CONTRA BANKING NETWORK PREDATES FALL OF SOMOZA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000504550019-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 3
• Document Creation Date: December 22, 2016
• Document Release Date: February 9, 2012
• Sequence Number: 19
• Publication Date: April 21, 1987
• Content Type: OPEN SOURCE

Si Declassified in Part - Sanitized Copy Approved for Release 2012/02/09: CIA-RDP90-00965R000504550019-6
WASHINGTON POST
21 April 1987
Contra Banking Network Predates Fall of Somoza
3 By Dan Morgan
Washington Post Staff Writer
The secret financial network used by the Ni-
caraguan rebels to receive and distribute tens of
millions of dollars in donations after the cutoff of
U.S. military aid initially was set up in 1977 to
hide the money transferred abroad by wealthy
Nicaraguans fearful of a Sandinista victory, Mi-
ami banking sources say.
According to the sources, the contra network
used the same Cayman Islands bank-Banco de
America Central (BAC)-the same system of
Miami "pass-through" accounts and Panamanian
shell companies, and perhaps some of the same
advisers.
Soon after a stunning Sandinista attack at the
Masayq military barracks 17 miles outside Ma-
nagua on Oct. 17, 1977, worried members of
Nicaragua's middle and upper classes began
looking for ways to transfer assets out of the
country. Representatives of Managua's Banco de
America, then controlled by local sugar interests
and Wells Fargo Bank, established BAC as a sub-
sidiary in the Caymans, a haven with strict laws
safeguarding the privacy of depositors, according
to the banking sources.
In 1978, a pass-through arrangement was
worked out with Wells Fargo Bank in Miami,
enabling wealthy Nicaraguans visiting the city to
cash checks drawn on BAC while safeguarding,
the secrecy of their Cayman assets, sources say.
BAC deposits reached $14 million in 1978 and
eventually rose to nearly double that before the
1979 overthrow of dictator Anastasio Solnoza,
sources say.
BAC remained a bank for Nicaraguan. exiles.
Beginning in July 1984, contra leaders recently
revealed, an account at BAC was used to conceal
$33.5 million in donations from a foreign govern-
ment, widely believed to be Saudi Arabia. Saudi
officials have steadfastly denied that their coun-
try was the donor.
Today, this account is an important focus of
the Iran-contra investigation and has drawn the
attention of independent counsel Lawrence E.
Walsh and the House and Senate select commit-
tees, which expect to begin public hearings on
the affair next month. Sources confirmed that
BAC records at Barclays Bank in Miami have
been subpoenaed by Walsh. In addition to pro-
viding the most detailed portrait to date of how
the contras operated financially, the BAC ac-
counts may also shed light on the sources of oth-
er, earlier contributions to the rebels, investiga-
tive sources said.
While investigators apparently
have been unable to link accounts at
BAC to the unaccounted-for mil-
lions raised by secret arms sales to
Iran, bank records are helping in-
vestigators assemble a more au-
thoritative chronology of the under-
writing of the contra war.
This scrutiny has annoyed some
contra leaders. "Our hope was that
none of this would be made public
until we wrote the history of our
struggle,." contra leader Adolfo
Calero said in an interview.
The BAC account was in the
name of Esther de Morales, a rel-
ative of Carlos Morales, a lawyer
and close friend of Calero. From
July 1984 until March 1985, Calero
said, foreign contributions were
channeled to the BAC account
through banks in Switzerland and
New York. This money, he said,
was distributed to five other Pan-
amanian, Cayman and Miami bank
accounts that he instructed Morales
to set up.
Calero Controls Account
The money was spent on weap-
ons, food and supplies. Calero said
he alone controls the account and
that Morales executed transac-
tions on his instructions. Both
men have been questioned exten-
sively by investigators or the
grand jury working with the in-
dependent counsel.
Anti-Sandinista sources in Mi-
ami said Calero's control of the
BAC account enhanced his posi-
tion within the Nicaraguan resis-
tance. His critics have charged
that he allocated weapons, money
and other assistance to areas in
Honduras where his main military
supporters were concentrated, at
the expense of rebel leaders such
as Eden Pastors and Alfonso Ro-
belo in the southern front along
the Costa Rican border.
Calero has turned over to Walsh
and the House and Senate select
committees records of all transac-
tions involving the funds thought to
have come from the Saudis. Along
with other evidence, sources say,
these records may help document
whether funds were mishandled or
misappropriated, or if arms suppli.
ers "gouged" the contras by over-
charging for weapons.
The Saudi funds filled a crucial
gap for the contras. Covert funding
by the Central Intelligence Agency
reportedly ended in June 1984, and
direct U.S. military aid ended that
October and remained shut down
for two years. Conclusive evidence
that funds were mishandled, inves-
tigators said, would raise questions
about the caliber of leaders on
whom the Reagan administration
has relied and on whose behalf it so-
licited foreign rulers for money and
favors.
However, sources close to the in-
vestigation acknowledge that track-
ing millions of dollars that allegedly
went to the contras is proving to be
extremely difficult and that in some
cases "the trail goes cold," as one
put it.
In addition to the $33.5 million in
suspected Saudi funds, the contras
are known to have received another
$1.2 million from a U.S. tax-exempt
organization, the National Endow-
ment for the Preservation of Lib-
erty. This money apparently was
channeled to the BAC account in
the Caymans through Barclays
Bank in Miami, which replaced
Wells Fargo as BAC's pass-through
bank several years ago, banking
sources said.
Indirectly, another $27 million
went to the contras from a State
Department special fund for non-
lethal aid, after the suspected Saudi
funding ended in April 1985. Of that
amount, $9.7 in supplies was requi-
sitioned in the United States
through an office in New Orleans
headed by Adolfo Calero's brother,
Mario.
The U.S. purchases were care-
fully monitored by the State De-
partment, according to a General
Accounting Office study released
last December. However, the final
destination of millions of dollars
from the $17 million distributed
through the Miami accounts of var-
ious Nicaraguan brokers and sup-
pliers remains uncertain.
These funds went to hundreds of
businesses and individuals providing
goods and services to the contras in
Honduras, Costa Rica and Guate-
mala.
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Millions Unaccounted For
According to GAO documen-
tation, a small amount of the $17
million apparently was illegally used
to purchase weapons, some went to
members of the Honduran military,
and millions of dollars are unac-
counted for. The signatures on 29
checks totaling $805,245.63 were
illegible. A single concessionaire
charged with purchasing food, Su-
permercado, received checks for a
total of more than $700,000 during
a 10-day period in January 1986. In
several cases, investigators who
tried to verify vouchers against
which U.S. government payments
were made in Central America
were told that the goods had never
been sold, sources said.
Beyond aid that contra officials
acknowledge receiving, tens of mil-
lions of dollars intended for their
support apparently never reached
them. This includes $10 million that
State Department officials solicited
from the sultan of Brunei in August
1986. On State Department in-
structions, Calero said, he set up a
bank account in the Bahamas to re-
ceive the funds, but they never ar-
rived.
"I wish I knew where that money
was so I could send somebody to
get it," he said.
Some sources suggest that the
funds may have been diverted to
Switzerland to pay middlemen owed
money in connection with U.S.-Iran
arms sales.
Also unaccounted for are funds
that the Tower review board said
the contras received from two for-
eign governments in early 1985.
The Tower panel indicated that
these funds were raised by retired
major general John K. Singlaub in
.two unnamed countries believed to
be South Korea and Taiwan. But
Calero said Saturday, "We did not
get money or merchandise from
South Korea." The contra leader
said Singlaub had indeed solicited
funds but was turned down.
Bank Records Inaccessible
Difficulty getting access to Swiss
and other foreign bank records has
made it hard for investigators to
solve these mysteries.
By contrast, the access to
Calero's account at BAC marks a
significant turnabout. Since 1977,
BAC had maintained almost com-
plete secrecy behind the shield of
privacy provided by the Cayman is-
lands' laws.
Paradoxically, sugar interests
still doing business in Nicaragua re-
portedly retain a substantial inter-
est in BAC, which handled the funds
of anti-Sandinista businessmen and
bankers, and, more recently, of the
contras. Several banking sources
said a large interest in BAC is held
by the Pellas family, some of whom
still have major holdings in the Ni-
caraguan sugar business. Alfredo
Pellas Jr. is listed on Florida corpor-
ate records as a director of the BAC
International Credit Corp. of Mi-
ami, a BAC affiliate.
Ronald S. Liebman, BAC's Wash-
ington attorney, declined to com-
ment or answer questions for this
article on grounds that he wanted
to avoid publicity for his client.
BAC refused to turn over records
to a House Foreign Affairs subcom-
mittee during the investigation last
year into the State Department's
$27 million nonlethal aid program,
congressional sources said. At that
time the existence of an extensive
private support network for the
contras was still a secret.
from the Esther de Morales account
to an "E. Holmann." A contra
spokeswoman in Miami said that
the name was that of an "Edgar Hol-
mann," a money changer in Hondu-
ras who converted dollars into local
currency. But the entry does not
explain how the currency was sub-
sequently distributed, what ex-
change rate was used, or what Hol-
mann's commission was.
On Oct. 14, 1984, $150,000 from
one of the sub-accounts was con-
verted into travelers checks, the
records show. Contra officials ex-
plained last month that these
checks were used to pay expenses
in Washington, Honduras and Costa
Rica, but details of these expenses
were not given.
In his weapons purchases, Calero
said, he dealt with only four suppli-
ers: Singlaub, retired major general
Richard V. Secord, Miami arms
dealer Ronald J. Martin and retired
lieutenant colonel James L. McCoy.
Weapons Deals Unclear
On Nov. 6, 1984, there was a
payment of $432,500 to an account
Compromise With Barclays at the Royal Bank of Canada in
Committee Chairman Dante B.
Fascell, a Democrat who repre-
sents part of the Miami area,
eventually negotiated a compro-
mise in which BAC's pass-through
bank in Miami, Barclays, agreed
to turn over to committee inves-
tigators several thousand signa-
ture cards of persons with ac-
counts at BAC, but not to release
records of transactions involving
the BAC pass-through account.
Calero, who once managed a soft-
drink plant and now heads the Ni-
caraguan Democratic Force (FDN);
provided the first information about
the BAC account at a news confer-
ence in Washington March 5. Sub-
sequently, his aides allowed report-
ers to examine selected bank state-
ments and checks.
According to contra sources, the
records show that about $18.2 mil-
lion was paid to four companies for
weapons, and the rest-more than
$15 million after interest and prof-
its from currency transactions are
added-went for "humanitarian
purposes," such as food and cloth-
ing.
An example of the difficulty faced
by investigators following the "mon-
ey trail" can be seen in a few of the
transactions exhibited to reporters.
On Sept. 4, 1984, for example,
records show a $100,000 transfer
Montreal. A contra spokeswoman
said the money was for an "arms
purchase." But it is unclear what
weapons were purchased.
Also unclear is how the weap-
ons were priced. According to
Calero, "Some were market
prices; I got offers from all over.
Through Singlaub we got some
wonderful prices. And we got am-
munition from Secord through
China that was cheap: $75 a thou-
sand rounds when the market
price was $200."
The similarity of many Latin
names also creates problems in
tracing money.
In response to a question, Calero
said that a "Frederico Arguello was
a broker for money we received."
He said that Arguello converted
large amounts of dollars into local
currencies as a service to the
contra cause. He identified Arguello
as a cattle and cotton rancher in
several Central American coun-
tries.
A Frederick J. Arguello is listed
as the recipient of $41,000 in funds
channeled from the tax-exempt Na-
tional Foundation for the Preserva-
tion of Liberty on documents relat-
ing to the activities' of the organi-
zation in support of the contras.
The accounts were in the New
York and Miami branches of Israel's
Bank Leumi. However, a Frederico
rra
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J. Arguello who lives in Honduras
said through his son in Washington
last week that he has never had an
account at Bank Leumi and that he
never received any such funds. Ar-
guello, the son said, is a common
name in Central America.
Declassified in Part - Sanitized Copy Approved for Release 2012/02/09: CIA-RDP90-00965R000504550019-6