Friday, September 10, 2010

Covert Finances: Financing the Contras

Intelligence operatives of the special operation group undertook to raise money for right wing insurgents in Central America by in many ways. They used the records of the Republican National Committee and GOPAC, Newt Gingrich’s political action committee, to solicit donations. There was a long term program to raise money by defrauding banks, savings and loans, brokerage houses, and insurance firms. In several instances in the early 1980s, the agency bilked several Greyhound entities out of at lest $120,000,000.

In most cases officers of the banks and insurance companies knew what was occurring and went along. Frequently, FDIC or another federal agency entered these situations and repaired much of the damage at the expense of the tax-payers. The great advantage they had in perpetrating various frauds was the certainty that the Department of Justice would not come after them. Eventually, some of the agents learned that this was not quite true. If they were considered unreliable or possessing too much information, they did eventually spend time in prison. Al Martin, a low level operative, best stated his motives and those of his colleagues: “at least I can say I did so to help my country, which was the truth. And to line my own pockets.”

Economist Linda Napoleoni estimated that the intelligence community drained a little over a billion dollars out of the US economy through insurance and banking fraud. She claims Oliver North was mastermind of the scheme, and that it acted as an indirect tax because the taxpayer eventually had to intervene and make good the losses.

In the case of the banks, intelligence people usually obtained large loans and then began selling the bank’s stock short. When the bank collapsed, the loans either disappeared or were eventually repaid at 30 or 40 cents on the dollar. Sometimes the banks did not collapse but simply endured huge losses through bad loans. Bayshore National Bank in Florida was stripped of 13 million. Congressman Henry Hyde, who was OSS in World War II, was deeply involved in covert operations employed these tactics in defrauding the Oak Saving Bank in Illinois. The Resolution Trust Corporation brought a suite (93 C 2477) claiming that as a member of the Board of Directors, he did much, through gross negligence, to take down the bank, and with great losses. The case went to Federal Judge Brian Barnett Duff, a pal of George H. W. Bush, who ruled that almost all proceedings were to be kept secret. That ended the case.

One could guess that Hyde helped loot the bank on behalf of the agency and might have received a share. On the other hand, he paid a private investigator to keep track of the bank scandal, so he may have been acting on his own. But that is only a guess. Hyde had close ties with the Paradise Island Casino in the Bahamas since 1969, and would have been in a position to launder C.I.A. and other funds through it. Hyde , a key member of important committees, played the leading role in preventing the House investigation from turning up anything about C.I.A. involvement in Contra drug dealing. He was also the central figure in the impeachment of Bill Clinton.

In the end, the Bush administration gave some of the healthier failed S&Ls , along with tax breaks, to political friends at fire sale prices One the major benefi C.I.A.ries were Ronald Pearlman and the Bass family. Pearlman and his partners paid $315 million for $7.1 billion in good assets and $5.1 billion to make good bad loans.

There were also government-sponsored crooked real estate deals and bogus oil and gas contracts. Fraudulent securities transactions and false insurance claims were common. Many shell corporations were established, but not all their functions were scams. If they were they would very soon have no customers to prey on at the appropriate times. There were government-sponsored real estate deals and bogus oil and gas ventures. Fraudulent securities transactions and false insurance claims were common. People were encouraged to give airplanes and boats to covert agents for use in Central America. The donors were assured they would collect far more in tax breaks than the values of the donations. Donors were also helped to file false insurance claims for the allegedly "stolen "items. In one case, ATF agents accidentally stumbled onto some of the stolen items that were warehoused in Joplin, Missouri and brought the DEA into the case. Both agencies were quickly warned that they were interfering in a national security operation.

Some of the early scams were fairly benevolent. Big contributors were asked to buy securities and told they would profit and that some of the money would be channeled to fighting the contras. In the end they lost half their money. Commissions to the salesmen came to 15% and another 35% went to some accounts controlled by Oliver North. They were told that they could write off their losses on a 2 for one basis and that the IRS would not challenge this. There is no evidence that the IRS ever did. They lost nothing on an after-tax basis.

Major General Richard Secord’s companies usually had the name ‘stanford” in them. Lawrence P. Hamil alone had 39 corporations, all with the word “Gulf” in their names. Some were used to launder money, but most were deployed to raise money through fraud. Hamil often used Charles Keating’s Lincoln Savings and Loan to provide up-front money for his schemes. The bank received worthless securities as collateral. Frequent players in Hamil’s ventures were Major General John Singlaub, Major General Richard Secord, Jeb Bush, Neil Bush, George W. Bush, Prescott Bush, and Wally Bush.

Hamil attended Georgetown but did not graduate. In the late 1970s he served the C.I.A. by peddling American Express cards in Argentina, despite a trade embargo imposed by the Carter administration. During the Falklands War he worked with Amaro Pintos Ramos, a Brazilian industrialist, smuggling a few Exocent missiles into Argentina. He came into the Contra supply effort early and had copies of the C.I.A. plan for Operation Eagle, the effort to arm and supply the Contras. It is unknown how be obtained this Bill Casey document, perhaps it came through his ties to Ramos, George H.W. Bush friend and occasional partner.

Perhaps it came from Casey himself as he was a family friend. He was to excellent at real estate swindles, notably the a Boca Chica deal and the notorious Topsail Development Limited scam in Pensacola. In the 1990s, he seemed to be working for the Department of Defense. When he travels it is on a DoD Lear jet, and his luxury hotel bills are paid by the same agency. In 1998, it is said that he was busy channeling Chinese contributions into Bush gubernatorial campaign. The Justice Department claims to have no information on him, but has used a national security block to keep him off the witness stand. A few reporters who have explored his activities have lost their jobs,, but Gloria Borger survived after briefly showing an interest in him.

According to Gene Wheaton, a military criminal investigator with ties to the agency, rogue agents or “crazies” in the covert division carried out some operations to make money for the agency and themselves and becauses they were fun. In Operation’screw Worm,” they created an air base on the border of Mexico and Guatemala so they could move weapons into Peru to fight the insurgent Shining Path but also just to keep the conflict going and sell arms. They had customers on both sides. It was essentially a business operation.

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