CIA REPORT CONCLUDES AGENCY KNEW NOTHING OF DRUG DEALERS' TIES TO REBELS

WASHINGTON -- The CIA on Thursday released the first volume of an internal
investigation concluding that the agency knew nothing about California
cocaine dealers who claimed connections with CIA-backed rebels in Nicaragua.

The CIA inspector general's report was an effort to answer accusations made
in newspaper articles published in August 1996 that drug-dealing Nicaraguan
rebels and their supporters were responsible for introducing crack cocaine
to black neighborhoods in California in the 1980s.

The series of articles in the San Jose Mercury News suggested that the CIA
condoned the drug trafficking because the cocaine dealers kicked back
millions of dollars to rebels fighting the Marxist Sandinista Government of
Nicaragua.

The articles ignited a firestorm of protest, fanned by talk radio, the
Internet and the grapevine. The intelligence agency fervently denied the
accusation and undertook the internal investigation to try to restore its
image. The director of central intelligence, George J. Tenet, said Thursday
that "no investigation, no matter how exhaustive, will completely erase that
false impression or undo the damage that has been done" to the agency by the
articles.

The Mercury News published a long note from its editor last year saying the
articles were overblown. The reporter who wrote them, Gary Webb, has
resigned.

The CIA report released Thursday, the first of two volumes, includes
fragments of evidence about connections between the cocaine dealers and the
rebels, known as contras, but nothing like the seamless web reported by the
Mercury News.

The report concludes that one of the cocaine dealers mentioned by the
Mercury News, Oscar Danilo Blandon, gave a contra leader, Eden Pastora,
several thousand dollars, the use of two cars and a free place to stay. But,
the agency says, their relationship was not political. Blandon also met with
another contra leader, Enrique Bermudez, but says that he gave him no money.

Blandon told the CIA that he and another cocaine dealer, Norwin Meneses,
donated tens of thousands of dollars to contra sympathizers in Los Angeles.
The agency says it cannot prove or disprove that assertion. Its report says
neither man claims to have been "motivated by any commitment to support the
contra cause or contra activities undertaken by CIA," and that the agency
was unaware of their existence in the 1980s.

Another convicted drug dealer, Renato Pena Cabrera, who says he was an
unpaid representative of the contras in California from 1982 through 1984,
told CIA investigators that he had heard from a Colombian associate of
Meneses that some of the proceeds of several million dollars' worth of
cocaine he sold went to support the contras. The report includes no more
information on that assertion, other than to say that the CIA never had a
relationship with Pena.

The second volume of the report, to be completed next month, will examine
accusations that some contras and their supporters dealt in drugs. A 1989
Senate investigation concluded that they did. It said the largest contra
group moved money through a drug-smuggling network; that drug traffickers
gave the contras money, guns, planes and pilots; and that government money
meant to support the contras went to drug traffickers.

The CIA's inspector general, Fred Hitz, said Thursday that he had found no
evidence that the agency, or any of its employees, had dealt in drugs to
support the contras.

Copyright 1998 The New York Times Company