THE CIA-CONTRA-CRACK COCAINE CONTROVERSY:
A REVIEW OF THE JUSTICE DEPARTMENT’S INVESTIGATIONS AND PROSECUTIONS
(December, 1997)
Office of the Inspector General
Department of Justice

Chapter II: Oscar Danilo Blandon

As noted in the previous chapter, the San Jose Mercury News articles reported that Oscar Danilo Blandon was a cocaine trafficker in Los Angeles who provided the profits of his sales to the Contra revolution. According to the articles, Blandon, along with Norwin Meneses, turned "Rick Ross into L.A.'s first king of crack." The articles noted that in 1986 the Los Angeles Sheriff's Department (LASD) raided more than a dozen locations connected to Blandon's drug operation but found virtually no drugs at any of the locations. The articles reported speculation that the CIA compromised these LASD raids, perhaps because of Blandon's ties to the Contras. The articles reported further that while Blandon was eventually prosecuted in 1992 by federal authorities and "admitted to crimes that have sent others away for life," he was released from prison after 28 months in jail, and was paid by the DEA for his cooperation. Moreover, Blandon received permanent legal resident status in the United States.

In later chapters of this report, we describe the evidence of Blandon's ties to the Contras and the timing and extent of his sales of cocaine to Ross. This chapter examines the federal investigations of Blandon, in light of the claims in Mercury News articles concerning the lenient treatment Blandon allegedly received from the federal authorities. We describe in detail what DOJ officials knew and did in their investigations of Blandon and focus particular attention on the allegation that Blandon may have been protected because of his relationship with the Contras. Although we found troubling issues in the investigation and prosecution of Blandon, such as a lack of coordination among federal law enforcement offices and the improper granting of permanent resident status to Blandon by the INS, we did not find that any of these failures were the result of interference or pressure from the CIA or any other federal entity.

A. Background of Blandon

In his interview with us, Blandon described his background in Nicaragua and history of drug dealing in the United States. Blandon was born on July 29, 1951, in Managua, Nicaragua. His family members were well-known in Nicaragua and were substantial landowners. Blandon attended college in Canada and in Mexico, obtaining a degree in business administration. He returned to Nicaragua in 1974 to work in his father's real estate business. In 1978, he obtained a masters degree in business in Colombia, then returned to Nicaragua, where he worked for the Nicaraguan government as a director of retail and wholesale markets. In June 1979, after the fall of the Somoza regime, Blandon fled Nicaragua with his wife and daughter, traveling to Miami on a business visa. He applied for political asylum in the United States, which was initially denied but later granted.(5)

Blandon lived in Miami for a month, but then moved to Los Angeles, where he sold used cars for several years.

Blandon told us that in 1980 or 1981 he became involved with the Contra movement in Los Angeles. He said he opposed the Nicaraguan Sandinista rulers because they were communists. In Los Angeles, he began attending informal meetings involving approximately twenty opponents of the Sandinistas. In approximately 1980 or 1981, Colonel Enrique Bermudez, a leader of the Contra group called the "Fuerza Democratica Nicaragua" or "FDN," visited Los Angeles, and the informal group then affiliated itself with the FDN.

Blandon said that in 1982, he met Norwin Meneses when a friend asked him to pick up Meneses at the airport in Los Angeles. Meneses was living in San Francisco at the time. Blandon did not know Meneses, although he heard about Meneses' reputation as a drug trafficker and had also heard that Meneses was called the "Padrino," or "Godfather," in Nicaragua. During the course of a conversation they had when they initially met, Meneses told Blandon that he would give Blandon cocaine and teach Blandon how to sell it, and they would send the profits to the Contra revolution. Blandon said he agreed to this because he had "nothing to lose" and would do anything "to get back" to Nicaragua.

Blandon tried to sell two kilograms of cocaine "fronted" by Meneses, but Blandon had difficulty finding buyers and made little profit from the sales, so Meneses identified customers for Blandon to contact. Blandon also began collecting money that was the proceeds of drug sales for Meneses in Los Angeles.

Around this time, the FDN in Los Angeles began organizing rallies and parties to raise money for the Contras. Blandon said he used some of the money he collected from the drug sales for expenses related to the rallies, such as food and t-shirts. Blandon estimated that he contributed the equivalent of between $5,000 and $10,000 to the Contra cause in this way.

According to Blandon, in 1982 he flew with Meneses to Central America to meet with drug dealers and purchase drugs. While in Honduras, they also met with Enrique Bermudez, the leader of the FDN, and discussed the FDN's financial problems. Bermudez said the Contras in Honduras had little money and needed funds for supplies such as medicine. Bermudez said to Blandon and Meneses during the conversation that "the end justifies the means." Blandon told us, however, that he did not believe that Bermudez knew that Blandon and Meneses were selling drugs to support the Contras or that this statement referred to any drug sales. Blandon said that he began donating drug money to the Los Angeles group supporting the Contras, to be used to purchase supplies for the Contras, such as trucks or medicine. Blandon estimated that he gave about $40,000 all told from drug proceeds to the Contras.(6)

Blandon said that later in 1983, Bermudez addressed Contra supporters in the United States. He told the supporters that the Contras no longer needed their money because "the train is running," which Blandon interpreted to mean that the CIA was funding the Contras in Central America. Blandon continued selling drugs in Los Angeles, but for his own profit rather than to supply money for the Contras.

According to Blandon, in 1983 he broke with Meneses because he was making little profit selling the drugs that Meneses fronted and because he owed Meneses $100,000. Blandon told us that he began getting and selling cocaine on his own. Blandon, by his own admission, became a significant drug dealer, receiving cocaine from Colombians, Mexicans and Nicaraguans, and selling large quantities to Rick Ross as well as others. Blandon claimed to us that he did not begin selling to Ross until 1985, long after he had stopped selling drugs to support the Contras. In a later chapter discussing Ross, we describe the evidence as to the timing of when Blandon began selling cocaine that Ross supplied to customers in South Central Los Angeles.

B. DEA Investigation of Blandon

The first information concerning Blandon that we found in DEA files is a March 1983 report of a debriefing of a confidential source by the Los Angeles DEA. This source identified two organizations allegedly smuggling large amounts of cocaine into California. The first organization, allegedly headed by Robert Arana, smuggled cocaine from Colombia to Miami, and then transported the drugs to Los Angeles and distributed them to "Hollywood celebrities." The source identified four members of this organization, one of whom was Blandon. The second organization, headed by "Edwin Ivan Meneces," smuggled cocaine into the San Francisco area and distributed large quantities there.

Another DEA confidential source provided more information concerning Blandon in January 1985. According to the source, in early 1983, Meneses' Colombian source of supply had stopped providing Meneses with drugs and Meneses had begun getting cocaine from Blandon's source of supply. The source also said that Blandon owed Meneses a $200,000 debt and because Blandon did not have the money to pay it, he agreed to provide Meneses with cocaine. The source reported that in 1984, a drug trafficker furnished 18 kilograms of cocaine to Blandon, who in turn gave 8 kilograms to Meneses.

In February 1986, a third confidential source told the San Francisco DEA that in December 1982, Blandon had traveled to Miami for a conference in support of the Nicaraguan Contras and, while there, had visited two Nicaraguans who the source believed were involved in cocaine trafficking. During this visit, Blandon had received a telephone call from Meneses, although the source did not know the subject of the call. The source provided further details concerning Meneses' cocaine trafficking, but nothing further about Blandon.

This DEA source information apparently was treated as background intelligence, and the DEA did not open a case against Blandon until August 1986, when a confidential informant came into the DEA's Riverside, California, office and provided information to DEA Special Agent (SA) Thomas Schrettner. The informant described a loose confederation between two separate organizations distributing cocaine in California: the Blandon organization, located in southern California, and the Meneses organization, located in San Francisco. The informant did not have many details on Meneses, but provided extensive information about Blandon's operations. The informant reported that the principal supplier of cocaine to Blandon's group was Aparicio Moreno. According to the informant, Moreno also supplied Meneses, and Blandon gave drugs to Meneses as well. Blandon purchased high quality cocaine from suppliers other than Moreno if their prices were lower. The informant said that Blandon's organization was centered in San Bernardino County and operated from a trailer located at an auto dealership owned by Blandon, called Guerra Auto Sales, and from a restaurant owned by Blandon, called Nicamex Taco. The informant identified several other residences and businesses owned by Blandon where money and cocaine were stored. The informant also reported that Blandon, his wife Chepita, Ronald Lister, Moreno, Moreno's wife Aurora Moreno, Carlos Rocha, Ivan Torres, and others transported millions of dollars from Los Angeles to a townhouse in Miami that had been purchased for Blandon by Orlando Murillo. Murillo worked for the Government Security Bank in Coral Gables, Florida, and allegedly acted as the money launderer for the Blandon organization.

DEA agent Schrettner told us that this informant had no documents or corroborating evidence other than what was reported about the historical operation of the Blandon organization, and the informant was unable to provide more current information or infiltrate the organization. The informant never provided information to the DEA again.

As a result of this intelligence, however, on September 1, 1986, Schrettner formally opened a DEA case targeting "Blandon, his associates and source of supply." The DEA case initiation report discussed the informant's account and proposed using surveillance and other investigative tools to develop evidence to prosecute Blandon and other organization members.

C. FBI Investigation of Blandon

At approximately the same time that Schrettner opened the DEA case against the Blandon organization, FBI Special Agent Douglas Aukland of the FBI's Riverside, California office independently began a case against Blandon. On July 11, 1986, a confidential informant with information about the Blandon organization (LA CI-1) came, unsolicited, to FBI's Riverside office and told Aukland about Blandon's operations.

According to Aukland's report of LA CI-1's information, Meneses imported cocaine from Colombia through Nicaragua, Honduras, and Costa Rica, and was one of the largest distributors of cocaine on the West Coast. A pilot nicknamed "Oklahoma Dick," who possibly lived in the Tulsa area, regularly flew to South America to obtain this cocaine. The informant said the cocaine was then supplied to "Aparicio," Meneses, and Blandon. Blandon was said to be Meneses' largest competitor, although the two had previously been partners and still operated together when necessary. According to LA CI-1, among the members of Blandon's organization were his wife (Chepita), Orlando Murillo (who routinely laundered cocaine funds for Blandon), and Ronald Lister, a former Laguna Beach, California police officer who, in September 1985, allegedly drove with Blandon to deliver 100 kilos of cocaine to "major suppliers of LA 'rock houses'" in exchange for 2.6 million dollars.

According to Aukland's report, LA CI-1 reported further that Blandon and Meneses were founding members of the Nicaraguan Democratic Force (FDN), a wing of the Contra movement headed by "Calero," and that Blandon and Meneses used their drug profits to help fund the FDN. According to Aukland's report, LA CI-1 said that in January 1985, Eden Pastora, another Contra leader, had met with Blandon in Miami in an effort to "seek[] cocaine funds from Blandon to fund Contra operations [but] no deals were struck during that meeting."

When we interviewed Aukland about this case, he reported that he normally worked white collar crime matters and that the Blandon case was his first drug investigation. Aukland thought LA CI-1 supplied valuable information and persuaded his supervisors in the Riverside FBI resident office and in the Los Angeles Field Office to let him work the case. Aukland said he did not get much help on the case from his supervisors or other agents, who were already spread thin handling other matters.

Aukland said to us that he thought LA CI-1 had come to the FBI because he had reached a "low point" in his life and also may have wanted to get back at people in the Blandon organization. LA CI-1 seemed "apolitical" to Aukland and did not appear to be a Contra sympathizer. Aukland told the OIG that although LA CI-1 said he did not know how much Blandon had contributed to the FDN, he thought that Blandon had originally started dealing drugs so that he could support the Contras. According to Aukland, the FBI paid LA CI-1 about $10,000 in total for his cooperation.

Through the FBI, we also interviewed LA CI-1. He appeared to have extensive and direct knowledge of the Blandon and Meneses drug organizations during the early 1980s. He related how Blandon had come, "broke," to Los Angeles in 1982, had started to sell drugs for Meneses in small quantities, and had ended up a big dealer, distributing large quantities of cocaine. LA CI-1 told us that Blandon had never claimed to him to be selling drugs in order to support the Contras, and, contrary to Aukland's representations, LA CI-1 did not think that was Blandon's motivation. Blandon also never told LA CI-1 that he had given any money to the Contras. LA CI-1 opined that Meneses and Blandon may have been "moral supporters" of the Contras but had no direct role in founding the FDN. According to LA CI-1, Meneses and Blandon were concerned only about when the next cocaine shipment would arrive.

Regarding the statement attributed to him in Aukland's report concerning Eden Pastora, LA CI-1 said that he had meant that Pastora had been seeking funds from Blandon that LA CI-1 knew were cocaine funds, but LA CI-1 did not know if Pastora knew that the source of the funds was cocaine trafficking. LA CI-1 said he did not know anyone who received cocaine from the Contras or sold cocaine to make money for the Contras.

D. DEA and FBI Cooperation in the Blandon Investigation

The FBI and DEA Riverside offices were located in the same building, and in September 1986 Aukland and Schrettner learned that they both had information about the Blandon organization. According to their investigative reports, on September 3, 1986, they met, along with their supervisors, to discuss their cases against the Blandon organization. The DEA agents said at the meeting that the DEA in Riverside did not have the manpower to work the case but could assist the FBI if the FBI took the lead role in the investigation. Schrettner told us that at this time, he and the DEA in southern California were concentrating on numerous heroin cases and he could not devote his full time to the Blandon case. Aukland confirmed to us that the FBI was the lead agency in the Blandon case and that the DEA was only able to provide part-time help on the case.

In September 1986, Aukland wrote in an investigative report that his recommendation was to obtain an "off-site" location, not in the FBI's Riverside office, to run the investigation on the Blandon organization. He also wrote that he planned to conduct surveillances of Blandon's possible stash locations, use pen registers on the telephones at those sites, and attempt consensual monitoring.

Aukland contacted the San Francisco FBI and the U.S. Attorney's Office in September 1986 and learned that FBI Special Agent Don Hale (now deceased) was investigating Meneses, in coordination with San Francisco Assistant U.S. Attorney Eric Swenson. Although Hale was not familiar with Blandon, he reported to Aukland that Meneses "has been known as a cocaine distributor for many years by the FBI and DEA." The San Francisco DEA had previously worked several cases against Meneses but had not developed sufficient evidence to prosecute him.(7) According to Hale, the FBI had received authority from the San Francisco U.S. Attorney's Office to attempt to build a historical drug conspiracy case against Meneses, but the FBI did not have an open case against him. Hale said he had three informants willing to testify against Meneses, although they were unable to infiltrate his organization. The informants had "indicated that Meneses, a Nicaraguan, deals in cocaine with both the Sandinista [sic] and Contra political factions in Nicaragua. Meneses is described as being basically apolitical and only interested in money." Hale told Aukland that Meneses was living in Costa Rica but came back to the United States on occasion.


5. INS records show that Blandon entered the United States on June 17, 1979 on a business visa and applied for asylum on February 15, 1980 in Los Angeles, California. On January 25, 1983, the Los Angeles INS office denied his request for asylum and later issued an Order to Show Cause why Blandon should not be deported. On June 27, 1983, Blandon filed a new application for asylum before an immigration judge, and on August 19, 1985, the judge granted Blandon's asylum application, finding that Blandon had a well-founded fear of prosecution if he were returned to Nicaragua. For a further description of Blandon's immigration status, see section L below.

6. Blandon also told us that during his trip to Honduras, he was carrying $100,000 for Meneses, to be used to purchase drugs from a big dealer in Bolivia. But when they were leaving Honduras, the police caught them with the money and confiscated it. Blandon later saw someone connected to the FDN, who went to the police and said that the money was for the Contras. Blandon said that, in reality, the money was not for the Contras but was intended for use in purchasing drugs. The police eventually released the money to Blandon, who then flew to Guatemala and gave it back to Meneses. They never received a visa to enter Bolivia and never consummated the proposed drug deal there.

7. We describe these cases in the next chapter of the report, which discusses the Meneses investigations.

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THE CIA-CONTRA-CRACK COCAINE CONTROVERSY:
A REVIEW OF THE JUSTICE DEPARTMENT’S INVESTIGATIONS AND PROSECUTIONS
(December, 1997)
Office of the Inspector General
Department of Justice