Covert Finances: Early Drug Operations

When government agencies do something illegal or something that would bring them shame or contempt they find covert ways of paying for the activities. Sometimes this financing involved money that came from the sale of drugs or weapons, and sometimes the funds came from the loot of war or elaborate financial schemes. On other occasions, banks or businesses have been looted to provide money for black operations. By following the money, we also learn that American intelligence people found it necessary to develop close ties with people in organized crime, who were often partners with the government in illegal transactions.

Unscrupulousness and lawless conduct in foreign affairs sometimes led to lawless conduct in American domestic affairs. After World War II, the United States used some of the loot Japan had amassed to finance the Liberal Democratic Party. These funds were called the “M Fund,”and the Eisenhower Administration turned control of the fund over to the Japanese right in return for pumping a substantial amount into Richard Nixon’s presidential campaign. Of course, the transfer had to be facilitated by the C.I.A., an agency that was increasingly moving toward the right.

The C.I.A. was created in 1949, and much of its money comes to it through the Department of Defense. The act creating the agency, provided for a black budget that the agency could spend as it pleased, provided there were no presidential order to the contrary.

any other Government agency is authorized to transfer to or receive from the Agency such sums without regard to any provisions of law limiting or prohibiting transfers between appropriations [emphasis added]. Sums transferred to the Agency in accordance with this paragraph may be expended for the purposes and under the authority of sections 403a to 403s of this title without regard to limitations of appropriations from which transferred.

Hence, vast amounts of money could be hidden in the budgets of various departments and transferred to the C.I.A., but there never seemed to be enough funding. It is difficult to determine when the C.I.A. found that the drug trade was a good way to finance operations. Perhaps it goes back to morphine trading by former Nazis who became C.I.A. contract operatives after World War II. There is also the theory that drug trading began with agents working in post-war Albania.

There is also evidence that from the beginning the C.I.A. needed funds other than those appropriated by Congress to carry out some operations. Using hidden funds removed the problem of public accountability. After World War II, what became the C.I.A. had a substantial store of Nazi and Japanese loot and treasure in the form of gold, platinum, and gems. It was kept in various places. Some was in the Black Eagle Trust in New York. Some was in the Philippines, and Ferdinand Marcos eventually helped administer it and was removed from power when he sought too large a share for himself. Imelda Marcos claimed that much of her fortune came from the Japanese gold, but she may have said that to cover up the fact that much of it came from graft. William Quasha, an American lawyer often in the Philippines, was Marcos’s money manager and funneled Marcos money into legitimate investments. Alan, his son, along with Harvard University, came to the rescue of George W. Bush in Harken Oil venture. In 1994 Alan Quasha became head of the American Stock Exchange. Today he is a member of Harvard board for its foreign policy center. Some of the money was used to influence elections in Europe and in more recent years some was used to reimburse international banks for bad loans to third world countries. In recent years, some believe these funds are mot completely controlled by the government but have been partly diverted from the use of right wing groups allied with the intelligence agencies. They were also used to bail out major banks and to buy into major financial institutions. It is claimed that they were also used as leverage to loot MGM and there was an unclear connection to the collapse of Banco Ambrosiano in Milan.


Drug money


The drug trade was a major source of unappropriated funds. For many years, it was second only to the profits from the illicit arms trade. From its creation, the agency has raised money by moving drugs. Eventually, private firms became important partners in the drug trade. Michael Ruppert has built a case that American International Group, a huge investment firm, has long been a partner in the drug trade. In 1995, Bill Clinton briefly nominating its CEO to be Director of the Central Intelligence Agency. The firm has been used in covert operations as early as World War II.


The Kuomintang (KMT) Nationalist Chinese had been dealing in drugs since the 1920s, and an exiled KMT force in the Shan State of Burma exchanged drugs for OSS arms in the 1940s. OSS Colonel Paul Helliwell began moving drugs to the U.S. where they were sold in Black ghettos during World War II. He created an OSS proprietary company, Sea Supply, in Miami to move the arms and drugs. Poppies from Burma and elsewhere were turned into motrphine base in jungle labs. Eventually it was turned into into China White and placed in the hands of US mafia distributors, Meyer Lansky in Tampa and the Santo Trafficantes, father and son. They also moved the drugs into the Latino Barrios. Helliwell served as one of the agency’s main contacts to Myer Lansky. He owned several banks which handled Lansky funds. With the likely help of Helliwell, the C.I.A. and Lansky used the Paradise Island resort for money laundering, and the agency must have known that the mobster was skimming casino profits. Resorts International were also part of the C.I.A.-Mob connection. It is not known whether the agency knew that Paradise Island profits ere sometimes being carried to Rebozo for Nixon. Often, Seymour (Sy) Alter, a Lansky man and Nixon/Rebozo friend since 1962, made the deliveries. Some came from the Paradise Island Bridge Company, represented by Halliwell. Nixon could have been a stockholder. We know he had an account in Halliwell’s Castle Bank. C.I.A. funds from Resorts International would often be used for black operations. The laundering operations in these places were simple enough. Someone like Khesoggi, known as a frequent big looser, would come in and blow a huge amount of money. Then other bills close to that amount could be moved out.

The French set up a drug network in Southeast Asia after World War. They employed the Corsican mafia to refine the morphine into heroin. When the French left, the C.I.A. took over their drug network. Two months after the French decamped, Colonel Edward Lansdale, a C.I.A., officer was leading the Saigon Military Mission and overseeing the C.I.A. drug trade. He would assist the Laotian warlord Vang Pao to overcome his rivals, and thus won a military By the late 1950s, distributors included the some Long Beach gangs

Meanwhile, the US police were moving against drug dealers from French Corsica. President Dwight Eisenhower cautiooned the C.I.A. to reign in these C.I.A. people in Southeast Asia, probably meaning to restrain their drug trafficking, but nothing happened. In addition, Nationalist Chinese entrepreneurs were moving drugs into the US with the full knowledge and connivance of the Taiwan and US governments. In 1960, Russ Koen pointed this out in his The China Lobby and added that prominent Americans were profiting from the trade. Harry J. Anslinger, head of the Federal Bureau of Narcotics, denounced him and the book, and Macmillan soon let it sink into obscurity.

After 1951 C.I.A. planes moved the drugs for them. Even after the KMT was forced out of Burma, the C.I.A. retained ties with drug traffickers in the area and played a role in damaging the careers of Richard Horn and some other DEA agents who worked against the trade in the 1990s. It appears that DEA agents often tried to derail the C.I.A. drug trade, but that others seemed to be working against drug-dealing competitors. It is also known that the Pacific Command of the U.S. forces briefly operated the drug trade of the Imperial Japanese Army briefly at the end of World War II. There is evidence that Egel Krogh turned up an illegal C.I.A. drug trade in 1971, which apparently had been unknown to the Nixon White House. It appears that the C.I.A. was working with French intelligence and Corsican gangsters in a Southeast Asian drug trade. When Nixon learned of this, he went after the C.I.A. operation.