GHOSTS OF FUJIMORI STALK PERU

Officially Abolished, The Spy Agency Known As The Sin Remains A
Force--And A Reminder Of Its Fugitive Master, Montesinos.

LIMA, Peru--The raiders struck before dawn, 10 well-armed agents of
the Peruvian intelligence service descending on a house here.

The target was not a terrorists' hide-out. It was a secret
"intelligence house" operated by the U.S. Drug Enforcement
Administration with approval of the Peruvian government.

The military judge leading the raid threatened to arrest the
U.S.-trained Peruvian police officers inside who were using high-tech
equipment to intercept communications by drug traffickers.

Alarmed DEA agents rushed to the scene and confronted the raiders,
who had tried to remove computer data. The Peruvian agents said they
were acting on orders of Vladimiro Montesinos, the chief of the
National Intelligence Service, known by its initials in Spanish: SIN.

U.S. officials called Montesinos. He apologized, explaining that his
agents thought the house was a base for Ecuadorean spies. But the
U.S. officials were dubious. The message of the raid was clear to
them: The SIN ruled Peru.

"They wanted to show they knew what we were doing and that there was
no such thing as a unilateral operation in Peru without the SIN being
aware of it," said one of the former U.S. Embassy officials who
described the 1996 raid to The Times. "It was a show of power. And
they wanted to intimidate their own people."

Power and intimidation: That is the story of the SIN. Although
Montesinos has fallen and Peruvian President Alberto Fujimori
resigned Monday, the two men who ruled Peru for a decade left behind
a suffocating culture of secrecy and paranoia. The spy agency,
spawned by the interwoven threats of cocaine trafficking and the
Sendero Luminoso (Shining Path) guerrilla movement, became a behemoth
that turned on the very citizens it was supposed to protect.

"I was very scared of Sendero," said reformist Congressman Luis
Iberico. "When the enemy became the SIN, I was even more scared. They
had money, resources, people--they could do whatever they wanted."

A vital step in Peru's transition to genuine democracy is fulfilling
Fujimori's vow to "deactivate" the SIN. Valentin Paniagua, who is
expected to become Peru's new president, inherits the challenge of
dismantling an army of spies in high and low places, a political
machine that has dominated the government.

Part of the problem is Montesinos, who remains a fugitive. Even if he
is caught or exiled, his mystique will make many Peruvians suspect
that his invisible empire lingers.

Officially, the spy agency has been shut down, and opposition leaders
hope to use its budget to pay for presidential elections next April.
But critics allege that some SIN operations continue, shifted to the
headquarters of the army intelligence service.

Further complicating reforms, most leaders here agree that Peru still
needs a crack spy agency because of the nation's history of terrorism
and drug trafficking.

The Peruvian spies "were good," said former U.S. Ambassador Dennis
Jett, who served from 1996 to 1999. "There were legitimate reasons,
between drugs and terrorists. You have to give Fujimori credit. He
did not wake up one morning to discover that 40% of his country was
in the hands of somebody else, like in Colombia. But because there
were no institutional constraints, no real courts or Congress, a
limited press, it was inevitable that the power would get abused."

Terrorist Threat Shaped Spy Agency

The SIN was shaped largely by the threat of Sendero Luminoso, which
waged war on the state in the 1980s and early '90s. So too were
journalists and politicians such as Iberico who once risked their
lives covering and supporting the fight against terrorism, only to
realize that the government had decided they were the new enemy.

Iberico, a 41-year-old former television journalist elected to
Congress in April, does not seem like a man who has spent 15 years
looking over his shoulder. But he carries a gun and a two-way radio.
As he talked recently in a restaurant here, two bodyguards hovered
nearby--part of the security team that protects him and his family.

And with good reason. Iberico brought down Montesinos. He obtained a
videotape recorded by SIN cameras of Montesinos paying a congressman
$15,000, an apparent bribe. The broadcast of the video in September
led Fujimori to oust his spy chief and announce early elections.

During their battles against the regime, Iberico and fellow
opposition legislators became fluent in the spy jargon that is now
commonplace here. Most Peruvians can tell you about deceptive media
stunts known as "psychosocial operations," or about the eavesdropping
apparatus that "sucks up" telephone conversations.

"This country has lived 20 years of paranoia," Iberico said. "It is a
culture of fear. Curing these wounds will take time."

In the late 1980s, Iberico covered the war against Sendero Luminoso
in jungle villages and dusty shantytowns for the Frecuencia Latina
television station. The guerrillas, inspired by the messianic Maoism
of their guru, Abimael Guzman, seemed on the verge of destroying the
nation.

Iberico's close ties to the security forces were partly professional,
partly patriotic. Especially after the 1990 election of Fujimori, who
was initially admired by the TV station's owner, Baruch Ivcher, there
was a sense of a common cause against terrorists. The coverage was
unabashedly pro-government.

"I never felt a conflict about doing propaganda against terrorism,"
Iberico said. Iberico ranked high on the terrorists' hit list. He
feared Sendero Luminoso's low-tech but far-flung spy network, known
as "a thousand eyes, a thousand ears." It used street vendors and
other sympathizers to stalk victims and set up assassinations and
bombings. The guerrillas infiltrated spies into the television
station as menial employees, Iberico said.

In June 1992, a guerrilla car bomb barreled into the station's
entrance and blew up, killing three people and damaging the building.

By this time, Fujimori had enacted a "self-coup" that temporarily
shut down Congress and gave Montesinos carte blanche against
terrorism. The beefed-up SIN became an umbrella agency over the
disparate intelligence services of the armed forces.

The U.S. Embassy valued Montesinos as the point man who could
overcome inter-service rivalries. Peruvian critics allege that he was
a paid agent of the CIA, the official U.S. liaison agency with the
SIN. The CIA has declined comment. But former embassy officials say
they were told that Montesinos was never on the CIA's payroll.

In any case, the spy chief clearly benefited from his ties to the
CIA. The SIN's tentacles spread in every direction.

"Montesinos had the same philosophy as [guerrilla leader] Abimael
Guzman: 'Except power, everything is an illusion,' " said Francisco
Loayza, a former SIN agent and estranged friend of the spy chief.
"They are very comparable personalities."

Montesinos filled the leadership of the military with intelligence
officers and army school classmates. He surrounded himself with a
praetorian guard of about 700 commandos, the Jupiter Group.

As Fujimori admitted recently, Montesinos--a former attorney for drug
lords--placed allies in the justice system to manipulate the courts.
Even conspiracies acquired a legalistic air: During the videotaped
payoff and other scandals, Montesinos allegedly required partners to
sign and fingerprint contracts attesting to their misdeeds.

Spies also infiltrated the tax agency, provincial bureaucracies and
neighborhood police stations, and patrolled rivers in the Amazon
basin.

Wiretapping became an industry. Agents diverted telephone company
lines to SIN headquarters, according to the former U.S. Embassy
official. The agency later acquired computerized frequency-hopping
gadgets made in Israel, according to the official, who like others
interviewed for this story requested anonymity because of the
sensitive topic.

Montesinos took pride in the SIN's telephone interception talents,
judging from another incident in his wary relationship with U.S.
anti-drug agents. In 1996, Montesinos sent a cassette to the DEA
through an intermediary. It was a recording of a U.S. drug agent
talking to an informant on an embassy phone, according to the former
embassy official.

"He made it known he was monitoring the phones," the official said.
SIN agents "were tapping journalists, politicians, businesspeople,
anyone they could use, anyone they thought could harm them."

An Army of Paid Informants

The official described watching a military officer who was the SIN's
operations manager work his well-compensated roster of informants.
"He was throwing out money like gangbusters. He had everything from
peasants to high-level attorneys."

The official number of agents of the SIN was about 2,000. But its
full army of agents, informants and occasional allies is believed to
number in the tens of thousands.

With power came abuse. Many Peruvians, however, were so exhausted by
the guerrillas' cruelty that they initially tolerated the SIN's
excesses.

Intelligence services "develop their own objectives which are not
necessarily those of the government," said sociologist Raul Gonzalez,
an expert on the security forces. "Agencies like the CIA, the Mossad,
the KGB sometimes believe their mission puts them above the
government."

And in a society with an official minimum wage of $100 a month and
where many make less, the growing intelligence sector offered
government salaries and a respected mission.

The SIN became an avenue of advancement for women, who were
especially useful for clandestine assignments in which men would
attract suspicion. However, the female agents suffered harassment and
sexual exploitation typical of a militaristic culture. A group of
women became disgusted during the mid-1990s as the war on terrorism
gave way to a terroristic war on dissidents.

"They had put up with the mistreatment during the fight against
Sendero, they could think they were doing something patriotic,"
Iberico said. "But now they were spying on journalists. They were
resentful, disillusioned."

The women became double agents. Using code names such as Little
Kisses and Living Encyclopedia, and elaborate precautions, they
provided the media with explosive scoops. Among their revelations:
Montesinos was accused of masterminding the Colina death squad, an
army intelligence unit that allegedly massacred 15 suspected
terrorist sympathizers in the Barrios Altos slum here in 1991 and
nine students and a professor at La Cantuta University a year later.

Iberico led Frecuencia Latina's investigative team at a time when the
station grew critical of the regime. Their sources--the disgruntled
spies and police officers, along with repentant guerrillas--taught
them the arts of gathering information, holding clandestine meetings
and detecting surveillance.

In October 1996, after Frecuencia Latina broadcast stories linking
Montesinos and the military to a drug lord, the SIN developed Plan
Octavio, which designated a list of journalists as enemies with code
names: Iberico was Doll, others were Shorty, Skinny and Fox.

According to copies of the plan later leaked to the media, the spy
agency targeted Ivcher, the Israeli-born Peruvian who owned
Frecuencia Latina, as the "principal objective" for retaliation. The
document described him as "highly dangerous to national security." It
accused him of using "his economic power, his influences, his double
nationality, and [of] demonstrating an absolute lack of love for Peru
with his boundless eagerness to smear the armed forces."

Television Station Crew Takes On the SIN

Casualties turned up in April 1997. A Frecuencia Latina crew sneaked
into a military hospital and broadcast a secret interview with Leonor
La Rosa, a military intelligence agent who had been tortured in the
basement of army intelligence headquarters. Two superior officers
later were convicted of brutalizing La Rosa in retribution for her
contacts with the media.

La Rosa was permanently crippled. Co-worker Mariela Barreto, the
ex-girlfriend of the alleged chief of the Colina death squad, was
slain, mutilated and dumped by a roadside.

But Iberico's reporters did not back down. The team broadcast reports
about Montesinos' mysterious fortune and SIN wiretaps of opposition
figures, including former U.N. Secretary-General Javier Perez de
Cuellar, who ran for president against Fujimori in 1995.

The station came under siege by the spy agency. Agents posed as
secretaries and maintenance workers. Military helicopters hovered
over a mattress factory owned by Ivcher. A station journalist brought
in one of his top intelligence sources, Little Kisses, to tell the
station owner firsthand of the danger.

"I will never forget when I met that brave young woman in the
basement," Ivcher recalled in a recent interview in Miami. "She said,
'Take care of yourself, sir. They want to kill you.' And she asked me
for nothing in return."

Within months, Ivcher was forced into exile. In a case that drew
international condemnation, the regime stripped him of his Peruvian
citizenship in 1997 and engineered a station takeover by minority
shareholders. (Two weeks ago, in a conciliatory gesture by the
government, Ivcher's citizenship was restored.)

Iberico, meanwhile, went into politics on an anti-corruption
platform. This summer, another intelligence service insider provided
him with the political equivalent of a nuclear weapon: the video of
Montesinos allegedly bribing the congressman.

Today, Montesinos is the all-purpose villain of the moment. His world
has come crashing down on him. A Peruvian special prosecutor is
investigating the origin of at least $58 million in overseas bank
accounts linked to Montesinos and allegations that the former spy
chief transformed the SIN into a giant mafia linked to drug lords,
arms traffickers and judicial corruption.

But others share the blame. The U.S. government ignored longtime
allegations against Montesinos, critics say.

"The CIA has great responsibility," Iberico said. "The democratic
system was battered with the permission of the CIA."

Meanwhile, former U.S. Ambassador Jett said Montesinos was
fundamentally a creation of Fujimori.

"We could have come out and said Montesinos is a bad guy and Fujimori
would have made the same calculation: Is he useful to me or not?"
Jett said. "Was there controversy about the relationship with
Montesinos? Yes. But everyone agreed that success on counter-drug
operations was important. We continued the relationship but kept our
side of it as clean as possible."

Beyond personalities, the challenge now is to finish dismantling the
spy machine. The painful transition to full democracy here will
resemble that of East Germany and other nations once dominated by
secret police forces.

"I'm afraid after 10 years of a government by spies in which
blackmail and treachery were part of politics, of the economic
transition, of the way the news was reported, that the country was
totally poisoned by that," said journalist Gustavo Gorriti.

"When the files of the SIN become known, the amount of mystery they
will reveal, I'm not sure how the country will metabolize that," he
added. "It has become a place in which things are conducted in a
crooked and gangster-like way."