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Langley’s Revenge

The 1980 Presidential Election and the Reconstruction of the CIA

Kent Heiner

On January 20, 1981 Ronald Reagan was inaugurated as the 40th President of the United States. Five minutes later, two years of diplomatic efforts came to fruition as the government of Iran gave final assent to the United States’ terms for the release of fifty-two American hostages being held in Iran.

A popular revolution had overthrown the Iranian monarchy in February 1979, eventually putting control of that country in the hands of Islamic "fundamentalists." Following the United States’ admittance of the deposed monarch for medical treatment, a mob of Iranian students stormed the US embassy in Tehran, taking fifty-two Americans hostage. Their captivity weighed heavily on the minds of all Americans and dominated the news. The crisis at first resulted in a sympathetic increase of public support for President Jimmy Carter, but as the days wore on and the presidential election grew nearer, public confidence in the incumbent president declined. The Americans remained in captivity for a total of 444 days, from November 4, 1979 until inauguration day in early 1981.

The timing of the hostages’ release soon gave rise to rumors that Republicans had made some sort of deal with the Iranian government to delay the release of the hostages in order to deny President Carter an opportunity to rally public support in the presidential race’s eleventh hour.

Whatever the source of these earlier rumors, we shall see that they were eventually found to be correct.

The 1979 revolution had left Iran in a state of disarray. Their military equipment inventories in particular were in a disastrous state of confusion, and the armed forces were in desperate need of spare parts for the American-made equipment which had been sold to the previous regime. For example, one badly-needed item was tires for Iran’s F-4 Phantom fighter jets. Such needs became even more urgent in April 1980 when Iran came under attack from neighboring Iraq. The hostage crisis was a major obstacle to the acquisition of the American-made supplies Iran needed to defend itself.

Though some Iranian officials referred to the United States as the "Great Satan," others were less antagonistic. The 1979 revolution had not effected a complete change in the sympathies of Iran’s leadership; neither had it rid the country of arms dealers who had previously done business with American arms suppliers. Because of Iran’s desperate need for military parts, individuals such as these were in an extraordinary position from which to effect a bargain between the hard-line elements who had taken the hostages and Americans wanting to negotiate the terms of their release. As we will see, the bargaining began in July 1980, in a Madrid hotel. The Americans were not there as representatives of the American government per se, but rather of a faction which had suffered recent losses and were hoping to recover them.

A recent revolution of sorts had gradually and quietly devastated one of the major centers of power in the United States as well. It had begun with the arrest of a handful of CIA agents at the Watergate Hotel, and had gathered momentum over the next five years. This sea change culminated in 1977’s "Halloween Massacre," in which 820 of the Central Intelligence Agency’s approximately 1,200 covert-operations positions were eliminated.

The 1970s had not been a pleasant decade for the Agency headquartered in Langley, Virginia. It had suffered many reversals and been the subject of numerous serious accusations of criminal behavior. As the decade began, the American war in Vietnam was beginning to look like a serious mistake and the Agency was dreading the blame that might come to it for its role in escalating American involvement in the region.

In 1972, for the first time in the Agency’s thirty-five year history, serious and well-documented accusations of CIA involvement in the international drug traffic were publicized. Harper’s magazine correspondent and Yale graduate student Alfred W. McCoy published The Politics of Heroin in Southeast Asia, an extremely damning book documenting that the CIA had taken over the management of Southeast Asia’s opium and heroin traffic from the French colonial authority in tandem with their assumption of the management of the war against Communism in the region. The CIA had pressed for the suppression of the book, claiming that it represented a threat to national security, but its efforts backfired badly. Both the New York Times and the Washington Post picked up the story of this attempt at censorship. NBC ran an hour-long program on the CIA’s role in the drug traffic in Laos.

Allegations never stopped surfacing after that time. In October of 1972, a former American refugee relief worker who had been in Laos in 1967 and 1968 published a letter in Harper’s recounting how he had seen the CIA’s guerrilla armies using US facilities to transport drugs with the full knowledge of local US officials. In October 1977, in his nationally syndicated column, Jack Anderson of the Washington Post accused the CIA of "helping an Asian opium ring smuggle drugs into the United States and then lying to Congress about it," citing a secret report from the House of Representatives (Lane 1991, 113).

Four years of friction between President Nixon and Richard Helms, the Director of Central Intelligence, came to a head after Nixon’s 1972 re-election, when Helms left the post to accept an assignment as Ambassador to Iran. Shortly after his inauguration in 1969, Nixon had begun pressuring Helms for information and documents related to the 1961 invasion at the Bay of Pigs. Helms stonewalled Nixon and his staff, and the matter was dropped for a time, though apparently not before mutual attempts at blackmail between the two men resulted in a checkmate.

Helms’ reassignment to Iran followed an attempt by the White House to get the CIA to bring the FBI’s Watergate investigation under control. This attempt, scripted by Nixon, again made reference to the Bay of Pigs invasion and Watergate conspirator Howard Hunt’s connection to it. Hunt had been a key figure in many of the CIA’s operations and had been heavily involved in the Agency’s attempts to unseat Fidel Castro until the arrest of four of his Cuban CIA colleagues were caught breaking into the headquarters of the Democratic National Committee at the Watergate Hotel early in the morning of June 17, 1972. Hunt had been part of the break-in as well, and his arrest followed soon thereafter.

In a private meeting on June 23rd with Bob Haldeman, his chief of staff, President Nixon discussed a strategy for containing the crisis. Haldeman told the President that a recommendation had been made to have Vernon Walters at the CIA call acting FBI Director L. Patrick Gray and "just say, ‘Stay the hell out of this – this is business here we don’t want you to go any further on it.’ [sic]" Such an exchange between the CIA and FBI was not unusual, said Haldeman, and "that would take care of it." The president agreed and added what he must have seen as an extra incentive for the CIA to get the investigation under control:

"Just say [unintelligible] very bad to have this Hunt fellow [unintelligible], ah, he knows too damned much . . . If it gets out that all this is involved, the Cuba thing, it would be a fiasco. It would make the CIA look bad, it’s going to make Hunt look bad, and it is likely to blow the whole Bay of Pigs thing which we think would be very unfortunate – both for the CIA and for the country . . ."

Two hours after this, the infamous "smoking gun" conversation, Walters, Helms, Haldeman and John Ehrlichman met in Ehrlichman’s White House office to carry out the President’s instructions, and the final act of the "Bay of Pigs" drama between Nixon and Helms played itself out.

Helms informed those present that the CIA was clear of any involvement in the break-in and that all suspects had terminated their employment with the CIA long since. Then Haldeman played the "Bay of Pigs" card, suggesting that the break-in or its perpetrators were linked to it. Haldeman recalls that Helms reacted violently, "gripping the arms of his chair, leaning forward and shouting, ‘The Bay of Pigs had nothing to do with this! I have no further concern about the Bay of Pigs!’" However, after the Director calmed down, he voiced no objection to having Vernon Walters intercede at the FBI. Why was the Bay of Pigs such a sensitive point for Helms? Haldeman inferred from the President that it had something to do with the Kennedy assassination.

Walters visited Patrick Gray that afternoon. Gray recalls that Walters advised him that the FBI "were likely to uncover some CIA assets or sources if we continued our investigation of the Mexican money chain," namely the money found in the possession of the Watergate burglars which had originated from the Committee to Re-elect the President but which had been laundered though a Mexican bank account. In other words, the money had likely gone through a Mexican "money laundry" connected to the CIA. Gray assured Walters that the FBI investigation would be carried out in a manner that would not damage CIA assets (Colodny, Gettlin 1991: 207-208).

Curiously, the Warren Commission seems to have been resurrected in the Watergate scandal. Many of those who helped construct the official government’s position on the death of John F. Kennedy were again called on to play a role in events surrounding the demise of the Nixon presidency. Gerald Ford, who falsified a crucial report as one of the commission’s seven members, became Nixon’s vice president. After Nixon’s resignation, Ford granted the former president a pardon in advance of any indictments which might result in Nixon’s prosecution in connection with Watergate. Another Commission member, John McCloy, was sought by Nixon for the job of Special Prosecutor, but declined. Warren Commission counsels J. Lee Rankin and William T. Coleman were also considered for the position (Weberman, Canfield 1992: 187). The position of Special Prosecutor was finally filled by Leon Jaworski, former Special Counsel for the Warren Commission. Arlen Specter, the Assistant Counsel who developed and promoted the Commission’s "Single Bullet" theory (derisively nicknamed the "Magic Bullet" theory by its detractors), was asked by Nixon to be his defense lawyer. Albert Jenner, the man responsible for the Commission’s investigation into the possibility of conspiracy, was approved for the position of impeachment counsel in the Watergate hearings. (Davis, p. 412). Charles Rhyne had been present at the Commission’s hearings as an official observer and was hired as the defense lawyer for Nixon secretary Rose Woods. Warren Commission administrative aide Charles Shaffer was a defense lawyer for White House attorney John Dean. Counsel Joseph A. Ball was John Ehrlichman’s defense lawyer in the Watergate affair.

Given these many connections, one might speculate that Watergate and the Kennedy Assassination were connected in some way. What is certain is that the investigation of both affairs presented grave potential damage to many centers of power and that men whose loyalty and discretion were trusted by those powers were carefully selected to handle both affairs.

As well as resulting in the resignation of the President, Watergate also eventually resulted in major changes at the CIA. The Agency’s proximity to the burglars and cover-up did not escape notice. The White House had attempted to use its knowledge of questionable Agency operations to pressure the Agency into assisting in the cover-up. The Agency was vulnerable because of the assistance it had provided Howard Hunt even after Hunt’s "official retirement" from the CIA: it had provided equipment and services which were used in some of Hunt’s illegal activities, and made it easy for an impartial observer to conclude that Hunt may have been working for the Agency rather than the White House.

After Director Richard Helms had been replaced by James R. Schlesinger, an internal memo was circulated to CIA employees instructing them to report any knowledge they had of illegal or unethical activities undertaken by the Agency in the past. This inquiry continued after Schlesinger left the agency to head the Department of Defense and was replaced as Director of Central Intelligence (DCI) by William Colby, who had originated the idea while working under Schlesinger. The 693-page product of this internal investigation became known as the "family jewels," and its ostensible use was to prevent future abuses. At least a portion of the long list of Agency violations, including the surveillance of American citizens, was eventually leaked to the press. In December 1974, they were published by Seymour Hersh in the New York Times. A presidential commission was appointed a mere two weeks later to investigate the allegations of wrongdoing and make recommendations for possible reforms; this commission became known as the Rockefeller Commission and was under the direction of Nelson Rockefeller, Vice President to Gerald Ford.

In January of 1975, Ford held a White House luncheon with the publisher of the New York Times and a few of the editors. Ford explained that the Commission members (among whom were Ronald Reagan and John Connally) had been chosen with great care because they might encounter matters of extreme sensitivity – even more sensitive than spying on Americans. When prodded for more specifics, Ford replied "Like assassinations . . . but that’s off the record!" Though the Times did not publish Ford’s remark, word of it eventually reached Daniel Schorr of CBS News. When he failed to get a categorical denial of CIA involvement in assassinations from Bill Colby, Schorr aired Ford’s concern over what the Commission might find on the CBS Evening News (Powers, 1979: 290-91).

Former Warren Commission counsel David Belin was appointed as the Rockefeller Commission’s Executive Director. Following press coverage of a symposium at which photographic expert Robert Groden had presented an enhanced version of the Zapruder Film (the famous footage graphically depicting President Kennedy’s death), Groden was given the opportunity to present his film to Belin and to present formal testimony to the Commission. Groden notes that, lamentably, "Statements were attributed to me that I had never made, and critical portions of my testimony had been severely altered and their meaning distorted." Fortunately, Groden was allowed to present the film the next month on Geraldo Rivera’s TV program. The resulting publicity resulted in his appearance in the House of Representatives on April 15, 1975. "A few days later," Groden writes, "Congressman Thomas N. Downing introduced a resolution to reopen the investigation of the Kennedy Assassination.

Watergate convicts Frank Sturgis and Howard Hunt were also called to testify before the Rockefeller Commission. The reason for their appearance was a series of photographs which were brought to the Commission’s attention. The photographs, taken in Dallas immediately after the assassination of President Kennedy, showed three men being escorted through the crime scene by what appeared to be Dallas police officers. Someone had noticed a resemblance between two of the men and Hunt and Sturgis.

As the Rockefeller Commission uncovered more abuses on the part of intelligence agencies, both houses of Congress determined to conduct their own investigations. The Senate Select Committee on Intelligence Activities was led by Senator Frank Church (hence, the "Church Committee") and its counterpart in the House became known as the Pike Committee after Rep. Otis Pike took over its leadership that July. From that time on, DCI Bill Colby spent a great deal of his time appearing before Congress, answering for various crimes committed by the Agency.

In the spring of 1975, career CIA officer David Atlee Phillips retired, announcing that he was forming the Association of Former Intelligence Officers to defend the CIA against its critics. At the press conference he called to make the announcement, Phillips went straight to work. As the CIA’s principal propagandist in the Bay of Pigs invasion and other CIA covert actions, much of Phillips’ career had been dedicated to telling lies for the Agency. This day was no different. The CIA did not finance the overthrow of Chilean president Salvador Allende, he declared; the CIA never plotted the assassination of Fidel Castro. Finally, he said, his retirement from the CIA was indeed genuine and the organization he was forming was not a CIA operation in disguise.

Phillips wad worked with Howard Hunt in at least two of the CIA’s coup attempts in Latin America. Both men were key officers in the 1954 coup which overthrew the Arbenz government in Guatemala, as well as in the 1961 invasion of Cuba at the Bay of Pigs. Both men’s names have been linked to the Kennedy assassination in Dallas as well, as we shall see.

Eventually, Congress discovered that the CIA had attempted many times in the early 1960s to assassinate at least three foreign heads of state, among them Cuban leader Fidel Castro. President Ford attempted to suppress this discovery by writing a letter to Senator Church, but Church answered Ford’s plea for silence by issuing a statement to the press. Bill Colby was dismissed by Ford late that year and on November 4th, a New York Times column asserted that the firing was a result of Colby’s failure to contain the congressional investigations. Ford’s nominee to fill the vacancy was George H.W. Bush, the Chairman of the Republican National Committee. Senator Church was one of many to oppose the nomination. As a well-known political figure, Bush was considered by many to be an inappropriate choice for the position, especially in light of the politically subservient role the Agency was now being revealed as having played in the past.

Congress also learned that in its attempts to assassinate Castro, the CIA had contracted with the mob. Chicago mobster Sam Giancana was called to testify before the Church Committee in the summer of 1975, but was murdered in his home on June 19th before he could appear. Giancana’s intimates were certain that Sam had been done in by the CIA. Jimmy Hoffa disappeared the following month and was never seen thereafter. Giancana’s associate Johnny Roselli, who had also been an organizer in the Castro plots, was found floating in an oil drum off the Miami coast in August of 1976.

In December 1975, the political pendulum reached its zenith and began to reverse its course for a time. The CIA’s Chief of Station in Greece was assassinated on the 23rd of that month. The CIA and its supporters immediately began to make political hay of the tragedy, blaming the assassination on the bad publicity brought about by the Church Committee. Noting the irony in this turn of events, CIA officer John Stockwell wrote:

No conceivable action or incident could have been more beneficial to the CIA at that time. Colby bitterly denounced the enemies of the CIA who were exposing it. A reaction set in on Capitol Hill and in the press community. Doors began to close on the congressional investigators in the rush of sympathy and support for CIA officers who were thought to be living hazardous lives in the service of their country. When Church Committee members traveled abroad to investigate CIA stations, they were berated by case officers’ wives, who claimed that even their children were endangered by the committee’s disclosures (Stockwell 1978, p. 237).

The Pike Committee, which had been working rather less flamboyantly than the Church Committee, sent its final report to the Government Printing Office on January 23, 1976. Two days later, a copy of the report was leaked to Daniel Schorr of CBS News, and it was presented in that evening’s broadcast. The following morning, an extensive summary of the report was published in the New York Times. The House of Representatives voted on January 29th not to release the report to the public in its current form, instead allowing the White House and CIA to remove any information which might compromise the CIA’s ability to do its job. A few days after the vote, the Village Voice published the Pike Committee report in full, and Daniel Schorr received the blame for the leak. The Church Committee’s final report was released in April 1976, but not before the CIA had been allowed to edit it.

Revelations of the CIA’s attempts to assassinate Fidel Castro were accompanied by speculation that President Kennedy may have been assassinated by Cuba as an act of retaliation. Even though former DCI Allen Dulles had been one of the Warren Commissions seven members, the Agency’s attempts on Fidel Castro and its maintenance of a pool of hit men were never revealed to the Commission. With these new revelations as a starting point, a subcommittee of the Church Committee led by Senators Gary Hart and Richard Schweiker led a quiet investigation into the Kennedy assassination. The Schweiker-Hart subcommittee managed to avoid the attention of the press, and its belief that the assassination had been the result of a conspiracy was reflected in the Church Committee’s final report on July 23, 1976. The report also noted that the Subcommittee had experienced substantial interference from the intelligence community and the Ford administration (Groden, 151).

On September 17, 1976 Thomas Downing’s resolution to open a new investigation into the murder of President Kennedy was approved in the House of Representatives by a margin of 280 to 65. Despite bureaucratic infighting, bad press, red herrings, and the CIA’s efforts to stall and stonewall the committee until its two-year mandate elapsed, The House Select Committee on Assassinations (the committee was also charged to investigate the slaying of Martin Luther King) was able to uncover a great deal on information regarding Kennedy’s death.

One investigator working for HSCA discovered that David Atlee Phillips had been seen with Lee Harvey Oswald. Gaeton Fonzi, who had also worked for the Schweiker subcommittee, had several interviews with Cuban exile Antonio Veciana. Veciana told Fonzi that his CIA case officer, who called himself "Maurice Bishop," had once introduced him to Oswald in Dallas. A police sketch was made from Veciana’s description of "Bishop." Senator Schweiker recognized the face in the sketch as a good likeness of Phillips. Having good reason to be fearful of his safety, Veciana refused to go on record identifying Phillips as "Bishop," but from the information he provided, Fonzi was satisfied that the men were the same. Fonzi "introduced" Veciana to Phillips at a luncheon held by Phillips’ Association of Former Intelligence Officers and watched in total fascination as Veciana stared across the table at Phillips, who was nervously avoiding Veciana’s gaze; Phillips’ hands shook visibly. Later, as he gave sworn testimony to the House Select Committee on Assassinations, Phillips blatantly lied about never having been introduced to Veciana by name. Phillips was called in by HSCA a third time, this time for "informal" questioning, in August 1978. Fonzi writes of this occasion, "I watched as David Phillips, his hands shaking noticeably, lit his third cigarette. He had forgotten he had two already burning, hardly touched, sitting on the lip of the ashtray." (Fonzi 276-78) The HSCA had Phillips nailed, but for some reason they let him go.

Marita Lorenz came to the attention of the Schweiker subcommittee because of her assertion that she had been assigned by the CIA to administer lethal poison to her close personal friend, Fidel Castro. The attempt never took place, Lorenz said, because the poison pill given to her by CIA agent Frank Sturgis had dissolved in the jar of cold cream where she had hidden it. She also told of gun-running missions with Sturgis for which Howard Hunt was the paymaster. About a year and a half later, she told HSCA investigator Gaeton Fonzi that one such trip had taken Lorenz and Sturgis to Dallas. With them on the trip were Cuban exiles Orlando Bosch and Pedro Diaz Lanz, American mercenary Gerry Patrick Hemming, and Lee Harvey Oswald, whom she knew as "Ozzie." They arrived in Dallas in November of 1963, where they met Howard Hunt and a "mafia punk" named Ruby. She would later recall that the brothers Guillermo and Ignacio Novo Sampol (then gaining notoriety as anti-Castro terrorists) were on the trip as well. One might suspect that Lorenz, as Castro’s former lover, may have been repeating disinformation fed to her by Cuban military intelligence in order to cause trouble for some of Cuba’s most dangerous foes. There are reasons to believe her story, however. After she came forward, Frank Sturgis was arrested at her apartment for allegedly threatening her. Secondly, she was eventually called as a witness in a libel suit brought by Howard Hunt against a publisher who had alleged Hunt’s involvement in the Kennedy assassination. Hunt was unable to establish an alibi demonstrating that he was not in Dallas on the day of the assassination, and lost the suit on appeal. Lastly, Lorenz was not the only one to place Hunt in Dallas on that day.

In mid-August 1978, two independent articles appeared in East Coast newspapers, each alleging the existence of a CIA internal memo placing Hunt in Dallas on the day of the assassination. Both articles cited sources in or close to the House Assassinations Committee. One article, written by Victor Marchetti, a former aide to Richard Helms, declared that the CIA was planning to retreat to a new line of defense, admitting limited Agency involvement in the killing and leaving Howard Hunt and Gerry Patrick Hemming to twist slowly in the wind.

Despite all that it had found, the HSCA could not collectively muster the courage to make any specific accusations. Knowing that it had to justify its work in some way, the committee’s final report, released on July 17, 1979, focused on a single issue: they had developed scientific evidence that one of the gunshots fired in Dallas had come from a second position; therefore there was more than one gunman. The final report read: "The committee believes, on the basis of evidence available to it, that President John F. Kennedy was probably assassinated as the result of a conspiracy. The committee is unable to identify the other gunman or the extent of the conspiracy."

The Central Intelligence Agency had fought hard to keep any damaging information out of the HSCA’s report. In doing so, they had the complete cooperation of the Committee’s general counsel, Robert Blakey. Blakey kept the Agency informed of the Committee’s most sensitive findings, and "invariably sought FBI and CIA clearance" when hiring new employees (Lane 1991, 34). Blakey did not pursue evidence linking Lee Harvey Oswald to the Agency, focusing instead on any leads indicating the involvement of organized crime. In order to gain access to the CIA’s files, Blakey had agreed that all materials that the Committee wished to use in its final report would be subject to CIA review before publication. He had allowed the Agency to stall and stonewall the Committee, and had instructed his staff to bear in mind the political reality that the Agency would still be around long after the Committee had faded into history. "Be nice to the Agency," he had admonished (Fonzi 1993: 257,299).

In addition to attacks from the outside, the Agency experienced many defections from its own ranks. Victor Marchetti, who had been with the CIA for 14 years until his resignation in 1969, cowrote The CIA and the Cult of Intelligence with John D. Marks, formerly of the State Department. The book was extremely critical of the Agency, and the CIA demanded to censor the book before publication. The CIA eventually won out after the case was heard before the Supreme Court. The book was published in 1974, with editor’s notes indicating how much of the manuscript was deleted and where – about one-fifth of its total content.

There were no deletions in Inside the Company: A CIA Diary by former CIA officer Philip Agee. Published in 1975, Agee’s book named every agent and every operation he could remember from his twelve-year career. Amid the ongoing investigations of the CIA, Agee accused the CIA of engaging in coup attempts, destabilization, political repression, and assassination plots in a dozen countries. Furthermore, the Agency bore at least partial responsibility for tens, if not hundreds, of thousands of deaths:

In Chile, the Company spent millions to "destabilize" the Allende government and set up the military junta which has since massacred tens of thousands of workers, students, liberals, and leftists. In Indonesia in 1965, The Company was behind an even bloodier coup, the one that got rid of Sukarno and led to the slaughter of at least 500,000 and possibly 1,000,000 people (Agee 1975, introduction).

Word of Agee’s intention to publish a book sent shock waves through the CIA and put the entire Western Hemisphere division into "damage control" mode. When his intentions became known, "the Agency proceeded exactly as it would have if he had flown to Moscow, terminating agents and shutting down operations about which Agee might have known." (Powers 1979:70)

John Stockwell had led the CIA’s Angola Task Force in 1975. He served in the CIA for twelve years until his resignation on April 1, 1977. His open letter to Director Stansfield Turner, urging him to clean up the corruption and ineptitude in the agency, was published in the Washington Post on the tenth of the month. Stockwell followed up in 1978 with In Search of Enemies, a book which told the story of the CIA’s Angola campaign and the folly, violations of law, and lies to Congress which attended it. The CIA subsequently arranged for all earnings on the book to be denied to its author, as it had in the case of former CIA officer Frank Snepp. Snepp had authored Decent Interval, his account of America’s abandonment of its Vietnamese allies.

It was becoming apparent that there were two CIAs, one of which was – or at least had been – completely out of control. The Agency has two major divisions: the Directorate of Intelligence (DI), which performs the relatively uncontroversial task of analysis, and the Directorate of Operations (DO), which runs the agents and plans covert actions. It was the DO’s activities that were exposing the Agency to so much fire from the public and the legislature.

By the time that the two congressional committees had faded into history, they had revealed a harrowing number of illegal activities including illegal wiretaps and mail tampering, propaganda and infiltration of the domestic and foreign press, cooperation with organized crime, assassination attempts on foreign heads of state, and illegal "mind control" research. In addition, there were allegations of complicity in drug smuggling, state terrorism, and mass murder. One of the more outrageous revelations was the CIA’s use of prostitutes to lure unsuspecting victims into apartments where they would be surreptitiously administered doses of LSD and other drugs so that the effects of the drugs could be observed by CIA scientists. Such experimentation on unwitting subjects violated the laws which had been applied to the Nazis at the Nuremberg trials, and was only one incident in a series of horrors perpetrated with CIA funding. And, of course, one had to wonder how much more was still hidden from public view. Lurking just below the surface of the public consciousness was the possibility that the CIA had assassinated John F. Kennedy.

Illegal activities aside, some of the more legitimate functions of the clandestine services were coming to public light for the first time, and this had opened the door for open debate on the value of such activities. Not just outside critics, but many former CIA officers were telling the American people that the covert activities of the CIA more often worked against the legitimate security interests of the United States.

If the Agency was to continue to serve any useful and legitimate function, the cowboys and crooks in the Directorate of Operations had to go. And it was Stan Turner’s job to show them the door.

Turner was appointed DCI by newly-elected President Carter in 1977, replacing George Bush, who had held the position for less than a year. Bush was relatively well-liked in the Agency, in contrast to Turner, who immediately "made it his business to let the agency know it was a ‘disgrace.’" Turner came into the job with a mandate to clean up the Agency and the opinion that the Agency was overstaffed and relied too much on human sources rather than technological ones. Turner also recognized the frustration of ambitious younger officers who didn’t see any vacancies at the agency’s higher levels. He became "the most disliked and distrusted director" in the CIA’s history (Ranelagh 1986: 635) even before he let his axe fall on the DO.

In 1977, it came to Turner’s attention that a former CIA employee named Edwin Wilson was supplying Libyan dictator Muammar Qadaffi with explosives, timing devices, and assassination training. At least three other former CIA employees had been involved as well, one of whom had gone to the FBI and CIA to report Wilson’s activities. A 1977 article in the Washington Post suggested that Wilson continued to get support from current employees of the Agency. Turner investigated the issue and came to the names of Ted Shackley and Thomas Clines. Clines had been Wilson’s case officer and had been Shackley’s assistant and close associate for many years. When Shackley had been the chief at the CIA’s station (code-named JMWAVE) in Miami in the early 1960s, Clines managed the Cuban exile operatives there. Clines followed Shackley to Laos in 1965, when Shackley was assigned as Chief of Station there.

By 1977, Shackley held the second position in the CIA’s Directorate of Operations and was said to have been in line for DCI if Ford had been elected. Clines was then the head of the CIA’s Office of training. Both men, when called into Turner’s office, denied that their association with Wilson was anything more than a casual social relationship. Having no solid grounds for firing either of the two men, but still not believing their assertions of innocence, Turner reassigned Shackley to the National Intelligence Tasking Center and Clines to a post in the Caribbean. Eventually the two retired from the Agency and joined Wilson in an arms-shipping venture.

In Secrecy and Democracy, Turner laments the common perception of his Fall 1977 staff reduction as the summary firing of over 800 employees. Only seventeen people were actually fired, he writes, and an additional 147 were forced into early retirement. The remainder of the 800-plus positions were to be vacated through attrition. Turner had announced his intentions to his "top people" in August 1977 and was unprepared for the outcry which followed the actual reductions in October. The notices to the employees affected were in the form of a curt form letter which went out on October 31. Turner later regretted letting himself be talked out of sending something more humane as a follow-up.

The episode became known as the "Halloween Massacre," remembered in Agency history with as much infamy as the sinking of the Maine. It wasn’t just the individual injustices which made the cutbacks sting so badly. It was the perception that Turner, a newcomer, was virtually eliminating the Agency’s covert-action capability, abolishing a grand tradition that had changed history time and time again. What neither Turner nor most of the employees he alienated were likely to have known is that the CIA’s grand tradition of covert action had also been providing cover for a great deal of illegal business.

The secret operations of the CIA had long been the ideal way for drug smugglers to protect their business. The CIA requires the services and expertise of smugglers to get people and information across borders. The CIA can give near-eternal secrecy to any documents it wishes to, its operations are highly compartmentalized, its employees are sworn to silence, it operates worldwide, it has the ear and authority of government, and of necessity it deals with all sorts of shady characters. Its operatives are nearly immune to prosecution, because in order to defend themselves in court, they would have to be allowed to reveal state secrets and call witnesses who might be asked to do the same.

Being in the business of supporting or suppressing many insurgent groups around the world, the Directorate of Operations cannot help but become familiar with the drug producers and traffickers of the world, because drugs are in many cases the only currency that such insurgent groups know. One cannot fund a revolution by opening a chain of department stores, and why would one try if one lives in the coca-growing regions of the Andes or the opium-growing regions of Central or Southeast Asia?

Combine these institutional circumstances with the flaws of human nature, and the result is nearly inductive proof that there must be CIA complicity in the drug trade. Of course, the empirical evidence is there as well. As mentioned before, Alfred McCoy and others watched it happen in Southeast Asia, where the CIA was supporting the opium growing Hmong (or "Meo") tribesmen and others like them; and Jack Anderson reported a similar operation in the Washington Post in October 1977.

Similar shenanigans had taken place during the early 1960s as part of the CIA’s support of the Cuban exiles against Castro. The air and boat traffic taking equipment and raiding parties to and from Cuba was protected from US authorities by the CIA and often carried illegal drugs as a bonus. While there is little evidence that the CIA condoned this aspect of the activity, the smuggling among the CIA’s Cuban exiles remained unknown to the general public until 1970, when the Bureau of Narcotics and Dangerous Drugs’ "Operation Eagle" arrested scores of exiles on suspicion of narcotics trafficking. Of the 150 suspects arrested nationwide, as many as 70 percent were veterans of Brigade 2506, the exile force which the CIA landed at the Bay of Pigs in 1961 (Scott, Marshall 1991: 26).

At least by the time the US had withdrawn from Vietnam, the CIA’s drug trafficking had become big business. It appears that some of the few Agency officials who were "in the know" and a few of their associates established a chain of banks to launder the money.

The Nugan Hand Bank was incorporated in Sydney, Australia in 1973 by Frank Nugan and Michael Hand. Nugan was an Australian lawyer. Hand was an American former Green Beret and CIA agent who had worked for Ted Shackley in Laos, where CIA-connected drug smuggling ran rampant. The Hmong army under the CIA’s direction used the Agency’s airline, Air America, to transport raw opium from the hills to refineries in Vientiane and Saigon.

Nugan Hand survived for eight years before collapsing in a scandal that makes Enron look unremarkable in comparison. In addition to leaving depositors penniless in the collapse, Nugan Hand was exposed as the launderer of funds for millions of dollars in drug money. Even more disturbing, the institution seemed closely connected to the CIA:

The bank’s founders, along with Nugan and Hand, were four officials of Air America, a CIA proprietary . . . The director of [Nugan Hand’s] Chang Mai [Thailand] office claimed on Australian television that he handled $2.6 million in less than six months. The money was garnered from the drugs transiting the area. The bank, he put it starkly, was a laundry for Meo tribesmen and other poppy growers. The Bangkok office was run by the former CIA chief of station in Bangkok . . . records from the Bangkok office were full of descriptions of troop deployments and arms sales in the region. Investigators found it hard to believe Nugan Hand was just a bank and not an abettor of U.S. intelligence. (Nathan 1982)

Nugan Hand had facilitated the smuggling of drugs not only by "laundering" the money (that is, obscuring its origins), but also by providing a channel for cash to avoid Australian export controls on its way to Bangkok to buy the drugs (McCoy 1991: 468). As its operations expanded, it attracted ever more former intelligence officials, including William Colby, who became the bank’s legal counsel in the late 1970s, and Dale Holmgren, who had been chairman of Air America’s predecessor, Civil Air Transport.

Nugan Hand’s rise in the later 1970s coincided with the exposure and closing of another CIA-connected bank, owned by Paul Helliwell. Helliwell had served US intelligence in China as an officer in the Office of Strategic Services (OSS), which was the wartime forerunner of the CIA. Helliwell, Howard Hunt, Lou Conein, and Mitch WerBell were part of a team that paid its informants in opium (Marshall, et al., 1987:32). After China had been won from the Japanese and lost to the Communists, Helliwell, the CIA, and the Chinese Nationalist army (KMT) continued to run a campaign in the region heavily dependent on drugs. Throughout the 1950s, Civil Air Transport flew the opium, the KMT fought the battles and grew the opium, the Chinese Nationalist government in Taiwan paid for it all, and Helliwell – now a lawyer in Miami – organized the shipment of arms to the KMT through Sea Supply, Inc., which was a CIA front company in Miami. This arrangement dovetailed into the CIA operations of the 1960s, across the border from Burma into Laos, in which the KMT were replaced by the Hmong, Civil Air Transport by Air America, and Sea Supply, Inc. by companies like Edwin Wilson’s Maritime Consulting. Helliwell’s Castle Bank was exposed in the late 1970s as a "laundry for both CIA and organized crime funds," some of which Helliwell skimmed in order "to pay off men close to party leaders in Washington." (Scott, Marshall 1991: 92).

Whoever was reaping the final profits in these and similar enterprises would not have been pleased to see the CIA’s covert action capabilities disappear with Turner’s staff reductions. Neither would they have lacked the influence or money to ensure the eventual undoing of such actions. Peter Dale Scott notes that

Ironically, Carter’s very reform movement, by forcing its opponents into a defensive alliance, contributed to . . . an on-going scheme (and in part an illegal conspiracy) to reverse the post-Watergate reforms of intelligence abuses, first by electing Ronald Reagan in 1980, and then by committing him, through the contra program, to a resurrection of abandoned CIA covert operations (Marshall, et al. 1987:19)

Many of the CIA operatives dismissed by Turner had experience with the manipulation of elections. As Professor Scott has said, such people were not likely to have shrugged off their dismissal and gone to open bookstores. Instead, they put their training to work for their popular former boss whom Turner had replaced.

They were angry and bitter, and many volunteered to work with the Reagan-Bush campaign, especially given the added attraction of a former CIA chief as the vice-presidential candidate. "There were Reagan-Bush posters, cut off in the middle with only the right side, i.e. the George Bush side, up all over the agency," recalled a former staff member who had frequently visited the headquarters at Langley.

Years later, Richard V. Allen, Reagan’s chief foreign-policy adviser during the campaign, condescendingly dismissed this group as a "plane load of disgruntled former CIA" officers who moved into the Reagan-Bush campaign headquarters in Arlington, Virginia . . .

The operations center in Arlington, which maintained a twenty-four hour watch on news developments, was under Stefan A. Halper, who had been associated with the Bush campaign. The watch officers of the operations center were former CIA employees who had worked for the Bush primary campaign. (Sick 1991: 23-24)

But the former intelligence official who most definitely went beyond both the call of duty and the bounds of fair play in his support for Reagan-Bush was the campaign manager, William Casey. Casey had served in the OSS during the war, directing agents in Germany. After the war, he was for many years a Wall Street lawyer before going into a distinguished career of finance-related public service. Casey chaired the Securities and Exchange Commission from 1971 to 1973, was Under Secretary of State for Economic affairs from 1973 to 1974, and was President and Chairman of the US Import-Export Bank from 1974 to 1976. In 1976, he served as a member of President Ford’s Foreign Intelligence Advisory Board.

Why the crossover between intelligence and finance? Why would such a person lead the Reagan campaign? More mundane explanations might be proposed, but when considering Casey’s career as a whole, we might conclude that the common thread was the CIA’s role in the drug trade, which generates untold billions in liquid cash. Casey’s role, then, was to ensure that Reagan and Bush took over the White House so that the damage done to the CIA’s covert arm during the Carter years could be reversed (which Casey did accomplish as Reagan’s DCI) and that the illegal revenues would again flow to Wall Street.

To accomplish this end, Casey took extraordinary measures. During the summer and fall of 1980, Casey took part in a series of meetings with representatives from Iran which resulted in delay of the release of the American hostages being held there until after the November election. In return, Casey promised the Iranians that once Reagan was elected, the United States would permit Israel to sell Iran the military parts it so badly needed.

Though a 1992 congressional investigation falsely claimed that there was "no credible evidence" that these meetings took place, the reality of the events should not be doubted. Gary Sick of Columbia University was once a skeptic regarding the hostage conspiracy, which had come to be called "October Surprise"; he served on the National Security Council staff under presidents Ford, Carter, and Reagan, and was the White House’s point person on Iran during the hostage crisis. For years after the crisis, he was sure that the events of the crisis "could be explained adequately without resort to what I considered to be a conspiracy theory based on little more than a coincidence of timing." (Sick 1991: 5). Then he came across an article in the New York Times which contradicted Casey’s alibi for the alleged meetings with the Iranians. After researching the matter a great deal further, Sick eventually was able to obtain eyewitnesses accounts of the Paris meetings, some of which also named George Bush as a participant (Sick 1991: 223-225).

Former Newsweek journalist Robert Parry has written a great deal about the Casey-Iranian meetings as well. In 1995, Parry reported the discovery of a Russian diplomatic cable amongst the files of the House task force which investigated the "October Surprise" allegations. In 1993, just as the task force was concluding its investigation, Moscow sent them a response to an earlier inquiry, apologizing for the length of time it had taken to prepare it.

"William Casey, in 1980, met three times with representatives of the Iranian leadership," the Russians wrote. "The meetings took place in Madrid and Paris." At the Paris meeting in October 1980, "R[obert] Gates, at that time a staffer of the National Security Council in the administration of Jimmy Carter and former CIA director George Bush also took part," the Russians said. "In Madrid and Paris, the representatives of Ronald Reagan and the Iranian leadership discussed the question of possibly delaying the release of 52 hostages from the staff of the U.S. Embassy in Teheran." (Parry 1995)

To the Russians’ great surprise, their report was dismissed. Indeed, it was not made public until Parry found it almost three years later in a box of task force documents in a disused Capitol ladies’ room.

After Reagan took office in 1981, Stan Turner was replaced as Director of Central Intelligence by Bill Casey. Casey created 2500 staff positions, had the headquarters building complex expanded to accommodate the new staff, and rehired most of the 800 employees whom Turner had let go. Public opinion was on his side.

In an era of terrorist bombings and hijackings, many Americans felt the CIA needed to grow stronger in order to prevent such occurrences . . . Even Congress, which less than a decade before had censured the CIA strongly, began to change its opinion. At Casey’s urging, Congress appropriated 25 percent more money for intelligence, bringing the CIA’s budget to more than $3 billion per year. By 1986, intelligence constituted one of the fastest-growing portions of the federal budget. (Ellis 1988: 57)

Covert operations were of course expanded as well, most notably in Central America, where the Reagan administration sought to put down leftist insurgents in El Salvador and to unseat the Sandinista government in Nicaragua. The CIA also became active in Afghanistan, where it supported the mujaheddin rebels against the Soviet occupying forces.

As with most other major CIA covert actions, drugs played a major role in Afghanistan and Central America. Alfred McCoy’s The Politics of Heroin: CIA Complicity in the Global Drug Trade gives the reader an excellent overview of the trafficking which took place during the Afghan war under the auspices of the CIA and its Pakistani counterpart the ISI. As the American "War on Terrorism" brings these players together again in the 21st century, we see the familiar patterns emerging.

Far more has been written on the cocaine trafficking which took place in Central America in connection with the Nicaraguan resistance. The CIA’s role is more transparent in that theater of operations, the financial connections are better documented, and the participation of many high public officers is known. Though an analysis of the former Afghan conflict will teach us a great deal about the one now raging in the region, an analysis of the trafficking connected to the contras will serve better as the denouement of the present story and will more clearly support its central themes.

The contra war was an eerie parallel to the CIA’s fight against Castro twenty years earlier. In Nicaragua, the Somoza dictatorship had collapsed in 1979, to be replaced by the left-leaning Sandinista regime which quickly fell from favor with the United States. The CIA became a great patron of the resistance movement against the new regime. This resistance movement, generally known as the contras, consisted both of disillusioned former Sandinista fighters and of former members of Somoza’s corrupt and brutal National Guard. Of the two groups, as had been the case with the Cuban exile resistance against Castro, it was the old guard which adopted the more ruthless and extreme methods and which received the greater amount of support from American covert action programs, eventually pushing other resistance movements out of the picture.

Shortly after coming into office in 1981, President Reagan authorized $19 million in aid to the contras. This was followed in November 1981 with a National Security Decision Directive spelling out the specific guidelines for the CIA’s covert aid program. The rationale behind the directive was to use the contras to interdict the alleged flow of arms from the Sandinista government to leftist rebels in El Salvador, another "hot spot" to which the Reagan Administration was committed. But this rationale was seen by both the administration and its critics as a pretext for hostile action against the Nicaraguan government, and in December 1982 the House of Representatives passed a bill explicitly outlawing the use of government funds for "overthrowing the government of Nicaragua." How this money could be distinguished from that being sent to the contras for the purpose of stopping the flow of arms to El Salvador, the bill did not say.

The point soon became moot, for in April 1984 it was revealed that the CIA had arranged the mining of Nicaraguan harbors earlier in the year. This, combined with reports of rampant terrorism and atrocities committed by the contras, was enough to prompt Congress to put a final stop to U.S. aid. Despite continued attempts by the Reagan camp to define the conflict in terms of the arms traffic to El Salvador, the Boland Amendment 1984 forbid funds from any American military or intelligence organization to be used either directly or indirectly for the support of any military or paramilitary operations in Nicaragua.

The El Salvador issue by that time was only a ruse. One CIA analyst had announced publicly that there was no evidence of incoming arms from Nicaragua since 1981. The most obvious contradiction of the administration’s rationale for supporting the contras was its supplying of the rebels on Nicaragua’s southern border, on the opposite side of the country from El Salvador. The Reagan Administration was simply determined to wage war on Nicaragua, and it continued to do so even after the passage of the Boland Amendment. Anticipating the banning of official American aid, CIA Director Bill Casey had directed Lieutenant Colonel Oliver North, a Marine assigned to the National Security Council, to build an extra-governmental supply network which could take over the operation.

For men like Oliver North, the motivation for breaking the law in pursuit of the administration’s Central American agenda appears to have been a combination of ideology and eagerness to carry out orders. But the amount of drug trafficking connected to the operation suggests other possible motivations on the part of other participants. Some individuals involved in the operation have explained that the trafficking was a means to pay for the military supplies being sent to the contras. This is plausible enough, considering the number of contra supply flights which are known to have returned to the U.S. from Central America laden with cocaine, bypassing customs with the assistance of their CIA sponsors. But the possibility cannot be ignored that the trafficking and the profits connected to it were – to some players at least – the primary end, and the contra war simply a means. As we shall see, a great number of figures in the contra supply program had previous experience in drug-related CIA operations.

Even before official aid was cut off in 1984, we see evidence of CIA "premeditation" of narcotics trafficking in an understanding reached between Bill Casey and the Attorney General in 1982. A letter to Casey from Attorney General William French Smith on February 11, 1982 exempted the CIA from having to report narcotics violations of the part of its agents. As investigative reporter Robert Parry wrote,

The exemption suggests that the CIA’s tolerance of illicit drug smuggling by its clients during the 1980s was official policy anticipated from the outset, not just an unintended consequence [of contra support programs] followed by an ad hoc cover-up (Parry 1998).

Parry also noted the long list of crimes which the CIA was still required to report, making the narcotics exemption all the more noteworthy.

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1982 letter from Smith to Casey
(click to enlarge)

Much of the CIA’s activity on the contra war’s "southern front" centered around the 8,000-acre ranch owned by John Hull, an American in Costa Rica. Hull was getting $10,000 per month from the National Security Council for the support and maintenance of two contra camps. Hull’s ranch was also a stop on one of the CIA’s guns-for-drugs circuits. Planes loaded with weapons left Fort Lauderdale for El Salvador’s Ilopango air base; the weapons were then flown to Hull’s ranch by Salvadoran officers, where they were unloaded and replaced with a cargo of cocaine before heading back to the U.S. Hull personally observed both aspects of the freight handling, which was done by his employees.

From John Hull, the chain of accountability went upward in two different directions. Robert Owen was Hull’s liaison with Oliver North at the National Security Council. Owen visited the ranch, reporting to North on the support of the Nicaraguan fighters. Both men expressed frustration regarding the misuse of funds and lack of professionalism they encountered; they seemed far less concerned about peripheral matters such as drug smuggling than they were about the actual conduct of the covert war. Hull also reported to the CIA’s chief of station in Costa Rica, Jose Fernandez. Fernandez reported to Clair George, who was the man in charge of the Agency’s covert action directorate and had been personally chosen by Bill Casey to assist Oliver North’s "enterprise."

The American corner of the triangular gun-and-drug-smuggling route which went through John Hull’s ranch was handled by the CIA’s Cubans in Miami and environs. The operation was supervised by Rene Corvo, and the weapons were supplied by Francisco "Paco" Chanes. Felipe Vidal was active at both the Miami and Costa Rican sites. In secret testimony before Congress, Jose Fernandez tried to distance the CIA from the trafficking being conducted by its agents; the Agency knew that Vidal and Corvo had a "problem with drugs" but protected them because they were "our people."

At the Ilopango stop, career CIA agent Felix Rodriguez and convicted terrorist Luis Posada directed the shipment of weapons to the contras on the southbound flights. DEA agent Celerino Castillo was tipped off that cocaine was being stored in hangars 4 and 5 at Ilopango air base, but was told by his superiors to steer clear of the base because it was a CIA operation.

In April 1985, some of the mercenaries who had been working for John Hull were arrested by the Costa Rican authorities. After they told what they knew, Assistant U.S. Attorney Jeffrey Feldman was hot on Hull’s trail and determined to prosecute him for the gun- and drug-smuggling taking place at his ranch. He had his eyes on Owen and North as well. It took a call from Attorney General Ed Meese to Feldman’s boss, the U.S. Attorney for the Southern District of Florida, to stymie the case.

But whether or not Hull would ever face indictment, his part of the operation was thoroughly compromised. Alternate arrangements were developed in a July meeting in Miami attended by Adolfo Calero, the contras’ Washington lobbyist, Enrique Bermudez, the contra commander, Oliver North, and two old acquaintances from the days of the CIA’s secret war in Laos: Thomas Clines and Air Force General Richard Secord.

Secord had been stationed in Udorn, Thailand from August 1966 to August 1968, where he ran air operations in cooperation with Ted Shackley’s CIA station in Laos. Secord’s Air America had bases in both Udorn and Vientiane, where Shackley was headquartered. Oliver North had been in Secord’s command, and Secord called Thomas Clines a "close associate" from those days. Air America became notorious for drug smuggling, and Secord is even said to have coordinated the bombing of opium fields belonging to rivals of the CIA’s local "clients." (Hopsicker 2000: 188)

At the Miami meeting, North asked Secord to arrange the construction of a secret airfield in the northwest of Costa Rica as an alternative landing site to the Hull ranch. Secord set up a Panamanian shell company called "Udall Research Corporation" to build the airstrips. Secord also coordinated the flights of C-130 cargo aircraft at the site. At this site as well as the Hull ranch, drugs as well as arms were a primary cargo. Secord’s former Air America pilots were recruited back into service, now flying for "Southern Air Transport," a Miami company which had ties to the CIA going back at least to the 1960s.

More disturbing than the CIA’s narcotics trafficking itself is the manner in which it seems to have been a major factor in the making or unmaking of several presidencies. Reagan’s victory and Carter’s defeat appears to have been made certain by traffickers determined to regain their foothold in the intelligence community.



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