CIA INTERCESSION IN S.F. RECOUNTED

On a hot August day in 1984, a lawyer from CIA headquarters walked into the
office of a federal prosecutor in San Francisco to ask for a favor.

The CIA man was reluctant to give his name or his government affiliation,
the assistant U.S. attorney recalled, and embarked on an "opaque
conversation" about what he called an "uncomfortable situation":

Drug agents had seized $36,020 from a defendant in the West Coast's biggest
cocaine bust. The defendant claimed the cash was not drug profits but money
belonging to U.S.-backed contra rebels fighting Nicaragua's Sandinista
government.

The defendant's lawyers were set to go to Costa Rica to question two contra
leaders about the money. The CIA feared this might cause unwanted publicity
and "potential . . . disaster" for the agency's contra operations, the
laconic CIA lawyer, Lee Strickland, said in a subsequent cable.

The Reagan administration's contra program already was under fire in
Congress, which had threatened to cut CIA funding for it.

"While the allegations might be entirely false, there are sufficient factual
details which could cause certain damage to our image and program in Central
America," Strickland's cable read.

At the prosecutor's office in the Federal Building at 450 Golden Gate Ave.,
Strickland stressed that the agency would be "immensely grateful" if the
money were returned to the drug dealer, eliminating any reason for the
defense lawyer's potentially troublesome questions in Costa Rica.

Although the U.S. attorney's office aggressively confiscates suspected drug
funds, it decided within a week to return the money. "The United States
attorney was most deferential to our interests," Strickland said in another
cable.

The CIA's discreet visit was described in a report last month from the
Department of Justice's office of inspector general, which examined
allegations that department officials protected drug dealers because of ties
to the contras or pressure from the CIA.

The 407-page report by Inspector General Michael R. Bromwich sheds new light
on the controversial refund, saying it resulted partly from the CIA's
"desire to protect the public image of the contras or the CIA" and thus
raised a question of "propriety."

The study confirms that the Justice Department and the CIA withheld
information about the case from a late 1980s U.S. Senate inquiry, a former
Senate investigator said.

The CIA cables cited in the report also conflict with statements by
then-U.S. Attorney Joseph Russoniello, who has maintained that the money was
returned solely to avoid a costly legal fight over it.

The report affords a rare -- if not entirely clear -- view of secret CIA
operations. And it poses a troubling question that may arise when
intelligence agencies intercede in prosecutions: Are they protecting true
national-security interests, or avoiding public accountability?

Although a few significant California drug dealers appeared to provide
modest sums to the contras, the report said, none got special treatment
because of political activities. Allegations that their trafficking was
linked to the CIA were "not supported by the facts," it said.

And neither the CIA nor any other national security arm reached out to
prosecutors on behalf of the dealers -- except in the San Francisco case, an
instance the study called troubling.

Noting that the reason for the refund remains murky, the report expressed
concern that the CIA "considered the potential press coverage of a
contra-drug link to be sufficient reason to attempt to influence the
decision to return the money."

CIA spokeswoman Anya Guilsher declined to discuss the propriety of the
agency's action. The CIA intervened not to help the defendant, she said, but
because the CIA mistakenly believed one of the contra leaders to be
questioned in Costa Rica had worked with the agency.

The CIA stepped in after federal agents seized 430 pounds of cocaine as
divers unloaded it from a Colombian freighter on Jan. 17, 1983, at Pier 96
in San Francisco, in what became known as the "Frogman case."

Among some 50 people ultimately convicted was a Nicaraguan named Julio
Zavala. When drug agents raided his South San Francisco home, they
confiscated cocaine, two weapons and $36,020.

Judd Iversen, Zavala's lawyer, filed a motion seeking court permission to
take depositions in Costa Rica that, he said, would prove the money belonged
to a contra group and that U.S. agents sanctioned, or were involved in,
selling cocaine to fund the contras.

The late U.S. District Judge Robert F. Peckham ruled there was no basis for
allowing depositions about a CIA role in drug smuggling. But he said Iversen
could depose two contra leaders in Costa Rica about the source of the money.

But by Aug. 14, 1984, prosecutors had opted to return the money to Zavala
and the depositions were canceled.

The government never conceded it was contra money. And Zavala, an alleged
leader of the drug ring, was convicted in 1985 on six felony charges and
sentenced to 10 years in prison.

A 1986 Examiner report on the refund sparked inquiries by Congress and the
State Department.

As noted in the inspector general's report, then-U.S. Attorney Russoniello
sent a letter to The Examiner's editor expressing outrage at the suggestion
that his office returned the money for political reasons or tried to cover
up a link between contras and drug traffickers. Zavala was prosecuted fully,
he said.

The letter, which he distributed to the media and Congress, also said the
refund "had nothing to do with any claim that the funds came from the
contras or belonged to the contras. It had to do with the fact that it would
have cost the taxpayers . . . at least that much to fund the excursion to
Costa Rica."

But CIA cables and officials give a different account:

In late July 1984, the CIA's Costa Rica station sent a cable to CIA
headquarters in Langley, Va., reporting -- in what the agency later called a
case of mistaken identity -- that one of the contra leaders to be deposed
was a former CIA "asset," a person who had worked for the CIA.

"Station is concerned that this kind of uncoordinated activity" -- the
depositions -- "could have serious implications for anti-Sandinista
activities in Costa Rica and elsewhere," the cable said.

As a result, on Aug. 7, 1984, CIA lawyer Strickland visited the prosecutor
on the case, Assistant U.S. Attorney Mark Zanides, about the "uncomfortable
situation," the report said.

An Aug. 24, 1984, cable explained that the agency made this "discreet
approach" to "ascertain details of the subject prosecution and to avoid
inquiry into activities or other (CIA) interests."

The cable said "it was agreed by all that any litigation concerning the
currency seizure would be fruitless. In essence, the United States Attorney
could never disprove the defendant's allegation that (this) was (CIA) money
. . . Accordingly, at (the CIA's) request, the U.S. Attorney has agreed to
return the money to Zavala . . ."

It added:

"We can only guess as to what other testimony may have been forthcoming. . .
. (the CIA) will continue to monitor the prosecution closely so that any
further disclosures or allegations by defendant or his confidants can be
deflected. . . . the United States Attorney was most deferential to our
interests . . . "

A CIA official -- identified in the report only by the alias of Ms. Jones --
told the inspector that the burning issue in the Frogman case was the
potential claim that a CIA asset was diverting agency funds to the drug
trade and the risk of bad publicity.

The claim would be explosive, she said. "What would make better headlines?"

When the inspector inquired if it was unusual for the CIA to ask prosecutors
for a favor, Jones said all intelligence agencies routinely encounter
problems in protecting their assets. She said her office -- the CIA's policy
coordination staff -- focused on protecting CIA interests implicated in
court cases, which involved contacting prosecutors.

Assistant U.S. Attorney Zanides said he reported his contact with the CIA to
Russoniello, who later ordered him to cancel the depositions because of
their cost, the report said. Zanides said he wasn't concerned about
refunding the money because it didn't jeopardize the prosecution, it said.

The study concluded, "Zanides likely passed on this information, as it is
unlikely that a line assistant would not notify his superiors of contact by
an attorney from the CIA."

The CIA also contacted two of Zanides' superiors, a CIA cable said, but both
told the inspector they did not recall that. One of them added that the
agency's approach at the very least would have been reported to Russoniello.

But Russoniello told the inspector the CIA never contacted him, and that he
knew nothing about it contacting anyone in his office, according to the
report. He said he didn't recall the considerations behind the final
decision to return the money, only that he decided it was not cost effective
to go to Costa Rica, the report said.

Russoniello told The Examiner, "I didn't know that they (the CIA) had an
interest." Zanides declined to comment.

The CIA cables also conflict with the Justice Department's denial in the
late 1980s that any intelligence agency had interceded in cases involving
allegations of contras and drugs, said Jack Blum, who investigated the cases
as special counsel to the Senate Foreign Relations subcommittee on
terrorism, narcotics and international operations.

Justice Department spokesman Will Mancino declined to comment on the earlier
denials.

The CIA withheld documents on the Frogman case from the subcommittee, a
report by the CIA acknowledged in January.

The agency's efforts to have the cash returned "did not appear to be
intended to influence the outcome of Zavala's trial," that report said, but
to protect its contra operations.

The CIA cables, it added, exaggerated the agency's influence on the decision
to refund the money.

CIA spokeswoman Guilsher said the agency does not often intercede in
criminal cases.

Such cases may pit protection of national-security operations against
prosecution of criminal suspects, said G. Robert Blakey, a law professor at
the University of Notre Dame in Indiana and former chief counsel to the
House Select Committee on Assassinations.

In the Frogman case, Inspector General Bromwich concluded that drug dealer
Zavala or his friends "fabricated the claim that the seized money belonged
to the contras . . . to salvage some of his drug profits."

But Bromwich called on the public, Congress and the CIA's inspector general
to "assess the propriety of (the CIA's) intervening in this law-enforcement
matter based, at least partly, on a desire to protect the public image of
the Contras or the CIA." The inspector general's report was prompted by 1996
articles in the San Jose Mercury News suggesting that CIA complicity in
contra drug trafficking largely was responsible for the crack cocaine
epidemic. The report found the paper's main allegations were not substantiated.

1998 San Francisco Examiner

Checked-by: Melodi Cornett