The initial Committee investigation into the international drug trade, which
began in April, 1986, focused on allegations that Senator John F. Kerry
had received of illegal gun-running and narcotics trafficking associated
with the Contra war against Nicaragua.
As the Committee proceeded with its investigation, significant information
began surfacing concerning the operations of international narcotics traffickers,
particularly relating to the Colombian-based cocaine cartels. As a result,
the decision was made to incorporate the Contra-related allegations into
a broader investigation concerning the relationship between foreign policy,
narcotics trafficking and law enforcement.
While the contra/drug question was not the primary focus of the investigation,
the Subcommittee uncovered considerable evidence relating to the Contra
network which substantiated many of the initial allegations laid out before
the Committee in the Spring of 1986. On the basis of this evidence, 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. In each
case, one or another agency of the U.S. government had information regarding
the involvement either while it was occurring, or immediately thereafter.
The Subcommittee found that the Contra drug links included:
--Involvement in narcotics trafficking by individuals associated with the
--Participation of narcotics traffickers in Contra supply operations through
business relationships with Contra organizations.
--Provision of assistance to the Contras by narcotics traffickers, including
cash, weapons, planes, pilots, air supply services and other materials,
on a voluntary basis by the traffickers.
--Payments to drug traffickers by the U.S. State Department of funds authorized
by the Congress for humanitarian assistance to the Contras, in some cases
after the traffickers had been indicted by federal law enforcement agencies
on drug charges, in others while traffickers were under active investigation
by these same agencies.
These activities were carried out in connection with Contra activities in
both Costa Rica and Honduras.
The Subcommittee found that the links that were forged between the Contras
and the drug traffickers were primarily pragmatic, rather than ideological.
The drug traffickers, who had significant financial and material resources,
needed the cover of legitimate activity for their criminal enterprises.
A trafficker like George Morales hoped to have his drug indictment dropped
in return for his financial and material support of the Contras. Others,
in the words of Marcos Aguado, Eden Pastora's air force chief:
.. took advantage of the anti-communist sentiment which existed in Central
America ... and they undoubtedly used it for drug trafficking.
While for some Contras, it was a matter of survival, for the traffickers
it was just another business deal to promote and protect their own operations.
In the wake of press accounts concerning links between the Contras and drug
traffickers' beginning December, 1985 with a story by the Associated Press,
both Houses of the Congress began to raise questions about the drug-related
allegations associated with the Contras, causing a review in the spring
of 1986 of the allegations by the State Department, in conjunction with
the Justice Department and relevant U.S. intelligence agencies.
Following that review, the State Department told the Congress in April,
1986 that it had at that time "evidence of a limited number of incidents
in which known drug traffickers tried to establish connections with Nicaraguan
According to the Department, "... these attempts for the most part
took place during the period when the resistance was receiving no U.S. funding
and was particularly hard pressed for financial support." The report
acknowledged that, "... drug traffickers were attempting to exploit
the desperate conditions," in which the Contras found themselves.
The Department had suggested that while "individual members" of
the Contra movement might have been involved, their drug trafficking was
"... without the authorization of resistance leaders."
Following further press reports linking contra supply operations to narcotics,
and inquiries from the Foreign Relations Committee to the State Department
concerning these links, the State Department issued a second statement to
the Congress concerning the allegations on July 24, 1986.
In this report, the State Department said, "... 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."
A year later, in August 1987, the CIA's Central American Task Force Chief
became the first U.S. official to revise that assessment to suggest instead
that the links between Contras on the Southern Front in Costa Rica to narcotics
trafficking was in fact far broader than that acknowledged by the State
Department in 1986.
Appearing before the Iran-Contra Committees' the CIA Central American Task
Force chief testified:With respect to (drug trafficking by) the Resistance
Forces ... it is not a couple of people. It is a lot of people.
The CIA's Chief of the Central American Task Force went on to say:
We knew that everybody around Pastora was involved in cocaine ... His staff
and friends (redacted) they were drug smugglers or involved in drug smuggling.
The Justice Department was slow to respond to the allegations regarding
links between drug traffickers and the Contras. In the spring of 1986, even
after the State Department was acknowledging there were problems with drug
trafficking in association with Contra activities on the Southern Front,
the Justice Department was adamantly denying that there was any substance
to the narcotics allegations. At the time, the FBI had significant information
regarding the involvement of narcotics traffickers in Contra operations
and Neutrality Act violations.
The failure of U.S. law enforcement and intelligence agencies to respond
properly to allegations concerning criminal activity relating to the Contras
was demonstrated by the handling of the Committee's own investigation by
the Justice Department and the CIA in the spring of 1986.
On May 6, 1986, a bipartisan group of Committee staff met with representatives
of the Justice Department, FBI, DEA, CIA and State Department to discuss
the allegations that Senator Kerry had received information of Neutrality
Act violations, gun running and drug trafficking in association with Contra
organizations based on the Southern Front in Costa Rica.
In the days leading up to the meeting, Justice Department spokesmen were
stating publicly that "the FBI had conducted an inquiry into all of
these charges and none of them have any substance."
At that meeting, Justice Department officials privately contradicted the
numerous public statements from the Department that these allegations had
been investigated thoroughly and were determined to be without foundation.
The Justice Department officials at the meeting said the public statements
by Justice were "inaccurate." The Justice
officials confirmed there were ongoing Neutrality Act investigations in
connection with the allegations raised by Senator Kerry.
At the same meeting, representatives of the CIA categorically denied that
the Neutrality Act violations raised by the Committee staff had in fact
taken place, citing classified documents which the CIA did not make available
to the Committee. In fact, at the time, the FBI had already assembled substantial
information confirming the Neutrality Act violations, including admissions
by some of the persons involved indicating that crimes had taken place.
In August 1986, Senator Richard Lugar, then-Chairman of the Committee and
the ranking member, Senator Claiborne Pell, wrote the Justice Department
requesting information on 27 individuals and organizations associated with
the contras concerning allegations of their involvement in narcotics trafficking
and illegal gunrunning. The Justice Department refused to provide any information
in response to this request, on the grounds that the information remained
under active investigation, and that the Committee's "rambling through
open investigations gravely risks compromising those efforts."
On October 5, 1988, the Subcommittee received sworn testimony from the Miami
prosecutor handling the Neutrality and gun-running cases that he had been
advised that some officials in the Justice Department had met in 1986 to
discuss how "to undermine" Senator Kerry's attempts to have hearings
regarding the allegations.
The Subcommittee took a number of depositions of Justice Department personnel
involved in responding to the Committee investigation or in prosecuting
allegations stemming from the Committee's investigation. Each denied participating
in any agreement to obstruct or interfere with a Congressional investigation.
In order to place in their proper perspective the attempts to interfere
with' or undermine, the Committee investigation, a lengthy chronology has
been prepared which appears at appendix A of this report.
III. THE GUNS AND DRUG SMUGGLING INFRASTRUCTURE DEVELOPS
Covert war, insurgency and drug trafficking frequently go hand-in-hand without
regard to ideology or sponsorship. General Paul Gorman, testified that the
use of narcotics profits by armed resistance groups was commonplace. Gorman
stated further that: "If you want to move arms or munitions in Latin
America, the established networks are owned by the cartels. It has lent
itself to the purposes of terrorists, of saboteurs, of spies, of insurgents
DEA Assistant Administrator David Westrate said of the Nicaraguan war:
It is true that people on both sides of the equation (in the Nicaraguan
war) were drug traffickers, and a couple of them were pretty signficant.
Drug trafficking associated with revolution in Nicaragua began during the
late 1970's with the Sandinistas attempt to overthrow the regime of Anastasio
Somoza Debayle. At the time, the Sandinistas were supported by most governments
in the region. Thosegovernments helped provide the FSLN with the money,
weapons, and the sanctuary they needed to overthrow Somoza.
Costa Rica, which has dozens of unsupervised airstrips near the Nicaraguan
border, became an important supply and staging area for the Sandinistas.
These air strips were used by Noriega and others for shipments of weapons
to the Sandinistas.
Former senior Costa Rican Law enforcement officials told the Subcommittee
they were instructed to keep their narcotics investigators away from the
Nicaraguan border during the Sandinista revolution. Even when they had received
hard information about drugs on the aircraft delivering weapons, the officials,
in effort to avoid controversy regarding the war, ignored the tips and let
the flights go. 
A number of Costa Ricans became suppliers for the Sandinistas. These included
Jaime "Pillique" Guerra, who owned a crop dusting service and
a related aircraft support business in northern Costa Rica. Guerra refueled
and repaired the planes which came from Panama loaded with Cuban weapons
for the Sandinistas. Guerra's crop dusting business
was excellent cover for the movement of aviation fuel to the dozens of remote
airstrips they used without arousing the suspicions of Costa Rican authorities.
When the Sandinista insurgency succeeded in 1979, smuggling activity in
northern Costa Rica did not stop. Surplus weapons originally stored in Costa
Rica for use by the Sandinistas were sold on the black market in the region.
Some of these weapons were shipped to the Salvadoran rebels from the same
airstrips in the same planes, flown by the same pilots who had previously
worked for the Sandinistas.
Costa Rican law enforcement authorities said that the drug trafficking through
northern Costa Rica continued as well. They said that their police units
lacked the men, the communications equipment and the transport to close
down the airstrips and seize weapons and drugs.
Werner Lotz, a Costa Rican pilot serving sentence for drug smuggling, testified
that there was little the Costa Rican government could do to deal with the
continuing drug trafficking:
"Costa Rica has got only civil guards, underpaid and easily bought
.. To be very clear ... our guard down there is barefoot, and you're talking
about 50 men to cover 400 kilometers maybe." 
IV. DRUG TRAFFICKING AND THE COVERT WAR
When the Southern Front against the Sandinista Government in Nicaragua was
established in 1983, Costa Rica remained ill-equipped to deal with the threat
posed by the Colombian drug cartels. Then, as now, the country does not
have a military, its law enforcement resources remain limited, and its radar
system still so poor that Contra supply planes could fly in and out of the
clandestine strips without being detected.
Following their work on behalf of the Sandinistas and the Salvadoran rebels,
the Colombian and Panamanian drug operatives were well positioned to exploit
the infrastructure now serving and supplying the Contra Southern Front.
This infrastructure was increasingly important to the drug traffickers,
as this was the very period in which the cocaine trade to the U.S. from
Latin America was growing exponentially.
In the words of Karol Prado, an officer of the ARDE Contra organization
of Eden Pastora on the Southern Front, "drug traffickers ... approaches
political groups like ARDE trying to make deals that would somehow camouflage
or cover up their activities."
The head of the Costa Rican "air force" and personal pilot to
two Costa Rican presidents, Werner Lotz, explained the involvement of drug
traffickers with the Contras in the early days of the establishment of the
Southern Front as a consequence of the Contras lack of resources:
"There was no money. There were too many leaders and too few people
to follow them, and everybody was trying to make money as best they could."
The logic of having drug money pay for the pressing needs of the Contras
appealed to a number of people who became involved in the covert war. Indeed,
senior U.S. policy makers were not immune to the idea that drug money was
a perfect solution to the Contra's funding problems.
As DEA officials testified last July before the House Judiciary Subcommittee
on Crime, Lt. Col. Oliver North suggested to the DEA in June 1985 that $1.5
million in drug money carried aboard a plane piloted by DEA informant Barry
Seal and generated in a sting of the Medellin Cartel and Sandinista officials,
be provided to the Contras. While the suggestion
was rejected by the DEA, the fact that it was made highlights the potential
appeal of drug profits for persons engaged in covert activity.
Lotz said that Contra operations on the Southern Front were in fact funded
by drug operations. He testified that weapons for the Contras came from
Panama on small planes carrying mixed loads which included drugs. The pilots
unloaded the weapons, refueled, and headed north toward the U.S. with drugs.
The pilots included Americans, Panamanians, and Colombians, and occasionally,
uniformed members of the Panamanian Defense Forces.
Drugpilots soon began to use the Contra airstrips to refuel even when there
were no weapons to unload. They knew that the authorities would not check
the airstrips because the war was "protected".
The problem of drug traffickers using the airstrips also used to supply
the Contras persisted through 1985 and 1986. By the summer of 1986, it became
of significant concern to the U.S. Government officials who were involved
in the covert Contra supply operations undertaken during the Boland Amendment
period. As then-CIA Station Chief, "Thomas Castillo" testified
to the Iran/Contra Committees, U.S. Ambassador to Costa Rica Lewis Tambs
wanted to place guards on the secret Contra supply airstrip at Santa Elena
in Costa Rica, to avoid:
having drug traffickers use that site, and this was a continuing concern
during the period of June, July and August.
The concern highlights the degree to which the infrastructure used by the
Contras and that used by drug traffickers was potentially interchangeable,
even in a situation in which the U.S. government had itself established
and maintained the airstrip involved.
Pilots who made combined Contra weapons/drug flights through the Southern
--Gerardo Duran, a Costa Rican pilot in the airplane parts supply business.
Duran flew for a variety of Contra organizations on the Southern Front'
including those affiliated with Alfonso Robelo, Fernando"El Negro"Chamorro,
and Eden Pastora, before U.S. officials insisted that the Contras sever
their ties from Duran because of his involvement with drugs. 
Duran was convicted of narcotics trafficking in Costa Rica in 1987 and jailed.
--Gary Wayne Betzner, drug pilot who worked for convicted smuggler George
Morales. Betzner testified that twice in 1984 he flew weapons for the Contras
from the U.S. to northern Costa Rica and returned to the United States with
loads of cocaine. Betzner is presently serving a lengthy prison term for
--Jose"Chepon" Robelo, the head of UDN-FARN air force on the Southern
front. Robelo turned to narcotics trafficking and reselling goods provided
to the Contras by the U.S.
The State Department selected four companies owned and operated by narcotics
traffickers to supply humanitarian assistance to the Contras. The companies
were:--SETCO Air, a company established by Honduran drug trafficker Ramon
--DIACSA, a Miami-based air company operated as the headquarters of a drug
trafficker enterprise for convicted drug traffickers Floyd Carlton and Alfredo
--Frigorificos de Puntarenas, a firm owned and operated by Cuban-American
--Vortex, an air service and supply company partly owned by admitted drug
trafficker Michael Palmer.
In each case, prior to the time that the State Department entered into contracts
with the company, federal law enforcement had received information that
the individuals controlling these companies were involved in narcotics.
Officials at NHAO told GAO investigators that all the supply contractors
were to have been screened by U.S. intelligence and law enforcement agencies
prior to their receiving funds from State Department on behalf of the Contras
to insure that they were not involved with criminal activity.
Neither the GAO nor the NHAO were certain whether or not that had actually
The payments made by the State Department to these four companies between
January and August 1986, were as follows:
SETCO, for air transport service.......................$186,924.25
DIACSA, for airplane engine parts........................41,120.90
Frigorificos De Puntarenas, as a broker/supplier for various serv-
ices to Contras on the Southern Front..................261,932.00
VORTEX, for air transport services......................317,425.17
Total  .............................................806,401.20
A number of questions arise as a result of the selection of these four companies
by the State Department for the provision of humanitarian assistance to
the contras, to which the Subcommittee has been unable to obtain clear answers:
--Who selected these firms to provide services to the Contras, paid for
with public funds, and what criteria were used for selecting them?
--Were any U.S. officials in the CIA, NSC, or State Department aware of
the narcotics allegations associated with any of these companies? If so,
why were these firms permitted to receive public funds on behalf of the
--Why were Contra suppliers not checked against federal law enforcement
records that would have shown them to be either under active investigation
as drug traffickers, or in the case of DIACSA, actually under indictment?
Ambassador Robert Duemling, Director of the Nicaraguan Humanitarian Assistance
Organization (NHAO), who was responsible for the operation of the program,
was unable to recall how these companies were selected, when questioned
by Senator Kerry in April, 1988. Ambassador Duemling
also could not recall whetheror not the contractors had in fact been checked
against law enforcement records prior to receiving funds from the State
Department. In previous testimony before the Iran/Contra Committees, Ambassador
Duemling had recalled that NHAO had been directed by Lt. Col. Oliver North
to continue "the existing arrangements of the resistance movement"
in choosing contractors.
At best, these incidents represent negligence on the part of U.S. government
officials responsible for providing support to the Contras. At worst it
was a matter of turning a blind eye to the activities of companies who use
legitimate activities as a cover for their narcotics trafficking.
Before being chosen by the State Department to transport goods on behalf
of the Contras from late 1985 through mid-1986, SETCO had a long-standing
relationship with the largest of the Contra groups, the Honduras-based FDN.
Beginning in 1984, SETCO was the principal company used by the Contras in
Honduras to transport supplies and personnel for the FDN, carrying at least
a million rounds of ammunition, food, uniforms and other military supplies
for the Contras from 1983 through 1985. According to testimony before the
Iran/Contra Committees by FDN leader Adolfo Calero, SETCO received funds
for Contra supply operations from the contra accounts established by Oliver
U.S. law enforcement records state that SETCO was established by Honduran
cocaine trafficker Juan Matta Ballesteros, whose April 1988 extradition
from Honduras to the United States in connection with drug trafficking charges
caused riots outside the U.S. Embassy in Tegucigalpa.
For example, a 1983 Customs Investigative Report states that "SETCO
stands for Services Ejectutivos Turistas Commander and is headed by Juan
Ramon Mata Ballestros, a class I DEA violator." The same report states
that according to the Drug Enforcement Agency, "SETCO aviation is a
corporation formed by American businessmen who are dealing with Matta and
are smuggling narcotics into the United States."
One of the pilots selected to fly Contra supply missions for the FDN for
SETCO was Frank Moss, who has been under investigation as an alleged drug
trafficker since 1979. Moss has been investigated, although never indicted,
for narcotics offenses by ten different law enforcement agencies.
In addition to flying Contra supply missions through SETCO, Moss formed
his own company in 1985, Hondu Carib, which also flew supplies to the Contras,
including weapons and ammunition purchased from R.M. Equipment, an arms
company controlled by Ronald Martin and James McCoy.The
FDN's arrangement with Moss and Hondu Carib was pursuant to a commercial
agreement between the FDN's chief supply officer, Mario Calero, and Moss,
under which Calero was to receive an ownership interest in Moss' company.
The Subcommittee received documentation that one Moss plane, a DC-4, N90201,
was used to move Contra goods from the United States to Honduras.
On the basis of information alleging that the plane was being used for drug
smuggling, the Customs Service obtained a court order to place a concealed
transponder on the plane.
A second DC-4 controlled by Moss was chased off the west coast of Florida
by the Customs Service while it was dumping what appeared to be a load of
drugs, according to law enforcement personnel. When the plane landed at
Port Charlotte no drugs were found on board, but the plane's registration
was not in order and its last known owners were drug traffickers. Law enforcement
personnel also found an address book aboard the plane, containing among
other references the telephone numbers of some Contra officials and the
Virginia telephone number of Robert Owen, Oliver North's courier.
A law enforcement inspection of the plane revealed the presence of significant
marijuana residue. DEA seized the aircraft on March
Frigorificos de Puntarenas is a Costa Rican seafood company which was created
as a cover for the laundering of drug money, according to grand jury testimony
by one of its partners, and testimony by Ramon Milian Rodriguez, the convicted
money launderer who established the company.
From its creation, it was operated and owned by Luis Rodriguez of Miami,
Florida, and Carlos Soto and Ubaldo Fernandez, two convicted drug traffickers,
to launder drug money. Luis Rodriguez, who according
to Massachusetts law enforcement officials directed the largest marijuana
smuggling ring in the history of the state, was indicted on drug trafficking
charges by the federal government on September 30, 1987 and on tax evasion
in connection with the laundering of money through Ocean Hunter on April
Luis Rodriguez controlled the bank account held in the name of Frigorificos
which received $261,937 in humanitarian assistance funds from the State
Department in 1986. Rodriguez signed most of the orders to transfer the
funds for the Contras out of that ac-count. Rodriguez
was also president of Ocean Hunter, an American seafood company created
for him by Ramon Milian-Rodriguez. Ocean Hunter
imported seafood it bought from Frigorificos and used the intercompany transactions
to launder drug money.
In statements before a Florida federal grand jury in connection with a narcotics
trafficking prosecution of Luis Rodriguez, Soto testified that he knew Luis
Rodriguez as a narcotics trafficker who had been smuggling drugs into the
U.S. since 1979. Soto also testified that they were partners in the shipment
of 35,000 pounds of marijuana to Massachusetts in 1982.
Milian-Rodriguez told Federal authorities about Luis Rodriguez' narcotics
trafficking prior to Milian-Rodriguez' arrest in May 1983. In March and
April 1984, IRS agents interviewed Luis Rodriguez regarding Ocean Hunter,
drug trafficking and money laundering, and he took the Fifth Amendment in
response to every question. In September, 1984,
Miami police officials advised the FBI of information they had received
that Ocean Hunter was funding contra activities through "narcotics
transactions," and noting that Luis Rodriguez was its president. This
information confirmed previous accounts the FBI had received concerning
the involvement of Ocean Hunter and its officers in Contra supply operations
involving the Cuban American community.
Despite the information possessed by the FBI, Customs and other law enforcement
agencies documenting Luis Rodriguez' involvement in narcotics trafficking
and money laundering, the State Department used Frigorificos, which he owned
and operated, to deliver humanitarian assistance funds to the Contras in
late 1985. Official funds for the Contras from the United States began to
be deposited into the Frigorificos account in early 1986, and continued
In May 1986, Senator Kerry advised the Justice Department, Drug Enforcement
Agency, State Department, NHAO and CIA of allegations he had received involving
Luis Rodriguez and his companies in drug trafficking and money laundering.
In August 1986, the Foreign Relations Committee asked Justice whether the
allegations about Luis Rodriguez were true, and requested documents to determine
whether the State Department might have in fact provided funds to a company
controlled by drug traffickers. Justice refused to answer the inquiry.
The indictment of Luis Rodriguez on drug charges 18 months later demonstrated
that the concerns raised by Senator Kerry to the Justice Department and
other agencies in May 1986 concerning his companies were well founded, as
the State Department had infact chosen companies operated by drug traffickers
to supply the Contras.
DIACSA was an aircraft dealership and parts supply company partly owned
by the Guerra family of Costa Rica. DIACSA's president, Alfredo Caballero,
was under DEA investigation for cocaine trafficking and money laundering
when the State Department chose the company to be an NHAO supplier. Caballero
was at that time a business associate of Floyd Carlton--the pilot who flew
cocaine for Panama's General Noriega.
In an affidavit filed in federal court in January, 1985, DEA Special Agent
Daniel E. Moritz described working as an undercover money launderer "for
the purpose of introducing myself into a criminal organization involved
in importing substantial quantities of cocaine into the United States from
South America." That organization was the Carlton/Caballero
partnership. According to Agent Moritz, the cocaine traffickers used DIACSA
offices "as a location for planning smuggling ventures, for assembling
and distributing large cash proceeds of narcotics transactions, and for
placing telephone calls in furtherance of the smuggling ventures."
From March 1985 until January 1986, Moritz received approximately $3.8 million
in U.S. currency from members of this organization "to be distributed,
primarily in the form of wire transfers around the world." Most of
the $3.8 million was delivered in DIACSA's offices.
Moritz met both Alfredo Caballero and Floyd Carlton in March of 1985. Moritz
had previously learned from a confidential informant that Carlton was a
"major cocaine trafficker from Panama who frequented DIACSA and was
a close associate of Alfredo Caballero." The informant added that "Caballero
provided aircraft for Floyd Carlton Caceres' cocaine smuggling ventures"
and that Caballero allowed Carlton and "members of his organization
to use DIACSA offices as a location for planning smuggling ventures, for
assembling and distributing large cash proceeds of narcotics transactions
and for placing telephone calls in furtherance of the smuggling ventures."
Alfredo Caballero was described by the informant "as the man in charge
of operations for Floyd Carlton Caceres' cocaine transportation organization."
Other members of the group were Miguel Alemany-Soto, who recruited pilots
and selected aircraft and landing strips, and Cecilia Saenz-Barria. The
confidential informant said that Saenz was a Panamanian "in charge
of supervising the landing and refueling of the organization's aircraft
at airstrips on the Panama/Costa Rica border" and that he "arranges
for bribe payments for certain Costa Rican officials to ensure the protection
of these aircraft as they head north loaded with cocaine."
During 1984 and 1985, the principal Contra organization, the FDN, chose
DIACSA for "intra-account transfers." The laundering of money
through DIACSA concealed the fact that some funds for the Contras were through
deposits arranged by Lt. Col. Oliver North.
The indictments of Carlton, Caballero and five other defendants, including
Alfred Caballero's son Luis, were handed down on January 23, 1985. The indictment
charged the defendants with bringing into the United States on or about
September 23, 1985, 900 pounds of cocaine. In addition, the indictment charged
the defendants with laundering $2.6 million between March 25, 1985 and January
Despite the indictments, the State Department made payments on May 14, 1986
and September 3, 1986, totaling $41,120.90 to DIACSA to provide services
to the Contras.
In addition, the State Department was still doing business with DIACSA on
its own behalf six months after the company's principals had been indicted.
Court papers filed in the case in July 1986, show that the U.S. Embassies
of Panama and Costa Rica were clients of DIACSA. While DIACSA and its principals
were engaged in plea bargaining negotiations with the Justice Department
regarding the cocaine trafficking and money laundering charges, U.S. Embassy
personnel in Panama and Costa Rica were meeting with one of the defendants
to discuss purchasing Cessna planes from the company.
Each of the defendants in the DIACSA case was ultimately convicted on charges
of importing cocaine into the United States. The sentences they received
ranged from ten years for one non-cooperating defendant, to nine years for
Floyd Carlton, to three years probation for Luis Caballero and five years
probation for his father, DIACSA's owner, Alfredo Caballero, as a consequence
of their cooperation with the government.
When the State Department signed a contract with Vortex to handle Contra
supplies, Michael B. Palmer, then the company's Executive Vice-President
signed for Vortex. At the time, Palmer was under active investigation by
the FBI in three jurisdictions in connection with his decade-long activity
as a drug smuggler, and a federal grand jury was preparing to indict him
The contract required Vortex to receive goods for the Contras, store, pack
and inventory them. At the time the contract was signed, Vortex's principal
assets were two airplanes which Palmer previously used for drug smuggling.Vortex
was selected by NHAO assistant director Philip Buechler, following calls
among Buechler, Palmer, and Pat Foley, the president of Summit Aviation.
In 1984, the Contra forces under Eden Pastora were in an increasingly hopeless
situation. On May 30,1984, Pastora was wounded by a bomb at his base camp
at La Penca, Nicaragua, close to the Costa Rica border. That same day, according
to ARDE officer Karol Prado, aid to ARDE from the United States was cut
Despite continued pressure from the United States, Pastora refused to place
his ARDE forces under a unified command with the largest of the Contra organizations--the
Honduras-based FDN. The CIA considered Pastora to be "disruptive and
unpredictable." By the time the Boland Amendment
cut off legal military aid to the Contras, the CIA had seen to it that Pastora
did not receive any assistance, and his forces were experiencing "desperate
Although there are discrepancies among the parties as to when the initial
meeting took place, Pastora's organization was approached by George Morales,
a Colombian drug trafficker living in Miami who had been indicted on narcotics
According to the State Department report to the Congress of July 26, 1986:
Information developed by the intelligence community indicates that a senior
member of Eden Pastora's Sandino Revolutionary Front (FRS) agreed in late
1984 with (Morales) that FRS pilots would aid in transporting narcotics
in exchange for financial assistance...the FRS official agreed to use FRS
operational facilities in Costa Rica and Nicaragua to facilitate transportation
of narcotics. (Morales) agreed to provide financial support to the FRS,
in addition to aircraft and training for FRS pilots. After undergoing flight
training, the FRS pilots were to continue to work for the FRS, but would
also fly narcotics shipments from South America to sites in Costa Rica and
Nicaragua for later transport to the United States. Shortly thereafter (Morales)
reportedly provided the FRS one C-47 aircraft and two crated helicopters.
He is reported to have paid the sum of $100,000 to the FRS, but there was
no information available on who actually received the money.
The State Department said it was aware of only one incident of drug trafficking
resulting from this agreement between the Contras and Morales and that was
the case of Contra pilot Gerardo Duran. Duran was arrested in January 1986,
in Costa Rica for his involvement in transporting cocaine to the United
States. Duranwas an FRS pilot from 1982 to 1985
and operated an air taxi service in Costa Rica. According to Marco Aguado
and Karol Prado, Duran would fly supplies to the Contras on the Southern
Front and he would charge for each flight.
Robert Owen, courier for Lt. Col. Oliver North, testified to the Iran/Contra
Committees that he told North he thought Karol Prado was involved in trafficking
drugs out of Panama, and that Pastora's pilot, Marco Aguado, was also involved.
The Subcommittee was unable to validate Owen's claims. Prado vehemently
denied these allegations stating that he believed the drug trafficking allegations
against Pastora were the result of a CIA effort to discredit him.
Morales testified that his involvement with the Contras started in 1984
at the urging of Marta Healey, the widow of one of his drug pilots, Richard
Healey. Marta Healey's first husband was Adolfo
"Popo" Chamorro, the second in command to Eden Pastora in the
FRS. She came from a prominent Nicaraguan family.
At the time of his first contract, Morales was under indictment for marijuana
smuggling. He testified that he thought by assisting the Contra cause his
indictment would be dropped. Marta Healey introduced Morales to Popo Chamorro,
Marco Aguado and Octaviano Cesar at a meeting in Miami. According to Morales,
he wanted to make a deal: He would help the Contras with their needs, and
"they in exchange would help me with my objective, which was solving
my indictment." Morales believed the Contra leaders would help him
solve his legal problems because of their contacts with the CIA.
On October 31, 1987 in San Jose, Costa Rica, the Subcommittee videotaped
the depositions of three Contra leaders with intimate knowledge of the Morales
relationship with Pastora's organization in video depositions. The three
were Karol Prado, Pastora's head of communications; Marco Aguado, Pastora's
air force chief; and Octaviano Cesar who, along with his brother Alfredo,
were political allies of Pastora's at the time. A fourth, Adolfo "Popo"
Chamorro, who was Pastora's second in command in ARDE, testified in closed
session of the Subcommittee in April 1988. Chamorro's testimony was taken
in closed session by the consent of the Subcommittee at his request. Dick
McCall, of Senator Kerry's personal staff, in an arrangement worked out
with Chamorro and his attorneys, subsequently interviewed him in Miami.
Each denied knowing that Morales was under indictment for drug trafficking
when they first met him at Marta Healey's house in Miami. Popo Chamorro
said that as far as he knew Morales was just another rich Miami resident
with strong anti-Communist feelings.
In addition, all three denied receiving more than $10,000 in cash from Morales.
The Subcommittee found that $10,000 was given to Popo Chamorro to cover
the cost of transporting a C-47 owned byMorales, which he donated to ARDE,
from Haiti to Ilopango Air Force Base in El Salvador.
While denying receiving funds personally, Prado, Aguado and Cesar each confirmed
elements of Morales' story.
According to Prado, Octaviano Cesar and his brother Adolfo allied themselves
politically with Pastora in the Summer of 1984. A decision was then made
to send Popo Chamorro and Octaviano Cesar to the United States to look for
funds. In September, Popo Chamorro returned to Costa
Rica with photographs of a DC-4 and a Howard plane, and told Pastora that
they would get six more planes, including a Navajo Panther from George Morales.
Pastora told Chamorro that the C-47 was the most practical plane for the
Contras at the time and Popo returned to Miami to arrange for its transfer.
Chamorro provided the Subcommittee with an aircraft purchase order, dated
October 1, 1984. The notarized purchase order provided that for the sum
of one dollar, a McDonnell-Douglas DC-3, the civilian designation for a
C-47, would be transferred to Marco Aguado. The order was signed by George
Morales, as the seller, and by Marco Aguado, as the purchaser.
In addition, Chamorro gave the Subcommittee a list of flights made by that
C-47 to ferry arms from Ilopango to Costa Rica and La Penca. Between October
18, 1984 and February 12, 1986, some 156,000 pounds of material were moved
from Ilopango to air fields in Costa Rica. Of the 24 flights during this
period, eleven were to La Penca on the Nicaraguan side of the Rio San Juan.
The Subcommittee substantiated key elements of the Morales story, although
it did not find evidence that Cesar, Chamorro, or Prado were personally
involved in drug trafficking. First, all witnesses agreed that Morales gave
ARDE a C-47. Evidence of an association between them is also provided by
a Customs document. This document, provided to the Committee by the U.S.
Customs Service, shows that Morales entered the United States from the Bahamas
on October 13, 1984, with Marco Aguado, Octaviano Cesar and Popo Chamorro.
They carried $400,000 in cash and checks which were declared by Aguado,
Chamorro and Cesar. They claimed that the checks and money were returned
to Morales after clearing Customs.
Aguado summarized the relationship between the Southern Front Contras and
the drug traffickers in terms of the exploitation of the Contra movement
by individuals involved in narcotics smuggling. According to Aguado, the
trafficking organizations, "took advantage of the anti-communist sentiment
which existed in Central America ... and they undoubtedly used it for drug
trafficking." Referring to the Contra resupply operations, Aguado said
the traffickers used "the same connections, the same air strips, the
same people. And maybe they said that it was weapons for Eden Pastora, and
it was actually drugs that would later on go to the U.S.... They fooled
people ... Unfortunately, this kind of ac-tivity, which is for the freeing
of a people, is quite similar to the activities of the drug traffickers."
Octaviano Cesar testified that when he dealt with Morales he was:
Thinking in terms of the security of my country. It just didn't enter my
mind that I would become involved in such a mess, because it never entered
into my mind to get in that [drug] business ...
I went a couple of times inside in Nicaragua and I saw people there. Young
kids 15, 16 years old, they were carrying 30, 40 rounds of ammunition against
the Sandinistas ... And that's why I did it. I'm not proud of it, but I
just didn't have any choice. I mean, the U.S. Congress didn't give us any
choice. They got these people into a war. The people went inside of Nicaragua,
80 miles inside. They had thousands of supporters, campesinos there helping
them ... Now, when those people retreat, those campesinos were murdered
by the Sandinistas. I don't want that, but that's the reality of life.
In addition, Cesar told the Subcommittee that he told a CIA officer about
Morales and his offer to help the Contras.
Senator KERRY. Did you have occasion to say to someone in the CIA that you
were getting money from him and you were concerned he was a drug dealer?
Did you pass that information on to somebody?
Mr. CESAR. Yes, I passed the information on about the--not the relations--well,
it was the relations and the airplanes; yes. And the CIA people at the American
military attache's office that were [sic] based at Ilopango also, and any
person or any plane landed there, they had to go----
Senator KERRY. And they basically said to you that it was all right as long
as you don't deal in the powder; is that correct? Is that a fair quote?
After the La Penca bombing of May 30, 1984, all assistance was cut off by
the CIA to ARDE, while other Contra groups on both fronts continued to receive
support from the U.S. government through a variety of channels. The United
States stated that the cut-off of ARDE was related to the involvement of
its personnel in drug trafficking. Yet many of the same drug traffickers
who had assisted ARDE were also assisting other Contra groups that continued
to receive funding. Morales, for example, used Gerardo Duran as one of his
drug pilots, and Duran worked for Alfonso Robello and Fernando "el
Negro" Chamorro, who were associated with other Contra groups, as well
as for ARDE.
In a sworn deposition which was taken in San Jose Costa Rica by the Subcommittee
on October 31, 1987, Karol Prado, Pastora's treasurer and procurement officer,
vehemently denied allegationsconcerning the personal involvement of ARDE
leadership in drug trafficking. Prado said that because of Pastora's problems
with the U.S. government, it was his belief that the CIA was attempting
to discredit the former Sandinista Commandante and his supporters in ARDE
with allegations that they were involved in drug trafficking.
Thomas Castillo, the former CIA station chief in Costa Rica, who was indicted
in connection with the Iran/Contra affair, testified before the Iran/Contra
Committees that when the CIA became aware of narcotics trafficking by Pastora's
supporters and lieutenants, those individuals' activities were reported
to law enforcement officials. However, Morales continued
to work with the Contras until January 1986. He was indicted for a second
time in the Southern District of Florida for a January 1986 cocaine flight
to Bahamas and was arrested on June 12, 1986.
Morales testified that he offered to cooperate with the government soon
after he was arrested, and that he was willing to take a lie detector test.
He said his attorneys repeated the offer on his behalf several times, but
on each occasion the U.S. Attorney, Leon Kellner, refused.
Leon Kellner and Richard Gregorie, then the head of the criminal division
of the Miami U.S. Attorney's office, met with the staff of the Committee
in November 1986. They said that Morales' story was not credible and that
Morales was trying to get his sentence reduced by cooperating with a Senate
committee. As Morales had not yet been sentenced, both Kellner and Gregorie
discouraged the staff from meeting with Morales at that time, and the staff
respected their request. Kellner and Gregorie said that Morales was like
the many Miami cocaine traffickers who use the "I was working for the
Following his testimony before the Subcommittee, Morales renewed his offer
to work with the government. This time, federal law enforcement officials
decided to accept the offer. Morales provided the government with leads
that were used by law enforcement authorities in connection with matters
remaining under investigation. In November 1988, the DEA gave Morales a
lengthy polygraph examination on his testimony before the Subcommittee and
he was considered truthful.
John Hull was a central figure in Contra operations on the Southern Front
when they were managed by Oliver North, from 1984 through late 1986.
Before that, according to former CostaRican CIA station chief Thomas Castillo's
public testimony, Hull had helped the CIA with military supply and other
operations on behalf of the Contras. In addition,
during the same period, Hull received $10,000 a month from Adolfo Calero
of the FDN--at North's direction.
Hull is an Indiana farmer who lives in northern Costa Rica. He came to Costa
Rica in mid-1970's and persuaded a number of North Americans to invest in
ranch land in the northern part of the country.
Using their money and adding some of his own, he purchased thousands of
acres of Costa Rican farm land. Properties under his ownership, management
or control ultimately included at least six airstrips. To the many pilots
and revolutionaries who passed through the region, this collection of properties
and airstrips became known as John Hull's ranch.
On March 23, 1984, seven men aboard a U.S. government owned DC-3 were killed
when the cargo plane crashed near Hull's ranch, revealing publicly that
Hull was allowing his property to be used for airdrops of supplies to the
Contras. But even before this public revelation
of Hull's role in supporting the Contras, officials in a variety of Latin
American countries were aware of Hull's activities as a liaison between
the Contras and the United States government. Jose Blandon testified, for
example, that former Costa Rican Vice President Daniel Oduber suggested
he (Blandon) meet with Hull in 1983, to discuss the formation of a unified
southern Contra command under Eden Pastora.
Five witnesses testified that Hull was involved in cocaine trafficking:
Floyd Carlton, Werner Lotz, Jose Blandon, George Morales, and Gary Betzner.
Betzner was the only witness who testified that he was actually present
to witness cocaine being loaded onto planes headed for the United States
in Hull's presence.
Lotz said that drugs were flown into Hull's ranch, but that he did not personally
witness the flights. He said he heard about the drug flights from the Colombian
and Panamanian pilots who allegedly flew drugs to Hull's airstrips. Lotz
described the strips as "a stop for refuel basically. The aircraft
would land, there would be fuel waiting for them, and then would depart.
They would come in with weapons and drugs." Lotz said that Hull was
paid for allowing his airstrips to be used as a refueling stop.
Two witnesses, Blandon and Carlton recounted an incident involving the disappearance
of a shipment of 538 kilos of cocaine owned by the Pereira or Cali cocaine
cartel. Teofilo Watson, a member of Carlton's smuggling operation, was flying
the plane to Costa Rica for the Cartel. The plane crashed and Watson was
killed. The witnesses believed that the crash occurred at Hull's ranch and
that Hull took the shipment and bulldozed the plane, a Cessna 310, into
the river.Carlton testified that the Colombians were furious when they discovered
the cocaine missing. He said they sent gunmen after Hull and in fact kidnapped
a member of Hull's family to force the return of the cocaine. When that
failed they became convinced that Carlton himself stole the cocaine and
they sent gunmen after him. The gunmen dug up Carlton's property in Panama
with a backhoe looking for the lost cocaine, and Carlton fled for his life
Gary Betzner started flying for Morales' drug smuggling network in 1981.
Betzner testified that his first delivery of arms to the Contras was in
1983, when he flew a DC-3 carrying grenades and mines to Ilopango Air Force
Base in El Salvador. His co-pilot on the trip was Richard Healey, who had
flown drugs for Morales.
Betzner said the weapons were unloaded at Ilopango by Salvadoran military
personnel and an American whom he assumed worked for the U.S. Department
of Defense. Betzner testified that he and Healey flew the plane on to Colombia
where they picked up a load of marijuana and returned to their base at Great
Harbor Cay in the Bahamas.
According to Betzner, the next Contra weapons and drugs flight took place
in July 1984. Morales asked him to fly a load of weapons to Hull's ranch
and to pick up a load of drugs. Betzner flew a Cessna 402-B to John Hull's
ranch. According to Betzner, he was met at the airstrip by Hull and they
watched the cargo of weapons being unloaded, and cocaine, packed in 17 duffel
bags, and five or six two-foot square boxes being loaded into the now-empty
Cessna. Betzner then flew the plane to a field at Lakeland, Florida.
Yet another guns for drugs flight was made two weeks later. On this trip,
Betzner said he flew a Panther to an airstrip called "Los Llanos,"
about ten miles from Hull's properties and not far from the Voice of America
transmitter in northern Costa Rica. Betzner testified that Hull met him
again and the two watched while the weapons were unloaded and approximately
500 kilos of cocaine in 17 duffel bags were loaded for the return flight
Hull became the subject of an investigation by the U.S. Attorney for the
Southern District of Florida in the spring of 1985. In late March 1985,
Assistant U.S. Attorney Jeffrey Feldman and two FBI agents went to Costa
Rica to investigate Neutrality Act violations by participants in the Contra
resupply network that were also under investigation at the time by Senator
Kerry. Both the Feldman and Kerry inquiries had been prompted in part by
statements made to reporters by soldiers of fortune imprisoned in Costa
Rica who alleged John Hull was providing support for the Contras with the
help of the National Security Council.
Feldman and the FBI agents met with U.S. Ambassador to Costa Rica, Lewis
Tambs, and the CIA Chief of Station, Thomas Castillo,who told him John Hull
knew Rob Owen and Oliver North and gave the impression that Hull had been
working for U.S. interests prior to March of 1984. In addition, one of the
embassy security officers, Jim Nagel, told one of the FBI agents accompanying
Feldman, that regarding Feldman's inquiries, "... these were agencies
with other operational requirements and we shouldn't interfere with the
work of these agencies." When Feldman attempted
to interview Hull, Feldman learned that Hull was told by the embassy staff
not to talk to him without an attorney present.
Feldman concluded that U.S. Embassy officials in Costa Rica were taking
active measures to protect Hull. After Feldman interviewed two of the mercenaries,
Peter Glibbery and Steven Carr, regarding their allegations of Hull's involvement
in criminal activity, Feldman learned that Kirk Kotula, Consul in San Jose,
was "trying to get Carr and the rest of these people to recant their
statements regarding Hull's involvement with the CIA and with any other
American agency. Feldman added "... it was
apparent we were stirring up some problem with our inquiries concerning
John Hull." Feldman concluded that because
Hull was receiving protection from some US officials, that it would not
be possible to interview him. Feldman therefore took no further steps to
In an effort to stop the investigation against him and to cause the Justice
Department to instead investigate those urging an investigation of Hull,
Hull prepared falsified affidavits from jailed mercenaries in Costa Rica
to U.S. Attorney Kellner. In the affidavits the mercenaries accused Congressional
staff of paying witnesses to invent stories about illegal activities associated
with the clandestine Contras supply network. The Justice Department ultimately
concluded that the affidavits had been forged. Kellner testified that he
"had concerns about them and ... didn't believe them.
To this day, the Justice Department has taken no action against John Hull
for obstruction of justice or any related charge in connection with his
filing false affidavits with the U.S. Justice Department regarding the Congressional
In the period in which he was providing support to the Contras, Hull obtained
a loan from the Overseas Private Investment Corporation for $375,000 which
ultimately proved to have been obtained with false documentation.
In 1983, Hull and two associates, Mr. William Crone and Mr. Alvaro Arroyo
approached OPIC for a loan to finance a joint venture wood products factory
that would make wheelbarrow and ax handles for the U.S. market. In fact,
according to testimony from Crone and OPIC officials, no contributions from
Hull, Arroyo or himself were made to the joint venture. On the basis of
the applica-tion, some supporting documentation and a site visit, on March
30 1984, OPIC advanced $375,000.
By the end of 1985, after one interest payment, the loan lapsed into default,
and OPIC officials began to recognize that the project was a fraud, and
that Hull had made false representations in making the application to OPIC.
OPIC officials found that the money which was disbursed by their Agency
was deposited in Hull's Indiana bank account and the funds were withdrawn
by Hull in cash. When OPIC inquired in 1986 as where the funds were going,
Hull told OPIC officials that he would be using the cash to buy Costa Rican
money on the black market to get a more favorable exchange rate.
In fact, Costa Rica has a favorable exchange rate for foreign investment
and the excuse Hull offered does not make sense. What appears to have happened
is that Hull simply took the money, inasmuch as no equipment was purchased
for the factory, no products were shipped from it, and Hull's partner, Crone,
testified that he never saw the money. Indeed, prospective purchasers complained
that they paid Hull for products in advance but never received delivery.
On the basis of the subsequent OPIC investigation of the loan to Hull's
company, in April 1987, the case was referred to the Justice Department
for a criminal fraud investigation. While nothing
has yet happened for almost two years, the Justice Department maintains
the investigation is still ongoing.
OPIC foreclosed on the properties which Hull had put up as collateral for
the loan. Following the foreclosure to recover their monies, OPIC sold the
property at auction. However, in order to prevent a sale far below the market
price, OPIC bid at the auction and wound up purchasing its own property
OPIC then attempted to sell the property directly. An advertisement was
placed in The Wall Street Journal which attracted a single offer from an
investment banker in Philadelphia. An agreement was negotiated whereby the
company purchasing the property from OPIC was required to make no down payment,
and only to repay OPIC its $187,500 from the future proceeds of the sale
of timber cut on the land. The corporation which purchased the property
has no other assets other than the land. If the agreement is fulfilled by
the purchasers of the land, OPIC will realize repayment of $187,500, half
of the original $375,000 loaned to Hull.
The Subcommittee also heard testimony investors who had allowed Hull to
purchase property for them and then to manage the property, who testified
that he did not deliver on his promises, he failed to purchase the properties
he said he would, and in one case,took farm equipment off a farm he was
paid to manage and converted it for his own use.
In mid-January 1989, Hull was arrested by Costa Rican law enforcement authorities
and charged with drug trafficking and violating Costa Rica's neutrality.
The San Francisco Frogman case was one of the first cases in which allegations
linking specific Contra organizations to drug smugglers surfaced. In a July
26, 1986 report to the Congress on Contra-related narcotics allegations,
the State Department described the Frogman case as follows:
"This case gets it nickname from swimmers who brought cocaine ashore
on the West Coast from a Colombian vessel in 1982-1983. It focused on a
major Colombian cocaine smuggler, Alvaro Carvajal-Minota, who supplied a
number of West Coast smugglers. It was alleged, but never confirmed, that
Nicaraguan citizen Horacio Pereira, an associate of Carvajal, had helped
the Nicaraguan resistance. Pereira was subsequently convicted on drug charges
in Costa Rica and sentenced to twelve years imprisonment. Two other Nicaraguans,
Carlos Cabezas and Julio Zavala, who were among the jailed West Coast traffickers
convicted of receiving drugs from Carvajal, claimed long after their conviction
that they had delivered large sums of money to resistance groups in Costa
Rica and that Pereira, who was not charged in the case, has said the profits
from the drug sale would finance resistance activities."
The allegations made by Cabezas and Zavala involved two Southern Front Contra
groups--UDN-FARN, a military group associated with Fernando "El Negro"
Chamorro, and PCNE, a Contra political group in the South. Cabezas claimed
that he helped move 25 to 30 kilos of cocaine from Costa Rica to San Francisco,
generating $1.5 million. According to Cabezas, part of that money was given
to Troilo and Fernando Sanchez to help Eden Pastora's and Fernando "El
Negro" Chamorro's operations on the Southern Front in 1982 and l983.
After the trial, the U.S. government returned $36,020 seized as drug money
to one of the defendants, Zavala, after he submitted letters from Contra
leaders claiming the funds were really their property. The money that was
returned had been seized by the FBI after being found in cash in a drawer
at Zavala's home with drug transaction letters, an M-1 carbine, a grenade,
and a quantity of Cocaine.
The Subcommittee found that the Frogman arrest involved cocaine from a Colombian
source, Carvajal-Minota. In addition, Zavala and Cabezas had as a second
source of supply, Nicaraguans living in Costa Rica associated with the Contras.
FBI documents from the Frogman case identify the Nicaraguans as Horacio
Pereira, Troilo Sanchez and Fernando Sanchez.Pereira
was convicted on cocaine charges in Costa Rica in 1985 and sentenced to
12 years in prison. An important member of the
Pereira organization was Sebastian "Huachan" Gonzalez, who also
was associated with ARDE in Southern Front Contra operations. Robert Owen
advised North in February 1985, that Gonzalez was trafficking in cocaine.
Jose Blandon testified that Eden Pastora knew that Gonzalez was involved
in drug trafficking while he was working with ARDE. Gonzalez later left
the Contra movement and fled from Costa Rica to Panama, where he went to
work for General Noriega.
During the Pereira trial, evidence was also presented by the Costa Rica
prosecutor showing that drug traffickers had asked leader Ermundo Chamorro
the brother of UDN-FARN leader Fernando "El Negro" Chamorro, for
assistance with vehicles to transport cocaine and for help with a Costa
Rica police official.
Troilo and Fernando Sanchez were marginal participants in the Contra movement
and relatives of a member of the FDN Directorate.
Several groups of Miami-based Cuba Americans provided direct and indirect
support for the Southern Front during the period that the Boland Amendment
prohibited official U.S. government assistance. Their help, which included
supplies and training, was funded in part with drug money.
The State Department described the allegations in its July 1986 report to
Congress as follows:
There have been allegations that Rene Corbo and other Cuban Americans involved
in anti-Sandinista activities in Costa Rica were connected with Miami-based
drug traffickers. Corbo reportedly recruited a group of Cuban American and
Cuban exile combatants and military trainers in the Miami area who operated
inside Nicaragua and in the northern part of Costa Rica. Two Cuban exiles
in this group, Mario Rejas Lavas and Ubaldo Hernandez Perez, were captured
by the Sandinistas in June 1986. They were reportedly members of the UNO/FARN
group headed by Fernando "El Negro" Chamorro. There is no information
to substantiate allegations that this group from Miami has been a source
of drug money for the UNO/FARN or any other resistance organization.On
May 6, 1986, Committee staff met with representatives of the Justice Department,
FBI, DEA, CIA and State Department, to advise them of allegations of gun
running and drug trafficking in connection with this group.
In August 1986, the Committee requested information from the Justice Department
regarding the allegations concerning Corbo and fellow Cuban Americans Felipe
Vidal, Frank Castro, and Luis Rodriguez and Frank Chanes (two of the principals
in Frigorificos de Puntarenas and Ocean Hunter), concerning their involvement
in narcotics trafficking. The Justice Department refused to provide any
information in response to this request, on the grounds that the information
requested remained under active investigation, and that the Committee's
"rambling through open investigations gravely risks compromising those
Less than three months earlier, the Justice Department had advised both
the press and the Committee that the allegations had been thoroughly investigated
and were without foundation. 
At no time did the Justice Department disclose to the Committee in response
to its inquiry that extensive information had in fact been developed by
the FBI from 1983 through 1986 suggesting that many of the allegations the
Committee was investigating were true.
At the May 6, 1986 meeting with Committee staff, the CIA categorically denied
that weapons had been shipped to the Contras from the United States on the
flights involving Rene Corbo, noting that the material on which they were
basing these assertions was classified, and suggested that the allegations
that had been made to the contrary were the result of disinformation.
In fact, as the FBI had previously learned from informants, Cuban American
supporters of the Contras had shipped weapons from south Florida to Ilopango,
and from there to John Hull's airstrips in Costa Rica.
The persons involved admitted to the FBI that they had participated in such
shipments, making general statements about them beginning in 1985. On June
4, 1986 and June 16, 1986, Rene Corbo, one of the principals in the shipments,
explicitly told the FBI that he had participated in shipping weapons to
the Contras in violation of U.S. Neutrality laws.
The Cuban-American contingent supporting the Contra effort on the Southern
Front work with Pastora until May 30,1984 bombing at La Penca. After the
assassination attempt on Pastora they shifted their allegiance to Fernando
"El Negro" Chamorro of UDN-FARN. By mid-June 1984, the drug smuggling
through the Southern Front zones controlled by the Contras had grown sufficientlyobvious
that Robert Owen warned Lt. Col. Oliver North at the NSC that the "Cubans
(are) involved in drugs."
Notes taken by Colonel Robert L. Earl during his tenure at the NSC described
how in August 1986, the CIA was worried about
.. disreputable characters in the Cuban-American community that are sympathetic
to the Contra cause but causing more problems than help and that one had
to be careful in how one dealt with the Cuban-American community and its
relation to this, that although their motives were in the right place there
was a lot of corruption and greed and drugs and it was a real mess.
In August 1988, Corbo and Castro were indicted in a Neutrality Act case
involving the Contras brought by the U.S. Attorney for Miami and prosecuted
by Assistant U.S. Attorney Jeffrey Feldman. No narcotics-related allegations
were included in the August 1988 indictment.
One of the three principals in Frigorificos de Puntarenas and Ocean Hunter,
Luis Rodriguez, was indicted on drug charges in April 1988. The others,
Frank Chanes and Moises Nunez, participated in Contra military assistance
operations in 1984 and 1985. Nunez was employed
by both the drug money laundering front, Frigorificos de Puntarenas, and
by Glenn Robinette on behalf of the Second-North Enterprise. Former CIA
Costa Rica Chief of Station Thomas Castillo told the Iran-Contra committees
that Nunez "was involved in a very sensitive operation" for the
A particularly controversial allegation arose during the course of the Subcommittee's
investigation. This involved Ramon Milian Rodriguez's offer to assist the
Contras, following his arrest for money laundering.
In a June 26, 1987 closed session of the Subcommittee, Milian Rodriguez
testified that in a meeting arranged by Miami private detective Raoul Diaz
with Felix Rodriguez, he (Milian) offered to provide drug money to the Contras.
Milian Rodriguez stated that Felix accepted the offer and $10 million in
such assistance was subsequently provided the Contras through a system of
Milian Rodriguez testified that he also offered to assist in entrapping
the Sandinistas in a drug sting--all in return for dropping the charges
then pending against him.
Felix Rodriguez strenuously denied Milian Rodriguez's version of the meeting,
stating that he reported Milian's offer to a number of U.S. government agencies,
including the FBI and CIA. No action was taken by those agencies, and Milian
Rodriguez's case went to trial.
Raoul Diaz refused to respond to a Committee subpoena to discuss his recollection
of the meeting. Therefore, because of the diffi-culty the Subcommittee faced
in ascertaining who was telling the truth--Ramon Milian Rodriguez or Felix
Rodriguez--Milian was asked whether he would be willing to take a polygraph
examination. He agreed to submit to an examination on the question of providing
drug money to the Contras through Felix Rodriguez.
Senator Kerry, the Subcommittee Chairman, arranged for one of the country's
leading polygraph experts, Dr. Donald Raskin of the University of Utah,
to travel to Washington, D.C. to administer the test. Dr. Raskin administered
a partial examination of Milian Rodriguez on June 3-4, 1988. On two critical
questions, Ramon Milian Rodriguez's answers were determined to be deceptive
by Dr. Raskin. The questions were as follows:
1. Did Felix Rodriguez ask you to arrange deliveries of money for the Contras
during the meeting at Raoul's office?
2. Did you arrange approximately five deliveries of money for the Contras
on the basis of phone calls you personally received from Felix Rodriguez?
On the third question, Dr. Raskin could not determine whether or not Ramon
Milian Rodriguez was being truthful in his response. The question was as
3. Did you arrange the deliveries of at least $5 million for the Contras
using the procedures that you and Felix worked out?
At that point, Milian Rodriguez stated that he did not want to continue
the examination. Based upon Dr. Raskin's oral evaluation of Ramon Milian
Rodriguez, the Chairman concluded that his version of the meeting with Felix
Rodriguez and his subsequent relationship with Felix in providing drug money
for the Contras was not truthful. The Chairman reached no conclusion regarding
the issue of whether Ramon Milian arranged for the deliveries of at least
$5 million for the Contras.
During Felix Rodriguez' public testimony before the Subcommittee on July
14, 1988, Senator Kerry stated that he did not believe Ramon Milian Rodriguez'
version of the meeting was truthful.
However, Milian Rodriguez' testimony regarding the Cartels, General Noriega's
role in narco-trafficking, and his involvement in setting up companies which
were later used to support the Contras, was corroborated by a number of
witnesses, including Jose Blandon, Floyd Carlton, Gerald Loeb, and a Miami
attorney who had supplied information on the Cartels in a closed session
deposition. In addition, Milian Rodriguez' testimony on many of these points
was corroborated by extensive documentary evidence and by grand jury statements
by his partners in federal criminal proceedings.