Drug Airlines
Through their ownership of an air services company called SETCO, the Perez brothers were associated with Juan Matta-Ballesteros, a major cocaine kingpin connected to the 1985 torture-murder of DEA agent Enrique "Kiki" Camarena, according to reports by the DEA and U.S. Customs. Hitz reported that someone at the CIA scribbled a note on a DEA cable about Arana stating: "Arnold Arana . . . still active and working, we [CIA] may have a problem."
Despite its drug ties to Matta-Ballesteros, SETCO emerged as the principal company for ferrying supplies to the Contras in Honduras. During congressional Iran-Contra hearings, FDN political leader Adolfo Calero testified that SETCO was paid from bank accounts controlled by Oliver North. SETCO also received $185,924 from the State Department for delivering supplies to the Contras in 1986. Furthermore, Hitz found that other air transport companies used by the Contras were implicated in the cocaine trade as well.
Even FDN leaders suspected that they were shipping supplies to Central America aboard planes that might be returning with drugs. Mario Calero, Adolfo Calero's brother and the chief of Contra logistics, grew so uneasy about one air freight company that he notified U.S. law enforcement that the FDN only chartered the planes for the flights south, not the return flights north.
Hitz found that some drug pilots simply rotated from one sector of the Contra operation to another. Donaldo Frixone, who had a drug record in the Dominican Republic, was hired by the CIA to fly Contra missions from 1983 to 1985. In September 1986, however, Frixone was implicated in smuggling 19,000 pounds of marijuana into the United States. In late 1986 or early 1987, he went to work for Vortex, another U.S.-paid Contra supply company linked to the drug trade.
By the time that Hitz's Volume Two was published in fall 1998, the CIA's defense against Webb's series had shrunk to a fig leaf: that the CIA did not conspire with the Contras to raise money through cocaine trafficking. But Hitz made clear that the Contra war took precedence over law enforcement and that the CIA withheld evidence of Contra crimes from the Justice Department, Congress, and even the CIA's own analytical division.
Besides tracing the evidence of Contra-drug trafficking through the decade-long Contra war, the inspector general interviewed senior CIA officers who acknowledged that they were aware of the Contra-drug problem but didn't want its exposure to undermine the struggle to overthrow Nicaragua's leftist Sandinista government.
According to Hitz, the CIA had "one overriding priority: to oust the Sandinista government. ... [CIA officers] were determined that the various difficulties they encountered not be allowed to prevent effective implementation of the Contra program." One CIA field officer explained, "The focus was to get the job done, get the support and win the war."
Hitz also recounted complaints from CIA analysts that CIA operations officers handling the Contras hid evidence of Contra-drug trafficking even from the CIA's analysts.
Because of the withheld evidence, the CIA analysts incorrectly concluded in the mid-1980s that "only a handful of Contras might have been involved in drug trafficking." That false assessment was passed on to Congress and to major news organizations -- serving as an important basis for denouncing Gary Webb and his "Dark Alliance" series in 1996.
CIA Admission
Although Hitz's report was an extraordinary admission of institutional guilt by the CIA, it went almost unnoticed by the big American newspapers.
On Oct. 10, 1998, two days after Hitz's Volume Two was posted on the CIA's Website, the New York Times published a brief article that continued to deride Webb but acknowledged the Contra-drug problem may have been worse than earlier understood. Several weeks later, the Washington Post weighed in with a story that simply missed the point of the CIA's confession. Though having assigned 17 journalists to tear down Webb's reporting, the Los Angeles Times chose not to publish a story on the release of Hitz's Volume Two.
In 2000, the House Intelligence Committee grudgingly acknowledged that the stories about Reagan's CIA protecting Contra drug traffickers were true. The committee released a report citing classified testimony from CIA Inspector General Britt Snider (Hitz's successor) admitting that the spy agency had turned a blind eye to evidence of Contra-drug smuggling and generally treated drug smuggling through Central America as a low priority.
"In the end the objective of unseating the Sandinistas appears to have taken precedence over dealing properly with potentially serious allegations against those with whom the agency was working," Snider said, adding that the CIA did not treat the drug allegations in "a consistent, reasoned or justifiable manner."
The House committee -- then controlled by Republicans -- still downplayed the significance of the Contra-cocaine scandal, but the panel acknowledged, deep inside its report, that in some cases, "CIA employees did nothing to verify or disprove drug trafficking information, even when they had the opportunity to do so. In some of these, receipt of a drug allegation appeared to provoke no specific response, and business went on as usual."
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