Drugs, Law Enforcement and Foreign Policy: A Report Prepared

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.

Drugs, Law Enforcement and Foreign Policy: A Report Prepared

Postby admin » Sat Apr 23, 2016 2:33 am

Drugs, Law Enforcement and Foreign Policy: A Report Prepared by the Subcommittee on Terrorism, Narcotics and International Operations of the Committee on Foreign Relations, United States Senate
by Committee on Foreign Relations, Claiborne Pell, Rhode Island, Chairman
Subcommittee on Terrorism, Narcotics and International Operations, John F. Kerry, Massachusetts, Chairman
100th Congress, 2d session
December 1988

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Drugs, Law Enforcement and Foreign Policy: A Report Prepared by the Subcommittee on Terrorism, Narcotics and International Operations of the Committee on Foreign Relations, United States Senate

COMMITTEE ON FOREIGN RELATIONS

CLAIBORNE PELL, Rhode Island, Chairman
JOSEPH R. BIDEN, JR., Delaware
PAUL S. SARBANES, Maryland
ALAN CRANSTON, California
CHRISTOPHER J. DODD, Connecticut
JOHN F. KERRY, Massachusetts
PAUL SIMON, Illinois
TERRY SANFORD, North Carolina
BROCK ADAMS, Washington
DANIEL P. MOYNIHAN, New York
JESSE HELMS, North Carolina
RICHARD G. LUGAR, Indiana
NANCY L. KASSEBAUM, Kansas
RUDY BOSCHWITZ, Minnesota
LARRY PRESSLER, South Dakota
FRANK H. MURKOWSKI, Alaska
PAUL S. TRIBLE, JR., Virginia
DANIEL J. EVANS, Washington
MITCH McCONNELL, Kentucky
GERYLD B. CHRISTIANSON, Staff Director
JAMES P. LUCIER, Minority Staff Director

SUBCOMMITTEE ON TERRORISM, NARCOTICS AND INTERNATIONAL OPERATIONS

JOHN F. KERRY, Massachusetts, Chairman
BROCK ADAMS, Washington
DANIEL P. MOYNIHAN, New York
MITCH McCONNELL, Kentucky
FRANK H. MURKOWSKI, Alaska

TABLE OF CONTENTS:

• Letter of Transmittal
• 1. Executive Summary and Conclusions
o Past Failures
o Policy and Priorities
o Administrative Recommendations
o Specific Legislative Recommendations
• 2. Introduction
o Origins and Methodology
o The Scope of the Threat
o Domestic Effects of International Drug Trafficking
o Effects on Foreign Countries
o The National Security Implications of the Drug Trade
o Synopsis of the Report
o Open Issues and Subjects Requiring Further Investigation
• 3. The Bahamas
o Introduction
o Growth of Official Corruption with Vesco and Bannister
o Use of Norman's Cay for Smuggling
o Response by U.S. to Lehder Problem
o Extent of Bahamian Corruption Today
o Bahamas Seeks to Influence U.S. Policymakers
o Bahamian "Cooperation"
o Conclusions
o Appendix: State Declassified Material
• 4. Colombia
o Introduction
o Origins of Narcotics Trafficking in Colombia
o Origin of the Cartels
o Organization and Wealth
o The Cartel's War Against the Colombian Government
o Adequacy of Legal and Law Enforcement Measures
o Conclusions
• 5. Narcotics Traffickers and the Contras
o Introduction
o Executive Branch Response to Contra Drug Allegations
o The Guns and Drug Smuggling Infrastructure Develops
o Drug Trafficking and the Covert War
o The Pilots
o U.S. Government Funds and Companies with Drug Connections
 A. SETCO/HONDU CARIB
 B. FRIGORIFICOS DE PUNTERENNAS
 C. DIACSA
 D. VORTEX
o The case of George Morales and FRS/ARDE
o John Hull
o San Francisco Frogman Case, UDN-FARN and PCNE
o The Cuban-American Connection
o Ramon-Milian Rodriguez and Felix Rodriguez
• 6. Cuba and Nicaragua
o Introduction
o Historical Background
o Cuba As a Way-Station for Smugglers
o Case History: George Morales
o Ideological Use of Drugs
o Cuba, Panama and the Cartel
o Castro Denies Involvement
o Allegations Concerning Nicaragua
o Summary and Conclusions
• 7. Haiti
o Introduction
o The Colombians Move In
o The Miami Connection
o DEA's Operations in Miami and in Haiti
o Conclusions
• 8. Honduras
o Introduction
o History of Narcotics Trafficking in Honduras
o Bueso-Rosa, Latchinian and Narco-Terrorism
o Ramon Matta Ballesteros
o Rigoberto Regalado Lara
o Policy Issues
• 9. Panama
o Introduction
o Origins of Corruption in Money Laundering
o Early Panamanian Involvement in Narcotics
o Noriega's Corruption of Panamanian Institutions
o Noriega's Involvement in the Arms Business
o Noriega and the Cartel
o Noriega's U.S. Partners
o U.S. Knowledge of Noriega's Activities
o Why Did the U.S. Fail to Respond to Noriega Allegations?
o Mixed Messages
o Conclusion
o Appendix: GAD-NSC Correspondence
• 10. Money
o Introduction
o Defining the Problem of Money Laundering
o The Bank Secrecy Act Restricts Money Laundering
o The International Loophole
o Case Histories
 Cayman Islands
 Bahamas
 Panama
o One Money Launderer's Experience
o U.S. Response to the Problem
o Effectiveness of Current Reporting Requirements
o Summary and Conclusions
• 11. Law Enforcement vs. National Security: Confused Priorities
o Introduction
o Barry Seal and the Cartel
o Bueso-Rosa and the Contras
o Intelligence vs. Law Enforcement
o Misguided Priorities
o Consequences of Privatizing U.S. Foreign Policy
o Case Studies
 Michael Palmer
 Frank Camper
 Richard Brennecke
 Conclusion
• 12. Conclusions
o National Security Issues
o Federal Priorities
o Covert Activity Issues
o Law Enforcement Issues
o Money Laundering Issues
o Personnel Issues
o Neutrality Act
• Appendixes
• A. Narcotics and the North Notebooks
o Summary
o Committee Action
o Selected Drug Related Entries
• B. Allegations of Interference With the Committee Investigation
o Allegations of Interference
o Chronology
• C. Witness List
o Witnesses
o Writs
o Subpoenas
o Depositions
• Appendix
• The Exhibits consist of documents referred to in footnotes.
• ABA Report, 1988, "Criminal Justice in Crisis"
• State Department International Narcotics Control Strategy Report (INCSR), March 1988, Paraguay
• State Department INCSR, 1989, Mexico
• London Sunday Times Magazine, September 29, 1985: Paradise Lost
• State Department INCSR, 1988, Bahamas
• NBC Nightly News, April 30, 1987
• State Department INCSR, 1988, Bahamas
• State Department INCSR, 1989, Bahamas
• Black, Manafort and Stone, Proposal for the Government of the Bahamas
• Bruce Bagley, "Colombia and the War on Drugs," Foreign Affairs
• State Department INCSR, 1987, Colombia
• The Miami Herald, November 29, 1987, "The Medellin Cartel"
• The Miami Herald, December 2, 1987, "Little Man Led to Big Drug Bust"
• The Miami Herald, December 3, 1987, "Cartel's Killers Stalked Heroic Cop For a Year"
• State Department INCSR, 1988, Colombia
• State Dept. Doc. No. 3079c "Allegations of Misconduct of the Nicaraguan Resistance," March, 1986
• State Dept. Doc. No. 5136c "Allegations of Drug Trafficking and the Nicaraguan Democratic Resistance," July 26, 1986
• North Notebooks, "Pastora Revealed as Drug Dealer"
• Memo, Robert Owen to Oliver North, April 1, 1985
• Letter, Eden Pastora to Elliot Abrams and David Sullivan, April 10, 1986
• Customs Report, Guy Penilton Owen, May 9, 1983
• Shippers Export Declaration, R/M Equipment, Inc., for Hondu Carib Cargo to Armed Forces of Honduras February 28, 1985
• Notebook found aboard Hondu Carib plane, "Rob Owens"
• Statements, Carlos Soto, in re: Luis Rodriguez, April 3, 1987
• Statements, Carlos Soto, in re: Luis Rodriguez, May 8, 1987
• Statements, Carlos Soto, in re: Luis Rodriguez, June 17, 1987
• Florida Dept. of Law Enforcement Investigative Report, Eugenio Garcia, April 4, 1987
• Testimony of Carlos Soto, September 29, 1987
• Indictment, U.S. v. Floyd Carlton-Caceres et al.
• Affidavit of DEA Agent Moritz, U.S. v. Carlton
• U.S. v. Caballero Motion for Permission to Travel
• Indictment, U.S. v. Luis Rodriguez
• Frigorificos Account, NHAO< GAO Summary
• NHAO Signature Cards, Frigorificos de Punterennas
• NHAO Records, Frigorificos
• Ocean Hunter, Inc. corporate records
• Mr. Shrimp; NCP Trading Florida corp. records
• Aquarius Seafood, Florida corp. records
• FBI Investigative Report of George Kiszynski, from DC Diaz re Continental Bank Bombing
• Letter from John C. Lawn to Senator Kerry re: Morales Polygraph, January 13, 1989
• North notebook entries re "John Hull"
• Newsweek, "The CIA Blows An Asset"
• San Francisco Examiner, letter to the Editor from U.S. Attorney Joseph Russoniello
• Teletype to FBI Director re Zavala/Cabezas
• CBS Evening News, June 12, 1986
• State Department documents, NHAO, back up documents to Frigorificos de Punterennas notarized by "Francisco Aviles Saenz"
• FBI 302's of George Kiszynski, including statements of Rafael Tores Jimenez, Rene Corvo, Joseph Marcos, Francisco Hernandez
• San Francisco Examiner, "Big Bay Area Cocaine Ring Tied to Contras," March 16, 1986
• Letter from John Bolton to Senator Claiborne Pell and Senator Richard G. Lugar, August 11, 1986
• All Things Considered, May 5, 1986
• Shippers Export Declaration, Florida Air Leasing Corp., March 6, 1985, for "medical supplies" for "Salvadoran Refugees"
• Florida Aircraft Leasing Corp Invoice to "American Flyers," for Fort Lauderdale-San Salvador-Ford Lauderdale
• Florida Aircraft Leasing Declaration, March 6, 1985
• Business Cards, Moises Nunez, Frank Chanes, from FBI Investigative Files released in U.S. v. Corbo
• Customs Report, interview with Ramon Milian Rodriguez, May 6, 1983
• FBI 302, interview with Frank Castro:
o August 10, 1987
o August 20, 1987
o March 8, 1985
• Customs Report, interview with Ramon Milian Rodriguez, May 4, 1983
• Redacted copy of DEA interview of "Miami Attorney"
• State Department INCSR, 1988:
o Cuba
o Haiti
o Honduras
• New York Times, "Military Officers in Honduras Linked to Drug Trade," February 12, 1988, James LeMoyne
• Washington Post, December 7, 1987, "U.S. Looks at Honduras as Drug Transfer Point"
• Memorandum from Jose Blandon to Subcommittee, February 1988
• Panama A Haven For Traffickers, Knut Royce, June 1985
• The Times Union, June 10, 1985, "Panama military officers deemed drug traffickers," Knut Royce
• New York Times, "Panamanian Strongman Said to Trade in Drugs, Arms and Illicit Money," June 12, 1986, Seymour Hersh
• NBC Nightly News, February 22, 1989
• Reuters, February 25, 1987, re Bueso-Rosa
• AP, February 25, 1987, "North Erred in Defending Convicted Honduran," George Gedda
• AP, April 14, 1987, "North Got FBI Report on Contra-Supply Probe, Officials Say"
• Report, Pegasus/Camper, December 12, 1984
• MemCom, Jeffrey Feldman, November 18, 1987, Internal Security Section, Criminal Division, Justice Department
• Christian Science Monitor, "Justice Officials Find No Crime Link to Contra Leaders," May 6, 1986, Warren Richey
• U.S. Department of Justice, Memo from Ken Bergquist to Steve Trott, re Upcoming "Contra" Hearings in the Senate Foreign Relations Committee, May 13, 1986
• Attendees at May 6, 1986 Meeting Between Foreign Relations Committee and government agencies
• Messick MemCom, May 6, 1986 meeting
• Deposition of Leon B. Kellner, Esq., November 8, 1989
• Narcotics Investigation, October 5, 1988 (with attachments)
• Drugs, Law Enforcement and Foreign Policy, Central America, September 28, 1987 (with attachments)
• Deposition of Thomas E. Marum, October 25, 1988
• Deposition of Mark N. Richard, November 7, 1988
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Re: Drugs, Law Enforcement and Foreign Policy: A Report Prep

Postby admin » Sat Apr 23, 2016 2:34 am

LETTER OF TRANSMITTAL

U.S. SENATE, COMMITTEE ON FOREIGN RELATIONS,
Washington, DC, April 13, 1989.

Hon. CLAIBORNE PELL,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.

DEAR MR. CHAIRMAN: Two years ago, you directed the Subcommittee on Narcotics, Terrorism and International Operations to conduct an investigation regarding the links between foreign policy, narcotics and law enforcement in connection with drug trafficking from the Caribbean and Central and South America to the United States. This Report is the final written product of that investigation in the 100th Congress.

Pursuant to your direction, the Subcommittee conducted fourteen days of open hearings, nine executive sessions, and received testimony from 27 witnesses. In addition, the staff deposed an additional 20 witnesses. Thirty subpoenas were issued, many calling for the production of extensive documentation.

The Subcommittee's investigations resulted in a wide-ranging review of past policies and practices in handling foreign policy and the war on drugs. It is our privilege to transmit the report containing findings and conclusions based on the investigation, a country-by-country analysis of the drug problem as it has affected U.S. foreign policy in Latin America, a review of drug links to the Contra movement and the Nicaraguan war, of money laundering, and of issues involving conflicts between law enforcement and national security. Appendices to the report detail allegations of how the Committee's initial investigation in 1986 may have been interfered with.

We very much appreciate the support and assistance you have given us throughout the course of this investigation. I would like to note our personal appreciation for the efforts of the personnel who handled this investigation: Special Counsel Jack A. Blum, Kathleen Smith, and Jonathan Litchman of the Committee Staff; and Richard McCall, Jonathan Winer, and David McKean of Senator Kerry's personal staff, along with Senator Kerry's former administrative assistant, Ron Rosenblith. This report would not have been possible without their dedicated work.

The Subcommittee believes that this investigation has demonstrated that the drug cartels pose a continuing threat to national security at home and abroad, and that the United States has too often in the past allowed other foreign policy objectives to interfere with the war on drugs. The Subcommittee hopes that this Report will contribute to better understanding by the Congress of this problem, and to constructive legislative proposals which may allow us to avoid repeating the mistakes of the past.

Sincerely yours,

JOHN KERRY, Chairman.
BROCK ADAMS.
DANIEL P. MOYNIHAN.
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Re: Drugs, Law Enforcement and Foreign Policy: A Report Prep

Postby admin » Sat Apr 23, 2016 3:37 am

EXECUTIVE SUMMARY AND CONCLUSIONS

"The American people must understand much better than they ever have in the past how (our) safety and that of our children is threatened by Latin drug conspiracies (which are) dramatically more successful at subversion in the United States than any that are centered in Moscow." 1


That warning was delivered in Subcommittee testimony by General Paul C. Gorman, now retired and formerly head of U.S. Southern Command in Panama. Such a characterization, coming from an individual who served with such distinction in the United States Army, should not be taken lightly.

There should not be any doubt in anyone's mind that the United States is engaged in a war directed at our citizens: the old, the young, the rich, the poor. Each day, with what has become a numbing regularity, the' American people are besieged with the news of the latest casualties in the drug war.

The Colombian drug cartels which control the cocaine industry constitute an unprecedented threat, in a non-traditional sense, to the national security of the United States. Well-armed and operating from secure foreign havens, the cartels are responsible for thousands of murders and drug-related deaths in the United States each year. They exact enormous costs in terms of violence, lower economic productivity, and misery across the nation.

The American criminal justice system has been overwhelmed by the drug war. To date, most of the U.S. law enforcement efforts have been directed at the domestic drug distribution network. The result is a criminal justice system swamped with cases which cannot be processed fast enough, jails that are overflowing with prisoners, a greater influx of cocaine than when the war on drugs was declared in 1983, and a cheaper, higher quality product.

As a recent study sponsored by the Criminal Justice Section of the American Bar Association noted:

A major problem reported by all criminal justice participants is the inability of the criminal justice system to control the drug problem . . . through the enforcement of the criminal law. Police, prosecutors and judges told the Committee that they have been unsuccessful in making a significant impact on the importation, sale and use of illegal drugs, despite devoting much of their resources to the arrest, prosecution and trial of drug offenders.2


Attempts to interdict the flow of drugs at the border, while important, has experienced only marginal success. According to U.S. officials in the vanguard of the war on drugs, at best, interdiction results in the seizures of only 15 percent of the illegal narcotics coming into the country. For the drug cartels, whose production capabilities stagger the imagination, a 15 percent loss rate is more than acceptable.

Demand reduction through education and rehabilitation are critical elements in the war on drugs. But most experts acknowledge that even this strategy will require a considerable period of time before major inroads are made into significantly reducing cocaine usage in this country.

The narcotics problem is a national security and foreign policy issue of significant proportions. The drug cartels are so large and powerful that they have undermined some governments and taken over others in our hemisphere. They work with revolutionaries and terrorists. They have demonstrated the power to corrupt military and civilian institutions alike. Their objectives seriously jeopardize U.S. foreign policy interests and objectives throughout Latin America and the Caribbean.

The Subcommittee investigation has led to the following conclusions and recommendations.

PAST FAILURES

In the past, the United States government has either failed to acknowledge, or underestimated, the seriousness of the emerging threat to national security posed by the drug cartels. The reasons for this failure should be examined by the Senate Select Committee on Intelligence, in concert with the Senate Committee on Foreign Relations, to determine what corrective steps should be taken.

In some instances, foreign policy considerations interfered with the U.S.'s ability to fight the war on drugs. Foreign policy priorities towards the Bahamas, Honduras, Nicaragua, and Panama at times delayed, halted, or interfered with U.S. law enforcement's efforts to keep narcotics out of the United States. In a few cases within the United States, drug traffickers sought to manipulate the U.S. judicial system by providing services in support of U.S. foreign policy, with varying results.

U.S. officials involved in Central America failed to address the drug issue for fear of jeopardizing the war efforts against Nicaragua.

The war against Nicaragua contributed to weakening an already inadequate law enforcement capability in the region which was exploited easily by a variety of mercenaries, pilots, and others involved in drug smuggling. The Subcommittee did not find that the Contra leaders personally were involved in drug trafficking. There was substantial evidence of drug smuggling through the war zones on the part of individual Contras, Contra suppliers, Contra pilots, mercenaries who worked with the Contras, and Contra supporters throughout the region.

The saga of Panama's General Manuel Antonio Noriega represents one of the most serious foreign policy failures for the United States. Throughout the 1970's and 1980's, Noriega was able to manipulate U.S. policy toward his country, while skillfully accumulating near-absolute power in Panama. It is clear that each U.S. government agency which had a relationship with Noriega turned a blind eye to his corruption and drug dealing, even as he was emerging as a key player on behalf of the Medellin cartel.

POLICY AND PRIORITIES

International drug trafficking organizations are a threat to U.S. national security. Our government must first acknowledge that the activities of the drug cartels constitute a threat of such magnitude and then establish a more coherent and consistent strategy for dealing with the problem.

The threat posed by the drug cartels should be given a major priority in the bilateral agenda of the U.S. with a number of countries including the Bahamas, Haiti, Colombia, Bolivia and Paraguay. It should be among the most important issues with a number of other countries, including Mexico and Honduras.

In order to signal to other countries the seriousness with which the United States regards the drug issue, the President should convene a summit meeting of Latin American leaders to begin developing a strategy to deal with this issue and related economic problems.

Narcotics law enforcement has often taken a back seat to other diplomatic and national security priorities. The war on drugs must not in the future be sacrificed to other foreign policy considerations.

ADMINISTRATIVE RECOMMENDATIONS

The Treasury Department should begin negotiations on gathering information on large foreign U.S. dollar deposits, as authorized by the 1988 Omnibus Drug Bill.

The State Department should make a special effort to control multiple entry visas from countries which are major drug transit countries or which harbor major drug organizations.

The Federal Aviation Administration should undertake a major effort to inspect hundreds of substandard aircraft, many of which are used for smuggling illegal narcotics. These aircraft are located throughout the United States, and those which do not meet FAA specifications should be grounded immediately.

Individuals who represent themselves as working for the CIA or other national security agencies of the United States Government, and who in fact do not, should be prosecuted promptly to the full extent of the law.

All U.S. law enforcement agencies should devote significantly greater attention to counter-intelligence in order to prevent drug traffickers from penetrating their operations.

The existing distrust among law enforcement agencies working on the drug problem and national security agencies must be resolved. Ways must be found to make it possible for law enforcement agencies to have access to national security intelligence information related to the drug threat.

Federal salaries of senior prosecutors and investigators must be raised and special Senior Executive Service Positions created in order to encourage the most talented and experienced personnel to remain on the job.

SPECIFIC LEGISLATIVE RECOMMENDATIONS

The President should be given a series of optional sanctions to apply to major drug producing and drug-transit countries which have not fully cooperated with the U.S. in drug enforcement efforts. This would allow the President to certify a nation under the national security provision of 481(h)(2)(a)(i)(II), and thus avoid the mandatory sanctions contained in current law, while still giving him other optional sanctions. The proposed sanctions would include: prohibiting ships that have stopped at such a nation within 60 days from discharging passengers or cargo in the U.S.; denying landing rights in the U.S. to the national airlines of such a nation; subjecting goods and containers from any such nation to special inspections, quarantines, or other additional regulations to prevent them from being used to transport prohibited substances to the United States; denying or limiting non-immigrant visas to nationals of any such nation; eliminating Customs pre-clearance agreements with any such nation.

'No government employee or official with responsibility for narcotics issues in either the Executive or Legislative branches of government should be permitted to represent a foreign government on narcotics matters for a period of three years after they leave. The penalties for violating such a prohibition should be the same as for violations of the Federal Regulation of Lobbying Act of 1946.

The Department of State should be required to notify the Congress within 10 days whenever it denies a request from law enforcement for reasons of national security or foreign policy. The notification should include a full description of the reasons for the refusal. Past decisions by the Department of State to end law enforcement operations on such grounds should have been subject to Congressional review; this provision would ensure that Congress remain in a position to exercise oversight over such decisions.

The Department of State should be prohibited from entering into contracts with any individual or company under indictment or convicted of any narcotics-related offenses, including money laundering. The Department should be required to institute procedures by which it would routinely check with the FBI, Customs and DEA to determine whether a company or individual is under investigation before the Department enters into any contract with the company or individual.

No U.S. intelligence agency should be permitted to make any payments to any person convicted of narcotics' related offenses, except as authorized in writing by the Attorney General in connection with the investigation or prosecution of criminal activity.

The Neutrality Act should be amended to apply only to actions which are not specifically authorized by the State Department. Each such authorization would require prompt notification by the State Department to the House and Senate Foreign Affairs and Foreign Relations Committees, and Select Committees on Intelligence.

The annual drug certification report should be required to review links between international narcotics trafficking, money laundering and international terrorism (including guerrilla groups on the right and the left with regard to ideology.)

The National Director of Narcotics Policy should be required to report to the Congress on current U.S. federal personnel practices affecting all persons engaged in the war on drugs to determine whether adequate resources are being devoted to hiring, training, promotion, and retention of federal employees responsible for narcotics matters.

_______________

Notes:

1. Subcommittee testimony of General Paul Gorman, Part 2, February 8, 1988. p. 27.

2. Criminal Justice in Crisis. A Report to the American People and the American Bar on Criminal Justice in the United States, American Bar Association, Criminal Justice Section, Washington, DC, November 1988, p. 5.
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Re: Drugs, Law Enforcement and Foreign Policy: A Report Prep

Postby admin » Sat Apr 23, 2016 4:33 am

INTRODUCTION

ORIGINS AND METHODOLOGY


In early 1986, Senator John Kerry began a staff investigation of allegations that elements of the supply network supporting the Nicaraguan contras were linked with drug traffickers. In April, 1986. Senator Kerry took information he had developed to the Chairman of the Foreign Relations Committee, Richard Lugar, who agreed to conduct a staff inquiry into those allegations.

In response to a request by Senator Kerry, Senator Lugar scheduled a closed session of the Committee on Foreign Relations on June 25, 1986, to discuss these allegations and to determine whether or not adequate attention and priority was being given to international narcotics law enforcement efforts generally. Senator Kerry was concerned that because of the preoccupation with other foreign policy priorities relating to several nations, the United States was not dealing adequately with the growing global drug problem.

At that meeting, Senator Kerry raised questions as to the willingness of the Administration to investigate allegations of drug trafficking involving the Contra supply network and the apparent reluctance to deal with Bahamian drug corruption for reasons of national security. Senator Kerry noted that witnesses who had brought this information to his attention had also allegations of drug-related corruption concerning Nicaraguan officials.

In response, the Committee, at the direction of the then-Chairman Senator Richard Lugar, decided that an investigation of drug allegations relating to the war in Nicaragua should be undertaken.

In February 1987, at the direction of Chairman Claiborne Pell, the Committee continued its investigative efforts, expanding the focus to include the impact of drug trafficking from the Caribbean, and Central and South America on U.S. foreign policy interests. In April, the responsibility for the investigation was given to the Sub-committee on Terrorism, Narcotics and International Operations chaired by Senator Kerry, with Senator McConnell serving as the ranking member.

The Subcommittee conducted fourteen days of open hearings, nine executive sessions, and received testimony from 27 witnesses. In addition, the staff deposed an additional 20 witnesses. Thirty subpoenas were issued, many calling for the production of extensive documentation.

The Committee sought, and received, documents from a large number of government agencies, including the Drug Enforcement Administration, the Federal Bureau of Investigation, the Department of Defense, the Department of the Army, the Central Intelligence Agency, the Defense Intelligence Agency, the U.S. Customs Service, the Department of State, the Department of the Treasury, the Overseas Private Investment Corporation and the National Security Council.

In addition, the full Foreign Relation Committee conducted extensive questioning of officials on the global narcotics problem in 1987 and 1988 in response to the annual International Narcotics Control Strategy Report. That report is an annual submission to the Congress mandated by the Anti-Drug Abuse Act of 1986. The law requires the President to certify that major illicit drug producing country or a major drug-transit country cooperated fully with the United States in the previous year, or took adequate steps on its own with respect to illicit drug production, trafficking and money laundering.

One hearing was conducted jointly by the Subcommittee on Terrorism, Narcotics and International Operations and the Subcommittee on International Economic Policy.

In preparation for the hearings the staff interviewed dozens of people in and out of government. Many of these interviews were kept confidential to ensure candid discussions. The Subcommittee traveled to Costa Rica where depositions were taken and interviews conducted with present and former government officials.

By agreement with Chairman Daniel Inouye of the Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition, the staff assigned to the investigation were cleared to review the documents provided to the Select Committee in the course of its investigation. The Committee staff reviewed thousands of Select Committees documents, including the classified version of notebooks maintained by Oliver North during the period he was at the National Security Council, the "North Diaries."

A number of witnesses and prospective witnesses were convicted felons, having been imprisoned for narcotics-related offenses. The Subcommittee made use of these witnesses in accordance with the practice of Federal and State prosecutors, who routinely rely on convicts as witnesses in criminal trials because they are the ones with the most intimate knowledge of the criminal activity.

All witnesses who appeared before the Subcommittee did so under oath and the threat of prosecution for perjury. The Subcommittee did not and could not offer reduced sentences in exchange for testimony. Before using the testimony of convicted felons in a public session, the Subcommittee staff attempted to corroborate the witnesses' stories. Many of the witnesses were considered sufficiently credible to have been used by prosecutors in grand jury investigations and trials, including the major federal narcotics prosecutions of General Noriega, Medellin cartel leader Carlos Lehder, and officials in Haiti and the Bahamas.

Gaining access to convicted felons and making arrangements to have them testify required the cooperation of the Department of Justice and numerous U.S. Attorneys. In some cases the cooperation was excellent, while in others the Subcommittee confronted one difficulty after another which delayed the investigation and complicated the presentation of testimony in public hearings.

As this report is read, it should be kept in mind that the purpose of the investigation was to identify the nature of the threat posed by international drug trafficking and the adequacy of the U.S. government response to the threat. The Subcommittee was interested in the larger policy questions and was not seeking to develop specific cases against individuals.

THE SCOPE OF THE THREAT

When the Senate Committee on Foreign Relations began its investigation two years ago into drug trafficking, law enforcement and foreign policy, this issue was widely viewed as being primarily a law enforcement problem. While public debate over the drug problem focused on improving international and domestic law enforcement efforts, the size, capability and activities of the cartels were rapidly expanding.

There are probably few issues which have caused greater strains in our relations with other nations, particularly with our Latin American neighbors, than that of international drug trafficking. The problem has given rise to a growing frustration in the Congress over the seeming inability of many nations in the hemisphere to eliminate or curtail the production or transshipment of cocaine and marijuana destined for marketing in the United States. On the other hand, there are valid concerns on the part of our Latin American allies that were it not for the demand problem in the United States, the drug issue would be of more manageable proportions.

After two years of investigation carried out under the auspices of the Subcommittee on Narcotics, Terrorism and International Operations, it is apparent that the United States is facing a significant national security problem. It is a problem serious enough for us to re-examine our perception as to what constitutes national security threats to ourselves and our friends around the world.

In the post-World War II era, the national security focus of the United States was framed by our predominant concern with East-West competition around the globe. This concern with Marxist expansionism in general, and Soviet expansionism in particular, led us to take a series of extraordinary steps to respond to the threat. These steps ranged from implementing the Marshall Plan for Western Europe, to establishing NATO and other military alliances around the world, to fighting conventional wars in both Korea and Vietnam.

As the United States enters the decade of the 1990's, it is clear that the operations of the international drug organizations also constitute a threat of serious national security dimensions. In Latin America, these organizations, known as cartels, have become a powerful supra-national political force with economic resources of a magnitude to shape developments in Central and South America, and throughout the Caribbean.

The most powerful of the Latin American drug cartels are located in Colombia. The Colombian cartels constitute an international underworld so extensive, so wealthy, and so powerful, that today they operate virtually unchallenged. They have organized themselves into elaborate conglomerates for the purposes of growing, harvesting, processing, transporting, selling and repatriating their profits from cocaine and marijuana. Men like Pablo Escobar, Jorge Ochoa, Jaime Guillot-Lara, and Carlos Lehder, formed ocean-spanning, mafia-like organizations capable of very large and very complex undertakings.

They have built coca processing centers in the nearly impenetrable rain forests of the Amazon River Basin in Colombia -- factory complexes capable, in a week's time, of converting tons of coca paste flown in from Peru and Bolivia into crystalline cocaine. The finished product is then flown across the Caribbean and Central America to the United States. It is estimated that there are five dollars of profit for each dollar the cartels invest in the farm-to-market process.

The magnitude of the profits associated with the international drug trade is staggering. The June 20, 1988 edition of Fortune Magazine reported that the global drug trade may run up to $500 billion a year, more than twice the value of all U.S. currency in circulation.

As witness after witness stressed to the Subcommittee, the cartels are driven by financial rather than ideological motives. They are willing to do business with anyone as long as it helps further their narcotics interests. Their power threatens to undermine regional stability, and they have already demonstrated the capacity to destabilize democratic governments. These developments are deeply inimical to the national security interests of the United Stares.

DOMESTIC EFFECTS OF INTERNATIONAL DRUG TRAFFICKING

To appreciate the degree to which the international drug traffickers have affected the lives of the American people, one needs only to analyze the statistics. Polls show that about 50% of all Americans say they have had a relative or close friend who has had a problem with illegal drugs and one out of every three says that illicit drugs can be purchased within a mile of their home.

In addition:

Sixty percent of all illegal drugs produced in the world are consumed here in the United States;

some twenty million Americans smoke marijuana, nearly six million regularly use cocaine, and half a million are addicted to heroin;

the National Institute for Drug Abuse reports that cocaine related hospital emergencies have risen nearly 600 percent between 1983 and 1987. Cocaine-related deaths have risen from under 400 in 1983, to nearly 1,400 in 1987, the last year for which such statistics are available;

it is estimated that 70 percent of all violent crime in the United States is drug-related;

the street price for a kilo of cocaine in the United Slates has plummeted from $60,000 in 1980, to approximately $9,000 a kilo today. This has put cocaine within the means of the vast majority of Americans, and shows how ineffective interdiction efforts have been;

between 1982 and 1985, the amount of cocaine seized coming into the United States more than doubled from 31 metric tons to 72.3 metric tons. The problem has reached such crisis proportions that various federal agencies involved in the war on drugs cannot come up with a reasonable estimate as to how much cocaine reaches the streets of our country today;

it is estimated that cocaine usage among the work force costs the United States $100 billion a year in lost productivity;

the American market for drugs produces annual revenues of well over $100 billion at retail prices. This is twice what U.S. consumers spend for oil each year.

EFFECTS ON FOREIGN COUNTRIES

It is not only the people of the United States who are victimized by the operations of the cartels. The cartels, utilizing corruption and violence, have literally bought governments and destabilized others.

In Colombia, the cocaine lords have coopted an entire nation and its government. Beginning in 1984, efforts by the Colombian government to crack down and dismantle the cartels since 1984 have led to unprecedented violence. In the past two years, 57 judges, including half of the Supreme Court, and two cabinet officials have been assassinated. A year ago, Colombia's attorney general was murdered by cartel assassins.

While Colombia's democracy has been threatened, Panama's has been stolen. The relationship established in the 1970's between drug traffickers and a little-known officer in the Panamanian intelligence -- Manuel Antonio Noriega -- has grown as Noriega's power has increased. As a result, Panama has become a safe haven and critical base of operations for the cartels, particularly as a money-laundering center. The trend toward democratization was reversed in Panama, and Noriega now presides over the hemisphere's first "narcokleptocracy." 1

The corrupting influence of the cartels has now been felt throughout Latin America and the Caribbean. The Subcommittee received testimony that remote islands in the Bahamas chain could be rented for use as transit sites for cocaine and marijuana destined for the United States. Despite the expenditure of significant sums of money devoted to joint interdiction efforts with the Government of the Bahamas, the International Narcotics Control Strategy Report of March 1988 estimated that 60 percent of the cocaine and 50 percent of the marijuana coming into the United States continued to transit that country. U.S. officials attribute the problem to the continuation of drug-related corruption at all levels of government.

In 1987, the Colombian cartels established a major, and secure base of operations in Haiti, turning that country into another significant transit point for cocaine coming into the United States. The cartels bought protection from the upper ranks of the Haitian military which, in turn established a distribution network in the United States. This network is characterized by a high level of violence associated with its operations.

The cartels now pose a serious threat to Costa Rica, having established themselves in the northern war zones used by the Nicaraguan insurgents. Costa Rica, the most free, stable and longest-standing democracy in the region, continues to be ill-equipped to deal with this threat despite the fact that it has the toughest drug laws in all of Latin America.

In Peru, there are reports that drug money funds the Sendero Luminoso's efforts to topple the democratically-elected government of that country.

In Bolivia, democratically-elected governments face an almost insurmountable task in destroying coca production and cocaine labs operating with near impunity in that nation.

They have corrupted local officials, including police and military, in Mexico, and there are allegations that the corruption has spread to higher-level officials. This development may be making an already serious situation worse, as Mexico continues to remain a major producer of opium poppy and cannabis and continues to be a primary source of heroin and marijuana entering the United States.

Elements of the military in Honduras are involved in drug-related corruption, undermining the fledgling attempts to establish a truly democratic, civilian-based government in that country. Because of the pervasive influence of the Honduran military on every aspect of life in that country, there is concern that the experience in Panama could be replicated in Honduras.

In Paraguay, drug corruption within the military also has been a serious problem for some time. Despite the fact that Latin America's longest-standing dictator, General Alfredo Stroessner, was ousted recently in a military coup, U.S. drug enforcement officials are concerned that the narcotics trade through Paraguay will continue unabated. As the State Department has acknowledged, there are "frequent allegations that Paraguayan officials are involved in narcotics trafficking."2 General Andreas Rodriguez, the mastermind of the coup, has been linked in press reports as a major figure in the drug trade.

THE NATIONAL SECURITY IMPLICATIONS OF' THE DRUG TRADE

The cartels want stable governments in Latin America, but weak institutions which they can control. They want a climate in which they can do business freely, without government interference. In many countries of Latin America and the Caribbean, they have succeeded in accomplishing this goal.

In many instances, the cartels have allied themselves with organizations which are engaged in illicit movements of arms and ammunition, for whatever purpose or whatever ideology -- on the right or the left. General Paul Gorman, in his testimony before the Subcommittee, described the problem very succinctly when he observed:

"If you want to move arms or munitions in Latin America, the established networks are owned by the cartels. It has lent itself to the purposes of terrorists, of saboteurs, of spies, of insurgents, and of subversives."

Such alliances have been established with left-wing insurgent groups such as M-19 in Colombia. and the Sendero Luminoso in Peru. General Noriega in Panama has been a major figure in the clandestine arms trade, selling weapons to anyone or group who would buy them, including the FMLN in El Salvador.

As the Subcommittee found, even the Nicaraguan Contras fighting to overthrow the Sandinistas were not immune from exploitation by narcotics traffickers.

If allowed to continue unchallenged, the operations of the cartels will have even more serious implications for U.S. foreign policy interests throughout the hemisphere. If there has been one area of foreign policy in which the Congress and the Reagan Administration found agreement during the last eight years, it was the desirability of promoting and reinforcing the democratization process which has swept Latin America over the course of the last decade. This consensus was achieved despite the fractious debate over aid to the contras.

Other than the international debt issue, the operations of the drug cartels pose the most serious threat to the consolidation of democracy throughout Latin America. -- The basic foundation upon which democracy rests is respect for the rule of law and the guarantees it provides for individual rights and liberties. The cartels respect neither law, nor the rights of individuals, nor the institutions created to uphold the former and guarantee the latter. They have demonstrated the ruthless capability to undermine and destroy any institution or individual standing in their way.

Unfortunately, the international narcotics trade, historically, has been relegated to the backwaters of U.S. foreign policy concerns. It was not until recent years, when domestic cocaine usage reached epidemic proportions and drug-related violence on the streets of the United States reached crisis levels, that serious attention has been paid to this problem. However, the issue is still not given attention commensurate with the seriousness of the problem within most agencies of the federal government. To date, the U.S. has been unable to achieve effective coordination regarding the problem. The Congress mandated the creation of a new position, the "National Director of Narcotics Policy," informally known as the "drug czar," in response to this concern. The drug czar will need to focus attention on ensuring that the U.S. develops a strategy and allocates the resources necessary to wage effectively a war on drugs.

SYNOPSIS OF THE REPORT

In preparing this report, the Subcommittee has attempted to define the nature of the problems associated with the operations of the cocaine cartels. There are individual chapters devoted to Colombia, Panama, the Bahamas, Haiti, Honduras, and Cuba and Nicaragua. The Subcommittee had neither the time nor the resources to address other major problem countries such as Mexico, Paraguay, Peru, and Bolivia, or the emerging problems in Brazil. Nevertheless, the problems and the patterns of corruption are similar in these countries as to those addressed by the Subcommittee.

A separate chapter is devoted to the allegations of involvement of drug traffickers with the Contra movement and their supply operations.

There is also a separate chapter devoted to the issue of money laundering, which is the key to the effective operations of the cartels. The phenomenal profit associated with the narcotics trade is the foundation upon which the cartels' power is based. The Subcommittee members believe that a concerted attack on the cartels' money-laundering operations may be one of the most effective means to strike at their most vulnerable point.

A separate chapter is devoted to an examination of the conflicts between law enforcement agencies and the foreign policy and intelligence agencies of the U.S. government. For example, the DEA still maintains that it is receiving cooperation from Panama in U.S. drug enforcement efforts. Yet William Von Rabb, the Commissioner for U.S. Customs, has testified before the Committee that by 1983, U.S. agencies had more than enough evidence of General Noriega's involvement in the narcotics trade. This, according to Von Rabb, rendered any cooperation Panama was giving the U.S. in drug seizures and arrests virtually meaningless.

The Report also includes appendices concerning the notebooks maintained by Lt. Col. Oliver North, and their relation to the Subcommittee investigation, and on allegations concerning interference by government officials in the initial stages of the Subcommittee investigation.

The members of the Subcommittee are hopeful that, if nothing else, this report will stimulate significant debate and reflection both within and outside our government. The stakes are very high for us and for our friends throughout the hemisphere. This entails understanding all the dimensions of the problem and the events and circumstances that contributed to the development of the cartels. After all, violence and corruption associated with the narcotics trade is not just a problem from Latin America and the Caribbean. Both seriously affect the quality of life in the United States as well.

OPEN ISSUES AND SUBJECTS REQUIRING FURTHER INVESTIGATION

This report should be considered a first step toward a fuller understanding of the international scope of the narcotics problem. Many issues arose during the course of the investigation which could not be pursued in the 100th Congress because of the time and staff limitations. There are open issues and questions which call for further study.

1. The Subcommittee investigations of money laundering allegations involving the Bank of Credit and Commerce International should be completed. Developing an effective strategy against money laundering will require a more complete understanding of the way drug traffickers move, hide, and invest the profits from the profits from their illicit activities.

The Subcommittee's work thus far suggests that if the banking system can be closed to drug money and if assets owned by the drug cartels can be seized, large scale trafficking can be more easily controlled.

2. Serious questions abut the adequacy of the Neutrality Act in controlling the activities of mercenaries and soldiers of fortune arose during the hearings. The Subcommittee should examine the problems the Department of Justice has had using the Act and consider its revision.

3. The Subcommittee has received allegations that various factions in the Lebanese civil war are supporting their efforts with drug money and that they have started to work with the Colombian cartels. These allegations require thorough examination.

4. The Subcommittee has received allegations that heroin dealers used the war in Afghanistan as cover for their operations. There are reports of guns for drugs exchanges and significant drug related corruption. The 1988 International Drug Control Strategy Report prepared by the State Department obliquely acknowledged the problem, stating "individual resistance elements reportedly engage in opium production and trafficking as a source of income to provide staples for populations under their control and to fund weapons purchases." 3 Further it has been alleged that weapons for the resistance were diverted to the international arms market.

5. The March, 1989 International Narcotics Control Strategy Report again raised concern that drug-related corruption has continued to undermine narcotics law enforcement in Mexico. The Report described the emergence in 1988 of "an increasing number of Colombian traffickers, within Mexico, involved primarily with facilitating the transshipment of cocaine to the United States." 4

The level of drug related corruption in Mexico continues to be a priority concern of the Subcommittee. While there was neither the time nor the resources to investigate thoroughly the situation in Mexico, this will be a continuing focus of the Subcommittee's work in the future.

Other pending business includes the effort by the Foreign Relations Committee to obtain access to an unexpurgated version of Oliver North's notebooks. The notebooks contain numerous references to the drug issue but could not be deciphered, because key sections had been deleted by North and his attorneys. On April 6, 1989, those notebooks were turned over by North to the Independent Counsel in connection with his trial, when North waived his Fifth Amendment rights and chose to testify. The Subcommittee will continue to seek to obtain those notebooks. A detailed discussion of the North notebook problem has been included as an appendix to this report.

______________

Notes:

1. See Subcommittee testimony of Ramon Milian Rodriguez, Part 2, p. 255.

2. International Narcotics Control Strategy Report, US Department of State, Bureau of International Narcotics Matters, March, 1988, p. 100.

3. International Narcotics Control Strategy Report, U.S. Department of Slate, Bureau of International Narcotics Matters, March, 1988 p. 178.

4. International Narcotics Control Strategy Report, U.S. Department of State, Bureau of International Narcotics Matters, March 1989, p. 108.
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