INTEMS FOR DISCUSSION--2/6/86

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88G01117R000100040005-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 22, 2016
• Document Release Date: June 23, 2011
• Sequence Number: 5
• Publication Date: February 6, 1986
• Content Type: MISC

STAT
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
Next 1 Page(s) In Document Denied
Iq
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 STAT
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
Next 5 Page(s) In Document Denied
Iq
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88G01117R000100040005-1
STAT
Panama -- Memo for Poindexter from Turner
Names of People Who Should Be Called By Ambassador Briggs
5. "Panama 'Beheaded'" -- The Washington Post
6. "Who No Outrage over Panama's Coup?" -- Los Angeles Times
7. "Panama a haven for traffickers" -- San Antonio Light
8. "Panama's powerful figure in drug money laundering"
San Antonio Light
9. "Drug money snowballing in Panamanian banks" -- San Antonio
Light
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88G01117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
Next 7 Page(s) In Document Denied
Iq
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88G01117R000100040005-1
A26 FRIDAY, DECEMBER 6, 1985
10
L,iuaau iveuy, costa iuca, witnesses last saw tecnmcauy remains president.
Dr. Hugo Spadafora alive reading a newspa- The story was put. out that the Barletta eco-
per at a Panamanian National Guard border check-. nomic policies were largely to blame, but knowl-
point, where he was being, detained after having edgeable Panamanians look more to the Spadafora
. ' been removed from a bus,, about noon on Friday, ? affair. - Panama's painful progress toward democ-
Sept. 13. The next person the Costa Rican police racy was thereby '.'beheaded'.', too.
could find who had seen'him was the young man ?. In Panama these days, the atmosphere reeks of
who found his body, "completely decapitated," in police intimidation, but large numbers of citizens
La Vaquita River. just across.-.the border from have come out in the streets calling peacefully for
Panama-the next afternoon.. an inquiry into the Spadafora murder. Meanwhile,
Dr. Spadafora was known, among other things, the armed forces are bringing under their direct
for having formed, a battalion in Panama to. fight control a whole range of functions-ports, rail-
against the 'Somoza family in Nicaragua. He was roads, customs, immigration-previously and more,
also. known for being' a keen critic of,"among other properly under civil administration. The, Barletta things, the alleged drug trafficking connections of economic policy, which had been sanctioned by the
Gen. Manuel Noriega, strongman of Panama. ::. political. parties, threatens to go--by the boards,
The murder and its manner stunned Panama, . with immense potential costs to the country's eco-
which is not one. of those Central American places nomic viability and credit worthiness.
where the killing, let alone the evident torture and Gen. Noriega is' well known in Panama. He is
beheading, of critics Is routine. In 'an important. becoming well known outside Panama as an im-
sense, however, Dr. Spadafora was not the only perious leader who fears to let independent inves- _
victim. There is reason to believe that the elected tigators examine the Spadafora affair and to let in-
president, Nicolas Arditas Barletta, was planning to dependent citizens control their government. Al-
launch an inquiry' into the -crime' upon his return most every country in Latin America is 'going the
from a trip to the United Nations in October. While democratic way except Nicaragua and Panama.
he was still in New York, Gen. Noriega forced his Gen. Noriega is an embarrassment to his country,
ouster; actually, President Barletta, struggling to and to the integrity of the Panamanian armed
.::.,maintain a thread of constitutionality,. '.'separated" forces. - -
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88G01117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
Cos :Angclc6 Times
Friday, November 1, 1985
fJ-
VVhy No Outrage Over Panama's Coup?
By NORMAN A. BAILEY
Ever since 1982, when one Latin Ameri-
can country. after another began moving
from military dictatorship to democracy,
pessimists have been warning that The
region's persistent economic crisis would
cause the political tide to turn again. It was
said that the people would grow impatient
with the democratic system's inherently
slow management of the economy and
would look again to authoritarians for a
Draconian solution.
That appears to be the case in Panama,
.That
a coup is struggling to take hold. If
the democratic governments of the Hemi-
sphere don't intervene, Panama may be-'
come the first domino to fall.
Panama's crisis descended, ironically, on
the eve of the international financial
convocation in Seoul, where the United
States unveiled the outline of a new
program for dealing with Latin America's
huge. external debt-thus offering these
countries a light at the end of the economic
tunnel for the first time in three years.
In New York, on Thursday, Sept. 26,
President Nicolas Ardito Barletta of Pana-
ma gave a speech at the General Assembly
of the United Nations. That evening he
hosted a reception in honor of the U.N.
secretary-general. But around 9:30 p.m.
Barletta left his hotel suddenly and flew
back to Panama, into the teeth of a
gathering hurricane.
. He was met at the airport Friday
morning by officers of the Panamanian
National Guard headed by Gen. Manuel
Antonio Noriega, and taken to the guard
barracks. Fourteen hours later, at 3:30 a.m.
on Saturday, Sept. 28, Barletta issued a
declaration addressed to "the people of
Panama" and was sent home. Shortly
thereafter the first vice president, Eric
Arturo Delvalle, was sworn in as president,
over the vigorous objections of U.S. Am-
bassador Everett Briggs.
The reason given for Barletta's ouster
was the country's economic and financial
crisis and his inability to deal with it.
On the face of it; there would seem to be
no Latin American president better pre-
pared to understand and deal with the
economic situation than Nicolas Barletta.
He was educated as an economist at North
Carolina State University and the Univer-
sity of Chicago; he was minister of economy
in the government of Col. Omar Torrijos; he
was the World Bank's vice president for
Latin America from 1978 to 1984. In that
year, with the support of the National
Guard, he was elected president, narrowly
defeating 83-year-old veteran politician
Arnulfo Arias. From the time of his
inauguration until his overthrow, Barletta
tried to institute those economic measures
necessary to deal with Panama's foreign
debt service and economic crisis.
The overthrow of President Barletta's
government is triply dangerous. In the first
place, his downfall, as mentioned, is the
first reversal of the recent process of
democratization in Latin America. Second,
the excuse used (and it is certainly nothing
more than an excuse) is the economic and
financial crisis. There is not a country in
Latin America where this pretext could not
be used to justify a coup. Thus the worst
fears of the pessimists may be coming true.
Finally, Noriega, widely suspected of drug
dealings and the murder of an opposition
figure shortly before the coup, has indicat-
ed that he staged the takeover to forestall a
similar action by his second-in-command,
Lt. Col. Roberto Riaz Herrera, a leftist with
reported ties to the Sandinistas and Castro,
who is slated for retirement early next
year.
4
Nicolas Barletta claims that he is still
constitutional president of Panama. His
assertion rests on two grounds. In his
declaration, he spoke of "separating him-
self from his tasks," not "resigning," and
did so in front of his cabinet. According to
the Panamanian Constitution, the president
can separate himself from his tasks for up
to 90 days without ceasing to be president.
The first vice president then be6omes
temporary acting president. Also, Barletta'
addressed himself to "the people of Pana-
ma," not to the National Assembly, which
would have been 'appropriate had he
wanted to resign. The dean of the Univer-
sity of Panama's law school has agreed
with these interpretations. .
Given the dignity, and courage being
shown by President Barletta; given the
importance of reaffirming the democratic
process in the.face of the Hemisphere's
economic crisis; given the dangers of the
lethal formula of drugs plus radicalism in
strife-ridden Latin America, is it too much'
to ask the countries of the Hemisphere to
meet in the council of the Organization of
American States, put aside their habitual
hypocrisy for once and demand that the
constitutional president of Panama be
restored to the exercise of his office? Is it
too much to ask one of the democratic
countries of the region to convene an
emergency meeting of the council? Is it
also too much to ask the U.S. government
to support such a move, or is "twisting
slowly in the wind" now to be applied on a
worldwide scale?.
Norman A. Batley is senior associate of the
Washington consultant firm of Colby, Bailey,
Werner & Associates. He was special assist-
ant to the President for national security
affairs in 1981-83. - -
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
Panama is a safe-haven for narcotics traffickers and
guerrillas tvho hare financed their arms purchases
through the narcotics trade. The country's tight bank
U FIRST IN A SERIES
U SUBVERSION/A4
secrecy laws, the venality of
some of its bankers and the
layers. of corruption in its po-.
litical and military establishment allow wholesalers to
spend their ill-gotten wealth unimpeded by law en-.
forcerhen2 efforts..
Today, The Hearst Newspapers begins a series by
Knut Royce on Panama's little-understood role in the
narcotics trade.
By 'J7 PO'IC - .
The Hearst Newspapers '.
PANAMA CITY, Panama - The plot was hatched
in Havana. The final outcome was bloceshea off Co-*
lonibia's Pacific coast, but Panama' is what made it
happen.' .
,:It was on a steamy November day in. 1981 that a
medium-sized freighter, the Karina, entered the Pana-
ma Canal at Colon, on the Atlantic side of the isthmus,
to begin the eight-hour journey.to the Pacific. The
ctew and captain were from the Eastern bloc.-.
What set this' ship"apart from the-40 others that
passed through that, day.was that it was on its final
voyage.
The 40-mile canal crossing was uneventful. But
shortly after it passed through the last locks at Balboa,
The Hearst Newspapers have learned, it took on some
unlikely cargo at the fishing port of Vacamonte: a new-
captain and crew; tons of weapons and a small contin-
^gent'of insurgents belonging to the M-19 organization
that was waging guerrilla warfare in Colombia.
-`.'The M-19 .was: not aboard when it transited
(through the canal)," said a U.S. intelligence official.
with intimate knowledge of what happened that day.'
"After it transited, the captain changed. The whole
crew?changed. The captain and the crew now were
Panamanians. The M-19 cam on. There's r}o official
record of its being in Vacamonte. But.there's informa-
tion that's where it was." - .
The fishing port of Vacarnonte is a 20-minute drive
west of here. It is not a typical fishing port. Security
guards refused access to a reporter and photographer.
.,.!o the port. In. the past, they also have refused access
to U.S. Drug Enforcement Administration agents.
The largest fishing fleet there, ranging at various
times from two to four dozen ships, belongs to Cuba.
And the vessels, apparently, do not always carry fish.
The Karina on that day four years ago was on a mis-
sion sponsored by Cuba.
The mission's organizer was a major'C0
lomblan narcotics trafficker, Jaime Guil!ot
Lara, a fugitive from a 1982 U.S. federal
drug indictment. Cuba' had allowed him to
tranship narcotics into the United States. In
return, he used his smuggling network at
the behest of the Cubans to move. guns to
the M-19. ? .
Several days Lifter passing through the
canal, the Karina offloaded some of its.
weapons to another of Guillot-Lara's ships,
the Monarca.
A short time later, the Colombian Navy
sank the Karina with about 100 tons of
weapons and supplies stlll.in the.hold, kil:-
ing an estimated 20 persons. Three low-lev-
el M-19 members were rescued; as was the -
Panamanian captain,'although he died
while in custody. . _ -
.The following year, Thomas Enders,
then -assistant secretary-of state for inter-
American affairs,, testified before.a Senate
Committee that Guillot-Lara had received
$700,000 from Cuba to buy the arms and
had "also transferred funds.to the guerr:!-
las through an employee of.a Panamanv::n
bank." ;
? The Guillot-Lara-Cuba 'alli.ance was a
classic example of what officials now
cal!ing'narco-terrorism, the symbiotic rr'.i-
tionship between narcotics and subvers?nn.
'.There were other times when Cu? '-"-
Lara used Panama as a stopping point in c
gun-running missions. And not all of
? .
failed.-.
A month before the sinking of the !:ar-
ina, the M-19 guerrillas had hijacked a
3:cargo plane belonging to Colombia's A-
ospeca airline. '
As Guillot-Lara watched on a secret a:r-
.strip' in Colombia, the plane was loa"d
with 55 crates containing 10 Belgian
rifles e: ch and 90 boxes, each holding !
rounds of 7.62mm ammunition.,
The pilot flew the aircraft to the Or:e-
guaza River, where he was forced to lard :n
the water. Over the next several days t` ~?
freshly armed guerrillas raided severa:
small towns in the area.
The day after the plane was ditched, it
was discovered by Colombian authorities.
The empty crates showed that the arms had
been packed in Colon, Panama.
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
7
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
For:years M-19 guerrillas have passed
through Panama on the way to Cuba for
training. They also returned through Pana-
ma, picked up weapons and sneaked back
into Colombia. Occasionally they have been
cjiught, as was the case in'April 1951, when
a: group re-entering Colombia through Ec-
uador was, ambushed by.the Colombian
army:'
Panama is'an often-baffling.U.S. ally. It
is.strategically important to the United
States because of the'.canal, which comes
under"full Panamanian control in the year
:2000. ' and the U.S. military installations in
what once was the Canal Zone.
The U.S..Southern Command, which
would play a critical role in any military ac-
tion in Latin America,'is based here.
Panama is a quixotically charming tropi-
cal nation populated both by a well-educat-
ed service sector' and primitive Indian
tribes.-It also is struggling to sustain its re-
born. but tenuous democracy, overshad-
owed by an all-powerful military that pre-
fers' making dollars on the side to
oppressing the population.
pastime. is the pursuit of
The. national
cash. .
"It's like an old Humphrey Bogart mov-
ie," a Western diplomat said recently. "You
want to do something - legal or. illegal -
go to Panama with enough money. You can'
,.find away of doing it. You keep your nose
clean and you bring in money to keep Pana-
ma (in the) green, you're a good citizen."
Panama, through its banks, is the leading
laundering center for cocaine and marijua-
na traffickers,-and many of the deals are
made in the bars of its hotels and down-
town law offices.
"The thing that makes Panama so signifi-
cant.to me, and to most of us," said a senior
law enforcement' official in Washington;
"is that not only is it the center for launder-
ing proceeds, but it's a center for cutting up
the deals, for making payments, for meet-
ings. It's like the corporate center for drug
trafficking."
Unlike other banking centers with tight
:'bank secrecy laws, such as the Dutch Antil-
les, Switzerland'or' the Cayman Islands,
which. have. agreements with the 'United
States to reveal bank information in certain
felony cases, there 'are no bilateral 'agree-
ments here and secrecy is absolute.
.. Corporate records do not indicate true
owners. Many of. the bank accounts are
numbered and some of the bankers do not
ask questions when suitcases of.$20 bills
are' delivered'by:the armored cars..,
In addition, 'according to U.S. officials,
the Panamanian Defense Forces (PDF), also
responsible. for law. enforcement, often are
more aggressive in making a dollar out of
the drug traffic than in stopping it..'. .
In a scathing- staff report earlier this
year, the House Foreign Affairs Committee
quoted a "knowledgeable U.S.. source" as
saying: "The Panamanian Defense Force is
the axle around which the wheel of corrup-
tion turns."
"This'corruption is endemic and institu-
tionalized," the report said.
Gen. Manuel Noriega, the head,of the De-
fense Forces, dismissed the report as
The military niso has run guns to l ,ftlst
groups, although It Is widely believed that
these operations 'were motivated by profit
rather than ideology.
In 1979, a member of the military's intel-
ligence apparatus, the G-2, was indicted in
Miami in an armstsmuggling operation.on
behalf of the Sandinistas. .
The'following year, one'of its planes:
crashed while delivering arms to.Salvador-?
?
an guerrillas.
In 1981, a pilot for. the Defense.Forces
was arrested in Texas for trying to fly a
Huey helicopter'to Nicaragua..
Ricardo Arias Calderon, the'head of the
opposition Christian Democratic party and
unsuccessful candidate last year for vice
president, argues that the same apparatus
initially set up to smuggle guns a few years
'ago:has turned to more-profitable narcotics
trade. .
"In the late 1970s a network in.Panama
having to do with the Nicaraguan revolu-
tion developed," he said in an interview. "It
was used for funneling men, arms and es-
tablishing a network of planes and clandes-
tine contacts with officials in Cuba, Vene-
zuela, Panama, Costa Rica,- Nicaragua and
Miami." ?
It was set up, he sald,'by the late populist
dictator,.Gen. Omar Torrijos, "who wanted
to play a leading role as the Third World
leader for the region." - ? .
Arias Calderon said that Torrijos began
'by helping' arm the Sandinistas and later
the M-19'guerrillas, whom?he also urged to
take "a more political course."
"There then were clear indications that
the network was beginning to function in
'favor of the Salvadoran guerrillas," he said.
But over the past two years, he said,
"some of the same'names and planes used
'in* this network were also used to form a
network for drug trafficking. The more
they became involved with,Colombia, the
more there was the opportunity of shooting
two birds with one stone."
Peiping fuel'.this shift,_.he..said, was the
crackdown on drug traffickers in Co!om-.
bia, which started more than a year ago.
Many U.S. law enforcement officials agree.
that the growing pressure against traffick-
ers in Colombia has 'resulted in a partial
shift of activity into Panama.
'More
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1 -
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
Running guns and dope or laundering
drug money are tolerated, if not officially
sanctioned, because they bring cash, and
the ultimate. damage they cause is
elsewhere.
What is not tolerated is the importation
of l.roll,l(', ('iihii's l"iilel ('nsir0 fonni tint
out early In his carocr. . ?
? In 1!)59 w team of 100 Cuban guerrillas
landed in Panama to subvert a then-demo-
cratic government. They were quickly.
kicked out, although not before a'young
E y atNUT ROYCE
The Hearst Newspapers
PANAMA CITY; Panama - The
symbiosis of narcotics and subver=,
sion is a', relatively new
.phenomenon.
An exception was the disclosure
In-1973 of an official Bulgarian Im-
port-export agency, Kintex, which
facilitated the transiting of Turkish
morphine base through Bulgaria
and on to Marseille, where it would
be converted to'heroln.
In return, it was reported in
Newsday, the traffickers smuggled
guns to a Turkish left-wing group.
But over the past several years
this marriage- of. convenience has
taken roots elsewhere, most nota-
bly in Latin America. but in the
Middle East and the Far East as
well. . ? . .
Testifying at a Senate committee
hearing last month, David Wes-
trate, deputy assistant administra-
tor for the Drug Enforcement Ad-.
ministration, described - the
"emerging trend of using drug traf-
ficking to support political ends" as
a "major` change in the historical
pattern of drug trafficking."
During, the .1980s, he said, the-
.traditional profit motive has been
replaced in many Instances by "po-
litical activists, subversives and
.even some high government offi-
cials" who have turned to narcotics
"to finance political objectives."
For example: . .
El COLOMBIA: The Westrate testi-
fied last month that Carlos Lehder,
a major Colombian cocaine dealer,
had told a Spanish television net-
work in January that cocaine was
Panamanian Officer, Omar Torrijos, took a
slight bullet wound during a skirmish.
. After that sad lesson, however, Castro
came to learn that Panama could be much
more useful as a pipeline-
He and 'I'orrios became best of friends,
and Cuba and Panama have become lucra-
tive trading partners. Of the 54 companies
and individuals worldwide designated by
the U.S. Commerce. Department as Cuban
"fronts" set up to purchase Western goods,
35 are in Panama. I
the "atomic bomb" for Latin Amer=
.ica to use against U.S. imperialism
and that he had.establi shed contacts
.With the M-19 guerrilla
organization.
U.S. officials say that all five
guerrilla groups In Colombia - the
M-19, the Revolutionary Armed
Forces of Colombia, the National
.Liberation Army, the Popular Lib-
eration Army and the Pedro Leon
Arboleda group - finance. oliera-
tions by taxing marijuana growers
and protecting cocaine labs.
Carlton Turner, special assistant
'to President Reagan for drug-abuse
policy, said In an interview that Co- .
lombian authorities had told him
that in.1983 alone the Colombian
Revolutionary Armed Forces_
(FARC) earned $80 million from the,
drug trade.
"There were strong indications-
that they had purchased so many
weapons with that money that they
sold many to other groups," Turner,
.said.
And, just before his death in a
plane crash while flying into Pana-
ma in 1983, Jaime Bateman, the
leader of another Colombian insur-
gent group, M-19, publicly con-.-
firmed that he had purchased arms
from Portugal's black market with
"'protection" money from drug'
traffickers.
'..] PERU: In this leading coca plant-
producing nation, according to
State Department reports, the Mao...
ist. Sendero Luminoso terrorist'
group is said to have forged alli-
ances with coca plant growers and
traffickers, earning considerable
political support from peasants,
who.view the, eradication ptogram,
as a threat to a historical source of
income. . ,
W NICARAGUA: Last year Rodolfo
Palacios Talavera, first secretary at,
the Nicaraguan Embassy in Otta-
?.wa,? was expelled after he was'
found with $100,000 worth of co-,
caine.:A police informant said Pala-'
cios was part of a major drug ring'
that included Interior 'Minister To-
mas- Borge.
Last year, too, a Borge associate,
Frederico Vaughan, was indicted in
.Miami. for allegedly ascist;rg Co-
lombian traffickers in an to
ship 1,500 kilos of cocaine ;--o the
United States.
El HONDURAS:'.Last Nove^:tier,
the FBI uncovered a P'o. t:) assassi-
nate the president o! A
group of dissidents, ir.c'~c.:ng a
Honduran general, plan.r.?-d f?-st to
sell large amounts of cncai^e and
then to use the proceeds :o !:Hance
the overthrow of the Zovccr^.rncnt,
according to U.S. author::"s.
1J EL SALVADOR: Fla-:::,r this
year, customs officials in "'exas ar-
rested Francisco Guiro'a. an inti-
mate friend and leading fund-raiser
for El Salvador's right-w:rl: oPpo-
sition leader, Roberto d'Au`_uisson.
Inside eight suitcases in a pr'.vate
Sabreliner jet .vas a total of $5.9
million in $20 and $100 bi'!s.
. The dope may be grown else-
where and the guns may sold far
from its borders, but Panama in-
, creasingly is the catalyst that
brings the two together.
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1 , , (A o C Q
Panama's powerful figure
in? drug money laundering
ears, Panama has been a safe haven for narcotics traffickers and
For y
guerrillas who have financed their arms purchases through the narcotics trade.
Now it has become a trading ground for traffickers who are "washing" billions
of dollars through what authorities claim is th& world's largest cocaine and
marijuana money laundry. In a country whose national pastime is pursuit of
money, there Is an essential relationship between the narcotics trade and the
official corruption that allows it to flourish.
By l{?IUn f2OYCE
The Hearst Newspapers
PANAMA CITY,
Panama - In 1972, U.S.
narcotics agents recom-
mended to their boss
that he consider the "to-
tal and complete Immo-
bilization" - the code
phrase for assassination
A SERIES - of Lt. Col. Manuel
Noriega, then the head
of the Panamanian military's intelli-
gence unit, because of his alleged nar-
cotics activity.
U.S. officials rejected the recommen-
dation, and today the would-be victim is
Gen. Noriega, commander of the Pana-
ma Defense Forces, PDF, and, by most
accounts, the most powerful man in the
country.
But U.S. law enforcement suspicions
of Noriega's alleged role in narcotics
trafficking have not abated.
"He's under investigation by every-
one," said a federal narcotics investiga-
tor in Miami, where much of the co-
caine and marijuana shipped or
financed through Panama ends up.
No formal charges ever have been
made against the enigmatic defense
chief, and if U.S. agents have proof of
his direct involvement in narcotics traf-
ficking they guard it as tightly as a na-
tional security secret.
But the evidence is overwhelming
that officers in his 15,000-man Defense
Forces, which have military and law
enforcement duties, are involved in at
least protecting.the trafficking of drugs
and the transportation of cash coming
here to be laundered.
A scathing House Foreign Affairs
Committee report released earlier this
year described what it said was perva-
sive military corruption.
"Under previous governments, mem-
bers of the PDF were. encouraged to
take second 'jobs,' including drug
trafficking, to supplement their in-
come,". the report stated.. "Allega-
tions persist that high-ranking mlli-
ta.ry :officials are involved In
protection or actual trafficking
themseLves,"
:The'Hearst Newspapers inter-
viewed more than 24 federal agents
:who havqinvestigated narcotics..
cases with.links to Panama, as well
as: military and business officials in
Panama and the United States.
They detailed the links between of-
ficial corruption and the burgeon-
Ing narcotics Industry..
Much of the narcotics-related ac-'
tivity, the U.S. officials said, occurs `
at:the military Tocumen Airport,'
which also handles cargo. It is adja-
cent tp;Panama City's commercial
Omar Torrijos Airport.
It wasJiere, for instance, that on
May 18; 1982, a Convair 880 left for
New Iberia, La., with a load of
what was. alleged to be specially
prepared' livestock feed to tranquil-
ize ,airborne cattle. But U.S. offi-..
cials had been tipped and when U.S.,
Customs agents opened the "feed"
sacks they found, instead, 1,197
pounds of cocaine, which had been
loaded In full view of Panamanian
military personnel at the airport.
The cattle feed-shipping opera-
tioit was run out of a fixed-base op-
eration at Tocumen that was owned
by',a.tiaturalized Panamanian
named -Jorge Baena-Robinson.
He and.three others subsequently
were Indicted by a federal grand
jury in-Louisiana on four narcotics-
related_counts. The four are listed
as fugitives'. .
Mc-C-)
Baenali-l? ready had a track record
of alleged,involvement in drug traf-
ilcking,-and In at least one earlier
instance.'a'. smuggler caught in the
United. States told agents that the
narcotics had been shipped through
Baena's operation, sources said.
"OrL,Zwo previous occasions he
(Baena)?had been called (by the
Drug 1rnforcement Administration)
to the attention of Noriega," said an
official familiar with the case. "As
this particular case was coming
down, (DEA agents) had to go to
the Panarrianlan Defense Forces in-
telligence section, the G-2 (then
headed by.Noriega), and asked for
certain things to be done very
quickly."
The DEA has no law enforcement
authority in foreign posts.
"They weren't done very quick-
ly,".he said. "As a matter of fact, by
the time'the Panamanian forces got
around to looking for this guy"
(Baena), by the time they looked for
him. Why, lo and behold, he had
managed to escape to, they said, Ca-
racas. Baena managed to do a ml-'
raculous escape (via Tocumen Air-
port)..Nobody gets out of Panama
that thmdon't want to f;ct out, es-
pecially?.at Tocumen, with all the
contrgl$:tljey have there."
At Tocumen, too, that the'
It waS_'
INAIR cargo airline was based. A
1983 video=taped sting operation by
U.S. Customs officials in'.tiami net-
ted two Panamanian of ilc`a:s of the
airline Jtt;a conspiracy to launder
money--for a 12 percent fee_by
smuggling currency aboard INAIR
flights.
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
. Federal law requires that anyone.
transporting more than $10,000 In
cash out of the United States must
declare it to U.S. Customs.
Abelardo Valdes-Guerra, the air-
line's general manager, was con-
victed and sentenced to six months
In prison. During the trial, a video,
tape was shown in which the defen-
dants discussed how the $2 million
in cash concealed in cartons would..
arrive at Tocuman at 4:30 a.m. local
time and then be protected until
banks opened at 7:30 a.m.
"I have the connection to let
them in at the airport," Valdes-
Guerra said in. the tape. "Try to
come out by the military gate."
At another point he said, "I got
military guards in the station. So
it's no problem over there. I will tell
the guards nobody can touch this."
Also Introduced into evidence-
was a laminated business card that
had been in Valdes-Guerra's posses-
sion. It bore the signature of Lt. Col.
Alberto Purcell, a member of the
?PDF general staff and'head of the
air force.
The message, it appears, was in-
tended for his subordinates at Tocu-
men. men. It said, "The bearer, Mr. Abe-
lardo Valdes, Is a personal friend of
your superior. Whatever coopera-
tion, I authorize and appreciate."
Last June, scandal once again
rocked the airline. Customs agents
at Miami International Airport
found more than a ton of cocaine
stuffed inside several freezers
aboard an INAIR DC-8 cargo plane.
Only one man, a Colombian who
had purchased the freezers at the
Colon Free Trade Zone, was arrest-
ed. He pleaded guilty recently to a
charge of conspiring to import the
cocaine. The Colombian, Oscar Al-
fonsoCardona Donado, had been
arrested by the Defense Forces and ;
turned over to.the DEA.
His Miami attorney, Joel Rosen-
thal, described Cardona as "the
equivalent of a mule in this case."
He said, "His financial ability to
package such a deal clearly exceeds
his income and wherewitha,
multifold."
.Someone who appears to have
been much more than a mule In nar-
cotics trafficking is Julian Melo,
who, until last year, was Colonel
Melo, general secretary of the De-
fense Forces' High Command and a
protege of Norlega.
Melo's removal from the military
is said to have been prompted by his
alleged "protection" role, for a $2
million fee, in two apparently relat-.
ed narcotics-linked discoveries last
year.
One was a major cocaine lab that
had been set up but was not yet op-
erating In the Darien Jungle near,
Colombia. The' other was the dis-
covery of -a huge cache of ether, a
chemical precursor for the manu-
facturing of cocaine, In a Colon
Free Trade Zone warehouse.
The lab was discovered by pure
chance, according to U.S. officials.-
A fisherman had noted that a he-
licopter was offloading crates from
a ship on the Pacific Ocean and
transporting them to a deserted
beach on the fringe of the jungle.
From the beach the crates were
hauled to a point farther inland.
He reported the strange events to
the Defense Forces. Believing that
they had stumbled onto a Colombi-
an guerrilla landing party, the De-
fense Forces quickly dispatched
scouts to the site.
They found, instead, a virtually
completed laboratory. U.S. officials
reportedly asked them to allow the
lab to be completed and begin pro-
duction before law.enforcement
forces moved In. That way, they
would be given time to develop In-
telligence and then arrest the
principals. .
But the next morning, Panamani-
an troops swooped down, arresting
23 Colombian construction workers
and a bewildered elderly cook.
Since there were no drugs on the
site, they had committed no crime
- other than entering Panama
without proper documentation.
They were kicked out of the
country.
The ether was discovered soon
after the closing of the Darien lab.
Officials say that. at least some of
the ether was to have been used in
Darien.
At Washington's behest, Defense
Forces raided the Colon warehouse
and seized 17,000 55-gallon drums
of ether - enough to process a
staggering 200,000 kilos of cocaine.
There is some confusion about
what then happened to the ether. At
least a portion, and perhaps all of it,
was dumped into the ocean. -
U.S. officials worry that the 2-
year-old crackdown on narcotics
trafficking in Colombia, especially
of its cocaine labs, may have moved
some of that activity into Panama.
The Darien lab would support that
concern.
Political Ideology is a commodity
that Noriega reportedly lacks. He is
said to be a nimble manipulator
who* plays all sides against the
middle.
He has, however, become sensi-
tive to adverse news reports. Many
Panamanians believe he is groo-
mimg himself for a run at the presi-
dency In 1989.
A Panamanian photographer on
assignment for The Hearst News-
papers was arrested by the G-2 of-?
ter photographing Noriega's luxuri-
ous home in the nouveau-riche San
Francisco district here. His official
salary is less than $20,000 a year.
The photographer, Aurelio Jime-
nez, was released after two hours,
but the film In the camera and an-
other roll in the car's glove com-
partment were confiscated.
Panama's military, not unlike.
many others In Latin America, can-
not make do on the official defense
budget - $98 million this year -
and goes to the free market place to
supplement its income.
Panamanians and U.S. officials
contend the military owns a num-
ber of legitimate businesses, such as
the exclusive franchise for industri-
al explosives and a shipping busi-
ness in the Colon Free Trade Zone
called Transit S.A.
Unfortunately, some of the offi-
cers also have embarked on more
shady businesses, including gun-
running;the protection of narcotics
shipped through here and the Im-
portatioh of narcotics dollars.
What troubles one knowledge-
able U.S. officiai?is that the officers
may be getting greedier.
"e, ri i t
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
S D- 3Y SVX:: Gen. Manuel Noriega, left, commander of the
Panama Defense Forces, stands with ex-Col. Julian Melo, who as
general secretary of the Defense Forces' High Command was -
cashiered from the military by Noriega for his alleged role in
protecting narcotics traffic in the country last year. By most
accounts, Noriega is the most powerful man in Panama.
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
f^T'a?'?" ~.~ vP. ?sa..i~.w ?M Wlf9?'gF?4.'iRx't`S~' ? ~'!~ ~~
EXPENSIVE TASTEa::This posh.home, in the nouveau-riche
San Francisco district in Panama City, Panama, belongs to Cesar
Rodriguez, a close associate of, Gen. Manuel, Noriega. Rodriguez.
crashed a Panamanian plane in El Salvador in 1980 while running.
guns to rebels.
G~i*un~ing'.plays part:
x
?
'
i
s coinple
in:Panaa
?
By KNUT ROYCE -,
The Hearst Newspapers
PANAMA CITY,
Panama - Carlos
Wittgreen is one of
those Panamanians
.whose name keeps
cropping up In U.S.
? government files. .
It is, for instance, included in the
Commerce Department's list of Cu-
ban "designated nationals" with
whom Americans are barred from
doing business.
Wittgreen is the agent for much
of Cuba's commercial, business
here.
His name also came up as a de-
fendant In a 1979 federal indict-
ment returned in Miami after Bu-
reau of Alcohol, Tobacco and
i
Firearms agents broke up a r
ng Lopez, according to the 1979
smuggling guns to the Sandinistas, gunrunning documents, had been
then in the final stages of their rev- Panama's consul,in Miami. and had
olution in Nicaragua, helped Wittgreen shop for guns
secutor
th
e pro
And his name, as
in*the case was to find out, also
must have appeared in CIA
documents.
The "intelligence community,"
according to the prosecutor,-asked
to.have.the case dropped because.
Wittgreen was designated to head
security for the deposed and very ill
Shah of Iran, who had found tem-
porary haven In Panama.
Also In U.S. government intelll-
gence files Is the name of Cesar
.Rodriguez. .. .
In June 1980, Rodriguez piloted a.
plane that crashed on a clandestine
airstrip inside.El Salvador. He had
been running guns to the guerrillas. -
Salvadoran officials, who found
22,000 rifle cartridges inside the
wreck, said that a backup plane had
recovered Rodriguez and many of ..
.the arms. They also said the plane
belonged to the Panamanian De-
fense Forces, PDF.
Besides gunrunning for people
the U.S. government did not, much
like, Rodriguez and Wittgreen have .
something else in common: they are
close associates of Gen. Manuel
Noriega, chief of the PDF and, by.
most accounts, the most powerful
man in the country.
Noriega's chief spokesman is
Maj. Edgardo Lopez Grimaldi, a
burly and affable former diplomat
there. ' .
Lopez was not indicted, but,five
others, including Wittgreen, were.
The scheme involved buying more
than 1,000 rifles and pistols, as well
as ammunition, and shipping them
to a Panamanian hunting and fish-
ing club called Caza y Pesca.
Claiming that the weapons had
been intended for the PDF, Noriega
wrote a letter to Washington pro-
testing the Indictment.
? There was an awkward problem. '
The Nicaragua national guard un-
der the late dictator Gen. Anastasio
Somoza had seized truckloads of
the weapons as they were being
smuggled in through the Costa Rica
border. Their serial numbers
matched those on the weapons that
had been purchased by Lopez and
Wittgreen and the four other
defendants.
One of the defendants, according
to a government affidavit, already
had divulged to a Miami gun dealer
that $2 million worth of weapons
would be purchased and that they
were intended for "Nicaraguan
guerrilla forces," the Sandinistas.
. The indictment was technically
flawed and was withdrawn by the
prosecution. But when Assistant
U.S. Attorney R. Jerome'Sanford
started to prepare a new one, he be-
gan to get "a lot of pressure from
(the U.S.) Justice (Department) to
close the case," he recalled.
The intelligence community, he
said, wanted the charge dropped
because "the Shah was running
around and Wittgreen -was going to
be the chief of security for the
Shah."
It is this -political versatility -
running guns for leftist Insurgents
one day and providing protection to
an ailing former right-wing dicta-
tor the next - that leads many U.S.
officials and Panamanians to be-
lieve that what motivates Witt-
green, Norlega, Rodriguez and oth-
ers may be cash more than
ideology. ' ..
Wittgreen recently told an ac-
quaintance that he sees nothing
wrong in his relations with Cuba.
"I am a businessman," the ac-
quaintance recalled Wittgreen had
? said. "The United States, after all,
does business with Russia and with
China. What's wrong with my do-
ing business with Cuba?"
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
ii:
!L 0 Ti %11'_1 Vi
9
With little fanfare, a U.S. negotiating team has begun a critical mission in Pan -
nia: the opening of bank records belonging to narcotics traffickers who are-wash-
ing" billions of dollars though what authorities claim is the World's largest cocaine
and marijuana ?nioney laundry. Succcssful negotiations, the United States believes,
would r esult in a major break through in the war against narcotics and the political
instability it breeds in the lVestrrn ller, `sphere.
l;y ::i-'iJ il0YC2 * ..
.The Hearst Ne.vspapers
C LAST IN
A SERIES
PANAMA- CITY.
Panama - With its
tiled roof, manicured
'hed'ge and tropical
flowers gracipg the en-
trance, the First Intcra-
mericas Bank' loo=ts
more like a Mediterra-
nean villa than a finan-
cial institution.
Something else distinguishes it-from
the 125 other banks that help shape the
City's downtown skyline.
Awash in millions of narcotics dol
lars and a growing source of embarrass
ment to Panamanian. authorities, the
bank, owned by an indicted Colombian
dope'dealer, was closed by the goverr-
mcnt in March.
Rafael .Arosermena, vice president of
Citibank and president of the powerful
Banking Association here, smiles when
he'rcealls the event.'
"It was," he said in an interview,
"the first time in history that a bank
vas- closed dw.vn because it was too
liquid." - .
Concerned about Pananma's "image of
a center for laundering," he said, the as''
sociation last September adopted a code:
of ethics that set a limit of $100,000 on
eriy.sir.gle cash deposit a bank can ac-
cept. .And the government's Banco Na-
cional, which acts much like a central
bank, also agreed to the $100,000
limit '.'hen accepting cash from the
banks.
That is the goad news.
The bad news is that since all of
this happened, the laundering of
narcotics dollars through the city's
banks appeals to be increasing.
A senior Treasury Department
officijl said that excess cash flow
from the Banco Nacional to the U.S.
Fedeiral Reserve Bank has increased
dramatically over the past several
inont}s - a clear indication that
erbecause the laundr.: i;.g ::ifc?cts all
of us."
Citibank's Arosemi:':1igrees.
..It is very clear, %vc '?/ ?.;'.t to_assist
to help in stopping t. proceeds
of laundering," he -id.
But it is equally c',-. r that the
banks do not want ~.) ;-:::l all the
stops. Any agrc;:r Wit, .\ .- emena
said, would have 101c .:~tructed
so that "the positi-n ,:f P. ::ma is
not weakened with ,1 to other
banking centers."
It is not just losing t:.c 'lope dol-
lars that worries i:lO t Panamanian
bankers; it also is the p_ychuloglcal
effect.
Shedding light, ho?.v( %er slightly,
on narcotics do!h'r transactions
could have other - an
large amounts of cash continue to the Federal Reserve, ironically, was
be deposited in Panama despite the larger than in March - when the
self-set $100,000 limit. ' First Interamericas Bank was'
And most of that cash, officials closed:
assert, comes from narcotics The trend is disheartening. In
traffickers. 1980, only $250 million was deliv-
In a typical drug deal, a cocaine ered to the Federal Reserve; In'
:tihol-salcr is paid, say, $2 ;trillion 1951,.$593. million; in 1952, $1 bil-
in cash - normally in small bills - lion; it dipped slightly in 1983, to
for a hypothetical shipment. - $840'million, after the arrest of a
U.S. banks must report all cash. major' courier, Ramon Milian
de~o`its of more than $10,000 to Rodriguez. . '
the Treasury. That leaves a paper Most of the $4 billion-plus In cash
trail. - T o avoid that, the dealer ar- that has flowed into the local banks:
ranges for the cash to be delivered since 1950 is believed to have come
to Panama. from'narcotics wholesalers. It
The money usually is sn-w^glcd therefore represents an estimated
out of the United States, because $20 billion to X40 billion in retail
anyone 11-lingmore than $10,000 . narcotics sales in the United States,.
out of the country i )ust re;,.:.rt it to according to Treasury so.:rc,^s.
U.S. Customs. The transaction is fa- ? And that is just cr:_h. It does not
.c;litated because Panama uses'U.S. take into account the li?jsAreds of
bills P. its paper currency, although,
millions of narcotics r? oI?_rs that are
it calls them Daiboas instca d of transferred here by wire frn:m other
dollars. offshore banking cnters.
Once it arrives in P: narra, the "All of this has to be !.topped;'
cash is taken by ai n;ored truck to a said Carlton Turner, the White
local bank and deposited in a prear- House special assistant for drug-
ranged, secret account. The local .abuse policy. "These b:n::ors who.
bank needs only a limited amount are laundering mcmcy are probably
of cash for its daily use, so it deli '- more despicable tll;irt t;,c *,~ecal deal-
ers its surplus dollars to the Banco
Naciona1. . .
Since the Banco Nacional, too,
cannot use the cash, it ships it to the
U.S. Federal Reserve Bank. The re-
cords kept of those transactions In-
dicate the sharp increase in the cash
flow of Panarna's banks.
Panama's legitimate annual cash
need, according to the Treasury of-
ficial, is about $100 million, the
sane amount the Federal Reserve
delivered to Panama last year in
fresh bills. ?
But last year, according to Trea-
sury records, the Banco N acional
transferred $1.1 billion to the Fed-,
eral Reserve. -
Based on first-quarter records,
this year's total will be $1.3 billion
to $1.4 billion; April's delivery to
` fo?CD re~)'
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
 Id
Sanitized Copy Approved for Release 2011/06/23: CIA-RDP88GO1117R000100040005-1
~'~JCrF)J U F%ZUla1 : The First Interamericas Bank in Panama
City, Panama, owned by a Colombian narcotics trafficker under
indictment in the United States, was'shut down by Panama in
March. The bank is the focus of a drug money laundering
investigation in New York.
American tax evader, a corrupt Bo-
livian public official or Israeli busi-
nessman. forbidden from holding.
,.foreign accounts - worry that he,
. too, might get overexposed.
The United'States, aware of
.these concerns, has a couple of-
trump cards for the negotiations.
Administration sources say that
the government'may tot press for
recovery of the illicit funds as It has
in other criminal drug cases. Rath-
er, those proceeds could go directly
into the Panamanian treasury,
which would be a windfall for a na-
tion that has one. of the world's
highest per capita foreign debts -
$3.7 billion and- a deeply trou-
?
bled-economy.',
Consider the case of Ramon Mi-
Ilan Rodriguez. Acting on a tip from'
Panamanian -authorities, U.S. offi-
cials arrested Milian at a Fort Lau-
derdale,.Fla., airport on May 4,
1983, as he was ready to take off
for Panama with $5.4 million in'
cash. ..
A federal indictment returned in
Miami last year alleges that Milian,
over an eight-month period In 1982
and 1983, made weekly and some-'
times twice-weekly trips -to Pana-
ma in his private Learjet and depos
ited $151 million in cash Into local .
bank accounts that he had set up for
dozens of clients.
That $151 million is nearly three
times the $54 million in U.S. aid for
budgetary support for Panama for
fiscal 1935 and about a fourth of
what Panama currcritly needs to
service its debt.
The other U.S. trump card Is a'
Supreme Court ruling last January
that upheld a federal. -rand jury's
subpoena served on the Miami
branch of the Bank of Nova Scotia
for records held by the bank's
branches in the Bahamas and the
Cayman? Islands.
if the negotiations fail, accord'.ng.
to sources, the Justice Department
will execute more than 20 subpoc-.
nas for records in Panamanian
banks with branches in the United
States. -
'What makes Panama such a mag-
net for narcotics dollars is the ano-
nymity of .locally based corpora-
tions - there are 150,000 active
ones on file - and the use of U.S.
currency, as well as the tight secre-
cy of. Panamanian banks and the '
fact that Colombia is accelerating
its prosecution of narcotics agents.
Also, most of the narcotics
wholesalers are Latin Americans
who prefer hispanic Panama to the
decidedly Ang!o Bahamas and Cay-
man Islands,'or the Dutch Antilles.
For about S1,200, a local law
firm will design a paper corpura-
tion or appoint nomincadirectors to
conceal the identity of true owners.
Arosemena said that the Panama
Banking Commission, which regu-
lates the banks, -for several years'
was unaware of-who-owned First
Interamericas. Started in the 1970s
by seven former officers of the
.Chase Manhattan Bank to dea!
mostly in: trusts and commodities,
the venture failed.
He said that the bank then 'was
transferred to a bearer corporation
held by indicted Co!ontbian nurcot-
ics dealer Gilberto Rodriguez
Orc!ucla.
To be sure, only some of the local
banks, and only some of the officers
in them, routinely deal with narcot-
ics cash.
In addition to 'the 'First !ntcra-
merl-cas Bank, U.S. authorities
,point to several others.
Among them: the Banco Cafe-
tero, whose special account in a
New York bank was used by First
Interamericas as part of its alleged
laundering operation: the 73anco do
Ibcroamerica,' where %':!ian depos-
ited much of his cas'i: the 'Janco
Ganadero; the Banco !ntc occanico
de Panama; the Banco !ZZ!.,a': the
Banco de Colombia; and the 3anco
de Occidente.
It not only Is cash that gets
brought Into the co'a'l rv }? ^arcot-
ics trafflckcrs.*Ovcr . a's'. c^u~?.e
of years a new word _s in
the drug enforcon,..en' 'cx?c ?n -
the smurf.
The smurf is a mY.c!'- -nn who,
for a fee, takes a of
dope cash, goes to ,'.S.
banks - and s:)ml:- ?vcral
tellers at the sam .
cashier's chec':s ` - ? t ,an
Sl0,000 each. The c'-:'c? ten out to fictitious ?