CASH FLOW

CIA Gave Millions To Peru's Anti-Drug Chief

The Central Intelligence Agency gave ex-Peruvian spymaster Vladimiro
Montesinos at least $10 million in cash over the last decade and high-tech
surveillance equipment that he used for personal gain.

Montesinos, who now faces trial on murder, arms and drug trafficking
charges, as well as murder, among others, had founded and personally
controlled a counter-drug unit within Peru's National Intelligence Service,
known by its Spanish acronym SIN.

It was to that Narcotics Intelligence Division, known as DIN, that the CIA
directed at least $10 million in cash payments from 1990 until September
2000, according to U.S. officials. Most of the money was to have financed
intelligence activities in the drug war, though officials acknowledged a
small part was for antiterrorist activities.

The CIA knew the money was going directly to Montesinos and had receipts,
the sources said. "It was an agency-to-agency relationship," said one U.S.
official, speaking on condition of anonymity in Lima, the capital, "with
Vladimiro Montesinos as the intermediary."

The new information on Montesinos is part of an extensive
soon-to-be-released report by the International Consortium of Investigative
Journalists (ICIJ) on U.S. aid to Latin America. The material on Montesinos
is based on multiple interviews with U.S. and Peruvian officials. A CIA
spokesman in Washington denied any agency involvement with Montesinos.

However, an intelligence official who asked not to be further identified
confirmed that Montesinos had pocketed some, but not most, of the funds. He
said that the CIA had been fully aware that Montesino was involved in
corrupt deals and that the CIA had briefed the National Security Council,
State Department and Pentagon about the alleged corruption. He said the
agencies directed the CIA to continue to work with Montesinos because he
was Peru's designated chief of counternarcotics.

Montesinos disappeared in October as the regime of Peruvian President
Alberto Fujimori collapsed under wide-ranging corruption allegations. He
was seized in Venezuela on June 23 and returned to Peru on June 25 to face
corruption charges.

Over time, the United States accumulated evidence of corruption, human
rights abuses and other anti-democratic actions by Montesinos, but it
shrugged off the reports because Montesinos was a CIA asset.

But the final blow appeared to be Montesinos double-dealing in Colombia.
Montesinos used his CIA-backed position of influence to get rich and to
betray his benefactors. He arranged an arms deal that sent at least 10,000
AK-47 assault rifles from Jordan to Colombia's leftist FARC guerrillas,
collectively public enemy number one in the U.S. war on drugs in Latin
America and the main target of Washington's $1.3 billion counternarcotics
aid package to Colombia.

Montesinos had long been fingered as corrupted by drug money, although many
of the earlier claims that surfaced came from arrested drug dealers. But by
1997, the State Department began to document Montesinos' questionable
activities in its annual human rights reports. The Senate Appropriations
Committee noted in 1999 that it had "repeatedly expressed concern about
U.S. support for the Peruvian National Intelligence Service" and requested
that it "be consulted prior to any decision to provide assistance to the SIN."

The CIA suspected that Montesinos was involved in some illegal activities
and was not surprised when informed of the diversion of funds, U.S. sources
said. It continued doing business with him "because he solved problems,
including problems he created himself," one U.S. source told ICIJ.

The U.S. Embassy has provided Peru's anti-corruption prosecutor with
detailed information about the CIA's payments to Montesinos in response to
the Peruvian government's wide-ranging investigations into Montesinos'
malfeasance. The prosecutor, Ana Cecilia Magallanes, has told U.S.
officials that she has documents showing the diversion of SIN money,
including the CIA payments, toward illegal activities.

Peruvian prosecutors also allege that Montesinos collaborated with drug
traffickers, who paid him and his associates protection money. After 10
years as the power behind Fujimori, Montesinos had at least $264 million
deposited in foreign bank accounts in Switzerland, the United States, the
Cayman Islands and other nations, Peru's equivalent of attorney general,
Nelly Calderon Navarro, announced in June.

Three Peruvian military intelligence sources told ICIJ that surveillance
equipment provided by the CIA for the drug war was used by the SIN to
intercept the conversations of opposition political figures, journalists,
businessmen and military officers suspected of disloyalty to the Fujimori
regime. "Intelligence services" were sold to wealthy individuals,
corporations or influential officers. A buyer could pay $1,000 to $2,500
per week to receive intercepts from the tapping of a single phone.
Fujimori, who was re-elected president in June 2000 and amended the
Peruvian constitution in order to retain the office for nearly three
presidential terms, fled to Japan, where he resigned from office on Nov.
20, 2000.

The CIA began supporting Montesinos in the mid-1970s when he, as a Peruvian
military officer, came to Washington on an unauthorized visit and handed
over documents concerning Soviet arms deals with Peru.