The myth of mafias and drug cartels perpetuated by the media and the government deflects attention from and hides one of the most pernicious and powerful forms of organized crime, state-organized crime. Chambliss defines state-organized crime as acts committed by government officials or by the state that are defined by their own laws as criminal (Chambliss, 1986). Governments often engage in criminal acts such as smuggling (arms and drugs), assassination conspiracies, terrorist acts, and other crimes to further their foreign policy objectives or for economic advantage.
Needless to say, federal law enforcement, which doesn’t even track political corruption within the United States, does not tabulate instances of state criminality or conduct intelligence operations aimed at discovering the links between the government and organized criminals. However, both historical and contemporary research concludes that these alliances of convenience are neither new, nor rare.
State-organized crime is particularly apparent in the covert operations of intelligence agencies. Any government operation that is shielded from the public and hidden from oversight will inevitably become reliant on criminal activity to support and fund the operation. Covert operations provide the perfect setting for organized criminal activity simply because they are clandestine operations conducted with state sanction (Chambliss, 1986). Covert intelligence activities avoid the usual law enforcement scrutiny and surveillance. Passage through customs can be facilitated through official channels. Normal financial accounting procedures are not followed in covert operations. Investigators from law enforcement agencies can be diverted by claims of “national security.” And finally, organizers of such operations recruit individuals with the skills necessary to carry them out, most of which are criminal skills. It is typical for covert operators to work with well-established criminal undergrounds and for the government sponsoring the covert operation to—at the very least—tolerate (if not abet) the criminal activities of its organized crime allies.
In recent years, intelligence agencies in the United States have sought and received assistance from drug traffickers. While it is, of course, outrageously hypocritical for a government waging a drug war against its own citizens to seek assistance from drug traffickers, it is not surprising. As Chambliss (1986) points out, the characteristics of successful drug trafficking are the same qualities that are essential to successful intelligence operations. Both activities require the movement of bulky commodities, money, and couriers quickly and secretly. Both activities require great discretion and allegiance from temporary workers employed for illicit and covert activities. And both activities require the use of force and violence to assure the security of the operation. Let us consider a few salient examples.
Lansky, Luciano and Naval Intelligence: During World War II the Office of Naval Intelligence asked New York organized crime figures Meyer Lansky and “Lucky” Luciano to assist them with counter-intelligence operations on the New York waterfront:
Such activities allegedly began during World War II when the underworld figures in control of the New York docks were contracted by Navy intelligence officials in order to ensure that German submarines or foreign agents did not infiltrate the area. It was thought that waterfront pimps and prostitutes could act as a sort of counterintelligence corps. The man whose aid was sought for this purpose was Lucky Luciano; he was reportedly quite successful in preventing sabotage or any other outbreaks of trouble on the New York docks during the war. Following his arrest and conviction for compulsory prostitution in 1936, Luciano was granted parole and given exile for life in 1954 in exchange for the aid he provided during the war. (Simon, 2002, p. 82)
The French Connection: In the early 1950s, France was engaged in a war to prevent its colony of Vietnam from gaining independence. However, socialist dockworkers in Marseilles refused to load ships with military supplies bound for Vietnam. The United States wanted France to succeed in Vietnam to help contain communism. It also saw France, a major U.S. ally, threatened by a possible socialist-Communist electoral alliance and Communist domination of the trade unions. Attacking the French longshoremen, one of the most powerful leftist unions, served both ends. U.S. intelligence officers contracted Corsican organized crime syndicates heavily involved in prostitution and waterfront corruption to assist them in breaking the French dockworkers union. The Corsicans created “goon squads,” which attacked union picket lines, harassed and even assassinated union leaders, and eventually broke the union. As payoff, the Corsicans were granted the right to use Marseilles as a center for heroin trafficking—giving Corsican crime groups a new and very profitable enterprise and creating the infamous “French Connection” that would supply much of the heroin needs in the United States for the next twenty years.
The Cuban “Problem”: In 1959, Fidel Castro overthrew Cuban dictator Fulgencio Batista. Batista had been friendly to U.S. corporations and to U.S. organized crime interests who had run massive gambling, prostitution, and narcotics operations out of Havana.
Under the direction of Vice President Nixon, the Eisenhower administration elected to use the CIA to try to resolve the problem. As a first step, the CIA began to train anti-Castro Cuban exiles in terrorist tactics in what was known as “Operation 40.” Operation 40 involved terrorist attacks on Cuba, attempted assassinations of Cuban leaders, and an alliance with organized crime figures Sam Giancana, Santo Trafficante, and Johnny Roselli in a series of assassination plots against Castro himself.
In April 1961, the CIA-trained Cuban exiles attempted an invasion of Cuba at the Bay of Pigs. The invasion was a military disaster, and much of the military force was captured or killed. The failure of the Bay of Pigs invasion forced a change in tactics against Cuba. Operation 40 was replaced by JM/WAVE, an operation involving some 300 CIA agents and 4,000–6,000 Cuban exiles. JM/WAVE engaged in a series of terrorist attacks on Cuba, targeting sugar and oil refineries and factories. It also continued the assassination campaign begun earlier under Operation 40. In 1965, JM/WAVE was disbanded, as a direct result of the discovery that its aircraft were engaged in narcotics smuggling. Some of the JM/WAVE participants, having been trained in smuggling techniques and violence by the CIA, turned to organized crime, creating large gambling syndicates in New Jersey and Florida and forming the infrastructure for massive cocaine trafficking by Cuban and Colombian organized crime groups.
As a corollary to their Cuban operations, the CIA used the assistance of Meyer Lansky and others in setting up an elaborate financial structure to facilitate money laundering both for clandestine operations and for drug traffickers. CIA associates in the Caribbean, including the paymaster for the ill-fated Bay of Pigs invasion, played key roles in the operations of Castle Bank, a Florida money laundry for organized crime’s drug money. Another Florida bank with strong intelligence-community connections, the Bank of Perrine, has been used by Colombians to launder money from their burgeoning cocaine business. In the early 1970s, the CIA and organized crime played a key role in establishing and operating the World Finance Corporation, a Florida-based company involved in laundering drug money and supporting terrorist activities.
The Bank of Credit and Commerce International: There is no clearer example of collusion between and among intelligence agencies, banks and drug trafficking that the Bank of Credit and Commerce International (BCCI). BCCI was the seventh‑largest privately held financial institution in the world, operating 400 branches in 73 countries. The bank laundered millions in drug profits, mostly serving Colombian traffickers involved in the cocaine trade. The money laundering scheme entailed moving money around the world in order to disguise its source. Once the money reached its final destination, BCCI wired it to a variety of foreign banks in France, Britain, Luxembourg, Uruguay, Panama, and the Bahamas, placing the money in certificates of deposit (CDS). The CDSs were used as collateral for phony loans to drug traffickers in amounts slightly less than the value of the CDS. BCCI then collected the CDS as payment for the loans, pocketing the difference in the face amounts as a commission. In this way drug traffickers had “clean” money and BCCI made a substantial profit. In 1991, the Federal Reserve Board fined BCCI $200 million for its illegal laundering activities. BCCI had a clandestine division in the bank known as the “black network.” This was a global intelligence unit for the bank which also engaged in highly profitable illegal arms trafficking and clandestine drug transportation. The network operated on deposits from drug networks, tax evaders, and corrupt government officials, and frequently worked with governmental intelligence agencies, including the CIA. For example, BCCI held secret CIA accounts so that the CIA could finance covert aid to the U.S.-backed contras in Nicaragua and the Mujahedin rebels in Afghanistan. In turn, the CIA acquiesced to BCCI’s involvement in the heroin trade in Pakistan and the cocaine trade in Central America.
Nugan-Hand Bank: The Nugan Hand Bank was founded in Sydney, Australia in 1973 by Frank Nugan, a 30‑year‑old heir to an Australian fruit‑processing fortune, and by Michael Hand, a 31‑year‑old former Green Beret and CIA operative from the Bronx. The Nugan Hand Bank never did any banking. Nugan Hand made it’s money by charging high fees for illegal services. It was “a giant theft machine,” laundering billions of dollars from all over the world, financing the heroin trade (the bank even had a branch in Chang Mai, Thailand, the center of opium trade in the famous Golden Triangle), and engaging in tax fraud.
But most important was the bank’s role as a financial conduit for U.S. intelligence. In fact, some of the most influential officers of Nugan-Hand were directly involved in U.S. military and intelligence operations: its president was retired U.S. Admiral Earl F. Yates; its legal counsel was former CIA director William Colby; a consultant for the bank was former deputy director of the CIA, Walter McDonald; an ex‑advisor to Henry Kissinger and Zbigniew Brzezinski ‑ Guy Parker ‑ was an investment advisor for the bank. Finally, a “commodities trader” on the staff ‑ Andrew Lowe – was one of Australia’s biggest heroin importers.
In January of 1980, Frank Nugan was found dead in his Mercedes clutching a rifle. Nugan’s briefcase was in the car, and contained a list of prominent political, sports, business, and entertainment personalities who did business with the bank. Next to each name was a handwritten dollar amount, mostly five‑ and six figure sums. Also found, on Nugan’s lap, was a Bible (he was a staunch fundamentalist), with a piece of paper (interleaved at page 252) that bore the names of Robert Wilson (the ranking Republican on the House Armed Services Committee) and ex‑CIA director William Colby. Finally, in Nugan’s back pocket was Colby’s business card, noting Colby’s scheduled visits to Australia, Hong Kong, and Singapore. Following the death of Frank Nugan (officially listed as suicide) and the disappearance of Michael Hand four months later, investigations of the bank by the Australian Government confirmed the bank’s intelligence and organized crime connections.
The Mujahadeen: In the 1980s the CIA began operations in support of the Mujahadeen, a fundamentalist Muslim group of rebels fighting Soviet troops in Afghanistan. Mujahadeen leaders supervised the growing of opium poppies and with the assistance of the CIA, which had reopened trade routes to supply the Mujahadeen with weapons, smuggled the drug onto the world market. The net result of CIA assistance to the Afghani rebels was that the areas of Afghanistan and Pakistan they controlled became the world’s leading source of heroin exports to the United States and Europe by 1986.
Since the latest U.S. invasion of Afghanistan heroin production is once again booming. The warlords who form the “democratic” government of Afghanistan are heavily engaged in heroin production and trafficking, as well as in the trafficking of children for sexual exploitation. The impact of the U.S. invasion and its “warlord democracy” has been a 7400% increase in heroin production since 2001.
Iran-Contra: In the 1980s while the administration of Ronald Reagan was waging a draconian “war on drugs” domestically, its foreign policy administrators were waging a drug-financed war in Central America. The war by the “Contras” against the government of Nicaragua was financed in large part by (1) direct funding from major cocaine traffickers, (2) a “guns-for-drugs” scheme involving the cocaine cartels, and (3) direct drug trafficking by some of the Contra leadership. In addition, it now appears that U.S. government funds appropriated for humanitarian aid to the Contras were going directly to known drug traffickers. The testimony of Ramon Milian-Rodriguez before a Senate Foreign Relations Committee subcommittee exposed the connections between the United States and the Contras.
Milian-Rodriguez began his career as part of the CIA’s efforts to depose Fidel Castro in Cuba. He was trained to set up elaborate financial procedures to hide funding sources for those efforts. Later he became the chief money launderer for the Medellín cartel. He disbursed $10 million from Colombian drug lords through financial couriers in Honduras, Guatemala, Costa Rica, and Miami to the Contras between 1982 and 1985. Milian-Rodriguez testified that the Medellín Cartel agreed to help the Contras in return for favors from Washington: “ … the cartel figured it was buying a little friendship. We’re going to buy some good will and take a little heat off” (“Pilot,” 1987). Milian-Rodriguez testified that long-time CIA veteran agent Felix Rodriguez arranged the drug cartel’s contribution to the Contras. Rodriguez arranged the actual sites and times for the money drops. As Milian-Rodriguez said, “Felix would call me with instructions on where to send the money.”
While the Contras were receiving cash contributions from the Medellin cartel, they were also heavily involved in other drug-financed activities. The Reagan Administration’s covert war had been severely impeded by the Boland Amendment, passed by Congress in 1986, which cut off all military aid to the Contras. As a result the Reagan administration’s National Security Council set up a secret and illegal resupply operation, utilizing private sources. Lt. Col. Oliver North ran this covert resupply operation from the National Security Council. Some of the financing for the resupply efforts came from drug sales, which were then converted into weapons shipments. Key to this “drugs-for-guns” operation was a ranch in northern Costa Rica owned by an American named John Hull. A report from the Senate Foreign Relations subcommittee investigating this matter indicated that Hull received $10,000 a month from the National Security Council in 1984 and 1985. Planes carrying cocaine landed at the Hull ranch; the cocaine was then shipped by air or sea to the United States. A pilot named Gary Betzner provided details of two weapons-drugs runs to the Hull ranch, “I took two loads—small aircraft loads—of weapons to John Hull’s ranch in Costa Rica, and returned to Florida with approximately a thousand kilos of cocaine.” Betzner’s best estimate was that his drug flights alone netted the Contras about $40 million in profits. Another pilot, Michael Tolliver, flew 28 thousand pounds of weapons to Aguacate air base in Honduras. The weapons were off-loaded by Contra troops, who then on-loaded 25,360 pounds of marijuana, which Tolliver flew directly into Homestead Air Force Base in Florida. Tolliver was paid $75,000 for the flight.
Afghanistan One More Time: Since the U.S. led invasion of Afghanistan the production of heroin has escalated at a very unheard of rate. A decade after the American occupation of Afghanistan the country has a virtual monopoly on the production of heroin. A country occupied by allied troops and with a hand-picked warlord government produces 95% of the global supply of heroin. In fact, from 2006-2010 the pro-U.S. Afghani government oversaw the production of a 12,000 ton surplus of opium. The Afghani-warlord democracy managed to seize three tons of heroin 2008, less than 1% of the total produced in-country. Somehow, despite all the U.S. troops and all the anti-drug funding, 375 tons of heroin managed to move across the borders in 2008, most of it to U.S. ally Pakistan (United Nations Office of Drugs and Crime, 2010).
From the early days of World War II to the mountains of Afghanistan the U.S. government has been a close partner with organized crime and drug traffickers. In the name of “national security” the very state which is responsible for controlling organized crime has partnered with organized crime. The very state waging a vicious “war on drugs” at home protects drug traffickers abroad. It is the very definition of hypocrisy.
Gary W. Potter, PhD
Professor, School of Justice Studies
Eastern Kentucky University
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