996, Director of Central Intelligence (DCI) John Deutch asked the CIA Inspector General to investigate these allegations of connections between CIA, the Contras and drug trafficking. A 17-person team was formed to conduct the investigation.

The CIA Inspector General (IG) investigation included an examination of all information in CIA's possession concerning the individuals specifically cited in the San Jose Mercury News articles, and CIA knowledge of any drug trafficking allegations in regard to persons directly or indirectly involved in Contra activities, CIA assets, other individuals associated with CIA who dealt with the Contras, and companies and individuals involved in supporting Contra activities in Central America in the 1980s on behalf of CIA. The Report of Investigation consists of two volumes.

Volume I. Volume I, The "California Story," addresses findings regarding whether CIA knew of narcotics trafficking by Ricky Ross, Norwin Meneses and Danilo Blandon in Southern California. It also includes findings related to whether CIA knew of the narcotics trafficking activities of Julio Zavala and Carlos Cabezas in Northern California, their possible ties to the Contras and CIA's contacts with the San Francisco U.S. Attorney's Office in connection with their prosecution. Volume I was issued as a classified report on December 17, 1997. An unclassified version and an unclassified overview were made public on January 29, 1998. (2)

Volume I of the Report describes in detail the San Jose Mercury News allegations; the Scope of the IG Investigation; the Procedures and Resources used in the investigation; the Origin and Development of the Contra Conflict; CIA's Involvement with the Contras; Cocaine Flows through Central America in the 1980s; and Results of Previous Investigations into Alleged Contra Drug Trafficking.

Volume II. Volume II, The "Contra Story," addresses CIA's knowledge of any alleged drug trafficking by the Contras and persons or organizations who supported the Contra program in the 1980s. Volume II was issued as a classified report on April 27, 1998. The investigation included a review of any information in CIA's possession relating to:

CIA's knowledge of drug trafficking allegations regarding Contra-related individuals, organizations, independent contractors, and other individuals supporting the Contra program.

CIA's handling of, and response to, such drug trafficking allegations; and

CIA's sharing with other U.S. Government entities, including law enforcement agencies and the Congress, of such allegations.

The investigation on which Volume II is based was not intended to prove or disprove the allegations or information received by the Agency concerning possible drug trafficking by specific individuals or organizations. Further, the description of such allegations or information in Volume II is not intended as representing the judgment of the Office of Inspector General (OIG) regarding the veracity of the allegations or information. The investigation also was not intended to review or evaluate the effectiveness of any CIA programs in Central America in the 1980s. Finally, factual information in Volume II regarding whether particular allegations or information were or were not shared with other U.S. Government agencies or the Congress does not represent a judgment as to whether or not such information was required to be so shared.

Organization of Volume II. In the course of the investigation, OIG reviewed CIA records regarding hundreds of Contra organizations, Contra leaders, Contra supporters, and individuals and companies that were involved in the Contra program. Based on this review, several dozen Contra-related individuals and one Contra organization were found to have been the subject of allegations or information concerning involvement in drug trafficking. All information that was made available to the OIG from CIA records regarding these Contra-related organizations and individuals was examined.

Volume II is divided into five separate sections pertaining to Contra-related groups of organizations and individuals that were found to have been the subject of drug trafficking allegations or information.

Contra Organizations--Any Contra group that was known to CIA to have had an organizational policy of trafficking in drugs to raise money for the organization. The OIG investigation found information about only one such group.

Southern Front Contras--Contra leaders, members and supporters--including those associated with the FRS, BOS, UNO/South, and ARDE--who were based primarily in Costa Rica.

Northern Front Contras--Contra leaders, members and supporters--including those associated with the FDN, UNO, 15th of September Legion, ERN, MISURA, MISURASATA, and YATAMA--who were based primarily in Honduras.

Other Individuals Involved in the Contra Program--Individuals operating on behalf of CIA in support of the Contras, including foreign nationals used by CIA as intermediaries with various Contra organizations.

Pilots and Companies--Pilots and companies assisting in the Contra supply effort.

Within each of these five categories, Volume II examines the organization or individual's background; the Agency's knowledge of drug trafficking allegations regarding the organization or individual; CIA's response to the allegations; and CIA's sharing of such allegations with other U.S. Government entities, including law enforcement agencies and Congress.

Volume II also discusses the guidance that was available by statute, regulation, or CIA policy for dealing with known or suspected drug traffickers and how CIA personnel understood this guidance. The extent to which CIA disseminated intelligence relating to drug trafficking on the part of organizations and individuals associated with the Contras is also explained.

This Volume also includes three exhibits and five appendices. The appendices discuss information and issues related to Contra-drug trafficking allegations and other matters that were deemed to be relevant to this investigation.
EXECUTIVE SUMMARY AND CONCLUSIONS

KEY FINDINGS

Did CIA conspire with or assist Contra organizations or Contra-related individuals in narcotics trafficking to raise funds for the Contras or for any other purpose?

CIA and CIA Employees. No information has been found to indicate that CIA as an organization or its employees conspired with, or assisted, Contra-related organizations or individuals in drug trafficking to raise funds for the Contras or for any other purpose.

To what extent was CIA aware of allegations or information indicating involvement by Contra organizations or Contra-related individuals in drug trafficking? What did CIA do after becoming aware of such allegations or information?

Contra-Related Organizations. CIA received information that one Contra-related organization--the ADREN "15th of September" group--engaged in drug trafficking for fund raising purposes. This anti-Sandinista group formed in 1980 and disbanded in January 1982. No information has been found to indicate that other Contra organizations engaged in drug trafficking for fundraising or any other purpose, although individual members were alleged from time to time to be involved in drug trafficking.

Contra-Related Individuals--Southern Front. CIA received allegations or information regarding drug trafficking by Contra-related individuals in the Southern Front that operated from Costa Rica. In 1984, CIA received allegations that five individuals associated with the Democratic Revolutionary Alliance (ARDE)/Sandino Revolutionary Front (FRS) were engaged in a drug trafficking conspiracy with a known narcotics trafficker, Jorge Morales. CIA broke off contact with ARDE in October 1984, but continued to have contact through 1986-87 with four of the individuals involved with Morales.

The Morales Connection. In December 1988, the Senate Subcommittee on Terrorism, Narcotics and International Operations published a report entitled "Drugs, Law Enforcement and Foreign Policy." One section of that report summarized the involvement of ARDE/FRS members with drug trafficker Jorge Morales based upon Department of State information:
Information developed by the intelligence community indicates that a senior member of Eden Pastora's Sandino Revolutionary Front (FRS) agreed in late 1984 with (Morales) that FRS pilots would aid in transporting narcotics in exchange for financial assistance . . . the FRS officials agreed to use FRS operational facilities in Costa Rica and Nicaragua to facilitate transportation of narcotics. (Morales) agreed to provide financial support to the FRS, in addition to aircraft and training for FRS pilots. After undergoing flight training, the FRS pilots were to continue to work for the FRS, but would also fly narcotics shipments from South America to sites in Costa Rica and Nicaragua for later transport to the United States. Shortly thereafter (Morales) reportedly provided the FRS one C-47 aircraft and two crated helicopters. He is reported to have paid the sum of $100,000 to the FRS, but there was no information available on who actually received the money.

(Ellipses and parentheses are as they appear in the Subcommittee report.)

In addition to the five individuals associated with ARDE, CIA received drug trafficking allegations or information concerning 16 other individuals who supported Southern Front Contra operations based in Costa Rica.

Contra-Related Individuals--Northern Front. CIA also received allegations or information concerning drug trafficking by nine Contra-related individuals in the Northern Front, based in Honduras.

Other Individuals Involved in the Contra Program. CIA received drug trafficking allegations or information concerning five individuals who were used to support the Contra program.

Companies, Pilots and Other Individuals Working for Companies Used in Support of the Contra Program. CIA received drug trafficking allegations or information concerning 14 pilots and two other individuals who were associated with companies that provided support for the Contra program. CIA also learned of drug trafficking allegations or information concerning three companies that were used to support Contra activities from 1984 until at least 1988.

CIA received drug trafficking allegations or information concerning an individual who flew Contra support missions from Ilopango Air Base in El Salvador in 1985 and 1986.

CIA also received other information in 1986 to 1989 regarding additional suspicious activities, individuals and aircraft at Ilopango Air Base. However, no information has been found to indicate that CIA was aware that this information indicated that Contra-related organizations or individuals used Ilopango Air Base for drug trafficking.

What was the nature and extent of any statutory, regulatory, or policy guidance concerning CIA's handling of information about Contra-related organizations or individuals that were subject to allegations or information indicating they were involved in drug trafficking?

Statutory Guidance. The Department of Defense and Military Construction Appropriations Act for Fiscal Year 1987(3), which authorized $100 million for Agency support to the Contras, included a prohibition on the provision of any assistance to any group that, among other things, retained in its ranks any individual "who has been found to engage in . . . drug smuggling . . . ."

Executive Branch Guidance: Reporting Potential Crimes to Department of Justice. From August 15, 1979 to March 2, 1982, Attorney General Guidelines issued under Executive Order 12036 required CIA to report to DoJ possible violations of "any" federal laws--thereby including narcotics laws--by persons who were employed by, assigned to, or acting for CIA. The definition of "employee" in the Guidelines included assets, agents and independent contractors. Reporting of possible violations of federal law by non-employees was limited to a specific list of types of offenses that did not include narcotics violations.(4)

From March 2, 1982 to August 3, 1995, a Memorandum of Understanding (MOU) between the Attorney General and the DCI under Executive Order 12333 governed reporting of potential crimes. That MOU continued to require CIA to report to DoJ possible violations of "any" federal laws--again thereby including narcotics laws--by CIA employees. However, because of a change in the definition of "employee," agents, assets and independent contractors were moved to the non-employee category and thereby subject to the list of reportable offenses that did not include narcotics violations. The MOU provided that CIA would continue to have the discretion to report any offense by a non-employee to DoJ in addition to the potential crimes that were specified in the MOU.(5)

A February 11, 1982 letter from Attorney General William French Smith to DCI William Casey that accompanied the MOU noted that the 1982 MOU contained no formal requirement regarding the reporting of narcotics violations by non-employees and urged CIA's continuing cooperation with DoJ and the Drug Enforcement Administration. This letter did not, however, establish a legal requirement that CIA report potential narcotics violations by non-employees because no such requirement was included in the MOU. A February 8, 1985 internal DoJ memorandum stated explicitly that there was no requirement for CIA to report non-employee narcotics violations and suggested that the MOU would have to be renegotiated in order to include narcotics violations by non-employees as reportable crimes.

In August 1995, the 1982 DoJ-CIA Crimes Reporting MOU was revised. Under that revised MOU, assets and independent contractors are again considered "employees" for crimes reporting purposes. Further, narcotics violations are included among the list of "non-employee" crimes that must be reported to DoJ.

CIA Guidance. There was no Agency-wide regulation explaining the crime reporting responsibilities of CIA employees under E.O. 12333 and the DoJ-CIA MOU until December 23, 1987.

CIA's Directorate of Operations (DO) developed a draft DO Handbook in December 1980 that included a section that focused on restrictions and prohibitions regarding the use of narcotics intelligence collection agents who might be involved in narcotics trafficking. The instructions were not applicable to the Contra-related individuals or contractors discussed in Volume II, however, since none of those individuals or contractors were involved in the collection of narcotics intelligence. A summary of the 86-page draft DO Handbook was sent to all DO field stations in July 1982 and stated that the draft had been approved by the DCI and represented Agency policy. The DO Handbook was not formally issued until January 1996, however, more than 15 years later.

On March 6, 1987, Headquarters sent a cable to CIA personnel in Central America that, among other things, included a statement of the prohibition in the FY 1987 Department of Defense and Military Construction Appropriations Act on providing assistance to any group that retained in its ranks any individual who has been found to engage in drug smuggling. A January 21, 1988 Headquarters cable to CIA personnel in Central America that were directly involved in supporting the Contra program also summarized that statutory restriction.

On April 9, 1987, Acting DCI Robert Gates sent a memorandum to the Deputy Director for Operations (DDO) Clair George stating that it was imperative that CIA avoid involvement with individuals tied to the Contra program who were "even suspected of involvement in narcotics trafficking." The Gates memorandum instructed the DDO to vet contract air crews, air services companies and subcontractors with the Drug Enforcement Agency (DEA), U.S. Customs and the Federal Bureau of Investigation (FBI) to ensure that the Agency would not be involved in any way with individuals suspected of being involved in drug trafficking.

Were relevant CIA regulations and policies timely and adequate? Then-current CIA regulations and policies did not address a number of drug trafficking issues that were repeatedly encountered by Agency managers and personnel during the Contra program:

CIA had no published regulations or policies that addressed CIA employees' contacts with individuals or companies that were known or suspected to have been involved in drug trafficking, unless they were part of a counternarcotics operation or program. The Contra program was not such an operation or program.

CIA had no regulations or policies regarding CIA's responsibilities to identify and pursue allegations or information indicating that organizations or individuals were involved in drug trafficking.

CIA had no regulations or policies that required that information be requested from DEA, the Customs Service, or U.S. Government entities, other than the FBI, regarding individuals or entities of whom CIA had knowledge of drug allegations or information.

ADCI Gates' April 1987 memorandum stating that it was imperative that CIA avoid involvement with individuals in Central America who were even suspected of narcotics trafficking was not issued in any form that would advise Agency employees generally of this policy.

Agency personnel involved in the Contra program were not generally notified until January 1988 of the prohibition in the Department of Defense and Military Construction Appropriations Act for FY 1987, which went into effect in October 1986, on assistance to any group that retained in its ranks any individual who was found to engage in drug smuggling. A number of CIA personnel who were involved in the Contra program say they were aware of the statutory proscription prior to 1988, but no written guidance was provided to Agency personnel for determining that an individual had been "found to engage in drug smuggling" under the FY 1987 provision.

Recollections of CIA Personnel Regarding Alleged Drug Trafficking by the Contras. Notwithstanding the shortcomings in applicable regulations and policy, many employees and former employees say today that they understood the potential seriousness of information that linked participants in the Contra program to drug trafficking. Indeed, many say they believed that the Agency's policy was not to have relationships with such persons.

CONCLUSIONS

Were CIA actions in dealing with Contra-related organizations or individuals that were subject to allegations or information indicating they were involved in drug trafficking consistent with relevant statutes, regulations and policies?

Statutory Requirements. The provision in the FY 1987 Department of Defense and Military Construction Appropriations Act called for a cutoff of funding to any Contra group that retained a member who "has been found" to engage in drug smuggling. During the period from October 1986 until December 1987 in which this prohibition was in effect, CIA was aware of allegations or information of varying credibility suggesting that ten Contras may have been involved in drug trafficking. Additional actions could have been taken by CIA in each of these cases to determine the credibility of the allegations and information in order to comply with the intent and spirit of the legislation.

Executive Branch Requirements. CIA crimes referrals practices pertaining to potential federal narcotics violations were consistent with the applicable provisions of Executive Orders 12036 and 12333, the Attorney General Guidelines under E.O. 12036 and the 1982 MOU between the Department of Justice and CIA under E.O. 12333. No information has been found to indicate that the non-inclusion of narcotics violations by assets in the crimes reporting requirements of the 1982 DoJ-CIA MOU was intended to protect Contra activities.

CIA Policies and Practices. CIA acted inconsistently in handling allegations or information indicating that Contra-related organizations and individuals were involved in drug trafficking. In some cases, CIA pursued confirmation of allegations or information of drug allegations. In other cases, CIA knowledge of allegations or information indicating that organizations or individuals had been involved in drug trafficking did not deter their use by CIA. In other cases, CIA did not act to verify drug trafficking allegations or information even when it had the opportunity to do so. In still other cases, CIA deemed the allegation or information to be unsubstantiated or not credible.

With respect to air services companies, contract air crew members and other companies that were used to support the Contra program, CIA took prompt action in responding to ADCI Gates' April 9, 1987 instructions by requesting relevant information from U.S. law enforcement agencies in addition to the FBI. However, CIA's actions in response to information received from law enforcement agencies that indicated a possible drug trafficking connection by air services companies and individual crew members were inconsistent. Despite such information, several pilots and one mechanic continued to be associated with their companies in support of the Contra program.

To what extent did CIA share allegations and information indicating that Contra-related organizations or individuals were involved in drug trafficking with other U.S. Government entities?

Congress. Although records of congressional briefings in this regard were incomplete and often lacked specific detail, CIA briefings of the congressional intelligence oversight committees on Contra-related matters occasionally included allegations or information indicating involvement by Contra-related organizations or individuals in drug trafficking. CIA determined what was responsive to the requirement of keeping the congressional intelligence oversight committees "fully and currently" informed about Contra-related drug allegations.

CIA did inform the intelligence oversight committees in a timely manner of the 1984 allegations of association by ARDE members with drug trafficker Jorge Morales and their agreement for Morales to provide aircraft in exchange for facilitation of drug transport. However, CIA did not inform Congress of all allegations or information it received indicating that Contra-related organizations or individuals were involved in drug trafficking. During the period in which the FY 1987 statutory prohibition was in effect, for example, no information has been found to indicate that CIA informed Congress of eight of the ten Contra-related individuals concerning whom CIA had received drug trafficking allegations or information.

Law Enforcement and Other Agencies. The March 1982 DoJ-CIA Crimes Reporting MOU did not require that CIA report to DoJ narcotics trafficking violations by assets, or independent contractors associated with the Contras because assets and independent contractors were not defined as "employees" for crimes reporting purposes. However, the 1982 MOU gave CIA discretion to report offenses not included in the MOU. This discretion was exercised in 1984 when information pertaining to association by Southern Front Contra members with drug trafficker Jorge Morales was reported to DoJ. It also was exercised in a 1988 referral to DoJ of allegations of drug trafficking concerning another Contra official.

Allegations and information indicating drug trafficking by 25 Contra-related individuals was shared in a variety of ways with other Executive branch agencies, including law enforcement agencies as formal intelligence reports, cables and briefings in Washington, D.C., and the field. However, no information has been found to indicate that any U.S. law enforcement entity or Executive branch agency was informed by CIA of drug trafficking allegations or information concerning 11 Contra-related individuals and assets. Beginning in January 1988, CIA began providing a U.S. law enforcement agency's regional office in Central America with information received by CIA regarding possible drug-related or other suspicious activities at Ilopango Air Base.
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Re: OFFICE OF INSPECTOR GENERAL INVESTIGATIONS STAFF REPORT

Postby admin » Sun Jun 14, 2015 8:10 pm

QUESTIONS PRESENTED

41. Volume II of this Report reviews the Agency's knowledge and handling of drug trafficking allegations regarding Contra-related individuals and organizations and others involved in supporting the Contras on behalf of CIA. The specific questions addressed in Volume II are as follows:

What were CIA's legal and regulatory responsibilities during the Contra program regarding the reporting of potential drug trafficking crimes?

What policies and guidelines governed CIA's contacts during the Contra program with persons and organizations alleged to be involved in drug trafficking?

What do CIA Headquarters and field personnel recall regarding alleged drug trafficking by the Contras?

What drug trafficking allegations was CIA aware of, and when, involving Contra organizations? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?

What drug trafficking allegations was CIA aware of, and when, involving Southern Front Contras? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?

What drug trafficking allegations was CIA aware of, and when, involving Northern Front Contras? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?

What drug trafficking allegations was CIA aware of, and when, involving other individuals supporting the Contra program? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?

What drug trafficking allegations was CIA aware of, and when, involving pilots and companies supporting the Contra program? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?

What was the nature and extent of CIA's knowledge of allegations of Contra drug trafficking at the Ilopango air base?

To what extent did CIA disseminate "finished intelligence products" that included information about drug trafficking on the part of individuals, organizations, and independent contractors associated with the Contras?

To what extent did CIA share information with Congress regarding allegations of drug trafficking on the part of individuals, organizations, and independent contractors associated with the Contras?
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Re: OFFICE OF INSPECTOR GENERAL INVESTIGATIONS STAFF REPORT

Postby admin » Sun Jun 14, 2015 8:15 pm

PART 1 OF 2

Findings

What were CIA's legal and regulatory responsibilities during the Contra program regarding the reporting of potential drug trafficking crimes?

Reporting Potential Crimes to Department of Justice

Background. For over 20 years, CIA had broad discretion to report or not report information that came to its attention regarding potential violations of federal law by its employees, assets and other persons. According to a 1954 memorandum from CIA General Counsel Lawrence Houston to the DCI, Houston discussed the issue of reporting Federal criminal violations to the Department of Justice (DoJ) with Deputy Attorney General William P. Rogers on February 18, 1954. According to that memorandum, Rogers and Houston agreed that CIA would be responsible for determining whether a potential violation of criminal law by persons associated with CIA would be referred to DoJ for prosecution. This arrangement was based on the belief that CIA was in the best position to determine whether classified information might be revealed in the course of such a prosecution. The memorandum also stated that CIA would be obligated to refer to DoJ potential criminal matters that could be prosecuted without revealing classified information, and that any doubts would be resolved in favor of referring the matter to DoJ. Finally, Rogers and Houston agreed, according to the memorandum, that it was not necessary at that time to enter a formal agreement of any kind that would embody these understandings.

In the mid-1970s, this arrangement became more widely known and was subject to criticism by the Congress(6) and others. Then-Assistant Attorney General for DoJ's Criminal Division Richard Thornburgh wrote CIA General Counsel John Warner on July 24, 1975 to remind CIA of its duty to comply with 28 U.S.C. 535, a provision of law that imposes a duty on every department and agency in the Executive Branch to report promptly to the Attorney General any information, allegations, or complaints relating to possible violations of Title 18 of the United States Code by officers and employees of the U.S. Government. Warner responded on July 29 and acknowledged that "any other informal referral agreement that may have been in effect in the past was abrogated." At the same time, however, Warner noted that the DCI was charged under the National Security Act of 1947 with "protecting intelligence sources and methods from unauthorized disclosure" and that CIA would be seeking DoJ's advice as to fulfilling this responsibility in regard to "cases that will be reported."

CIA Regulation Regarding Crimes Reporting. As of November 28, 1975, CIA's policy for reporting information regarding potential violations of federal criminal law by employees and others was set forth in Headquarters Regulation (HR) 7-1 a(7). That regulation provided:

Information, allegations, or complaints of violations of the criminal provisions of the United States Code by CIA officers and employees, or relating to CIA affairs, shall be reported immediately by an employee to the Inspector General, who shall inform the General Counsel. Information, allegations, or complaints of violations of Title 18 of the United States Code involving Government officers and employees shall be expeditiously reported to the Attorney General by the General Counsel in compliance with 28 U.S.C. 535. Such report to the Attorney General shall include an evaluation of the impact, if any, of a prosecution on the national security or foreign relations of the United States, including intelligence operations which may be jeopardized or intelligence sources and methods which may be compromised thereby. CIA will not exercise a prosecutorial function.

E.O. 11905. A presidential directive that CIA report information to DoJ concerning potential violations of certain federal criminal laws by employees and non-employees was first established by President Gerald Ford in Executive Order (E.O.) 11905, dated February 18, 1976. The pertinent part of E.O. 11905--Section 4(a)--stated:

In carrying out their duties and responsibilities, senior officials [including those at CIA] . . . shall:

. . . .
(5) Report to the Attorney General that information which relates to detection or prevention of possible violations of law by any person, including an employee of the senior official's department or agency: . . . .

(Emphasis added.)

The preamble to Section 4 stated that:

Unless otherwise specified within this section, its provisions apply to activities both inside and outside the United States, and all references to law are to applicable laws of the United States.

The reporting obligations imposed upon CIA and other U.S. intelligence agencies by this provision exceeded those required of other federal agencies. Whereas the responsibilities of other agencies in this regard are limited by 28 U.S.C. 535 to potential violations of Title 18 by U.S. Government employees, E.O. 11905 required CIA and other intelligence agencies to report all possible violations of any law by any person.

A May 7, 1976 opinion by DoJ's Office of Legal Counsel confirmed the breadth of Section 4(a)(5) of E.O. 11905 by concluding that it required reports of possible violations of any law, civil or criminal, with respect to which DoJ had either investigative or prosecutorial jurisdiction. This opinion also noted, however, that the agencies were required to report such information to the Attorney General only when such information was acquired by them in the exercise of their functions under the E.O.

E.O. 12036. On January 26, 1978, President Jimmy Carter signed E.O. 12036, "United States Intelligence Activities," which superseded E.O. 11905. Section 1-7 of E.O. 12036 contained the following language regarding the obligation to report federal crimes:

The senior officials of each of the agencies within the Intelligence Community shall:

. . . .
(1-706) Report to the Attorney General evidence of possible violations of federal criminal law by an employee of their department or agency, and report to the Attorney General evidence of possible violations by any other person of those federal criminal laws specified in guidelines adopted by the Attorney General. . . . .

(Emphasis added.)

Section 4-204 of the E.O. defined "employee" as:

Employee means a person employed by, assigned to, or acting for an agency within the Intelligence Community.

E.O. 12036 thus narrowed the CIA's responsibilities with respect to reporting employee violations because it expressly limited the requirement to federal criminal violations. On the other hand, E.O. 12036 continued to require that intelligence agencies report any federal criminal violation by their employees, not just Title 18 violations. For example, most narcotics violations fall under Title 21 and would not be reportable by other U.S. Government agencies under a literal reading of 28 U.S.C. 535. Moreover, E.O. 12036 did not alter the fact that only the Intelligence Community agencies were required to report federal crimes by non-employees, although it did recognize that the scope of this portion of the reporting requirement could be narrowed by Attorney General guidelines.

On September 15, 1978, CIA amended HR 7-1 to incorporate the changes required by E.O. 12036. With respect to the obligation for reporting potential crimes, the revision read:
. . . .
Information, allegations, and complaints of possible violations of Federal criminal law by CIA employees or any other person shall be reported immediately by any employee to the Inspector General who shall inform the General Counsel. The Inspector General shall provide to the General Counsel an evaluation of the impact, if any, of a prosecution of such a violation on the national security or foreign relations of the United States, including intelligence operations which may be jeopardized or intelligence sources and methods which may be compromised. Pursuant to 28 U.S.C. 535 and Section 1-706 of Executive order 12036, evidence of possible violations of Federal criminal law shall be reported expeditiously to the Attorney General by the General Counsel in accordance with procedures and guidelines adopted by the Attorney General. . . . .

Attorney General Procedures for Crimes Reporting. On August 15, 1979, pursuant to section 1-706 of E.O. 12036, Attorney General Griffin Bell promulgated two sets of guidelines. One guideline pertained to the reporting of federal crimes committed by employees of agencies in the intelligence community. The other related to the reporting of federal crimes committed by non-employees.

The August 1979 Attorney General employee crimes reporting guidelines defined "employees" to include not only persons covered by the definition of that term in Section 4-204 of E.O. 12036 (i.e., those who were employed by, assigned to, or acting for an intelligence agency), but also any former employees when the offense was committed during their employment or related to potential violations of statutory restrictions on the post-employment activities of former employees. With respect to employees of intelligence agencies, the guidelines required the General Counsel to refer to DoJ any "allegations, complaints, or information tending to show that any officer or employee may have violated a federal criminal statute that the agency cannot establish as unfounded within a reasonable time through a preliminary inquiry."

The August 1979 Attorney General guidelines for reporting crimes committed by non-employees set forth several categories of federal crimes as to which reporting would be required:

Crimes involving intentional infliction or threat of death or serious physical harm (e.g., homicide, kidnapping);

Crimes impacting on the national security, defense, or foreign relations of the United States (e.g., espionage, sabotage, violations of the Trading with the Enemy Act, neutrality offenses); and

Crimes involving foreign interference with the integrity of United States Government institutions or crimes committed on behalf of a foreign power or in connection with international terrorist activity (e.g., bribery, election contributions, aircraft piracy, transportation of explosives).

Potential violations of federal criminal provisions relating to narcotics trafficking were not included among the categories of reportable crimes by non-employees. The guidelines did, however, include language also authorizing the General Counsel to report information concerning any offense that the General Counsel believed should be reported to the Attorney General.

On November 21, 1979, following the adoption of the August 1979 Attorney General guidelines, CIA amended HR 7-1. HR 7-1a (7) of that regulation stated:

Any employee who, in the course of official duty, becomes aware of any information, allegation, or complaint of possible violations of Federal criminal laws by any person, including a person employed by, assigned to, or acting for the Agency, is required to report immediately such information, allegation, or complaint to the General Counsel. The Office of General Counsel shall consult with the Office of Security and the Office of Inspector General when necessary in conducting a preliminary inquiry to determine whether a basis for referral exists and shall obtain from concerned Agency components an evaluation of the impact, if any, of a prosecution of such a violation on the national security or foreign relations of the United States, including intelligence operations which may be jeopardized or intelligence sources and methods which may be compromised. Pursuant to 28 U.S.C. 535 and Section 1-706 of Executive Order 12036, evidence of possible violations of Federal criminal law shall be reported expeditiously to the Attorney General by the General Counsel in accordance with procedures and guidelines adopted by the Attorney General
. . . .

This major revision of HR 7-1 established a requirement that CIA employees report information, allegations and complaints regarding possible violations of federal criminal law by any person directly to the General Counsel instead of indirectly through the Inspector General.

On November 21, 1979, CIA issued Headquarters Notice (HN) 7-39, "Supervisors' and Managers' Responsibility to Report Evidence of Crimes to the Attorney General--Executive Order 12036, Section 1-706." Section 4 of the HN addressed the issue of reporting potential crimes by employees:

. . . .
a. Employees. Senior officials of the Intelligence Community are required to report to the Attorney General evidence of possible violations by an employee of their department or agency of any Federal criminal law. The Executive order defines "employee" more broadly than the general or dictionary meaning of the word. "Employee" for the purpose of reporting crimes means a person employed by, assigned to, or acting for an agency within the Intelligence Community. Thus, for example, an agent, a safehousekeeper, a contract employee, or an independent contractor performing services for CIA is considered an employee.

In view of these obligations, all employees have been instructed to report to the Office of General Counsel when, in the course of official duty, they become aware of (a) any information, allegation, or complaint that an employee may have violated any Federal criminal law, and (b) any facts or circumstances that raise a suspicion in the employee's mind that a Federal criminal offense has been committed by a nonemployee
. . . .

(Emphasis added.)

On the same day, CIA issued a companion notice, HN 7-38, "Employee Responsibility to Report Evidence of Crimes to the Attorney General--Executive Order 12036, Section 1-706." This HN provided the following guidance to employees:

. . . .

3. In summary, all employees are instructed to report to the Office of General Counsel when, in the course of official duty, they become aware of (a) any information, allegation, or complaint that an employee may have violated any Federal criminal law, and (b) any facts or circumstances that raise a suspicion in the employee's mind that a Federal criminal offense may have been committed by a nonemployee.

. . . .

HN 7-38 did not define the term "employee," but referred to HN 7-39 and noted that it dealt with the same subject in much greater detail. HN 7-38 also advised employees who wished further clarification to contact their supervisor or Office of General Counsel (OGC).

E.O. 12333. On December 4, 1981, President Ronald Reagan signed E.O. 12333, "United States Intelligence Activities," which revoked E.O. 12036. The provision of E.O. 12333 requiring reporting of crimes to the Attorney General was not revised in any substantive way, except for adding a specific reference to protecting intelligence sources and methods. Unlike the two previous Executive Orders, however, E.O. 12333 required the head of an intelligence agency and the Attorney General to agree on crimes reporting procedures.

Section 1.7(a) of E.O. 12333 stated that heads of departments and agencies in the Intelligence Community should:

Report to the Attorney General possible violations of federal criminal laws by employees and of specified federal criminal laws by any other person as provided in procedures agreed upon by the Attorney General and the head of the department or agency concerned, in a manner consistent with the protection of intelligence sources and methods, as specified in those procedures.

(Emphasis added.)

Section 3.4(c) of the E.O. defined "employee" in the same way as that term had been defined in E.O. 12036:

Employee means a person employed by, assigned to or acting for an agency within the Intelligence Community.

As had been true under E.O. 11905 and E.O. 12036, the reporting obligations imposed upon CIA and other U.S. intelligence agencies by these provisions exceeded the obligations of other federal agencies. Whereas the responsibilities of other agencies in this regard are limited by 28 U.S.C. 535 to potential violations of Title 18 by U.S. Government employees, E.O. 12333 requires CIA and other intelligence agencies to report all possible violations of any law by any person.

1982 DoJ-CIA Memorandum of Understanding. To implement section 1.7(a) of E.O. 12333 and replace the August 1979 guidelines promulgated by Attorney General Bell under E.O. 12036, a MOU between CIA and DoJ regarding crimes reporting was signed by Attorney General William French Smith on February 11, 1982 and DCI William Casey on March 2, 1982. (See Exhibit 1 for the full text of this Memorandum.) The MOU defined "employee" for crimes reporting purposes as:

A staff employee or contract employee of the Agency;

Former officers or employees of the Agency, for purposes of offenses committed during their employment; and

Former officers or employees of the Agency, for offenses involving a violation of the statutory limits on activities of former U.S. Government employees.

This definition of "employee" was narrower than the definition of that term in Section 3.4(c) of E.O. 12333 which included any person "employed by, assigned to or acting for an agency within the Intelligence Community." (Emphasis added.) The effect of this omission was to move persons "acting for," but not employed by or assigned to, CIA from the "employee" to the "non-employee" category for crimes reporting purposes.

The list of non-employee crimes that were required by the 1982 DoJ-CIA MOU to be reported to the Attorney General was essentially the same as had been included in the August 1979 Attorney General guidelines. The only substantive change was that the 1982 MOU added certain violations of the Atomic Energy Act. As was the case with the 1979 Attorney General guidelines, the 1982 MOU did not include any type of narcotics violation among the lists of reportable crimes by non-employees. However, in language similar to that used in the portion of the 1979 Attorney General guidelines that applied to non-employees, Section IV D. of the 1982 DoJ-CIA MOU stated:

Notwithstanding any of the above provisions, the General Counsel may report any other possible offense when he believes it should be reported.

On February 11, 1982, Attorney General Smith sent a letter to DCI Casey notifying him that he had approved the MOU and was sending it to Casey for his signature. (See Exhibit 2 for the full text of this letter.) The letter stated, in part:

I have been advised that a question arose regarding the need to add narcotics violations to the list of reportable non-employee crimes . . . . 21 U.S.C. §874(h) [sic](7) provides that "when requested by the Attorney General, it shall be the duty of any agency or instrumentality of the Federal Government to furnish assistance to him for carrying out his functions under [the Controlled Substances Act] . . . ." Section 1.8(b) of Executive Order 12333 tasks the Central Intelligence Agency to "collect, produce and disseminate intelligence on foreign aspects of narcotics production and trafficking." Moreover, authorization for the dissemination of information concerning narcotics violatons [sic] to law enforcement agencies, including the Department of Justice, is provided by sections 2.3(c) and (i) and 2.6(b) of the Order. In light of these provisions, and in view of the fine cooperation the Drug Enforcement Administration has received from CIA, no formal requirement regarding the reporting of narcotics violations has been included in these procedures. We look forward to the CIA's continuing cooperation with the Department of Justice in this area.

(Emphasis added.)

The letter did not request that DCI Casey concur in the expectations expressed by Attorney General Smith. On March 2, 1982, Casey signed the MOU.

The first part of the Attorney General's letter referred to 21 USC 873(b). That statute provides:

When requested by the Attorney General, it shall be the duty of any agency or instrumentality of the Federal Government to furnish assistance, including any technical advice, to him for carrying out his functions under this subchapter [Title 21 of the United States Code]. . . .

The authority of the Attorney General to prosecute and litigate is not contained in Title 21 but rather is found generally in sections, 509, 516, 519, and 547 of Title 28. Those sections do not create a requirement to report narcotics violations to the Attorney General.

The second part of the Attorney General's letter referred to Section 1.8(b) of E.O. 12333. Section 1.8(b) states that the CIA shall "Collect, produce and disseminate intelligence on foreign aspects of narcotics production and trafficking." That section also does not create a requirement to report narcotics violations to the Attorney General.

The third part of the Attorney General's letter referred to sections 2.3(c) and 2.6(b) of E.O. 12333. Section 2.3(c) states that DCI and Attorney General-approved collection procedures shall permit an intelligence agency to collect, retain and disseminate "Information obtained in the course of a lawful foreign intelligence, counterintelligence, international narcotics or international terrorism investigation." Section 2.6(b) states that an intelligence agency is authorized to:

Unless otherwise precluded by law or this Order, participate in law enforcement activities to investigate or prevent clandestine intelligence activities by foreign powers, or international terrorist or narcotics activities.

Those sections do not create a requirement to report narcotics violations to the Attorney General.

The Attorney General's letter also stated that:

In light of these provisions [discussed above] and in view of the fine cooperation the Drug Enforcement Administration has received from CIA, no formal reporting requirement of narcotics violations has been included in these procedures.

However, reporting of narcotics intelligence information to the Drug Enforcement Administration would not satisfy the requirement of section 1.7(a) of E.O. 12333 that potential criminal violations be reported to the Attorney General. While the 1979 Attorney General Guidelines under E.O. 12036 permitted reporting of potential federal crimes to appropriate law enforcement agencies in certain circumstances in lieu of reporting to the DoJ Criminal Division, the 1982 CIA-DoJ MOU required notification to the Criminal Division of any such referral to an investigative agency or to a United States Attorney.

On March 2, 1982, DCI Casey wrote to Attorney General Smith stating that he had signed the procedures. DCI Casey's letter did not refer to the issue of reporting narcotics violations and did not indicate whether he agreed or disagreed with the statements in the Smith letter.

On February 8,1985, A. R. Cinquegrana, Deputy Counsel for Intelligence Policy at DoJ, wrote a memorandum to Mark M Richard, Deputy Assistant Attorney General, Criminal Division, in which he stated:

Pursuant to our discussion yesterday, attached are copies of the procedures governing CIA's reporting of crimes and the transmittal letters between the [Attorney General] and the DCI. As you can see, alleged violations of Title 21 [narcotics violations] by non-employees are not covered by the procedures to be reported. In lieu of formal reporting, however, the Attorney General's letter notes "the fine cooperation the Drug Enforcement Administration has received from CIA" and the Department's expectation of "continuing cooperation . . . in this area." Accordingly, it would appear that if CIA and DEA can work out a mutually satisfactory arrangement regarding the kinds of offenses at issue, there would be no need to modify the procedures, at least so far as non-employees are concerned.

(Emphasis in original.)

On January 5, 1988, in a letter to William F Weld, Assistant Attorney General for the Criminal Division that provided information regarding a possible violation of U.S. narcotics laws by Adolfo Chamorro, CIA General Counsel David Doherty noted that "Although this non-employee crime is not required to be reported under the Attorney General-approved guidelines, I am making this report because of the serious nature of the alleged offense." No information has been found to indicate that DoJ responded to this statement by the General Counsel.(8)

On December 23, 1987, the CIA's HR 7-1 was revised to incorporate the changes that had been established six years earlier by E.O. 12333. With regard to crimes reporting, Section d of the revised HR stated:

. . . .

(5) All employees shall report to the General Counsel via their components facts or circumstances that appear to indicate the commission of a criminal offense . . . . Pursuant to Section 1.7(a) of E.O. 12333, CIA is obligated to report, through its General Counsel, to the Attorney General possible violations of Federal criminal laws by employees and of specific Federal criminal laws by any other person as provided in the crimes reporting procedures in Annex D.

(Emphasis added.)

Annex D of the revised HR 7-1 consisted of the 1982 MOU between CIA and DoJ. The February 11, 1982 letter regarding narcotics violations that had been sent by Attorney General Smith to DCI Casey along with the 1982 MOU was not included in Annex D.

1995 Revision of the DoJ-CIA MOU. In August 1995, DoJ, CIA and other Intelligence Community agencies agreed to a revised MOU governing the reporting of crimes that superseded the 1982 MOU on that subject. This revised MOU remains in effect.

Section II.A of the 1995 MOU defines an "employee" as follows:

. . . a staff employee, contract employee, asset, or other person or entity providing service to or acting on behalf of any agency within the intelligence community.

Thus, the broad requirement to report any potential violation of law by any "employee" has been extended once again beyond persons employed by CIA and to include those who are "acting on behalf" of the Agency. Also, for the first time, potential violations of U.S. laws related to narcotics trafficking are specifically included by the 1995 MOU in the categories of potential violations by non-employees that are required to be reported to DoJ.

Coordination with DEA. On April 25, 1984, DEA and CIA revised an August 1978 MOU between them. The revised 1984 version of the DEA/CIA MOU, entitled "Procedures Governing Conduct and Coordination by CIA and DEA of Narcotics Activities Abroad," focused on the collection and sharing of strategic narcotics intelligence and the issue of coordination at the field level. It did not mention CIA's crime reporting responsibilities under the 1982 MOU between DoJ and CIA.

The introduction of the revised MOU states that:

[The MOU is] intended to promote coordination between the DEA Special Agent in Charge (SAC) and the CIA Chief of Station (COS) in matters of mutual interest, timely sharing of strategic narcotics intelligence and the prompt resolution at the Headquarters level of difficulties or disagreements. CIA and DEA have legitimate functions with regard to monitoring and countering international narcotics trafficking and production.

The revised MOU defines "strategic narcotics intelligence" as:

. . . includ[ing] information regarding the influence of narcotics production and trafficking on the economy of a country, possible corruption of government officials, geographic areas of narcotics production, narcotics trafficking routes, financial intelligence (movements of funds attributable to narcotics production and trafficking) and estimates of narcotics production.

Individual Views of CIA Responsibility to Report Narcotics Violations Under E.O. 12036 and the 1979 Attorney General Guidelines. Bernard Makowka, an attorney in OGC from 1975-1989 and Chief of the Intelligence Law Division in 1982, states that narcotics violations by agents or assets did not have to be reported under E.O. 12036 and DoJ guidelines that existed at the time. According to Makowka, both CIA and DoJ were comfortable with this arrangement. Makowka says CIA did not want to be involved in law enforcement issues while DoJ did not want "tainted leads" from CIA which could not be used in criminal prosecutions because of national security concerns.(9)

Makowka also states that E.O. 12036 restricted CIA from disseminating information on U.S. persons and therefore certain narcotics violations could not even be reported to DoJ. Makowka further states that the definition of "employee" in HN 7-39 is not consistent with the way that the OGC interpreted the term "employee" as it applied to E.O. 12036. According to Makowka, HN 7-39 could be read so as to require the reporting of agent crimes only when an agent was acting on behalf of CIA and that when the agent was acting on his own, no report would have to be made.

Edmund Cohen, an OGC attorney and Chief of the Administrative Law Division in 1982, states that there had been an agreement between CIA and DoJ under E.O. 12036 that CIA would not necessarily have to report crimes, including narcotics violations, if such crimes involved classified information.

The OGC attorney who served as Makowka's deputy in 1982 remembers being told by senior attorneys in OGC that there was a distinction made for reporting narcotics violations under E.O. 12036 in which the CIA would only report major narcotics violations to DoJ. He also notes that, in the late 1970s, CIA was not heavily involved in the collection of narcotics intelligence and it was not a high priority.

A. R. Cinquegrana, Deputy Chief of DoJ's Office of Intelligence Policy and Review (OIPR) from 1979 to 1991, states that he does not believe that the 1979 guidelines required CIA to report narcotics trafficking violations as potential crimes by non-employees since the definition of "employees" under those guidelines included agents and assets.

Negotiation of 1982 DoJ-CIA Crimes Reporting MOU. According to the OGC attorney who served as Makowka's deputy in the Intelligence Law Division in 1982, CIA and DoJ entered into discussions over an MOU to establish crimes reporting procedures shortly after E.O. 12333 was issued by President Reagan. Approximately two months transpired between the issuance of E.O. 12333 and an agreement between the CIA and DoJ.

The OGC attorney who served as Makowka's deputy in the Intelligence Law Division in 1982 states that CIA General Counsel Daniel Silver assigned him the task of writing the first draft of the MOU. He says that he used the Attorney General guidelines under E.O. 12036 as a starting point regarding the list of reportable crimes. He did not add any new crimes to the list in his draft MOU and instead simply took the list of crimes from the 1979 guidelines. He also states that he received specific instructions from Cohen to narrow the definition of "employee" in the draft MOU from the definition in E.O. 12333. He recalls that there were not many changes between his draft MOU and the final MOU.

Makowka remembers that the negotiations for all the E.O. 12333 procedures took a long time to complete. Makowka oversaw the MOU negotiations for CIA but was one step removed from the day-to-day activities. Those responsibilities were handled by Cohen and his deputy for OGC, and says Makowka, the DO/Policy and Coordination Staff also was involved. Makowka also recalls that DoJ questioned everything in the E.O. 12333 procedures and says he assumes that DoJ carefully reviewed the MOU as well.

Cohen recalls that the MOU was thoroughly coordinated with DoJ. Cohen says that the negotiations over the MOU involved the competing interests of DoJ and CIA. DoJ's interest was to establish procedures while CIA's interest was to ensure that the MOU protected CIA's national security equities.

George Clarke, OGC's Chief of Intelligence Community Affairs in 1982, remembers that there were many discussions between CIA and DoJ but does not recall the specific issues. Clarke does not recall any interagency disagreement over the crimes listed in the 1982 MOU.

While personnel from the DoJ's Criminal Division were not involved in the day-to-day negotiations, Cinquegrana says that OIPR kept them fully advised and consulted with them regularly as the draft developed. Cinquegrana says he and Mark Evans represented DoJ in the negotiations.

Mark Evans and Jerry Schroeder, both of whom were OIPR staff attorneys in 1982, state that they have no recollection of having worked on the 1982 Crimes Reporting MOU, although both worked on other aspects of implementing other provisions of E.O. 12333. Neither had any idea of who else may have worked on this issue. Cinquegrana states that Deputy Assistant Attorney General Mark Richard and OIPR Chief Mary Lawton(10) participated in some of the MOU discussions.

Richard says he probably had some input into the MOU, but that it was negotiated by Cinquegrana, as Lawton's deputy.

Exclusion of Narcotics Violations from Scope of Reportable Non-employee Crimes. Makowka remembers that the issue of narcotics violations was thoroughly discussed between DoJ and CIA before the MOU was signed. According to Makowka, DoJ questioned everything in the MOU and was very particular about every procedure listed in the MOU. He recalls that DoJ and CIA discussed the issue of whether narcotics violations should be in the list of reportable crimes and the parties arrived at an understanding where CIA would only report "serious, not run-of-the-mill, narcotics violations." Makowka believes that this represented a decision by CIA and DoJ to continue the practice established under the previous Executive Order in which only significant violations would be reported. Subsequently, Makowka added that DoJ and CIA agreed that significant narcotics transactions would continue to be reported even though not technically required under the MOU.

According to Cohen, CIA's main concern was the collection of intelligence on narcotics, not law enforcement. He recalls that the only discussion between CIA and DoJ in terms of reporting narcotics violations to DoJ was in the context of Agency employees and the Agency reporting potential violations of law picked up through applicant and employee polygraphs. The deputy to the Chief of OGC's Intelligence Law Division in 1982 believes that the 1982 MOU was intended to be a continuation of existing practices under E.O. 12036.

Cinquegrana states that DoJ's Criminal Division reviewed and concurred with the non-employee criminal violations listed in the MOU. He believes that the Criminal Division had a better appreciation than OIPR for the kinds of crimes that should be included in the MOU. According to him, the list of crimes in the MOU seemed to represent at the time the categories of crimes that DoJ might expect to come to the attention of an intelligence agency during the course of its business. Cinquegrana does not remember any disagreements between DoJ and CIA relative to specific types of violations. From his perspective in OIPR, he believes the failure to include narcotics on the list of reportable non-employee crimes was an omission and not a conscious decision to exclude such matters.

Mark Richard, Deputy Assistant Attorney General with responsibility for General Litigation and International Law Enforcement in 1982, states that he probably had some input into the MOU. He was unable, however, to explain why narcotics violations were not on the list of reportable crimes except that the MOU had "other deficiencies, not just drugs."

Purpose of the February 11, 1982 Smith Letter. Cinquegrana says he remembers getting a telephone call "at the last minute" from Makowka who pointed out to him that the MOU failed to include the reporting of narcotics violations by non-employees. The draft MOU had already been cleared by all DoJ components--and was about to be signed by the Attorney General--when Cinquegrana reportedly found out about this omission. Instead of reopening the negotiations and clearing a revised MOU, Cinquegrana states that he and OIPR's Mark Evans prepared a letter from the Attorney General to DCI Casey. The letter was designed to show the importance of the subject of reporting narcotics trafficking without reopening negotiations, and that it was DoJ's expectation that CIA would understand DoJ's intent. Evans has no recollection of working on such a letter.

Cinquegrana states that the letter was designed to create an expectation in the CIA that narcotics violations would be treated in the same way as the listed reportable crimes would be treated. Cinquegrana says that at that time DoJ hoped CIA would include guidance on narcotics trafficking reporting along with any guidance disseminated to its employees with respect to the MOU. Cinquegrana states that "we [DoJ] were trying to build the best case. . . . We anticipated that [narcotics violations] would be hard for the Agency to say 'no' to in terms of accepting the need to report such violations. And that 'responsible officials' would so realize." However, when asked about the specific effect of the Smith letter, Cinquegrana states that it would be going "too far" to conclude that the Smith letter added narcotics trafficking to the list in the MOU.

For his part, Makowka has no recollection of having a conversation with Cinquegrana about the fact that the 1982 draft MOU did not include narcotics violations as reportable crimes. He attributes the Smith letter to someone at DoJ becoming uncomfortable at the prospect of the MOU not including any mention of narcotics. Makowka believes that the letter reflects the understanding between DoJ and CIA that only serious, not run-of-the-mill, violations would be reported. Makowka does not believe that the letter changed the list of violations that were required to be reported to DoJ.

Cohen believes that the failure to add narcotics to the list of reportable crimes was an oversight by DoJ and that someone at DoJ became embarrassed on realizing that DoJ forgot to include narcotics violations in the list of crimes reportable to DoJ. Cohen speculates that the letter from DoJ was a "cover your ass type of document." His interpretation of the letter is that it implies CIA should keep doing what it had been doing before the signing of the MOU. Cohen believes that the language was vague and did not add narcotics trafficking to the list of crimes CIA is required to report, although as a practical matter he believes that it was better to err on the side of reporting.

Clarke believes the intent behind the letter was that it was an oversight not to include narcotics violations in the list of reportable crimes. Thus, DoJ sought to make it clear that it expected the Agency to report such violations.

Makowka's deputy in OGC's Intelligence Law Division in 1982 believes that the intent of the letter was for the Agency to continue its past practice of reporting certain non-employee narcotics violations. He also thinks the Smith letter may have been a compromise in which CIA would report only major narcotics activities.

Defining "Employee" in the 1982 MOU. Makowka recalls that his deputy and Cohen worked very hard to define the term "agent" during the MOU negotiations. He believes that an independent contractor is not a contract employee and therefore is not an employee for purposes of the MOU.

Makowka's deptuy states that he was given explicit instructions from Cohen to develop a narrower definition of "employee" for the MOU than the language in E.O. 12333. The reason for doing so was to make a distinction between those people with staff-like access over whom CIA has a high level of control and agents and assets over whom CIA has limited control. He does not know whether DoJ was aware of CIA's reasoning for narrowing the definition. As previously noted, Makowka states that the definition of "employee" in HN 7-39 was not consistent with OGC's interpretation of "employee" and that the 1982 MOU was a joint effort by DoJ and CIA to refine language that would reflect the existing practice between CIA and DoJ under E.O. 12036.

Cohen says he believes the term "contractor" as defined in the 1982 MOU means a person with staff access. It was not intended to cover assets or agents.

According to Clarke, CIA wanted to make crimes reporting procedures less onerous on CIA. Clarke believes that "employees" were considered to be individuals who were processed by CIA's Office of Personnel. Clarke says that crimes reporting requirements concerning employees did not cover anyone with whom the DO dealt operationally.

Cinquegrana states it was his understanding that agents would not be considered employees under the MOU, although he would consider independent contractors as being covered under the category of "employee." At that time, he considered agents to be similar to informants used by law enforcement agencies. Cinquegrana also notes that OIPR "only knew what the Agency told us" regarding the status and duties of agents and assets.

Gary Chase, Chief of OGC's Administrative Law and Management Support Division from 1986 to 1989, says the term "contract employee" is a term of art and did not include an asset and probably did not include an independent contractor.

View of CIA Requirements Under the 1982 MOU to Report Narcotics Violations by Non-employees. OGC attorneys involved in the MOU negotiations--Makowka, his deputy, and Cohen--agree that the Smith letter did not--in the case of non-employees--have the effect of adding narcotics violations to the list of reportable crimes under the MOU.

Prior to the 1982 MOU, Makowka states, CIA could report potential violations to the Federal Bureau of Investigation (FBI) or DEA and meet its crimes reporting obligations to DoJ. Under the E.O. 12333 and the 1982 MOU, it was, however, no longer sufficient for the CIA to report crimes to DEA or FBI. Such violations would also have to be reported to DoJ, even if reported to the FBI or DEA. Makowka believes that OGC would take into account statute of limitations issues when deciding whether to report an allegation to DoJ.

Cohen, who was in charge of making crimes reports to DoJ in the early 1980s, has no recollection of using the statute of limitations to avoid reporting a matter to DoJ. His view of erring on the side of caution was also the view of General Counsel Stanley Sporkin that, when in doubt, refer the matter to DoJ. Even though narcotics violations by non-employees were not covered by the MOU, Cohen states he would report a matter because not to do so might come back to haunt the Agency. On the other hand, he says that reporting of a matter really made no difference because DoJ never acted on the information.

Gary Chase, responsible for CIA's crimes reports to DoJ between 1986 and 1989, states that he is not familiar with the February 11, 1982 Smith letter and had not seen the 1982 letter prior to 1997. For him, the 1982 MOU was the definitive document that established CIA's responsibilities. Chase states that the 1982 MOU imposed no obligation on CIA to report narcotics violations by non-employees to DoJ.
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Re: OFFICE OF INSPECTOR GENERAL INVESTIGATIONS STAFF REPORT

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PART 2 OF 2

Cinquegrana states that he would have expected OGC to report narcotics violations by non-employees and not to look for reasons not to refer a matter. He also believes that CIA has no authority to make statute of limitation determinations because such responsibility lies with DoJ.

Summation. Between August 15, 1979 and March 2, 1982, CIA was required by the April 15, 1979 Attorney General's guidelines under E.O. 12036 and HN 7-39 to report to DoJ any narcotics trafficking allegations relating to individuals, assets, or independent contractors who were associated with the Contras because assets and independent contractors were considered "employees" for crimes reporting purposes.

As of March 2, 1982, the terms of the 1982 CIA-DoJ Crimes Reporting MOU under E.O. 12333 no longer required that CIA report to DoJ narcotics trafficking allegations regarding individuals, assets, or independent contractors associated with the Contras because assets and independent contractors were not considered "employees" for crimes reporting purposes.

The February 11, 1982 letter from Attorney General Smith to DCI Casey that accompanied the CIA-DoJ Crimes Reporting MOU, did not create an additional requirement that CIA report to DoJ narcotics trafficking allegations regarding individuals, assets, or independent contractors associated with the Contras. However, Section IV. D. of the 1982 CIA-DoJ Crimes Reporting MOU gave OGC discretion to report any offense to DoJ in addition to those crimes specified in the MOU, including narcotics trafficking allegations regarding individuals, assets, or independent contractors associated with the Contras.

The April 25, 1984 CIA-DEA MOU and its August 28, 1978 predecessor defined and established procedures for the conduct, coordination and sharing of strategic narcotics intelligence information between CIA and DEA abroad.

In August 1995, the 1982 CIA-DoJ Crimes Reporting MOU was revised. Under that revised MOU, assets and independent contractors are considered "employees" for crimes reporting purposes, and narcotics violations are included among the list of "non-employee" crimes that must be reported to DoJ. The 1995 revision of the DoJ-CIA MOU specifically includes narcotics violations among the lists of potential offenses by non-employees that must be reported to DoJ.

Maintenance of Relationships with Persons Suspected of Involvement in Drug Trafficking. The Department of Defense and Military Construction Appropriations Act for Fiscal Year 1987, which authorized $100 million for Agency support to the Contras, included a prohibition on the provision of any assistance to any group that, among other things, retained in its ranks any individual "who has been found to engage in . . . drug smuggling . . . ." See Public Law 99-500, October 18, 1986, Section 204(b)(2). This prohibition was made known to CIA personnel in three Latin America Division Stations in March 1987. In January 1988, personnel in those Stations and three other Latin American Division Stations were informed of the prohibition.

What policies and guidelines governed CIA's contacts during the Contra program with persons and organizations alleged to be involved in drug trafficking?

CIA's DO developed a draft DO Handbook in December 1980 that included a section that focused on restrictions and prohibitions concerning contacts with individuals who might be involved in narcotics trafficking. The instructions were not applicable to the Contra-related individuals or independent contractors discussed in Volume II, however, since none of those individuals or independent contractors were involved in the collection of narcotics intelligence. A summary of the 86-page draft DO Handbook was sent to all DO field stations in July 1982 and stated that the draft had been approved by the DCI and represented Agency policy. The DO Handbook was not formally issued until January 1996, however, more than 15 years later.

Headquarters sent a cable on December 14, 1981 to all DO Stations and Bases notifying Agency personnel that President Reagan had signed E.O. 12333 on December 4, 1981, thereby superseding E.O. 12036. The main discussion in the cable concerned "the conduct of intelligence activities involving U.S. persons." In that context, the cable included reference to the E.O.'s authority for CIA to collect, retain and disseminate "information obtained in the course of a lawful . . . international narcotics . . . investigation."

On June 26, 1982, Headquarters sent a cable to all DO Stations and Bases noting that Attorney General Smith had approved a variety of procedures implementing E.O. 12333 and governing CIA activities abroad. The cable transmitted a complete set of these procedures and noted that training teams would be dispatched to the field to brief personnel concerning the new procedures. Agency personnel associated with this training confirm that it took place. One officer associated with the training sessions recalls that questions regarding Agency dealings with drug traffickers were routinely raised in these training sessions in the field.

January 4 and April 9, 1985, Headquarters cables to Central and South American Stations outlined a training program that was to be delivered by visiting teams of CIA personnel. The cable explained that the training would cover, among other things, the topics of "accomplishing goals within the parameters of the law and sensitivity to legal and political considerations." In a section of the cable addressing reporting of crimes, the cable noted that "reporting of narcotics violations is not mandatory but [CIA] policy is to report strategic narcotics movements." (Emphasis added.) The training also was to address the interface between DEA and CIA outside the United States.

On April 9, 1987, Acting DCI (ADCI) Robert Gates sent a memorandum to Deputy Director for Operations (DDO) Clair George concerning air flights to Central America. In this memorandum, Gates addressed the standards for dealing with air crew members who were operating as contractors or subcontractors for the Agency. Paragraph two of the memorandum stated:

. . . .

It is absolutely imperative that this Agency and our operations in Central America avoid any kind of involvement with individuals or companies that are even suspected of involvement in narcotics trafficking. This must be true not only of those with whom we contract, but also their subcontractors. I believe it is essential that we obtain the names of all air crew personnel who have had any association with Agency contractors or subcontractors and vet those names through DEA, Customs, and the FBI--even though this is likely to be an onerous and occasionally inconvenient undertaking--and perhaps even hamper operations at times.

. . . .

While several former senior Agency officials recall its substance, no information has been found to indicate that this memorandum, in its entirety, was disseminated to anyone at CIA Headquarters other than DDO George. With one isolated exception, no information has been found to indicate that the text or a summary of this memorandum was cabled to Agency field personnel who were involved in the Contra program. Nonetheless, the content of the memorandum was apparently widely known. For example, then-Central America Task Force (CATF) Chief Alan Fiers and CATF legal advisor Louis Dupart state that they were well aware of the ADCI's memo and interpreted it to apply broadly. A July 1987 exchange of cables between Headquarters and a Central American Station, while not citing the memorandum, did cite Gates' prohibition against using suspected drug traffickers.

A March 6, 1987 Headquarters cable concerning Department of State (DoS) actions regarding Adolfo Chamorro described the statutory provision barring assistance to a group with members who were found to be involved in drug trafficking:

Section 204(8) [sic] of the Military Construction Appropriations Act of FY-87 which authorizes aid to the Nicaraguan Resistance forbids the provision of any aid to an organization which retains in its ranks any individual who has been found to engage in drug smuggling.

On January 21, 1988, Headquarters sent a cable to Central American Stations summarizing congressionally-imposed restrictions on the Contra program. The cable urged that it be read by all field personnel and included the statement:
. . . .
No assistance . . . may be provided to any group that retains in its ranks any individual who has been found to engage in . . . drug smuggling . . . . As [addressees] are aware, some individuals within the [Contra] resistance have been excluded from further participation due to their past and well documented contact with drug smuggling or drug smugglers. [Addressees] are reminded that should evidence of involvement of drug use or smuggling come to their attention, they should report it to [Headquarters] and aggressively follow up.

. . . .

What do CIA Headquarters and field personnel recall regarding alleged drug trafficking by the Contras?

A large number of CIA personnel and other individuals acting on behalf of CIA were involved in implementing the activities to support the Contras. The following are the views of individuals concerning--from a Headquarters or field perspective--what they observed, what they did or what they thought they were supposed to do in connection with allegations of narcotics trafficking by the Contras. Those commenting range from an Acting DCI, DDOs, Chiefs of CATF, and COSs, who dealt with substantial strategic and management issues, to an independent contractor operations officer who lived with the Contras in their military camps.

The Headquarters Environment. Headquarters personnel assigned to the CATF during the 1980s indicate that CATF perceived itself as a group of dedicated officers who had one overriding priority: to oust the Sandinista Government. This task was, in their view, complicated by the actions taken by Executive Branch officials, intense scrutiny from Congress and the media, changing congressional restrictions, and independent activities undertaken through the auspices of the National Security Council (NSC). CATF personnel say it was understood that congressional restrictions had to be honored to preserve the program and the Agency's integrity. At the same time, they were determined that the various difficulties they encountered not be allowed to prevent effective implementation of the Contra program.

Senior Agency and CATF managers indicate that they were aware of restrictions regarding Agency dealings with persons or organizations known to be involved in, or suspected of, drug trafficking. Further, these officers recall being aware that, if a crime were discovered, it had to be reported to Headquarters.

Robert Gates, who served as Deputy Director of Central Intelligence (DDCI) from April 1986 to January 1987 and May 1987 to March 1989 and ADCI from January to May 1987, says that it was his position that CIA had to determine whether the Contras were involved in drug trafficking. It was "a matter of self preservation," not only for the Contra program, but for the Agency. In general, Gates says that the Agency had an obligation to terminate its relationship with any asset who was suspected by U.S. law enforcement agencies to be engaged in drug trafficking. Furthermore, Gates states that the Agency had an obligation to determine whether its assets had past or present involvement in drug trafficking. Gates says that allegations of drug trafficking had to be checked out.

Gates states that the intent of his April 1987 memorandum to DDO George was to instruct the DO not to have anything to do with known or suspected drug traffickers.(11) Gates believes that the policy from his office concerning narcotics trafficking was clear and consistent.

John McMahon, who served as DDO from 1978 to 1981, DDI from 1981-1982, Executive Director in 1982, and DDCI from 1982 to 1986, recalls that CIA was obligated to report individuals who were suspected of narcotics trafficking. As DDCI, McMahon says that any criminal violation, including narcotics, had to be reported to the DoJ. Agency relationships with assets associated with the Contra effort who were suspected of drug trafficking should have been terminated and the information reported to DEA, McMahon says. The Agency had an obligation to determine whether individuals or organizations with which it became involved were engaged in drug trafficking. It was not enough just to terminate a relationship when narcotics trafficking was suspected, states McMahon.

John Stein, who was the Associate Deputy Director for Operations (ADDO) from 1978 to 1981, DDO from July 1981 to July 1984, and Inspector General from 1984 to 1985, recalls that specific laws governed reporting of possible criminal activity. Stein says that Station officers and managers were supposed to report on narcotics matters and that "narco-trafficking had to be reported in all conditions." Stein says it would then be up to the DDO to decide how, but not whether, the information should be disseminated. "[Dissemination] is the only wise thing to do bureaucratically," states Stein.

Former CATF Chief Fiers stated in his written response to CIA/OIG questions that the April 1987 Gates memorandum prohibiting use of suspected drug traffickers was ". . . seen as a clear, direct instruction. It was understood to apply broadly, but it was equally understood that the area of concern was the logistics chain--also known as the Contra supply network. The memo was taken seriously."

Louis Dupart, CATF's legal advisor from mid-1985 to mid-1988, says that documents such as the 1982 CIA-DoJ MOU regarding crimes reporting served as guidelines, but CATF took a "common sense approach" on the issue of crimes reporting. According to Dupart, directives are written for those who do not exercise good judgment, those "who operate too close to the edge." Dupart states that criminal activity would have been reported by CATF to the OGC lawyer who served as principal legal advisor to the DDO and the information would then have been referred to DoJ or the FBI.

According to Dupart, CATF did not want anything to do with "tainted people," so it would not have to explain later why it dealt with such people. He points out that, beginning in the fall of 1986, the Iran-Contra scandal had broken and "we knew we could not deal with anyone who was tainted. Everyone was looking for drug involvement by the Contras: Congress, law enforcement, the media, everyone." Dupart says that, although the April 1987 Gates memorandum to DDO George was adhered to, the memorandum had little real impact because it merely reflected previously established CATF policy.

An officer who served as Chief of CATF/Nicaraguan Operations Group (NOG) from 1985 to 1986 and as CATF Deputy Chief from 1986 to July 1987, recalls that CATF management regarded drug trafficking as a "peril" to the Contra program because of the persons with whom CATF had to deal. However, he says that information relating to drug trafficking was not considered a collection or operational priority per se.

An officer who served in the CATF from 1984 to 1985 as Executive Officer and the first NOG Chief recalls that there was "no time to pursue drug-related leads or information" due to the "press of business." He recalls that he just tried to stay ahead of the cable traffic and Bill Casey's desire to be more creative.

An officer who was assigned to CATF in late 1987 and was CATF Chief from 1989 to 1991, notes that the top priorities were implementation of the Contra programs as well as foreign intelligence collection. As he recalls, Headquarters expected the Stations to report any information they acquired concerning the possible involvement in drug trafficking of individuals or organizations affiliated with the Contras or the Agency's Contra program. However, he says there was no requirement at the time to seek out such information systematically and aggressively.

This officer states that the narcotics issue was a target of opportunity. He observes that all of the Central American Stations were seeking information that would link the Sandinistas to drug trafficking. The goal was to diminish the image of the Sandinistas.

An officer who was LA Division Chief from 1986 to 1989 and CATF Chief from 1982 to 1983, stated in his written response to CIA/OIG questions:

During the time I was C[hief]/CATF . . . , I recall there was little evidence of significant drug trafficking in the areas where the Contra forces were active (Honduras, Nicaragua, Costa Rica) except perhaps for some involvement by the Sandinistas. Later in the decade, cocaine from South America began to move more substantially into the US through the Central American area as pressure on trafficking in the Caribbean and other blue water areas increased. . . . Given the lack of credible data regarding Contra involvement in narcotics trafficking during the earlier years, however, I believe the primary focus with respect to drug trafficking was the continual monitoring required by our long-standing policy of insuring no involvement with any individuals or organizations involved in narcotics trafficking.

The only rumors or reports I recall hearing of alleged Contra involvement in drug trafficking were anecdotal remarks I heard upon returning to LA Division in . . . 1986 from CATF personnel, particularly C/CATF [Alan Fiers] (who had direct responsibility for management of the Nicaraguan and Central American programs), to the effect that there had been some credible reporting of narcotics trafficking in the Southern Front (Costa Rica) . . . .

While I cannot recall the existence of any reporting on any alleged Contra involvement in drug trafficking, I do not believe there were any requirements for special handling of such reporting nor do I recall any opposition or reluctance on the part of Agency officers to report on such topics.

The officer also recalled:

Everyone in LA Division and CATF was aware of the controversial political nature of the Nicaraguan and Central American programs, and everyone knew that special vigilance was required to ensure that there were no violations of law or policy guidelines in the implementation of the program, particularly regarding criminal activity, narcotics trafficking, human rights abuses, etc., on the part of members of the Contra movement. Further, no . . . programs ever conducted by the Agency during my tenure was [sic] ever run as transparently as the Central American and Nicaraguan programs. Congressional members and staffers traveled frequently throughout the area and received extensive and detailed briefings on virtually every aspect of the program. Over a period of years the staffers became intimately familiar with the Contra program, and they would have been the first to call our attention to any problems in reporting on allegations of drug trafficking by Contras or Contra-related individuals. Further, State Department officers were deeply involved in political aspects of the program and were equally attuned to the sensitivities involved.

The 1987 funding resolution requiring a funds cutoff to any organization involved in drug trafficking had no special impact other than to reinforce a policy that was already in effect to eschew any contact with groups or persons credibly suspected of involvement in drug trafficking. I believe our principal reaction to the resolution was to re-emphasize the importance of remaining vigilant to this danger.

The Gates memo in April 1987, insofar as it referred to drug trafficking, repeated and reinforced a policy already in effect. As I recall, the memo was written in the aftermath of a problem involving an Air Branch proprietary or contractor and US Customs.

The officer who was LA Division Deputy Chief from 1980 to 1981 and LA Division Chief from 1984 to 1986, recalls that narcotics allegations regarding assets would be reported and the relationship with the asset would be terminated. "Handling assets with narcotics allegations in Central America [was] a no-no," he recalls. He says "Narcotics was a large issue with Latin America Division. What was not large was Contra involvement with narcotics."

An officer, who served as NOG Chief from 1986 to 1988, says that "the general thing about people who would cause trouble was not to deal with them." However, there needed to be a basis for suspicion and a threshold, i.e., "suspected by whom and on the basis of what."

The OGC attorney who succeeded Dupart in 1987 as the CATF legal officer states that the Agency decision regarding whether to use an individual who was subject to a drug trafficking allegation depended on the strength of the allegation and the reliability of the source.

Despite this general understanding of Agency policy regarding drug allegations, CATF managers' recollections of the impact of the April 1987 Gates memorandum prohibiting the use of contractors or subcontractors who were involved in CIA air operations and were even suspected of drug trafficking indicate no specific implementation of that policy. The former NOG Chief, for example, does not recall anything specific about the April 1987 Gates memorandum, but recalls that it was around that time that CATF began to use more restrictive criteria for recruiting and maintaining relationships with individuals associated with the Contra program. He states that the instructions left no room for interpretation and that it was clear that CIA had to terminate its relationship with individuals who were suspected of drug trafficking. He notes that such decisions would have been made by CATF Chief Fiers in almost all cases.

One of the former Deputy Chiefs of CATF does not recall any specific discussion in CATF about the April 1987 Gates memorandum, nor does he recall a change in policy or more restrictive vetting criteria for assets and contractors. Two branch chiefs who served in CATF from 1986 to 1988 and 1987 to 1991, respectively, also do not recall any specific discussions about the Gates memorandum. One of the former Chiefs of CATF says he recalls the Gates memorandum and also that Agency relationships with some pilots may have been terminated as a result. He believes that the policy of vetting contractors and subcontractors was strictly adhered to.

The Chief of CATF's Special Activities Branch from 1986 to 1988 recalls Fiers discussing the Gates memorandum and that the general thrust of the discussion was that CATF could not deal with any subcontractors or purchase any aircraft that had previously been implicated in drug trafficking. He says that Fiers did not express displeasure with these guidelines during the discussion, and that Fiers said the Agency had to be totally clean with regard to individuals and aircraft. He indicates, however, that the Gates memorandum had little practical impact because CATF "already had [relationships with] the FDN pilots," meaning that new pilots were not needed.

Procedures for Vetting Contractors and Others. The April 1987 Gates memorandum included a requirement that contractors and subcontractors be vetted through DEA and Customs as well as the FBI. On March 31, 1988, CATF sent a memorandum to then-DDCI Gates regarding use to support the Contra program of pilots and companies that may have been involved in drug trafficking. The memorandum, among other things, set forth CATF's approval criteria for individuals and companies that were involved in transporting equipment for the Contra program and indicated that, per Gates' instructions of "a year ago [that] the Agency has been extremely careful to properly vet all pilots, mechanics, and companies . . .," and explains that if "some derogatory information is found or alleged, but the various agencies do not believe it would be a problem for the U.S. Government to have a contract with the individual or company, a special approval is required which is signed by the chief of the division."

A former Chief of CATF does not recall that a focused, "across-the-board" policy for vetting Contras with respect to drug trafficking was ever established. He states that, if there had been information supporting drug trafficking allegations against an individual, CIA would have "pulled out all the stops" to collect more information about the allegations. He recalls that there was a well established policy in CATF to vet Contra pilots to ensure that they were not linked to drug trafficking. He says, "The Agency has been extremely careful in properly vetting all pilots, mechanics, and companies."

The former Deputy Chief of CATF says that, if someone had a background in narcotics or there were allegations of narcotics activities, the information was "checked out." He says that the narcotics problem was particularly difficult to deal with when it came to the leasing of aircraft. He observes that it was hard to find a plane without a drug record and most DC-6s had been placed on watch lists by DEA.

The Chief of CATF's Special Activities Branch from 1986 to 1988 was responsible for vetting air crews and other support personnel. He says that he does not recall any specific guidelines regarding the use of pilots who were known or suspected drug traffickers. In fact, he recalls that the whole policy was "bizarre" because the vetting process was focused on ensuring that the aircraft that were being used had no prior history of involvement in drug trafficking. He recalls that there was great sensitivity to making sure the aircraft were "clean" so as not to run afoul of the congressional oversight committees and that it was as if the planes, not the individuals, were the narcotics traffickers.

The former NOG Chief says he does not recall the specific criteria for terminating a relationship with an individual who was alleged to be involved in drug trafficking. In his view, CATF was obligated to consider all derogatory information to be accurate. Back then, according to him, derogatory information from DEA or Customs, even if not substantiated, would have been enough to cause termination.

The Field Environment. Managers and officers who were assigned to Central America during the 1980s recall that the overriding priority task of their Stations and Bases was to support the Contras. In the field, CIA sought to develop and support military forces that could successfully engage the Sandinista Army. This effort, along with the maintenance of relationships with the Contra leaders, dominated Station and Base efforts and resource allocations. Recollections are mixed regarding the extent to which drug trafficking allegations became known and were reported.

A Central American Station's officers, who were responsible for handling Contra paramilitary activities in the 1980s, recall that the Station's main priority was to support the war effort. A former Deputy Chief of Station (DCOS) and Acting COS, says that "the Station was focused 99 percent on the [Contra] war effort" and that the "focus was always on the program." A Station officer states, "The focus was to get the job done, get the support and win the war." Another officer assigned to this Station adds that "the primary mission at [the] Station was supporting the Contras [and two other missions]." Another officer who was assigned to the Station in the mid-1980s says, "There was a war going on. The primary mission for seven years was fighting the Sandinistas." A paramilitary officer assigned to the Station in the mid-1980s recalls that his "only job was to train [Contras] in camps."

Most Station officers state that they would have reported to their supervisors or Headquarters for appropriate action any narcotics trafficking or criminal information they acquired. Most officers recall no allegations of trafficking by the Contras, although some do recall unsubstantiated rumors concerning individuals associated with Eden Pastora.

A Central American COS states that "narcotics was not something [Station personnel] were looking for in the 1980s, but that does not mean they would have ignored it if they had seen it." He says that his understanding of crimes reporting obligations since 1980 was that anything that looked to be criminal in nature should be reported to Headquarters.

The COS says he became aware of drug trafficking allegations against the Contras "fairly early" during his assignment. He says there was a group of "ne'er-do-well" people surrounding Eden Pastora who had histories that included criminal activity. He continues that "there was a range of derogatory information that may have included narcotics activities. Early traces revealed these folks should be treated carefully. Some were scoundrels." He indicates that the Headquarters reaction to derogatory information concerning Pastora's associates has to be considered in the context of DCI William Casey's overriding political objectives. As the COS explains:

. . . yes, there is derogatory stuff and we would be careful in terms of counterintelligence and operational security, but we were going to play with these guys. That was made clear by Casey and [then-LA Division Chief Duane] Clarridge.

The COS says he is fairly certain that there was never any large infusion of drug money to the Contras because they "never hit the jackpot" in a way that would have indicated drug money or a substantial contribution.

A Central American Station DCOS recalls that he "did not know anyone with drug connections."

Another Central American Station DCOS states that he has "no knowledge of any Contras who were alleged to be involved in narcotics trafficking." He adds that, "if narcotics trafficking had been conducted by the Nicaraguan Contras, Agency officers would have found out." He emphasizes that Station officers "would have jumped out of their skin had allegations of trafficking into the U.S. been made."

An officer who served as an Acting COS states that he did not recall any enunciation of a specific reporting policy regarding narcotics trafficking, noting that "if there was a crime, it was reported."

An officer who served as DCOS, recalls that "counternarcotics was dealt with within the context of the Contra Program; when it came across the Station's screen it was reported, but otherwise it was not a factor."

An operations officer assigned to a Central American Station recalls that "it went without saying that if one came into a situation involving a serious criminal allegation, it would be raised with Headquarters and made a matter of record." He also says that he did not at any time believe that Pastora or anyone associated with the Contras was involved in drug trafficking.

An officer assigned to a Central American Station states that information on aircraft and personnel--including Contras--possibly involving in drug trafficking was reported to Headquarters and the DEA office in 1984-85. He recalls that the "CIA policy on drug-related information was [to] report the matter to CIA Headquarters, develop the information, run traces where possible and that CIA Headquarters was supposed to forward the information to the DEA." Another Station officer says, "Narcotics was just not on the radar screen at the time and [the country where he was assigned] was not a big transshipment point." He adds, however, that standard worldwide DO practice was to report any criminal activity to the COS who would then be responsible for forwarding the information to Headquarters.

An officer assigned to a Central American Station recalls that she "never heard any rumors of drug trafficking" by the Contras. Another officer assigned to the Station recalls no allegation of trafficking by the Contras. He adds that "Contras may have been doing things we weren't aware of and we always didn't know what they were doing," but he didn't believe they were involved in narcotics.

The former Acting COS says that he does not recall the procedures for vetting assets and contractors, but that "it was not normal to check automatically with law enforcement agencies."

One Station officer recalls that, in effect, there was not much vetting of Nicaraguan assets. The officer recalls that she was not aware that any drug trafficking was taking place.

An independent contractor operations officer, who was assigned to train and support the Contras in their camps, recalls that he never saw anything to indicate drug trafficking on the part of the Contras with whom he dealt. He says that in every place he served in connection with the Contra program he had access to everything about the Contras. Although there were a few individuals who used marijuana personally, he says he never saw anything that suggested drug trafficking.

The independent contractor operations officer recalls that he was never tasked by the CIA officers with whom he dealt to determine whether there was any narcotics trafficking in the Contra camps. However, the officer also says that he believes that the allegations of narcotics trafficking by the Contras were "just something someone made up to cover up something else." He states that it was too evident that the Contras were getting money and help during the U.S. funding hiatus from somewhere and that narcotics trafficking allegations stemmed from efforts to explain the source of the support. In this light, he notes that Contra logistical personnel with whom he worked speculated that the flights that were sponsored by the U.S. private benefactors to support the Contras, must have been funded from the profits of narcotics trafficking. The independent contractor operations officer says that the Contra logistical personnel, noting that the Contras continued to receive food, medicine, ammunition and other aid during the U.S. Government cut-off of funds, "probably made the assumption that narcotics was paying for this."

The independent contractor says he believes that these suspicions were unfounded. He describes the Contra logistics personnel suspicions as "just comments" and says:
. . . it was an ideal situation to send drugs from [Central America] to the United States, but the Americans were too professional and had no reason to do so. Narcotics trafficking allegations were just rumors. If there was narcotics trafficking, it was probably from Nicaragua to the United States conducted by the Medellin cartel.

An officer, who was a Central American COS and later Deputy Chief of LA Division in the late 1980s, says that Honduras was not an attractive location for drug traffickers during this time period. A war was going on, it was a poor country, there were large numbers of U.S. military forces at Palmerola Air Base and elsewhere, there was a large U.S. radar system in operation that tracked aircraft throughout the region, and Airborne Warning and Control System aircraft operated in the area. Additionally, he recalls that the Contras controlled few, if any, airfields in Honduras. The geography of the country also was not conducive to drug trafficking by air. He notes that, for the most part, the land resembled a crumpled sheet of paper with few flat spots for landing strips. He says that, in his opinion, Guatemala, southern Mexico, or the Yucatan Peninsula were more desirable transshipment and refueling points for drug traffickers than Honduras.

He says he recalls reports that members of Eden Pastora's Southern Front organization may have engaged in drug trafficking activities and that Pastora may have later made admissions to that fact. There were also rumors that Mario Calero, the brother of Contra Northern Front leader Adolfo Calero, may have been involved in drug trafficking. He notes:
The rumors that Mario Calero may have been involved with drug trafficking while running an [aircraft] from Louisiana were not believed to be true and no credible reporting on any such activity was ever received.

He says it was his understanding that the U.S. Customs Service and possibly the Immigration and Naturalization Service (INS) inspected all Contra-sponsored flights into and out of the United States to ensure there was no contraband, such as narcotics and weapons, on board.

He notes that Adolfo Calero and Enrique Bermudez had modest homes in Miami during this time period. In Honduras, they lived even more modestly. He says he once visited Bermudez' home in Miami and was struck by the fact that Bermudez' wife had set up a hair salon in their home as a means of producing income. He comments that they certainly did not live as if they had access to large amounts of drug money.

He says that, if CIA or other U.S. Government organizations operating in Honduras had acquired information indicating that the Contras were engaged in narcotics trafficking, it would have--or should have--been disseminated in intelligence reports. He makes clear that CIA was not alone in its intelligence collection and reporting efforts in Honduras and that large amounts of intelligence were collected by other U.S. Government agencies. Reports of Contra drug trafficking, he says, would probably have been a topic of discussion at the Interagency Working Group that was run by DoS official Elliott Abrams. For example, according to him, there may have been discussions at the Interagency Working Group concerning a Contra who was caught by the Contras growing a patch of "pot." The offender, as he recalls, was court-martialed by the Contras.

An officer who was a Central American COS in the late 1980s and LA Division Chief from 1989 to 1993, recalls in his written response to OIG questions that a case involving Juan Rivas, a.k.a. "Quiche," was:

. . . the only instance [he] can remember of a member of the [Contra's] Northern Front being tied to narcotics trafficking. [Northern Front leader Enrique] Bermudez himself . . . had never been accused to [his] recollection of carrying out or tolerating trafficking or traffickers. [He] recall[s] no sign that the Northern Front received money from traffickers. In fact they owed lots of money to the Hondurans for food during periods when we could not support them.

An officer who served as a Central American Acting DCOS in the mid-1980s does not remember the provision in the FY87 $100 million funding legislation for the Contras directing that no funds could be provided to organizations whose members engaged in drug trafficking. Further, he does not recall receiving any special briefing regarding this condition for the funding. He observes, however, that such a condition would have been closely adhered to since such programs were very strict about compliance issues.

A Station operations officer in the mid-1980s says he does not recall any rumors of Contra involvement in drug trafficking during his tour. Another Station officer says that there is "no way" the allegations contained in the San Jose Mercury News can be true.

A logistics officer assigned to Central America in the mid-1980s says he once heard a rumor that the Contras had included marijuana in an air drop of supplies to troops in Nicaragua, but says he heard nothing more about the allegation. He says that it was his impression that the Contras were "military/ideological people rather than a criminal element." He observes that, from a logistical point of view, Contra operations were not conducive to drug trafficking. The material all came from "the North to the South." He does not recall any cargo going "from the South to the North" and believes the media allegations "sounded preposterous."

An operations officer says that he never heard anything about drug trafficking and never saw any evidence of drug trafficking. In fact, he recalls that the Contra camps did not even have alcohol available and no drinking was allowed. A Station staff officer says that she does not recall hearing anything about drug trafficking in connection with the Contras at that time.

An operations officer says that he obtained no information and heard no rumors during his tour about Contras engaging in drug trafficking. Noting that he had been a law enforcement officer prior to joining CIA, he says he saw no sign of drugs, "not even one marijuana cigarette," during his assignment. An officer assigned to Central America says that he was unaware of any Contra being involved in drug trafficking. The officer who served an Acting DCOS also says that he does not remember hearing any rumors or obtaining any information during his tour that linked the Contras in the country where he was assigned with drug trafficking.

A Station operations officer says that he did not hear any rumors of drug trafficking by Contra members. However, he vaguely remembers hearing about the lack of security at one of the air bases and how easy it would have been to move drugs in and out of the base. However, he says he cannot recall the name of the base.

A Station operations officer says that any information regarding drug trafficking by Contra leaders or any other asset would have been passed to Headquarters. He also states that he is unaware of any suppression by his supervisor or colleagues of information concerning Contra drug trafficking.

A Station operations officer recalls that CIA personnel serving in the country "clearly understood we were to have nothing to do with anyone involved in narcotics trafficking and to my knowledge no one ever did." He says that any drug trafficking information would have been handled in regular intelligence reporting channels. He says he recalls no management resistance at all to processing any reporting on drug trafficking and adds, "If someone attempted to hide such information, I would report them."

Finally, a Station operations officer says he does not believe that information regarding drug trafficking was ever suppressed by his colleagues or supervisors.
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Re: OFFICE OF INSPECTOR GENERAL INVESTIGATIONS STAFF REPORT

Postby admin » Sun Jun 14, 2015 8:16 pm

CONTRA ORGANIZATIONS

What drug trafficking allegations was CIA aware of, and when, involving Contra organizations? How did CIA respond to this information, and how was this information shared with other U.S. Government entities?

15th of September Legion--Justiniano Perez/Manuel Porro/Juan Francisco Rivera/Hugo Villagra/Fernando Brautigan/Felix Alcides Espinoza/Edwin Hoocker

Background. The military arm of the Nicaraguan Revolutionary Democratic Alliance (ADREN) was known as the 15th of September Legion. It was formed in 1980 and its principal leaders were Enrique Bermudez and Justiniano Perez Sala. Other leaders included Guillermo Mendieta Chaves, Alcides Espinoza, Ricardo "Chino" Lau, Manuel Porro, Manuel Villalobo, and Hugo Villagra.

In May 1981, a Central American Station reported that the ADREN, Nicaraguan Democratic Union (UDN) and MISURASATA had agreed in principle to combine forces in a new organization. They would continue to use the name 15th of September Legion for the organization's military arm. The new organization, the Nicaraguan Democratic Force (FDN), was established in September 1981. The FDN General Staff included Enrique Bermudez, Justiniano Perez, Ricardo Lau, and Juan Francisco Rivera. The merger of the UDN and the ADREN, including its 15th of September Legion, into the FDN was completed in early 1982. Former ADREN leader Guillermo Mendieta Chaves was excluded from the new organization because he was suspected of being a Sandinista spy.

The 15th of September Legion included a unit called the Special Secret Operations Command (OES). The Coordinator of the OES was Justiniano Perez. Other members included Fernando Brautigan, Alcides Espinoza, Edwin Hoocker, Ricardo Lau, and Gerardo Martinez Gutierrez. The unit was organized to increase ADREN's operational capabilities both within and outside Nicaragua.

The ADREN to some extent engaged in kidnapping, extortion and robbery to fund its operations. A June 1981 Central American Station draft field intelligence report stated that ADREN leaders "see themselves as being forced to stoop to criminal activities in order to feed and clothe their cadre." The ADREN also engaged in the bombing of Nicaraguan civilian airliners and airliner hijackings as methods of attacking the Sandinista Government. The Station reporting from June 1981 through March 1982 identified the following 15th of September Legion members as having been involved in criminal activities: Brautigan, Hoocker, Lau, Martinez, Perez, Porro, Rivera, and Villagra.

A September 1981 cable to Headquarters (discussed in more detail later in this section) indicated that ADREN had decided to engage in drug trafficking to the United States to raise funds for its activities. ADREN members Alan Downs and Edwin Hoocker reportedly had been involved in an initial delivery of drugs to Miami in July 1981.

The leader of the ADREN/OES, Justiniano Perez, resigned from the FDN in November 1981. Perez wrote a resignation letter in which he stated that he was leaving because of internal dissension and mistrust within the FDN leadership. A June 1982 cable to Headquarters reported that Enrique Bermudez, Chief of the FDN General Staff, had stated that the OES was involved in armed assaults and thefts to collect funds. According to Bermudez, Perez disclaimed responsibility but admitted he had lost control of the group.

According to a March 1982 Headquarters cable, the FDN had ceased using the name "15th of September Legion" by early 1982. The name had become associated with a small splinter group led by Perez, Porro, Rivera, and Villagra. Its personnel were principally former members of the ADREN/OES. The group reportedly continued to conduct criminal activities to support its operations against the Government of National Reconstruction (GRN) and identified itself as the 15th of September Legion.

Justiniano Perez Sala. In June 1982, Headquarters requested an assessment as to whether Perez "could be influenced to employ tactics other than those used by terrorists," if he were to be re-integrated into the FDN. In November 1982, with the support of MISURASATA leader Stedman Fagoth Mueller and the concurrence of the FDN, Perez re-joined the Nicaraguan Resistance (RN) as the Military Advisor to the MISURASATA.

A January 1984 cable reported that "Perez is the only person in Honduras and in the entire FDN with the leadership, charisma, and military tactical ability to make the movement go forward in the manner CIA would like." However, beginning in December 1983, two Stations reported that Perez became involved in a disinformation scheme, along with Francisco Rivera, Hugo Villagra and a Cuban-American U.S. citizen that was directed against the political and military leadership of the FDN. In May 1984, Perez withdrew from active service with the MISURASATA, returned to Miami, and had become associated with a dissident Nicaraguan exile group led by Hugo Villagra and the Cuban-American citizen that eventually became known as the Nicaraguan Coalition of Opposition to the Regime (CONDOR).

Manuel Porro Rubiales. A June 1982 cable identified Manuel Porro as a member of the FDN General Staff support unit. He was identified as an instructor at the FDN NCO School in an October 1982 cable. A September 1986 cable discussed Adolfo Calero's hiring of Porro as an assistant. A September 1987 cable indicated that Porro also reportedly handled Adolfo Calero's funding transactions between Miami and San Jose, Costa Rica, banks.

Juan Francisco Rivera Aguirre. In a May 1982 cable to Headquarters, Rivera was identified as FDN Chief of Logistics. A February 1983 cable reported that an FDN investigation had found Rivera guilty of misappropriating funds. According to a March 1983 cable, Rivera had contacted Carol Prado and indicated that he would leave the FDN and travel to Miami. In May 1983, a Station reported that Rivera was alleging that the FDN was "coming apart" due to internal conflicts, cliques and lack of control by CIA.

A June 1983 cable indicated that Rivera moved to Miami where he became one of the leaders of the dissident Nicaraguan exile group that eventually became known as the CONDOR group. According to a December 1984 Headquarters report, Rivera was active, along with Perez, Villagra and the Cuban-American citizen, in a disinformation campaign that attempted to ferment distrust between the Honduran military leadership and the FDN in Honduras. The CONDOR group's ultimate goal was to supplant the FDN leadership with its own members.

Hugo Villagra Gutierrez. A November 1982 cable identified Hugo Villagra as the FDN Chief of Operations. In August 1983, he was appointed as the Tactical Field Commander of FDN Forces in Nicaragua.

A December 1983 cable reported that Villagra had resigned from the FDN, claiming that he was not being supported by the FDN political and military leadership. Villagra moved to Miami and, according to a June 1984 Headquarters cable, became one of the leaders of the dissident Nicaraguan exile group that eventually became known as the CONDOR group.

Other 15th of September Personalities: Fernando Brautigan. No information has been found to indicate that Brautigan joined the FDN after the demise of the 15th of September Legion in 1982. However, an April 1983 Central American Station cable to Headquarters concurred in his appointment as a Military Advisor to Emery Hudson's Miskito Resistance organization in Costa Rica as requested by Miskito leader Norman Campbell. Brautigan was identified as a member of the dissident Nicaraguan exile CONDOR group in a May 1986 cable to Headquarters.

Felix Alcides Espinoza Rodriguez. According to a June 1983 cable to Headquarters, Alcides Espinoza was FDN Commander of Sagitario Base in June 1982. A November 1984 cable indicated that Espinoza was senior Military Adviser to MISURA.

Edwin Hoocker Coe. No record has been found to indicate that Hoocker joined the FDN after the demise of the 15th of September Legion in 1982. However, an April 1983 Central American Station cable to Headquarters concurred in his appointment as a Military Adviser to Emery Hudson's Miskito Resistance organization in Costa Rica as requested by Miskito leader Norman Campbell. A June 1984 FBI name trace request to CIA indicated that Hoocker had recently immigrated from Nicaragua and had taken up residence in Texas.

Allegations of Drug Trafficking. In September 1981, a report to Headquarters relaying information obtained from an asset stated that the ADREN leadership had made a decision to engage in drug smuggling to the United States in order to finance its anti-Sandinista operations. Reportedly an initial trial run had taken place in July 1981 when ADREN member Alan Downs carried drugs in a suitcase on a flight to Miami. Once the drugs were delivered and paid for, Downs reportedly turned over the proceeds to Edwin Hoocker in Miami. No other information concerning Downs has been found. Reportedly the drugs belonged to an unidentified Honduran who was a native of the Bay Islands and who operated out of San Pedro Sula.

A May 1982 cable from the FBI to CIA stated that reportedly "Justiniano Perez is a close friend of 'Paisa' (nickname) who is a Drug Trafficker." According to the cable, Perez told Paisa that "if [Perez] received financial assistance from Paisa he would make business concessions to him when and if Nicaragua were to be liberated."

A February 1982 Headquarters cable, in response to a name trace request, indicated that members of the splinter group of the 15th of September Legion Group who had refused to join the FDN were using the Legion name in conducting robberies, drug smuggling and hijacking.

CIA Response To Allegations of Drug Trafficking. No information has been found to indicate any action to follow-up or corroborate the allegations concerning ADREN/15th of September Legion drug smuggling into the United States. However, the September 1981 and February 1982 information against ADREN/15th of September Legion stemmed from a single source, and in October 1982, Headquarters issued a cable indicating that the source was thought to be untrustworthy and a possible agent of the Government of Nicaragua. A January 1982 Headquarters cable noted that an Agency asset should not meet Justiniano Perez and Francisco Rivera "who represent the 'Renegade' splinter group of the 15th of September Legion."

No information has been found to indicate that the Agency pursued any action to follow-up or corroborate the May 1982 FBI information concerning Justiniano Perez's alleged close friendship with a reputed drug trafficker named Paisa and Perez's alleged promise to help Paisa later in return for financial assistance. No record of any individual named Paisa has been found in CIA records.

Information Sharing with Other U.S. Government Entities. The September 1981 report that the ADREN intended to engage in drug smuggling to the United States was disseminated as an intelligence report on October 28, 1981 to the Departments of State and Treasury, FBI, U.S. Customs, Defense Intelligence Agency (DIA), and NSA. The report also was disseminated to the Ambassador and DEA representative in Tegucigalpa and to USCINC South. Several intelligence reports concerning the ADREN/15th of September Legion's criminal, non-drug trafficking, activities also were disseminated to U.S. law enforcement and intelligence community organizations between June 1981 and March 1982. No information has been found that this reporting was shared with Congress.
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