INTRODUCTION

  1. San Jose Mercury News Allegations of CIA/Contra Involvement in Narcotics Trafficking. In August 1996, the San Jose Mercury News published a three-part series of articles titled "Dark Alliance." The series related to a drug ring in California and its alleged connections to the Central Intelligence Agency (CIA)-backed Nicaraguan Contra resistance of the 1980s. (See Exhibit.)

  2. August 18, 1996: Part One. The first article in the series, published on August 18, 1996, set forth the primary allegation that a drug ring in the San Francisco Bay area had "sold tons of cocaine to the Crips and Bloods street gangs of Los Angeles and funneled millions in drug profits to a Latin American guerrilla army run by the U.S. Central Intelligence Agency." The article frequently referred to the Contra movement as the "CIA's army."

  3. The first article also made other specific allegations of CIA knowledge of, or involvement in, the drug ring's activities. According to the article, Contra financiers had allegedly met with CIA "agents" both before and while cocaine, in crack form, was being sold in Los Angeles. Further, these Contra financiers allegedly delivered cocaine on a cut-rate basis to Ricky Donnell Ross, a South Central crack dealer, who turned the cocaine into crack and sold it wholesale to gangs. The article further alleged that court records indicated that "the cash Ross paid for the cocaine was then used to buy weapons and equipment" for the large Contra group, Fuerza Democratica Nicaraguense (FDN). It further alleged that cocaine was "virtually unobtainable in black neighborhoods before members of the CIA's army started bringing it into South Central in the 1980s at bargain-basement prices."

  4. The first article also discussed Oscar Danilo Blandon Reyes' role in the drug ring. Blandon, a former FDN leader and Ross' cocaine supplier, according to the article, had testified at a then-recent San Diego drug trafficking trial that he had started working to raise money for the Contras in late 1981 and that the drug ring sold almost a ton of cocaine in the United States that year. The article did not report exactly how much money was purportedly given to the Contras by Blandon, but reported Blandon's testimony that "whatever we were running in L.A., the profit was going to the Contra revolution."

  5. The first article also reported that Blandon's operation was raided in 1986 and that his defense attorney had suggested that CIA had withdrawn its support of his cocaine operation because Congress had authorized $100 million in aid to the Contras in that year. According to the article, Blandon "told a San Francisco federal grand jury in 1994 that once the FDN began receiving American taxpayer dollars, the CIA no longer needed his kind of help." Blandon said that he and others in the drug ring then began running their drug business for themselves. According to the article, Blandon's defense attorney admitted that Blandon "never told him directly that he was selling cocaine for the CIA," but the attorney reportedly had come to this conclusion "from the atmosphere of CIA and clandestine activities that surrounded Blandon and his Nicaraguan friends."

  6. Another member of the ring alleged by the first article to have been connected to the Contras was Juan Norwin Meneses Cantarero. Meneses was a major California drug trafficker for whom Blandon worked and who was able to avoid imprisonment for many years, according to the article. The article alleged that representatives of the Drug Enforcement Administration (DEA), the U.S. Customs Service and the Los Angeles County Sheriff's Department had complained that investigations into the well-known Meneses organization were "hampered by the CIA or unnamed national security interests." The article also reported that Meneses had posed for a photograph with Contra leader Adolfo Calero, "a longtime CIA operative," and that Meneses had been an adviser to Enrique Bermudez, the military commander of the U.S.-backed Contra forces.

  7. The first article reported that Meneses' connections to the Contras were disclosed when he was convicted of drug charges in Nicaragua in 1992. The article reported that Enrique Miranda, a relative of Meneses' and a former Nicaraguan military intelligence officer, had alleged during Meneses' trial that Norwin Meneses and his brother Luis Enrique had "financed the Contra revolution with the benefits of the cocaine they sold" with the help of Salvadoran military personnel. According to the article, U.S. General Accounting Office records "confirm that El Salvador's air force was supplying the CIA's Nicaraguan guerrillas with aircraft and flight support services throughout the mid-1980s." The article also reported that Meneses had "close personal and business ties to a Salvadoran air force commander and former CIA agent named Marcos Aguado."

  8. August 19, 1996: Part Two. Part two of the "Dark Alliance" series, published on August 19, 1996, focused on the so-called "Frogman Case." In early 1983, San Francisco police apprehended several members of the drug trafficking ring after arresting several swimmers who were bringing ashore 430 pounds of cocaine. The article stated that one of the individuals arrested, a Nicaraguan named Carlos Augusto Cabezas, was connected to the Meneses organization. The article also reported that, in June 1984, the attorney for the cocaine ring's alleged leader, Julio Zavala, had asked the U.S. Government to return cash that had been seized from Zavala's apartment because Zavala insisted the money had been given to him by the Contras to buy supplies. The article also reported that Cabezas had testified at the trial that he had been sent to Costa Rica by Zavala to retrieve cocaine from Horacio Pereira. According to the article, Pereira was "in frequent contact with Contra commanders" and was a business associate of Norwin Meneses. The article reported that Pereira--who was later convicted of drug charges--and two Contras were the cocaine suppliers for the Frogman ring.

  9. August 20, 1996: Part Three. The third part of the San Jose Mercury News series was published on August 20, 1996. This article focused on the spread of crack in Los Angeles and the disparity in sentencing of drug traffickers in the United States. It included no additional allegations regarding involvement of CIA or Contra personnel in drug trafficking.

  10. Subsequent Comment. On May 11, 1997, San Jose Mercury News Executive Editor Jerry Ceppos wrote an editorial acknowledging that the "Dark Alliance" series as published in August 1996 had several shortcomings. "We presented only one interpretation of complicated, sometimes-conflicting pieces of evidence," Ceppos wrote. While the series had implied that Bay Area drug ring profits were funneled to the Contras for most of the 1980s, Ceppos wrote, the article had omitted Blandon's testimony in which he stated that he sent cocaine profits to the Contras for only about a year. Ceppos also noted that the imprecise language of the series had "strongly implied CIA knowledge" of the drug ring, although this was never explicitly stated. He wrote, "Although members of the drug ring met with Contra leaders paid by the CIA and [the series' author Gary] Webb believes the relationship with the CIA was a tight one, I feel that we did not have enough proof that top CIA officials knew of the relationship."

  11. Inspector General Investigation. As a result of the allegations published in the San Jose Mercury News series "Dark Alliance" in August 1996, Director of Central Intelligence (DCI) John Deutch asked the CIA Inspector General (IG) to conduct an investigation into the alleged connections of the CIA-backed Nicaraguan Contras and narcotics trafficking in California during the 1980s.

  12. Specifically, the DCI asked that the Inspector General examine:

(Copy follows.)

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