REAGAN'S SHADOW CIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00587R000200910003-9
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 4
• Document Creation Date: December 22, 2016
• Document Release Date: July 28, 2010
• Sequence Number: 3
• Publication Date: November 24, 1986
• Content Type: OPEN SOURCE

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~.. ~ `11 1~iY o
a $~_~~r NEW REPUBLIC ~-
24 November 1986
How the white House ran the secret'contra' war.~~ `
REAG~v'S SxanOW CIA
~ Br RoaExr Pnxxv Arro Bxwv BnxcEx
T
THE CRASH OF an arms-laden cargo plane in southern
Nicaragua on October 5 exposed more than an opera-
tion mounted by private American mercenaries or, as one
critic put it, by ex-CIA men with "a wink and a nod" from
the U.S. government. It brought into sudden focus a highly
covert paramilitary net~~ork of former intelligence opera-
tives working for the White House. The secret organiza?
lion was set up by iZeagan administration officials in early
1984 and enabled t1~e White House to circumvent a con-
gressional ban ?agaifist "directly or indirectly" aiding the
ronha rebels fightin ~ to overthrow the government of Nica-
' ragua. It was a shad~w CIA-hidden from Congress, unac-
countable to the Arerican public, and answering only to
the White House.
The secret White; House program reunited an old-boys
network of Former CIA operatives dating back to the Viet-
nam War and the Bay of Pigs invasion of Cuba. Many of
the participants-f>fom the program's chief organizers to
the men kicking cargo out of the planes-had worked for
the CIA. Eugene Hasenfus, the cargo handler who was
captured after the October 3 crash, flew missions for the
CIA-owned airline Air America during the Indochina War.
So did William Coqper, the pilot killed in the crash.
Documents on th~ plane led to other CIA connections. In
February Wallace Blaine Sawyer Jr., the co-pilot killed
when the plane was:shot down, Flew cargo planes to a U.S.-
built airstrip in Honduras for a Miami company called
Southern Air Transport. Southern Air was owned by the
CI.q until 1973.Over the past three years-as the conha aid
network evolved-$outhern Air emerged as a leading Pen-
tagon contractor tr4nsporting military equipment to Cen-
tral America and elsewhere. Southern Air's address was
also used by a my6terious firm, Corporate Air Services,
when it purchased the cargo plane that was shot down.
The former CIA' operatives,' involved in the contra air
resupply network, worked out of El Salvador's Ilopango
military airfield. Senior Salvadoran officials say the air
base would not be,available Eor such operations without
high-level U.S. approval. These former operatives also car-
ried credentials frorln the Salvadoran armed forces, identi-
fying them as U.S. military advisers.
Hasenfus, now qn trial in Nicaragua, says the supply
operation was direc f ed by two Cuban-Americans. Both, he
said, worked for the CIA. One of them was named Felix
' Rodriguez, and also known as Max Gomez. According to a
report prepared by d private arms dealer involved in the aid
network, Rodrigue>!/Gomez was placed at Ilopango air-
field by Donald Gre , a senior aide to Vice Presider
Bush, and by Nestor Sanchez, a top Pentagon official re
sponsible for Central American military aid programs
Gregg and Sanchez have held senior-level jobs at the C1A
and Bush was the director of the agency in 1976.
.But the connections go deeper still, ultimately tying in to
a White House program started in early 1984 to keep contra
aid alive despite Fierce congressional opposition. Senior
White House officials, facing a congressional aid cutoff,
prepared plans to establish a "private aid" network. This
more covert operation would replace the CIA in training,
arming, and directing the contra rebels in their war against
the leftist Sandinista government.
The initial "private aid" plan was drafted by Marine Lt.
Col. Oliver L. North, a National Security Council deputy
director Eor political-military affairs, according to adminis-
tration officials involved in the program. After discussion
of North's three-page memo by senior NSC staff officers,
then-NSC adviser Robert McFarlane presented it orally to
the president. The officials said Reagan approved the
operation.
NORTH, WORKING with Pentagon, State Depart-
ment, and other White House officials, implemented
the plan. He called upon former covert intelligence officers
to handle the operational side of the program, according to
L.S. officials and contra leaders. The White House recruited
retired Army Maj. Gen. John K. Singlaub, whose intelli-
gence background dates back to World War II and the
CIA's forerunner, the OSS. Singlaub organized fund-
raising Eor the ronrras and provided military advice.
Singlaub acknowledges clearing his actions with Nort
and meeting frequently with CIA Director William
_Case~o discuss the operation. Singlaub said he had a
arrangement with North "like in the military" when a
junior officer would tell a superior what he planned to do.
North's silence was regarded as affirmative approval. Two
former intelligence officers described the contra support
program as a "classic" covert operation with deniability
built in Eor the White House at every level.
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Singlaub, through his leadership of the L~orld Ant:-
Communist League, traveled extensively to solicit aid for
the congas from right-wing organizations and governments
receiving U.S. military assistance. One senior White House
official who participated in the discussions said the "big
three"' countries expected to provide substantial aid were
South Korea, Taiwan, and Israel. Sources close to Singlaub
said sizable donations came from businessmen close to the
governments of South Korea and Taiwan, the nations that
founded In~ACt in the 1960s. Singlaub also became in-
volved, through brokers in Europe, with Israeli sales to the
.~ntras of weapons and ammunition captured from the PLO
during Israel's 1982 invasion of Lebanon.
OVER TIME, other former CIA operatives were put in
key operational positions in support of the contras.
Bay of Pigs veteran Rodriguez/Gomez, who according to
Hasenfus was in charge of the contra air resupply operation,
was a CIA adviser to the Bolivian armed forces when thev
captured and killed Cuban revolutionary Che Guevara in
1967. Hasenfus said the other Cuban-American CIA agent
directing the contra air wing was named Ramon :Medina.
Based on a photograph shown him by Sandinista officials,
Hasenfus later identified Medina as Luis Posada Carriles, a
veteran of CIA anti-Castro operations in the 1960s. Posada
Carriles is now a fugitive wanted in Venezuela on charges
that he helped plan the October 1976 midair bombing of a
Cubans airliner with 73 people aboard, including the Cu-
ban national fencing team. A U.S. official subsequently
confirmed that Medina was Posada Carriles.
It is still not precisely clear how much day-to-day direc-
tion the resupply operation received from administration
officials. Salvadoran telephone bills from a sate house used
by Rodriguez/Gomez show repeated calls in September to
~iorth's private lines at the National Security Council.
North, through a spokesman, responded that he never
knowingly received calls from the safe house. Other calls
went to Stanford Technology Trading Inc., a firm outside
~~'ashington run by retired Air Force Maj. Gen. Richard V.
Secord. The Former general, who helped negotiate the sale
of A~tiACS planes to Saudi Arabia, reportedly acted as an
intermediary for gaining Saudi Financial support Eor the
~~~ntras. Secord denies the allegation.
The "private" network did succeed in keeping covert
.~merican aid Flowing to the contras while the administra-
tion pressured Congress to resume funding of the contras.
lCongress reluctantly agreed to provide s27 million in non-
lethal aid in 1985, and then approved s100 million in mili-
tary and other aid last month.) One retired senior CIA
official, though, said the contra aid network had spun "out
of control" and could end up resurrecting deep public
distrust of the CIA. He said the operation's lack of ac-
countability contributed to reported widespread corrup-
tion and even narcotics trafficking.
In early 1984, the Reagan administration was faced with
the stark choice: either bow to congressional demands to
halt U.S. aid to the contras or devise some way to circum-
vent the legal restrictions.
The administration had long chafed under the legal re-
quirement to keep the House and Senate intelligence com-
mitteesfully informed about covert activities. CIA officials
complained that the committees leaked sensitive informa-
tion and obstructed operations, such as the one that Presi-
dent Reagan authorized in 1981 to organize a Nicaraguan
rebel army. Congress, in turn, complained that the CI.A had
consistently misled the oversight panels as to the goals and
actions of the antra program. The administration had justi-
fied the contra operation as a way to interdict weapons
smuggled to leftist Salvadoran guerrillas by the Sandinis-
tas in 'Nicaragua. But Congress soon suspected the ob~ec-
tive was much more ambitious and barred the CIA from
trying to overthrow the Sandinista government.
The tension between Congress and the executive branch
erupted into afull-scale confrontation in early 1984 when
the oversight committees learned belatedly that the CIA
had directed the mining of Nicaragua's harbors and then
told the contras to claim public credit for the operations. The
mining controversy led to the cutoff of CIA aid in the
spring of 1984. Congress approved an amendment spon-
sored by Representative Edward Boland of Massachusetts
banning outright all U.S. military assistance to the conga;
beginning in October 1984. The ban-after the CIA had
spent an estimated s80 million-prohibited the CIA, the
Pentagon, or any other entity of the U.S. government in-
volved in intelligence from "directly or indirectly" aiding
the contras militarily.
Although many in Congress believed the Boland
amendment was so tightly written that the administration
would be forced to the sidelines, Oliver North had already
made clear to the rebels that U.S. assistance would con-
tinue. Edgar Chamorro, then one of eight directors of the
Nicaraguan Democratic Force (FDN), the largest rebel
army, said that in early 1984, North assured the FDN "of
continued United States government support, notwith-
standing the refusal of the Congress to appropriate more
funds." Chamorro made his statement in a sworn affidavit
given to the World Court after Nicaragua accused the
United States of violating international law. In January
1985, two close associates of North quoted him as saying',
"If it weren't for those liberals in Congress, we wouldn t be
doing half of what we do illegally."
Operating at the edges of the law, White House officials
used "cutouts," or intermediaries, to insulate themselves
from direct contact with some covert operatives. One con-
servative activist who played that role was Robert w'.
Owen. Although not on the government payroll, Owen
worked out of North's office in late 1984 and served as his
liaison to the contras. In the tall of 1985, Owen's personal
consulting Eirm was given a 350,000 contract with the State
Department office administering the s27 million in "hu-
manitarian" aid to the rebels.
One prominent rebel official said Owen "represented
North" as almost "a proconsul" to cons-a leaders. Awell-
placed U.S. government official said Owen acted as
North's go-between to the rebels and sat in on militarv-
related meetings that North "considered risky" in terms of
the Boland amendment. Owen, Eor example, helped orga-
nize Nicaraguan Indian military operations in Honduras in
late 1984 and early 1985, and tried to establish a 200-man
force in Costa Rica in early 1985, according to contra and
American sources.
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Teofilo Archibald ~~'ilson, a leader of Nicaraguan Indi-
ans fighting the Sandinistas, described how the Owen-
:North connection worked. Wilson met with ;North in June
1985 to complain that the FDN had refused to share prom-
ised military supplies. Wilson said North agreed to "solve
the problem" and told the Indian leaders to go to Miami,
where they would be contacted. Wilson said that several
days later, Owen arrived in Miami to discuss the situation
further and give the Indians cash to pay for their rooms.
[,'pan their return to Honduras, 1h'ilson and two other
Indian leaders said the CIA station chief brokered an
agreement that brought two planeloads of ammunition.
Owen also collaborated with John Hull, an American
who owns a Earm in northern Costa Rica and whom several
rebel officials have identified as a CIA asset working with
en the field commander of a pro-
~~nrra group called Civilian Military Assistance (CMA),
said he met Owen and Hull at a hotel room in Houston in
December 1984. Terrell said that Hull identified himself as
the liaison between the CI.~ and the rebels, and that Owen
called himself "a liaison officer Eor a government agency
that had a vested interest in this meeting."
T ERRELL SAID OWEN and Hull sought CMA's help in
organizing a Costa Rican front Eor the Honduran-based
FDN and discussed the number of .~merican volunteer
trainers needed. Owen cautioned that the Americans could
not be seen as entering Costa Rica to train conrras. Terrell
said he called FDN leader Adolfo Calera, who stressed the
importance of describing the plan exactly to Owen so he
could relay the information back to lti'ashington.
.~ month later, at President Reagan's second inaugural in
~~'ashington, CMA founder Tom Posey and a former U.S.
official met with Owen. They said Owen described him-
self as representing North. They said Owen urged CMA to
postpone a planned operation in Honduras and instead
assist the FDN open a military front in Costa Rica. CMA
agreed to send a training team to Costa Rica to help build a
"southern front," long a dream of CIA strategists seeking
to squeeze Nicaragua Erom north and south. (That effort
ultimately foundered in April 1985 when two members of
the team led an attack on a town in southern Nicaragua.
Costa Rican authorities responded by arresting Eive train-
ers un charges of violating Costa Rican neutrality.)
THE REAGAN administration has never acknowl-
edged any violation of the congressional ban, but nei-
ther has it offered a comprehensive explanation of its con-
tacts with the "private aid" network. One White House
official, speaking Eor the administration but insisting on
anonymity, denied any wrongdoing, but added that it was
"quite possible that Reagan and McFarlane discussed how
to help" the conrras in the face of the cutoff. In response to
one inquiry from the House Intelligence Committee,
McFarlane wrote on September 5, 1985, that no one on the
NSC staff had violated "the letter or spirit of the law."
But the hidden U.S. government role underscores a key
fact of the contra war since it started in 1981: its success
hinged on outside training and often direct U.S. control.
Early expectations at the CIA that the contras could oust the
Sandinistas by the end of 1983 were dashed when the FDN
proved unable to hold any territory or win significant
popular support inside ;Nicaragua. The frustration led to a
meeting in mid-1983 in Honduras, chaired by CIA Director
Casey. After the meeting, the CIA assumed direct respon-
sibility Eor a series of port raids, including the destruction
of oil reserves at the Pacific port of Corinto, and later for
the mining of :Nicaragua's harbors.
On January 5, 1984, at the town of Potosi, and at San Juan
del Sur on March 7, 1984, American CIA personnel dying
Hughes 500 helicopters exchanged Eire with Sandinista
forces, government sources said. One intelligence official
said the Potosi attack was ordered by a CIA officer out of
Frustration that Nicaraguan pilots could not do the job.
Hasenfus offered a similar explanation Eor creation of
the air resupply operation. In an interview in a prison
outside Managua, he said the conrras, who also own a small
Fleet of planes, did not have the pilots or aircraft to carry
out effective air drops. "Let's just say our Flights hit the
target," Hasenfus said. The original plan, he said, was to
buy supply planes, train the conrras to use them, and then
sell the aircraft to the amtras. But Hasenfus said that "just
never materialized," and "all of a sudden they needed
Flights and the flights started to go" with American pilots
and crews.
Although the October 5 plane crash brought to light
manv new details of the contra aid network, one area that is
still unclear is where the Funding came Erom after Congress
cut off aid. One U.S. government official involved in the
program recently estimated that no more than s17 million
was channeled to the conrras through private groups. Yet
other officials estimate the cost of sustaining the contra war
at between x100 million and s200 million. One possible
Pxolanation is that the contras had access to a variety of
funding sources, many originating with or arranged by the
C:nited States.
Earlier this year the General Accounting Office con-
cluded that more than half of the s27 million in non-lethal
assistance approved by Congress last year Eor the conrras
could not be tracked. Records of bank accounts used by
brokers for the funds revealed that millions of dollars were
transferred into offshore bank accounts, paid to the Hon-
duran military, or given to Miami brokers who worked
closely with the contra;. A draft GAO audit has also con-
cluded that x15,000 earmarked for purchase of clothes for
Indian rebels based in Costa Rica was diverted to buy
ammunition.
One U.S. official involved in the aunt*a program also said
that the diversion of U.S. Economic Support Funds (ESF)
through El Salvador, Guatemala, Honduras, and Israel was
vital to financing the secret war. One American arms dealer
who has sold weapons to the conrras said some arms were
purchased with "black money," a term for CIA funds that
are concealed in padded U.S. military contracts.
Other evidence points to the rebel forces using profits
from drug trafficking to pay for the war. One U.S. intelli-
gence report claimed that s250,000 from cocaine smuggling
was used to buy a helicopter and other military equipment
for troops loyal to Eden Pastors, a leader of the Costa
Rican-based force Revolutionary Democratic Alliance
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(ARDE). American law enforcement officials have said
other cont*a organizations operating in northern Costa Rica,
including the FDti, engaged in drug trafficking, often with
Cuban-Americans from Miami.
But on October 18 the contras' money problems eased
considerably. President Reagan signed into law the con-
gressional authorization for the x100 million aid package.
Two years after Congress banned aid and two weeks after
Eugene Hasenfus parachuted out of the fiery plane, U.S.
military aid to the c~nr*a; was legal once again.
Robert Parry is a l~'ashington reporter. Brian Barger is an
associate producer for the CBS '.dews show "6ti'est 5;'th
Street."
WHO'S WHO IN
THE CONTRa NETWOiuc
THE WHITE HOliSE
Robert McFarlane
tiSC adviser who obtained Reagan's approval in
early 198 for "private aid" network to aid the
.~~~-a;.
Oliver tiorth
tiSC official who proposed the network to evade con-
gressional aid ban.
Robert Owen
tiorth's intermediary with the various contra armies.
Donald Gregg
Former CIA official who helped Felix Rodriguez (see
below) get his job.
THE `PRIVATE' GEtiERALS:
John Singlaub
Leader of World Anti-Communist League and close
colleague of '~lorth's.
Richard Secord
Retired Air Force general, apparently active in funnel-
ing money to rntra; through other countries.
Tom Posey
Leader of Civilian Military Assistance (CM.A), a para-
military group that supports the contras.
FIELD OPERATIVES
Eugene Hasenfus
Hapless survivor of October 5 plane crash in tiicaragua
who says he worked for the CI.~.
Felix Rodriguez (a.k.a. Max Gomez)
Bay of Pigs veteran who directed the cent-a resupply
effort from an air base in El Salvador.
Luis Pbsada Carriles (a.k.a. Ramon Medina)
Rodriguez's colleague, wanted for terrorism.
John Hull
.~merican whose Costa Rican farm is a cent-a base.
THE MIAMI COI~NECTIOti
Leon Kellner
The L'.S. attorney in :Miami, investigating a 1985 illegal
arms shipment to the rnra;
Jesus Garcia
The 'Miami man whose revelations led to Kellner's
investigation.
Jose Coutin
aide to Posey and government informant against
Garcia.
Alan Saum
Another aide to Posey w?ho also helped arrest Garcia.
D.C. Diaz and Dennis Hamburger
Officers who used CMA's help to arrest Garcia.
Jack Terrell
.~ former CMA leader who says he discussed the assas-
sinations with the conrr,z;.
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