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The New Mafia

Cocaine supplies remained abundant through the end of Ronald Reagan’s administration. When, however, the contra effort came to an end, and the CIA withdrew from Central America, the DEA was finally able to work in the region without being impeded by the CIA and its local clients. Its stepped-up enforcement efforts helped to reduce cocaine supplies in the United States, contributing to a fall-off in demand. Unfortunately, just as cocaine use was declining, the demand for heroin began to rise, thanks to a surge in supplies. The primary source of the new heroin: Southeast Asia, the CIA’s old battleground. The covert alliances that the agency had created during the Vietnam era had once again come back to haunt us.

While this analysis seems on the surface plausible enough, it is in fact full of logical leaps and historical supposition. To begin with, the main source of heroin in the US in the late 1960s was not Southeast Asia but Turkey, a country with extensive poppy fields but, apparently, none of the covert alliances that occurred in Southeast Asia. (The essayists in War on Drugs do not claim otherwise.) The dwindling of heroin supplies that occurred in the early 1970s had less to do with our withdrawal from Vietnam than with Turkey’s agreement—under pressure from the Nixon administration—to eliminate illicit poppy production. During the last year or two, heroin has in fact begun to make a comeback. The primary source is indeed located in the Golden Triangle—in Burma, which in recent years has emerged as the world’s largest producer of opium.

The CIA was certainly active in Burma during the 1950s and 1960s, but during the last ten years, as production in Burma has greatly increased, the agency has had little, if any, presence in the country; even those who accuse the CIA of manipulating the drug trade do not claim otherwise. Burma’s opium boom is the result not of CIA operations but of favorable internal conditions, including near perfect weather for growing poppies, the collapse of the national currency, and continuing political turmoil. Bertil Lintner, a correspondent in Burma for the Far Eastern Economic Review, observes in an essay in War on Drugs that “for over forty years, the Golden Triangle has been a cockpit of anarchy, a virtually unadministered region, where a motley crew of self-made military commanders, mercenaries, communist and nationalist insurgents, contraband traders, and assorted outlaws have ruled with impunity.” It is this chaos, more than anything else, Lintner suggests, that has made Burma such a prolific opium producer.

As for the cocaine epidemic, those who hold the CIA responsible conveniently overlook the fact that the drug is produced not in Central America but in the Andes. No one—including the essayists in War on Drugs—charges the CIA with maintaining covert alliances with the traffickers in Colombia, Peru, and Bolivia, the main countries where cocaine is produced, during the period in the 1980s when drug trafficking in the region rapidly expanded. It is true that the Colombian drug lords shipped a great deal of cocaine through Central America, and some of it was probably handled by the contras and other groups financed by the CIA, which, further, was probably aware of its protégés’ activities. Yet this was only one of innumerable routes used by the traffickers. The Bahamas, the Dominican Republic, Haiti, Ecuador, Venezuela, Brazil, Surinam, Mexico—all have been used as transshipment points for Colombian cocaine, which has been transported in a great many different ways—in suitcases, on boats, in minivans, on airplanes, in shoes, hollowed-out lumber, coffee bags, even cans of sardines.

Moreover, the flow continues, although the CIA has sharply reduced its activities in Central America since the end of the Nicaraguan war and the contras have been disbanded. Today, the US market is so saturated with cocaine that the Colombian narcos are trying to develop new markets in Europe and Japan.

No country provides a clearer refutation of the CIA thesis than Panama. It is true that, for years, the CIA shielded Manuel Noriega, and his involvement in drug-dealing, from outside scrutiny. To Washington, his value as a professed anti-Communist who could be useful in the Nicaraguan civil war far outweighed any inconvenience his drug activities may have caused. As soon, however, as the “war on drugs” took precedence over the “war on communism,” Noriega became a liability, and the 82nd Airborne was sent in to get rid of him. In the three years since the invasion, the DEA has been working assiduously to seal off Panama to drug smugglers. It has failed. By the DEA’s own admission, more drugs are passing through Panama than ever before. Panama’s borders are too porous, the smugglers too resourceful, the Panamanian government too corrupt. In the face of such realities, the CIA’s part in the world drug trade seems irrelevant.


Conservative writers, too, have put forward drug conspiracy theories, none more vigorously than Rachel Ehrenfeld, a research scholar at the New York University School of Law. In 1990, Ehrenfeld published Narco-terrorism, a book that sought to pin the blame for global drug-related violence on Marxism-Leninism and the Kremlin. The end of the cold war has deprived her of that enemy. In her new book, she has found another one. Evil Money: Encounters Along the Money Trail describes money-laundering ventures in such disparate places as the Bahamas, Switzerland, and Los Angeles. Most eye-catching, however, is the discussion of the Bank of Credit and Commerce International. Ehrenfeld begins with a straight-forward account of BCCI’s founding by the Pakistani banker Agha Hasan Abedi, whose stated mission, Ehrenfeld writes, was to “revive Third World economies” by promoting “Islamic tenets and business practices.” In practice, however, “he and his bank stole from the poor and gave to the rich.”

Ehrenfeld goes on to describe BCCI’s many sinister practices. In doing so, she reveals the principal target of her animosity. “Most Arab/Islamic states,” she writes,

do not give high priority to improving the people’s welfare and standard of living. Instead, they view arms procurement as essential to maintaining the government’s power base…. Since radicalism and fundamentalism are “in,” anti-Western activities become a “must.”

Violence,” she adds, “has become the voice of political and religious conflicts among the Muslims”; the “support of terrorism” is a “crucial element in Islamic political culture.” The investigations into BCCI, Ehrenfeld adds, provide “a glimpse into the intricacies of the Islamic/Arab conspiracy against the West” and the “mutual ventures between Communist regimes and Arab and Muslim radical states and organizations.”

As described by Ehrenfeld, the people and groups taking part in this conspiracy sound bizarre. Shiite fundamentalists working with the KGB, she writes, set up a base of operations in Sierra Leone, turning it into “an international terrorist center.” The country “fronted for the acquisition of sophisticated weapon systems and electronic equipment for Middle Eastern terrorist organizations and East European intelligence services cooperating with them.” In Peru, meanwhile, BCCI “cemented the symbiotic relationship between Peruvian terrorists and drug traffickers, setting the stage for the emergence of narco-terrorism in Peru.” BCCI acted as a “consultant” to Shining Path guerrillas, Ehrenfeld writes, advising them to tax drug traffickers working in Peru and to insist that all payments be made in US dollars. The money thus earned was “deposited in accounts at BCCI for hefty commissions.” BCCI, Ehrenfeld goes on, brought in experts from the Abu Nidal Organization (ANO) to train Shining Path members in urban guerrilla warfare tactics.

The ANO, the Shining Path, and BCCI shared the same goal, combating imperialism, although their ideology was different. Abu Nidal’s cooperation with drug traffickers in Peru and other Latin American countries helped set up a dormant terrorist infrastructure in the Western Hemisphere and more specifically in the United States.

These are remarkable claims. The Shining Path has been the subject of countless books, articles, and monographs in recent years. Journalists, political scientists, and anthropologists from around the world have tried without much success to penetrate the secrets of its xenophobic leadership. At the same time, a great deal has been written both on the workings of the BCCI and on the activities of Abu Nidal. Virtually alone among writers on these subjects, Ehrenfeld has claimed to discover Abu Nidal’s role in training Shining Path guerrillas, and to know where the Shining Path keeps its money. How did Ehrenfeld reach such conclusions? One might think she has located high-level defectors from the Shining Path or the Abu Nidal group, but this is not the case. According to her footnotes, Ehrenfeld’s primary source is the “Task Force on Terrorism and Unconventional Warfare”—a group associated with the House Republican Research Committee. Ehrenfeld does not identify the members of this task force or describe the basis for their claims. Until she does, there is no reason to believe what she says.

Evil Money is filled with ethnic stereotypes (“a shrewd self-assured Arab merchant”), belabored sentences (“skepticism must have been painted all over my face”), questionable political judgments (“What most visitors do not realize is that Switzerland is a police state”), and breathless self-dramatization. “Most of my friends and associates and even strangers who heard what I was doing warned me that I could be in danger,” Ehrenfeld writes in the introduction. “Some even avoided meeting me in public places. More than a few requested that their assistance remain unacknowledged. Even my typist requested anonymity. I never doubted the importance of the work I was doing, and luckily neither did my publisher….” Unfortunately, that publisher paid little attention to such matters as veracity and plausibility.


The facts of BCCI’s story are so lurid that embellishing them would seem unnecessary. So far as we know, the bank did not advise the Shining Path, but there is solid evidence that it did business with former Peruvian president Alan García, enabling him to elude Peru’s foreign creditors by depositing Peruvian reserves in secret BCCI accounts. BCCI did not introduce Abu Nidal into the Andes, but it did provide him with several accounts in Europe, allowing him to move funds from one country to another. BCCI procured young virgins for the ruling family of Abu Dhabi and provided loans to middlemen selling arms to the Medellín cartel.

These activities are described in a new report by the Senate Subcommittee on Terrorism, Narcotics and International Operations, headed by John Kerry. This 794-page study grew out of the panel’s earlier investigation into the drug-trafficking activities of Manuel Noriega. The document, which took four years to produce, offers the most thorough look yet at the institution that came to be known as the Bank of Crooks and Criminals International. According to the report, BCCI did business in seventy-three countries, and in virtually every one it enlisted prominent officials to spread its influence, increase its assets, and evade government control.

In the United States, Clark Clifford was only one of many well-known figures willingly caught in BCCI’s net. Jimmy Carter flew around the world on a BCCI corporate jet, introducing Agha Hasan Abedi to world leaders. Andrew Young received a salary and loans from BCCI in return for providing contacts in the third world. Among the people who worked for BCCI in the United States were a former US senator (John Culver), a current Senate aide to Orrin Hatch, three former federal prosecutors, a former State Department official, a former White House aide, and two former attorneys for the Federal Reserve. The accounting firm Price Waterhouse failed to uncover the bank’s crooked financial practices, and the public relations firm Hill and Knowlton helped to polish its image.

Abroad, BCCI cultivated and bought officials in countries ranging from Argentina to Zimbabwe. According to Abdur Sakhia, a former senior official of the bank who testified before the subcommittee, those “in the payoff of BCCI” included the family of Indira Gandhi, President Ershad of Bangladesh, General Zia of Pakistan, and many African leaders. Sakhia testified:

I went to a World Bank meeting in Seoul, Korea and [BCCI official] Alauddin Shaikh was handing out cash in the hall to the staff of the Central Bank of Nigeria…Abedi’s philosophy was to appeal to every sector. If you were religious people he would help you pray. President Carter’s main thing was charity, so he gave Carter charity. [Pakistani] President Zia’s brother-in-law needed a job, he got a job. President [Ershad]’s mistress needed a job, she got a job. You needed the admission of your son to a top college? Abedi would arrange it somehow.

Abedi suffered an incapacitating stroke in 1989, and we will probably never know exactly what he had in mind when he built up BCCI. From the start, though, his goals were clearly global in scope. BCCI was to be the first transnational third world bank, comparable to the Bank of America and Chase Manhattan. A Sufi mystic who at annual meetings would speak about his philosophy for hours at a time, Abedi wanted BCCI to become the financial institution for Muslims around the world. For Pakistani shopkeepers in London’s East End or Indian Muslims in East Africa, BCCI became the bank of choice. By the end, BCCI would have one million depositors spread around the world.

However numerous, though, such small accounts would never enable Abedi to fulfill his ambitions, and he soon began cultivating the sheiks and crown princes of the Middle East. Even more important, he grasped that immense resources were becoming available in the criminal underworld, and he went after them with singleminded determination. Jack Blum, an investigator for the subcommittee, testified that BCCI “had 3,000 criminal customers,” each of them a “page 1” story. “If you pick up any one of [BCCI’s] accounts you could find financing from nuclear weapons, gun running, narcotics dealing, and you will find all manner and means of crime around the world in the records of this bank,” Blum said, BCCI helped Manuel Noriega launder drug money. It helped Pakistani officials acquire materials for its nuclear weapons program, and it helped Oliver North and Richard Secord ship arms to Iran. With every passing week, it seems, new revelations about BCCI emerge. In early November, for example, The Wall Street Journal reported that an important front man for BCCI had borrowed money in 1989 from the Atlanta office of Italy’s Banca Nazionale del Lavoro to supply high-grade steel to Iraq. The two biggest banking scandals of recent years may well be linked.

In an effort to prevent such activities from recurring, the Senate report puts forward ten full pages of recommendations. The United States, it asserts, must “develop a more aggressive and coordinated approach to combat international financial crime.” It must “take firm action against nations who permit their privacy and confidentiality laws to protect criminals from US regulators and law enforcement.” The Justice Department, the State Department, and the CIA must show greater vigilance.

All this seems admirable—and entirely inadequate. BCCI’s ability to evade regulation was not a matter of luck. The bank concealed its activities behind a thicket of holding companies, affiliates, subsidiaries, insider dealings, shell corporations, front men, buy-back arrangements, fractured corporate structures, and divided audits. In New York and Miami alone, the bank’s records came to several million pages filling nine thousand boxes. In the United Kingdom, BCCI’s liquidators, in the first year after the bank’s closure, indexed 2.4 million documents—a mere 2.5 percent of all BCCI documents in the country. “The records of BCCI’s criminal activity,” the Kerry committee concluded, “constitute an accounting and legal nightmare, and a full record of what actually took place is unlikely to be reconstructed.”

What’s more, the agencies responsible for monitoring BCCI were, in many cases, compromised by it. The CIA is perhaps the best example. During its investigation, the Kerry subcommittee learned that the agency had hundreds of documents containing data about BCCI and its involvement in money laundering, arms trafficking, terrorism, and the manipulation of financial markets. Yet most of this information was withheld from both the Federal Reserve and the Justice Department—the two key agencies with statutory responsibility over BCCI’s activities. The reason was that the CIA was itself using the bank. “Even when the CIA knew that BCCI was as an institution a fundamentally corrupt criminal enterprise,” the Senate report states, “it used both BCCI and First American, BCCI’s secretly held US subsidiary, for CIA operations.”

Because of the CIA’s refusal to cooperate, the Kerry subcommittee was never able to determine the exact nature of those operations. Nonetheless, its report helps to point up the real concern about the CIA and drug trafficking. It’s not that the CIA has helped move any large amount of drugs into the United States; it’s that the agency has colluded with groups involved in drug trafficking to further its own hidden aims. This is not an entirely new phenomenon, of course. As far back as the early 1960s, the agency enlisted the Mafia in its effort to bring down Fidel Castro. As the global criminal network has expanded, however, so have the opportunities for covert operators to exploit it. Instead of policing shady institutions like BCCI, the CIA has used them to finance, conduct, and ultimately conceal its activities around the world.

In its investigations of Noriega and BCCI, the Kerry panel has performed an invaluable service. In its recommendations, however, it has been a captive of the conventional wisdom about drugs, which has gone through three phases. During the first, in the late 1970s and early 1980s, the government concentrated its enforcement activities on the drugs themselves. Intent on keeping cocaine, heroin, and marijuana out of the country, the US invested many billions of dollars in patrol boats, radar systems, and border surveillance. The smugglers were hardly deterred, and the flow of drugs continued unabated. So, in the mid-1980s, officials turned their attention to a new target—the traffickers. Arresting the top drug lords, they believed, would lead to the collapse of the organizations they controlled. One result of this view was the invasion of Panama—in effect, a giant drug bust directed at Manuel Noriega. Another was the Colombian government’s offensive in 1989 and 1990 against the Medellín cartel. That offensive seemed highly successful; many of the cartel’s capos were either killed, arrested, or forced underground. Yet the cocaine continued to flow.

More recently, the war on drugs has entered a third phase. It’s no longer the traffickers who are considered important, but their money.

After years of struggle,” Rachel Ehrenfeld writes in Evil Money, reflecting the current official line, “governments and law enforcement agencies have concluded that the only way to combat drugs is to control drug money-laundering.” At the DEA, the Internal Revenue Service, the Customs Service, and the Justice Department—not to mention the Kerry subcommittee—the campaign against money laundering is all the rage. Armies of investigators and accountants are tracing money transfers, examining bank accounts, and poring over financial records—all part of a vast effort to foil the traffickers by seizing their assets. Operation Green Ice was part of the new approach. Unfortunately, it seems no more likely to succeed than the many efforts that preceded it.

The fascination with money laundering, and with the CIA and narcoterrorism, reflects the widespread tendency in Washington to view drugs as an external problem, forced upon us by foreign adversaries. Until that spell is broken, we cannot expect much progress in dealing with the drug problem. The beginning of a new administration would seem a good time to move beyond the emphasis on “endless enemies” and instead concentrate on the real cause of the drug problem—the continuing appetite of many Americans for drugs. To spend so lavishly on stings, raids, and investigations when treatment facilities in American cities remain overwhelmed seems truly a crime.

Even if we do begin to deal with the problem of addiction and its treatment, however, the international drug syndicates will remain a malevolent force, sowing violence, corrupting politicians, challenging governments. Is there nothing that can be done about them? Only one measure would seem to offer any real hope: legalization. The world’s drug organizations exist only because the commodities they trade in are illegal. If cocaine and heroin were suddenly legalized, the Colombian cartels, the Dominican gangs, the Chinese triads, and all the rest would soon collapse.

So far, the debate over drug legalization has concentrated almost exclusively on the likely effects such a policy would have in the United States. The most effective argument against legalization remains the likelihood that more Americans, including many children, would begin using drugs, or would use more drugs, if they were made freely available. The proponents of legalization have yet to provide convincing solutions to the many problems that would arise in administering a system in which drugs were legal. Against this, however, must be weighed the crippling blow legalization would undoubtedly deal to the world’s criminals. Any measure that would deny the new underworld its chief means of support at least deserves serious consideration.


Evil Money’ March 4, 1993

Drugs and the Law February 11, 1993

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