E. Previous Investigations Concerning Allegations of Contra Drug Trafficking

Allegations that the Contras were involved in the drug trade and that government agencies condoned or had knowledge of these activities are not new. DEA intelligence analyst Douglas Everett told the OIG that in the mid-1980s, DEA had heard rumors and had gathered some uncorroborated informant information about the involvement of the Nicaraguan Sandinista government in drug dealing but that the issue of the Contras did not come up until 1986.

However, in early 1986, around the time that the United States government was considering whether to fund the Contras again after a period of substantial restrictions on funding, allegations of Contra involvement in drug trafficking came to the forefront. Many of the allegations about the Contras came from a civil lawsuit filed in 1986 by journalists Tony Avrigan and Martha Honey against John Hull, Richard Secord, Albert Hakim, Pablo Escobar, Jorge Ochoa, and others for damage done to them by the defendants' alleged conspiracy to violate the Neutrality Act, 18 U.S.C. §§ 951 et seq. The complaint asserted that these defendants had smuggled weapons for the Contras through the Costa Rican ranch of United States citizen John Hull and then had smuggled drugs back through the ranch and into the United States, where they used the drug profits to purchase more weapons. This case was later dismissed when the defendants moved for summary judgment and the plaintiffs and their attorneys were fined for abuse of the judicial process.

As discussed above, in the spring of 1986, the Senate Foreign Relations Committee's Subcommittee on Narcotics, Terrorism, and International Operations began an investigation into the links between foreign policy, narcotics and law enforcement in connection with drug trafficking from the Caribbean and Central and South America to the United States. Part of this investigation included "a review of the drug links to the Contra movement and the Nicaraguan war."

The Senate Subcommittee concluded that the drug cartels posed a continuing threat to national security at home and abroad and that the United States has too often in the past allowed other foreign policy objectives to interfere with the war on drugs. The committee found that "it is clear that individuals who provided support for the Contras were involved in drug trafficking, the supply network of the Contras was used by drug trafficking organizations, and elements of the Contras themselves knowingly received financial and material assistance from drug traffickers." The report also found that the Department of Justice was slow to respond to allegations of links between drug traffickers and the Contras. The report stated that the Department of Justice denied there was any substance to the allegations even after a State Department report had been issued on the subject and despite FBI records "indicating involvement of narcotics traffickers in Contra operations and Neutrality Act violations."

The Subcommittee report concluded:

The war in Central America contributed to weakening an already inadequate law enforcement capability which was exploited easily by a variety of mercenaries, pilots and cartel members involved in drug smuggling. In several cases, drug smugglers were hired by Contra organizations to move Contra supplies. In addition, individual Contras accepted weapons, money and equipment from drug smugglers.

The report also found that:

There are serious questions as to whether or not U.S. officials involved in Central America failed to address the drug issue for fear of jeopardizing the war effort in Nicaragua.

In April 1986, the State Department issued a report in conjunction with the Department of Justice and the CIA, entitled "Allegations of Misconduct by the Nicaraguan Democratic Resistance." The report found "evidence of a limited number of incidents in which known drug traffickers tried to establish connections with Nicaraguan resistance groups." The report stated that "drug traffickers were attempting to exploit the desperate conditions" in which the Contras found themselves, especially during the period when the Contras were not receiving any authorized funding from the United States government and were hard pressed for financial support. The report concluded that while individual members of the Contra movement might have been involved, there was no evidence that the drug trafficking had been authorized by resistance leaders. A later report by the State Department in July 1986 again noted that "the available evidence points to involvement with drug traffickers by a limited number of persons having various kinds of affiliations with, or political sympathies for, the resistance groups."

During the Subcommittee's investigation, the DEA also attempted to gather information relevant to trafficking by the Contras or Contra sympathizers. This included a review of files and interviews with a number of DEA informants. In September 1986, the DEA sent a cable to all offices notifying them of "critical issues." The cable noted:

The debate over aid to the Contras is still being fought in Congress. Those supporting the Contras charge that the Sandinista government not only is exporting communism to the rest of Central America but that it also sends cocaine to the United States. Those elements against aid to the Contras charge among other things that the Contras support their activities through drug trafficking. Amid this debate, DEA receives an endless number of questions concerning what investigative or intelligence information this agency has concerning both groups. Headquarters must find a way to satisfy these questions and protect investigations.

In January 1987, the DEA produced a report entitled "Assessment of Connections Between Drug Traffickers and Anti-Sandinistas and Contras." The report concluded:

We judge that there is little substance to these allegations. There is no evidence that any of [the anti-Sandinista] groups play a role in any drug trafficking operations. If there is a connection it would have to be characterized as a situation in which these groups unwittingly received funds from politically sympathetic drug traffickers or individual Contra members participating in the traffic for their own personal gain.

The DEA review also did not confirm allegations made in the San Francisco Examiner in March 1986 that defendants in the San Francisco "Frogman case"⁽⁴⁾ had delivered large sums of money to the Contras from their cocaine profits. However, the DEA in San Francisco did note the following facts: a defendant arrested in a DEA investigation, Renato Pena, had listed his profession as a volunteer worker for the FDN and had asked a confidential informant to meet him at the FDN office on one occasion; a defendant in the Frogman case had made 51 telephone calls to the FDN office in San Francisco; and Norwin Meneses had offered to provide the DEA with information about Nicaraguans involved in cocaine trafficking in Los Angeles for the benefit of the Sandinista government.

The DEA reported that certain drug traffickers in Costa Rica might be associated with the Contra movement. This list included: someone arrested with one kilogram of cocaine who was later reported to be a member of the Southern Front Contra group Democratic Revolutionary Alliance (ARDE); pilot Gerardo Duran, arrested by Costa Rican authorities and associated with the ARDE; Jorge Morales, prosecuted in Miami on drug charges and alleged to be good friends and former business partners with ARDE leader Eden Pastora; and a suspect connected with the seizure in Miami of 414 kilograms of cocaine in a container of frozen food from Costa Rica who was known for his association with the ARDE.

The report also stated that the DEA had received allegations that Eden Pastora and the ARDE were involved in drug trafficking and that the ranches of two United States citizens in Costa Rica were being used to smuggle weapons to the Contras and cocaine to the United States. Finally, an informant had told the DEA office in Guatemala that Hanger Four at the Ilopango airfield in El Salvador, reportedly used to supply the Contras, was also being used by traffickers to store cocaine en route to the United States. The DEA reported that this investigation had been turned over to the U.S. Customs Service and to the IRS.

The DEA report concluded that there was insufficient information to confirm allegations that Contra groups were involved in drug trafficking. The report stated that if the groups had received drug proceeds, "it probably would reflect a personal decision by the trafficker or an individual Contra member, not a systematic organizational effort." It also found that the drug traffickers associated with Eden Pastora and the ARDE were:

not dedicated anti-Sandinistas political supporters. They have been described as "contrabandistas" who are involved in a range of illegal activity in Central America, including drug trafficking. While they may be associated with ARDE and sympathize with its cause, ARDE does not appear to direct their activities. Pastora's involvement with drug traffickers does not imply that the ARDE or other anti-Sandinistas groups condone his actions.

In January 1987, the CIA presented a report to the State Department that had been coordinated with the DEA. This report included information about an individual named Jose Orlando Bolanos who, in January 1982, met with DEA and FBI undercover agents, claimed to be in command of an anti-Communist movement in Nicaragua called the "Internal Front," and laid out a plan to import cocaine into the United States. According to the report, Bolanos requested funds for expenses in connection with his plan to import cocaine, but later refused to take the money and the plan was not implemented. The report also stated that, in December 1986, the U.S. Embassy in Guatemala had received unconfirmed reports from a single, untested source, that the political director for a Contra faction and a conduit for Nicaraguan Humanitarian Assistance funding were smuggling cocaine into the United States. The report stated that these allegations had not been substantiated.

In August 1987, the Chief of the CIA's Central American Task Force testified before the Iran-Contra Committee of Congress that drug smuggling by the Southern Front Contras was more significant than previously reported. He stated: "With respect to [drug trafficking by] the Resistance Forces . . . it is not a couple of people. It is a lot of people." He also noted in a deposition taken by Committee staff:

We knew that everybody around Pastora was involved in cocaine . . . His staff and friends (redacted) they were drug smugglers or involved in drug smuggling.

In November 1987, the "Report of the Congressional Committees Investigating the Iran-Contra Affair" (Joint Report) was issued jointly by the House Select Committee to Investigate Covert Arms Transactions with Iran and the Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition. An appendix to this report contains a memorandum written by a House investigator, dated July 23, 1987, entitled "Allegations Regarding Contra Involvement with Drug Smuggling." The memorandum concluded that the investigation had "not developed corroboration of allegations [of] U.S. government-condoned drug trafficking by Contra leaders or Contra organizations or that Contra leaders or organizations had in fact taken part in such activity." The memorandum noted that hundreds of witnesses had been questioned and records examined. The Joint Report also contained an appendix entitled "Organization and Conduct of the Committees' Investigation," which noted that it had tracked the source of the Contras' funds and failed to find any indication of drug trafficking or influxes of cash attributed to drugs. The report noted that Contra funding was largely accounted for by contributions from countries other than the United States.

The Office of Independent Counsel for Iran/Contra Matters (OIC), headed by Lawrence E. Walsh, did not formally investigate allegations that the Contras had been involved in drug trafficking. Former Special Counsel to the OIC William Hassler told the OIG that the drug aspect of the Iran-Contra investigation was "minute" -- so minute that the OIC did not have a representative of the DEA assigned to the case. Hassler said that the OIC did an exhaustive investigation to track the funding of the Contras and that, with the exception of several unexplained withdrawals of funds, the money was accounted for. Hassler stated that he did not see any evidence to suggest laundering of drug money by the Contras.

F. Scope of the OIG Investigation

The San Jose Mercury News articles spurred renewed interest in the subject of drug trafficking in support of the Contras, particularly the allegation that certain Contra supporters described in the articles trafficked drugs with the knowledge and support of the CIA and were responsible for the crack explosion in southern California and throughout the United States. We received numerous requests for a review of the allegations in the articles, including requests from individual Senators and members of Congress, the City Council of Pasadena, California, and several private individuals.

Rather than cover the same areas that had been investigated by Congress and other reviews at an earlier time -- closer in time to the actual events when witness recollections were fresher and documentary evidence was more readily available -- we decided that the primary focus of our investigation and report should be on the new allegations raised by the Mercury News stories. We have therefore concentrated on the allegations advanced by the articles that Danilo Blandon, Ronald Lister, Ricky Ross, and others in southern California and Norwin Meneses, Julio Zavala, and Carlos Cabezas in northern California were trafficking in drugs with the tolerance or protection of federal government agencies because of their ties to the Contras.

Our investigation did not focus on what CIA employees knew or did with regard to these and other Contra drug trafficking activities. The CIA Inspector General has jurisdiction over that subject and will report his findings in his own, separate report.

Our investigation also did not focus on the cases that were already reviewed extensively by the Senate Foreign Relations Committee's subcommittee. We had to make decisions about what the OIG could fruitfully investigate more than ten years after events had taken place, in an area where a great deal of investigation has already been done. We were told by subcommittee staff that even ten years ago people's accounts were contradictory and their memories were fragmentary, and we believed that it would be difficult, and not an efficient use of our investigative resources, to try to replow the ground already covered by the Subcommittee. As a result, we decided not to reinvestigate the same topics covered by the Subcommittee but instead primarily focused on the new issues raised by the San Jose Mercury News articles.

In our report, we describe the information we found in our interviews and review of Department of Justice files, as well as our conclusions concerning the validity of the allegations raised. In the course of our investigation, however, we inevitably encountered considerable evidence not only related to how the Department of Justice pursued drug trafficking activities by certain individuals, but also evidence related to the nature of these trafficking activities and whether the traffickers were, in fact, connected to the Contras or the CIA. In order to supplement existing accounts of the connections, if any, among the Contras, the CIA, and drug trafficking, we have also set out the evidence we found in DOJ files and in our interviews of DOJ employees and others concerning these connections. But, because our investigation into areas not related to DOJ were far from exhaustive, our conclusions in this regard are more tentative than our conclusions about DOJ actions in these cases.

The specific allegations raised by the Mercury News articles and elsewhere that are the primary focus of our report can be summarized as follows:

1. The articles suggested that the federal government protected Danilo Blandon from investigation and prosecution for drug trafficking so that he could provide drug money to the Contras. According to this claim, Blandon may have been tipped off by the CIA or other government entities to the execution of a search warrant on his residence and business in October 1986, and a federal investigation of Blandon in 1987 was closed because of Blandon's connections to the Contras or the CIA. In addition, the suggestion was made that Blandon received inappropriately lenient treatment after he was arrested for drug trafficking in 1992, and he improperly received a "green card" at this time.

2. Similarly, the federal government allegedly protected Norwin Meneses from investigation or prosecution for his drug trafficking so that he could provide funds to the Contras. The Mercury News articles suggested that Meneses, a known drug trafficker, was able to enter and live in the United States with impunity because of his Contra connections. The series noted that when the federal government finally indicted Meneses in 1989, the indictment was sealed and Meneses was never arrested.

3. The Mercury News articles indicated that Blandon's and Meneses' motivation for drug trafficking was to support the Contras and that they gave millions of dollars of drug profits to the Contra movement. One of the sources on which the Mercury News relied for this claim was Enrique Miranda, who accused Meneses of selling cocaine for the Contras and using the Salvadoran Air Force to transport cocaine shipments. We do not make definitive findings on Blandon's and Meneses' relationship with the Contras or how much money they provided to the Contras, but we report information we came across concerning these claims.

4. The articles suggested that Blandon's drug trafficking was connected to the CIA. The articles stated that during testimony before a federal grand jury in San Francisco in 1994, Blandon "implied that his cocaine sales were, for a time, CIA-approved." In addition, the series claimed that federal prosecutors blocked certain testimony in the 1990 trial of Los Angeles County Sheriff's deputies accused of corruption and in a trial of Ricky Ross in 1996 because the testimony may have revealed the CIA's ties to Blandon's drug money raised for the Contras.

5. The articles similarly suggested that a drug trafficking associate of Blandon, Ronald Lister, was protected from investigation and prosecution because of his alleged ties to the Contras and the CIA and that when he was prosecuted in 1990 he received inappropriately lenient treatment. According to these allegations, Lister funneled drug money and provided arms to the Contras and had connections to the CIA through another associate, David Scott Weekly.

6. The articles alleged that Ross and Blandon were the prime contributors to the rise of crack in Los Angeles and across the nation. Allegedly, cocaine was not available in South Central Los Angeles until they made it widely available and the drug network of Ross and Blandon was the catalyst for the crack epidemic that erupted in the 1980s across the entire nation, not just in Los Angeles.

7. The articles suggested that Ross was targeted for prosecution after he testified against corrupt Los Angeles County Sheriff's deputies in 1991. Moreover, the articles also raised the issue of disparity of treatment between Ross and Blandon, who received significantly different sentences after their convictions.

8. The articles reported that in 1984 federal prosecutors in San Francisco returned to Julio Zavala, a drug trafficker who had ties to the Contras, $36,800 that had been seized from him. The articles attributed the return of the money to the government's tolerance of drug trafficking activities by the Contras. In addition, we reviewed allegations that Zavala and fellow drug trafficker Carlos Cabezas dealt cocaine for the Contras in San Francisco in the early 1980s.

9. The articles resurrected certain allegations that had been made by Celerino Castillo, a former DEA agent who had been stationed in Central America during the 1980s, regarding federal government and CIA support or indifference to Contra drug trafficking. Castillo alleged, among other things, that the federal government and the DEA turned "a blind eye" to his reporting that drug trafficking was occurring at the Ilopango air base in El Salvador.

10. We also reviewed claims that the CIA passed information to the DEA about Contra drug trafficking that the DEA did not pursue. We attempted to determine whether such information was in fact furnished to the DEA and, if so, whether it was appropriately handled. We also inquired into the DEA's handling of claims of Contra drug trafficking that were received by sources other than from the CIA. For example, we reviewed allegations that DOJ did not properly prosecute John Hull, who lived in Costa Rica and was allegedly linked to the Contras and the CIA.

G. OIG Investigative Procedures

To investigate these matters, we first directed all DOJ components to identify all files and documents relating to these allegations or to drug trafficking on behalf of the Contras. We also requested all files relating to the specific individuals mentioned in the Mercury News articles. In all, we obtained and reviewed over 40,000 pages of documents from, among others, the FBI, the DEA, the INS, the Criminal Division of DOJ, various U.S. Attorneys' offices throughout the country, and the CIA.

We also met periodically with representatives from the CIA Office of Inspector General (CIA OIG) concerning its review. We conducted some joint interviews with the CIA OIG of persons who were relevant to both the CIA OIG and our investigations, and we shared relevant documents with the CIA OIG. The CIA OIG also agreed to review the CIA documents it collected during its review and provide to us any that related to DOJ activities or employees or to the specific individuals who were the subject of our review. Although we cannot be certain that the CIA OIG uncovered all CIA documents responsive to our requests, we did receive a significant number of such documents from the CIA OIG.

We want to make clear that the CIA OIG, a separate organization from ours, is conducting its own investigation into what CIA employees knew and did concerning the allegations of alleged drug trafficking by Contras. The CIA OIG will issue its own report with its own conclusions that will cover different ground from our report, which focuses on DOJ actions. While we coordinated some aspects of our two reviews, they are independent investigations that may reach different conclusions. We leave the CIA OIG to report its findings about CIA conduct regarding alleged drug trafficking by Contras.

During our investigation, we conducted over 200 interviews of relevant witnesses in the United States and in Central America. We attempted to interview former and current DOJ personnel who had knowledge concerning these allegations, as well as the principal persons involved in the allegations. Most of the people we contacted agreed to be interviewed, including Danilo Blandon, Norwin Meneses, Ronald Lister, Ricky Ross, Enrique Miranda-Jaime, Julio Zavala, and Carlos Cabezas. However, a small number of people declined to talk with us, including former DEA Costa Rica Country Attache Robert Nieves; CIA employees Alan Fiers and Joseph Fernandez; Oliver North; and several persons in Los Angeles who were partners or competitors of Ricky Ross. We also attempted to interview Celerino Castillo but were unable to because of interview conditions demanded by Castillo that were unacceptable to the OIG. We attempted to gain Castillo's cooperation through Representative Maxine Waters, but she also was unsuccessful in persuading him to speak with us. Although the Inspector General Act permits the issuance of subpoenas duces tecum for documents and records from people who are not employees of the federal government, OIGs lack the power to compel the testimony of non-government witnesses. This creates a significant gap in the evidence-gathering abilities of OIGs, which we have advocated be remedied by legislation.

Our investigation was made more difficult because of the number of years that have passed between the events and our review. Many of the witnesses we interviewed had only a dim recollection of the events in question or could not remember specific details at all, and some witnesses are now deceased. Certain files were also difficult to locate, are incomplete, or are missing. Because of the passage of time, we have no assurance that we uncovered every piece of information relevant to these issues. However, by and large, DOJ components were able to locate the documents and information that we requested, and they cooperated fully with our review.

The OIG devoted considerable resources to this exhaustive review. Five attorneys, five investigators, and various support staff worked either full-time or part-time on this matter.

H. Structure of the OIG Report

Our report is divided into twelve chapters. Following this introduction, the second chapter contains an analysis of the allegations concerning Danilo Blandon. The third chapter examines the allegations regarding Norwin Meneses. The fourth chapter is an analysis of what we uncovered during our review about the relationship of Blandon and Meneses to the Contras and to the CIA. The fifth chapter reviews the allegations made about Ronald Lister and his alleged relationship to the Contras and to the CIA. The sixth chapter discusses the allegations regarding Ricky Ross. Chapter seven discusses the allegations made by convicted drug trafficker Enrique Miranda-Jaime. Chapter eight discusses Julio Zavala, a convicted drug trafficker in San Francisco with ties to the Contras. Chapter nine describes the claims by Carlos Cabezas that he and Zavala dealt drugs to benefit the Contras. The tenth chapter examines the claims made by former DEA agent Celerino Castillo. The eleventh chapter discusses the exchange of information between the DEA and the CIA with regard to investigations of drug trafficking and reviews a number of specific cases in which DOJ allegedly failed to investigate or prosecute individuals because of their ties to the Contras, including the case of John Hull. The twelfth chapter provides a short conclusion to the report.

Because many of the separate chapters involve an overlapping cast of characters, and in many cases the same events, some repetition among the various chapters was inevitable. In some cases we have cross-referenced the chapters rather than repeat the same information.

Finally, we believe that a basic outline describing the various groups that supported the Contras and the timing of United States financing of these groups is a helpful aid to understanding the allegations at issue in this report. We therefore briefly describe in Appendix A to this report the basic structure of the Contra groups that were relevant to our review and the timing of United States funding of these groups. In Appendix B and C we briefly describe how crack is made and the history of cocaine. Appendix D contains additional details about Enrique Miranda's entry into the United States. Timelines of approximate dates for relevant events concerning several of the most important persons in this review -- Blandon, Meneses, Lister, Zavala, Cabezas, Miranda, and Castillo -- are contained in Appendix E. Appendix F contains a glossary of significant persons and terms used in the report.

4. The case was so named because it involved the arrest of divers as they attempted to retrieve 430 pounds of cocaine from a Colombian freighter berthed in San Francisco.

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