CIA FINDS NOTHING TO CONFIRM '96 MN REPORT

The Central Intelligence Agency, releasing an investigative report after a
month's delay, said Thursday that its Inspector General found nothing to
implicate it in the cocaine sales of two Nicaraguan drug dealers in the
1980s and the start of the nation's crack epidemic, contradicting a key
implication of a series published in the Mercury News in 1996.

However, investigators did find evidence that the CIA became involved in
the prosecution of a 1983 drug case in San Francisco, encouraging the
return of $36,000 seized in the case to Contra supporters in Costa Rica.
The agency also tried to discourage the U.S. Attorney from obtaining
depositions from the two Contra supporters.

The yearlong investigation, described by the agency as the most intensive
ever undertaken by its Inspector General, found no corroboration for many
key assertions made in the Mercury News series.

The Mercury News has acknowledged shortcomings in the series, saying that
while there was evidence to support specific assertions of the reports,
there was conflicting evidence on many points.

The basic findings of the CIA investigation were reported by the Mercury
News in December. A second report will look at CIA knowledge of drug
trafficking by the Contras and how the CIA handled such cases with U.S. law
enforcement agencies and Congress.

CIA Inspector General Frederick P. Hitz said that ``up to this point in our
reviews, and we're fairly far along, no evidence has been found that the
CIA as an organization or any of its employees engaged in drug trafficking
in support of the Contras or to raise funds for a Contra-related program.''

The investigation began after an August 1996 Mercury News series called
``Dark Alliance'' described the 1980s drug dealings of two Nicaraguans,
Juan Norwin Meneses and Oscar Danilo Blandon. The series alleged that the
men, as civilian members of the CIA-backed, anti-communist guerrilla army
called the Contras, had for the ``better part of a decade'' sold tons of
cocaine to a young street dealer named Ricky Ross in South Central Los
Angeles. The drugs helped trigger the nation's crack epidemic, the series
alleged, while mysterious government entities appeared to have protected
Blandon and Meneses as they funneled ``millions'' of dollars in drug
profits to the ``CIA's army,'' the Contras.

A firestorm of reaction followed, as many groups pointed to the series as
evidence that the CIA was complicit in the start of a drug craze that
devastated inner-city neighborhoods.

CIA Director George J. Tenet said ``the allegations made have left an
indelible impression in many Americans' minds that the CIA was somehow
responsible for the scourge of drugs in our inner cities. Unfortunately,
no investigation, no matter how exhaustive, will completely erase that
false impression or undo the damage that has been done.''

Members of Congress who have been following the issue could not be reached
for comment on the report.

But Rep. Maxine Waters, D-Los Angeles, who has been highly vocal on the
issue, told the Los Angeles Times that she was not satisfied with the
results.

``There are undeniable connections between the drug dealers and the Contras
that raise questions still,'' the congresswoman from Los Angeles said.
``Where there's this much smoke, there must be some fire.''

The CIA's Inspector General found:

No information that any past or present CIA employee or anyone acting on
the agency's behalf had any direct or indirect dealing with Meneses,
Blandon or Ross. Nor did anything link the CIA with two other figures
mentioned in the series and subsequent stories, Ronald J. Lister, a member
of Blandon's drug ring, or David Scott Weekly, whom Lister claimed was his
CIA contact.

No information that the drug ring was motivated by a commitment to support
the Contra cause. Blandon and Meneses said they donated between $3,000 and
$40,000 to Contra sympathizers.

No information that the CIA interfered with the investigation, arrest,
prosecution or conviction of Ross, Blandon or Meneses.

``CIA shared what information it had -- specifically on Meneses' 1979 drug
trafficking in Nicaragua -- with U.S. law enforcement entities when it was
received and again when subsequently requested by the FBI,'' the
investigation found.

The investigation also turned up numerous cables regarding Meneses, most of
them identifying him as a drug smuggler, launderer of counterfeit money and
dealer in weapons and as a member of the ``Nicaraguan mafia.''

CIA involved in case

However, the report documents CIA involvement in the prosecution of a 1983
cocaine-trafficking case in San Francisco in which more than 50 people,
many of them Nicaraguans, were arrested.

The CIA became involved when it learned that prosecutors were planning to
travel to Costa Rica to obtain the depositions of the two Contra supporters
in connection with prosecution of the case.

The agency ``misidentified'' one of the two men to be deposed as being
another person who was a CIA asset and began making inquiries, the report
said.

The agency encouraged the U.S. Attorney's Office in San Francisco to return
to two Contra supporters in Costa Rica about $36,000 seized from one of the
suspects. The U.S. Attorney's Office ``was most deferential to our
interests,'' a CIA cable states.

``We can only guess at what other testimony may have been forthcoming,'' a
CIA cable says. ``As matter now stands, CIA equities are fully protected''
but the CIA lawyers ``will continue to monitor the prosecution closely so
that any further disclosures or allegations by defendant or his confidants
can be deflected.''

The lead prosecutor on the case recalled discussing it with a CIA attorney
who said the agency would be ``immensely grateful if these depositions did
not go forward.'' However, prosecutors in the case told investigators the
decision to return the money was based on other considerations, not the
CIA's encouragement.

The CIA's interest in the case did not affect the outcome of the trial, the
Inspector General said.

The Mercury News series linked Meneses to the ring, but the Inspector
General said Meneses denied being part of it and that nothing was found to
connect him to it. Nor was a link found between the CIA and two men who
figured prominently in the San Francisco case, Julio Zavala and Carlos
Augusto Cabezas, although ``a relative of one of them had a relationship
with CIA until mid-1982.''

No connection found

Nothing was found indicating that any of that case's defendants were
connected to the Contras or that the Contras benefited from their
drug-trafficking activities. Nor was any information found supporting
Cabezas' recent and past claims that he gave money from his drug
trafficking activities to the Contras.

In a May 11 column, Mercury News Executive Editor Jerry Ceppos acknowledged
shortcomings in the articles after an extensive internal re-examination.

``In such complex situations, good journalism requires us . . . to deal in
the `grays,' the ambiguities, of life. I believe that we should have done
better in presenting those gray areas,'' Ceppos wrote.