TWO YEARS LATER, CIA-DRUG CONTROVERSY CONTINUES

House panel expected to hold hearings next year

Two years have passed since the Mercury News ignited a firestorm of
national controversy with a story of how supporters of a CIA-backed
guerrilla army in Nicaragua helped spark the crack epidemic in America in
the 1980s.

Since then, two federal investigations have produced three reports running
into hundreds of pages each. Now Congress is poised for a final look at the
evidence.

The verdict of the investigations: The story was wrong in its major
allegations, which were described as ``exaggerations of the actual facts''
by Justice Department Inspector General Michael R. Bromwich.

But the CIA doesn't come off well, either.

The latest report, by the CIA inspector general, is a startlingly detailed
confession by the agency that it knew some of its helpers were alleged drug
dealers, that it failed to investigate many allegations and even continued
using some suspected drug traffickers as assets.

The House Intelligence Committee probably will hold hearings early next
year, according to congressional sources. The committee should be finished
interviewing witnesses within a month or six weeks, committee sources said.

``We will most definitely be issuing a report at the end of the day,'' a
committee source said, ``so you will get to see whether we agree with what
Department of Justice and the CIA inspectors general came up with and if
there's something new that we haven't heard.''

The series, titled ``Dark Alliance,'' traced the careers of Norwin Meneses
and Danilo Blandon, two Nicaraguans living in California in the first half
of the 1980s, and Ricky Ross, a young drug dealer in South Central Los
Angeles. It claimed that the Nicaraguans had ``funneled millions in drug
profits'' -- from sales of ``cut-rate cocaine'' to Ross -- to a CIA-backed
guerrilla army known as the Contras.

The series also implied that the Nicaraguans were somehow protected from
prosecution by U.S. government agencies.

The articles took on a life of their own, propelled by widespread
distribution on the Internet. The New York Times, the Los Angeles Times and
the Washington Post conducted their own investigations and said they could
not confirm the allegations. More recently, a book and an Esquire magazine
article defended the series and criticized the Mercury News for later
saying the series didn't meet the paper's standards in several respects.
The series' author, Gary Webb, left the paper and published his own book
expanding on the series and defending its findings.

Series faulted

In two reports released this year, the inspectors general of the CIA and
the Department of Justice -- who are appointed by the president and who
report to Congress -- said their yearlong investigations did not
substantiate any of the series' major claims, including the notion that the
drug dealers ignited the crack epidemic in Los Angeles or nationwide. This
claim gave the story its explosive force, observed Bromwich, inspector
general of the Department of Justice.

But after poring over thousands of CIA cables and documents and
interviewing hundreds of people, the CIA inspector general's office found
that the agency was ``inconsistent'' in its reaction to allegations of drug
trafficking, unrelated to the Meneses-Blandon operation, in the Contra
apparatus. That is putting it mildly.

>From 1982 to 1995, the agency had no published policy covering CIA
employees' contacts with people or companies known or suspected to have
trafficked in drugs, the CIA inspector general reported. If the suspects
were merely hired help -- agents, assets or independent contractors --
narcotics allegations were exempt from law enforcement reporting requirements.

The only exception was for employees involved in a counternarcotics
program, and the Contra war wasn't such a program.

Nor did the CIA have a policy of identifying or following up on allegations
about suspected drug traffickers, the CIA inspector general discovered.

Despite the absence of such rules, the inspector general said that many CIA
personnel ``understood the potential seriousness of information that linked
participants in the Contra program to drug trafficking. Indeed, many say
they believed that the agency's policy was not to have relationships with
such persons.''

Drug allegations

Such sentiments apparently didn't apply in a number of cases found in CIA
records by CIA inspector general investigators.

The agency received allegations of drug trafficking about one organization
and several dozen people involved in the Contra war, some of whom it
continued to deal with. It didn't inform law enforcement of allegations
about 11 Contra-related individuals and assets, the inspector general
found, nor Congress of allegations about eight of 10 Contra-related people.

Only three intelligence reports about narcotics were completed by the
agency during the 1980s that related to potential Contra involvement in
drug trafficking.

Among the problems found by investigators in CIA records:

a.. The CIA continued dealing with several suspected drug traffickers
around Eden Pastora, leader of a ``Southern Front'' Contra army in Costa
Rica, after the agency severed its ties with Pastora in 1984 because he'd
been linked to a major drug trafficker. Pastora's lieutenants had entered
into a mutual assistance agreement with Jorge Morales, a drug smuggler who
offered Pastora's army an airplane and two helicopters in exchange for help
smuggling drugs.

b.. The agency worried about Cuban drug trafficker Frank Castro, who
donated some airplanes to a group of Cubans affiliated with Pastora. While
he was being prosecuted in 1983 for drug trafficking in Texas, he claimed
to be associated with the CIA. An unsigned, handwritten note found by
investigators for the inspector general said that the Department of Justice
``. . . is willing to drop if he was in fact associated (with) Agency.'' A
CIA cable to headquarters in 1984 warned that he was ``exploiting
widespread paramilitary activities'' in Costa Rica as a cover for drug
trafficking.

c.. The CIA apparently didn't investigate when it received allegations
about the Nicaraguan Revolutionary Democratic Alliance. In 1981, an
informant told the CIA that the group had decided to smuggle cocaine to
raise money and that a trial smuggling run had already been staged by two
members, using cocaine that belonged to an unidentified Honduran. The CIA
reported the allegations to federal law enforcement and intelligence
agencies, but decided the informant was untrustworthy and possibly an enemy
agent and apparently never investigated further.

d.. The agency learned in 1988 that a key Contra officer was an escapee
from a 1979 drug charge in Colombia. The man was Juan Ramon Rivas, who had
organized a task force of 5,000 combatants by 1986. The agency continued
using Rivas after its lawyers determined that ``CIA regulations in this
area focus solely on individuals currently in narcotics trafficking.'' In
1989, Rivas quietly resigned from the Contra effort ``for medical
reasons.'' The CIA informed the Drug Enforcement Administration of the
situation but not the Colombian government.

e.. The CIA also continued working with some of the 14 pilots and three
companies used to support Contra activities who were targets of drug
trafficking allegations. For example, in 1987, a debate erupted within the
CIA over whether to use a shipping company owned by Alan Hyde, a Honduran
who was dogged by rumors of drug smuggling.

Hyde had been turned down the year before when he offered to ``help'' the
CIA. After a flurry of memos and cables and bureaucratic hand-wringing, CIA
lawyers said there was no ``legal impediment'' to using Hyde's company,
especially if steps were taken to make sure no drug smuggling occurred on
the job.

The case of `Ivan Gomez'

Then there was a CIA's handling of ``Ivan Gomez,'' a former military man
from Venezuela who reportedly assisted Pastora's Contra group.

Gomez -- a fake name the CIA gave him -- admitted five years after he was
hired as a contractor by the CIA that in 1982 he had picked up a bag of
cash at a bar in New York for a brother who was later convicted of drug
dealing. Gomez was dropped from the agency's payroll in 1988, but he was
not reported to prosecutors because he was technically not an employee. The
information was given to the FBI in 1989, after the FBI's counterterrorism
section asked the CIA about Gomez.

``It's a striking commentary on me and everyone that this guy's involvement
in narcotics didn't weigh more heavily on me or the system,'' said a former
CIA manager.

Gomez also figured in a story told by a former San Francisco drug dealer,
Carlos Cabezas, who was cited in Dark Alliance as being a conduit of money
from the Meneses drug ring to the Contras.

Cabezas told investigators that a man named Ivan Gomez was present in 1982
when Cabezas delivered drug proceeds to a contact in a Costa Rican hotel,
thus raising the question of CIA involvement in the drug smuggling operations.

The inspector general's investigators concluded that Cabezas' story was
full of inconsistencies and contradictions, and that he was prone to
hyperbole. They said Gomez was in the United States at the time of the
alleged meeting, that he had not yet received his alias and that there was
no evidence that Cabezas trafficked in cocaine for the benefit of the Contras.

The CIA inspector general said his investigation turned up no links between
Meneses, Blandon and the CIA. Nor did the Department of Justice find any
evidence that Justice officials interfered with the investigation or
prosecution of the two Nicaraguans or helped protect them.

The Blandon-Ross ring is not mentioned in the CIA cables, memos and other
documents described in the second CIA report.

One CIA cable, dated June 1986, says that in September 1984 ``Costa Rican
drug trafficker Norvin (sic) Meneses sought the cooperation'' of Fernando
``El Negro'' Chamorro, to move drugs to the U.S. Chamorro was the leader of
a small group of Contras in Costa Rica. There is no indication the CIA
followed up on this report.

In July 1986, Meneses -- then in Costa Rica -- became a DEA informant,
giving information about his former partner Blandon and other drug
traffickers. He later traveled to Los Angeles to introduce a DEA informant
to Blandon.

Continued interest

There are enough new leads, investigative loose ends and unanswered
questions in the reports to guarantee continued interest in the series.

``We . . . recognize that it is impossible to draw conclusions . . . with
absolute certainty because of the age of the cases involved, faded
memories, the dispersion of witnesses and evidence, and the special
interests of many of the people we interviewed,'' Bromwich wrote.

``We are also realistic enough to recognize that the suspicion of federal
law enforcement will not be extinguished by our report on these
allegations, especially because there remain some unanswered questions,
which are multiplied when the investigation takes place so long after the
events being investigated.''

Checked-by: Pat Dolan