THE ADMIRAL'S LETTER
Sometime in June 1979, Michele Sindona, Johnny Gambino, and Rosario Spatola met in a room at the Conca d'Oro Motel in Staten Island. Sindona disclosed his plan to liberate Sicily from the mainland. He informed them that Dr. Miceli Crimi had generals in the Italian army drawing up maps of the military bases that must be taken over. “The US military has authorized me to do this,” he told them. “They will not participate in the coup, but there will be a fleet off the coast of Sicily. After we have taken over, they will enter the island to help restore order and protect us from Italy.”57
For proof of US involvement, Sindona produced a letter from Admiral Morris. “See? It is true,” he told the American mobsters. “We can do this. But I need two hundred more men. More guns. If you help, I will grant all Mafiosi amnesty for crimes committed before the coup.”58 Rosario Spatola kissed Sindona's hand, a Sicilian gesture of respect. The plan was ingenious. The Gambino capos would cooperate. What greater catastrophe could the combined forces of Gladio, the Mafia, and the Vatican inflict upon Italy for its concessions to communism than the breakaway of one of its most important provinces as a separate state?
CLOSING TIME
But it was too late for Sindona to realize his dream of an independent Sicily. In August 1976, Carlo Bordoni, his right-hand man, was arrested in Caracas at the request of the US Justice Department for his role in the collapse of Franklin National. From his cell, Bordoni granted interviews to Italian journalists in which he spoke of the machinations of the Sindona syndicate, including the ties to the Vatican and the CIA.59 In January 1977, Mario Barone, whom Sindona appointed to head Banca Privata, spoke of the “list of 500” that Sindona kept in a safety deposit box. This list, according to Barone, contained the names of five hundred politicians, industrialists, and Mafiosi involved in Operation Gladio and the smuggling of “hot money” out of Italy.
The walls were closing in on Sindona. The federal officials left Bordoni in the filthy cell in Venezuela three years before extraditing him to the United States in June 1979. By this time, Bordoni was willing to spill his guts in court. The trial date for Sindona was set for September 10. But St. Peter's banker was not terribly worried. He believed he would be protected by the US intelligence officials he had served so long and so well. After all, his only crime was to make the world safe for democracy by “opening the floodgates of black funds.”60 Few men could have done more. On the morning of August 2, Sindona walked out of his luxurious suite in the Hotel Pierre and disappeared.
Most well-developed heroin networks very quickly move towards a complementation of interests between the narcotics traffickers and corrupt elements of the enforcement agencies responsible for the suppression of the illicit drug trade.
Alfred McCoy, The Politics of Heroin, 2003
Sindona's dream of an independent Sicily was shared by the CIA not only because of its strategic location for US military bases but also because of the island's pivotal importance to the narcotics industry. By 1970, the Mafia had established hundreds of laboratories within Sicily for the refinement of heroin. One was an orange-roofed stucco villa on the Via Messina Marina; another was a decrepit storefront near Brancaccio.1 The capos no longer needed the services of the Corsicans. They had established their own connections to the drug lords of Southeast Asia and had obtained the services of talented French scientists.2 To maintain their monopoly on the trade, the Sicilian mob worked with the Nixon administration in launching the so-called war on drugs. The war resulted in raids by Interpol on Corsican laboratories throughout the French Riviera, eradicating the only source of competition.
Business was booming. By 1971, there were more than 500,000 heroin addicts in the United States, producing a cash flow of $12 billion. On a government survey, 3,054,000 Americans admitted to using heroin at least once. Down at the morgue, where people don't lie, the numbers told a different story: 41 percent of the drug-related deaths were now linked to heroin.3
Southeast Asia remained the main source of opium. From Laos alone, over a ton of opium arrived every month in Saigon on C-47 military transport planes that had been provided by the CIA to Lt. General Vang Pao of the Royal Lao Army.4 So much opium was flowing into Saigon that 30 percent of the American servicemen in Vietnam became heroin addicts.5 Some of this same heroin was smuggled into the United States in body bags containing dead soldiers. When DEA agent Michael Levine attempted to bust this operation, he was warned off by his superiors, since such action could result in the exposure of the supply line from Long Tieng.6
Cash from the network continued to be deposited by the mob in parochial banks throughout Italy. From these financial firms, including Banco Ambrosiano, the money flowed into the IOR (which continued to collect its 15 percent processing fee) before the funds were transferred to privately held mob accounts in Switzerland, Liechtenstein, Luxembourg, and the Bahamas. But this system was not equipped to handle the billions generated from the heroin trade throughout the world. And so a host of new laundries were established by the CIA.
CASTLE BANK & TRUST
One of the first of these operations was Castle Bank & Trust, which was established in the Cayman Islands by the ubiquitous Paul E. Helliwell in 1962. This bank, according to Penny Lernoux, author of In Banks We Trust, “formed a bridge between the poppy fields of Thailand and organized crime in the United States,” while Helliwell retained his dual role as “CIA paymaster [from off-the-record accounts] and mobster's counselor”7 Helliwell organized an entire Caribbean banking circuit and numerous Panamanian shell companies. He continued to operate Sea Supply and became Thai consul in Miami, operating out of the American Bankers Insurance building. Ever industrious, Helliwell also served as legal counsel to Meyer Lansky's protégé Santo Trafficante and as an adviser to Lyndon Johnson.
The Cayman Islands represented the ideal place for Helliwell's offshore banking company. A nation of 13,500 residents and 14,000 telex numbers for banks, sometimes no more than tiny offices, the Caymans offered banks a degree of secrecy that matched that of Switzerland, Luxembourg, and Liechtenstein. Within a decade, Castle Bank was joined in the Caymans by a branch of Nugan Hand Bank and the World Finance Corporation. All three dealt with the CIA, the Vatican, and mob boss Santo Trafficante.
THE CIA CASINO
Initially, the funding for the Castle Bank came from the International Diversified Corporation, a CIA-controlled Panamanian holding company that had been set up by CIA operative Wallace Groves. A convicted felon who had served two years in prison for selling worthless stock, the Agency had assigned Groves such tasks as organizing coups, funding political parties, and cleaning dirty money.8
Money flowed into the Castle Bank not only from International Diversified but also from a host of underworld figures, including Moe Dalitz, the racketeer who became known as “Mr. Las Vegas,” and Morris Kleinman, and Samuel A. Tucker, who operated the gambling syndicate in Ohio and the Desert Inn in Las Vegas.9
A SINISTER SISTER
Castle Bank & Trust was joined at the hip to Mercantile Bank and Trust, another CIA operation that was set up in the Bahamas by Helliwell. Castle owned a large block of stock in Mercantile, and vice versa, and both became principal depositors in each other's operation. In addition, the banks shared most of the same directors.10 Money flowed back and forth in a bewildering array of transactions that included International Diversified. Mercantile and Castle interlocked with Underwriters Bank, Ltd., another firm that Helliwell created in the Bahamas. The majority shareholder of this firm was the American insurance conglomerate American International Underwriters Corp. (AIUC), which was established as part of the insurance empire headed by former OSS agent C. V. Starr, and evolved into the giant multinational AIG (American International Group). AIUC, according to Peter Dale Scott, author of The American War Machine, “was an insurance conglomerate with suspected ties to the CIA in Southeast Asia.”11
In 1976, Mercantile was closed by the Bahamian Government after investors discovered t
hat the bank's holdings were worthless. This came as a surprise to the shareholders since Price Waterhouse, the prestigious accounting firm, had certified a few months before the collapse that Mercantile possessed $25.1 billion in assets. Unfortunately, these assets were alleged “loans” given to unidentified individuals. The money vanished into the agency's black hole.12
THE BLACK HOLE
In 1977, the IRS launched an investigation into the affairs of the Castle Bank that became known as Project Haven. Investigators obtained evidence that the source of much of the money deposited in the bank by underworld figures was the heroin trade in Southeast Asia. Such evidence led to a grand jury investigation. But after the jury was assembled, the investigation was called off. The CIA had issued a warning to the US Justice Department that the pursuit of criminal proceedings against the Castle Bank would endanger “national security.”13 The Washington Post later uncovered an IRS memo stating that the case against Castle involved “hundreds of millions of dollars.”14 The final figure might never be known, because of the strict disclosure laws concerning Bahamian bank records.
A DEAD BANKER
On January 27, 1980, two Australian policemen, driving along the Great Western Highway near the port of Sydney, came upon a 1977 Mercedes Benz parked along the side of the road. Inside the car, slumped across the front seat, was the body of a burly, middle-aged man. Searching his pockets, the policemen found the business card of William Colby, former director of the CIA. On the back of the card was Colby's itinerary for his trip to Hong Kong and Singapore. The dead man's hand was wrapped around the barrel of a new .30-caliber rifle. Next to the body was a Bible with a meat-pie wrapper as a book mark. On the wrapper were scrawled the names of Colby and California Congressman Bob Wilson, then the ranking Republican on the House Armed Services Committee.15
The dead man was identified as Frank Nugan, co-owner of the Nugan Hand Bank and one of the most prominent lawyers in Australia. His death was ruled a suicide despite the fact that Nugan's fingerprints were not on the rifle, and only a contortionist could have shot himself in the head from the position in which he was found in the vehicle.16
When Nugan's partner, Michael Hand, a former Green Beret who had served in Vietnam, learned of the death, he rushed back to Sydney from a business trip in London and began shredding enough of the bank's documents to fill a small cottage. The next day, Hand held a meeting of Nugan Hand Bank directors in which he warned them that they must follow his instructions in destroying all records of transactions, otherwise they would “finish up with concrete shoes” or find their wives being delivered to them “in pieces.”17 By June 1980, Nugan Hand Ltd was in liquidation. It owed about $50 million to creditors. Hand fled to the United States, never to be seen or heard from again.18
THE BLACK BANK
The Nugan Hand Bank had been established in 1973 by Nugan and Hand. Shortly after setting up headquarters in Sydney, the bank blossomed into twenty-two branches. One branch was set up in Chiang Mai, the heart of Thailand's opium industry, in the same suite as the United States Drug Enforcement Administration (DEA). The DEA receptionist answered the bank's phone and took messages when the representatives were out.19 Neil Evans, the former head of the Chiang Mai branch, told investigators that he had seen millions pass through his office, claiming that the bank operated solely “for the disbursement of funds, anywhere in the world, on behalf of the CIA, and also for the taking of money on behalf of the CIA.”20
The money taken from the bank by the CIA was used to purchase weapons from international arms dealer Edwin Wilson for guerrilla forces in Indonesia, Thailand, Malaysia, Brazil, and the white Rhodesian government of Ian Smith.21 Wilson was a former CIA operative who was later convicted of selling arms and explosives to the Libyan government of Muammar Gaddafi.22 Funds were also shelled out to undermine the liberal government of Prime Minister Gough Whitlam, who had pulled Australian troops out of Vietnam and condemned the bombing of Hanoi. These actions were orchestrated by Theodore Shackley, the CIA's deputy director of operations. After Whitlam was removed from office by John Kerr, Australia's governor-general, in 1975, the black ops money flowed to Italy and the IOR, for support of the Christian Democrats.23
The bank also imported heroin into Australia from the Golden Triangle. This dirty work was done by Australian police officers in service to the CIA, according to the Commonwealth-New South Wales Joint Task Force on Drug Trafficking. In 1976, one such officer, Murray Riley, organized five shipments of heroin into Australia, mostly in false-bottom suitcases. For each shipment the branches of the Nugan Hand were used to transfer the purchase money from Sydney to Hong Kong. Over one hundred pounds of heroin was involved in each importation, and much of this was eventually shipped from Hong Kong to the United States. Riley was also involved in two heroin importations in July and September 1977.24
THE SPOOK STAFF
The president of the Nugan Hand Bank was Admiral Earl Preston Yates, who served as the deputy chief of staff at US Pacific Command during the final stages of the American withdrawal from Vietnam. General Edwin Fahey Black, the bank's representative in Hawaii, commanded American troops in Thailand during the Vietnam War, having previously served with the National Security Council (NSC) and the Office of Strategic Services (OSS). Lieutenant-General Leroy Joseph Manor, who worked for the bank in the Philippines, had been appointed chief of staff of the Pacific Command, while General Erle Cocke, a World War II veteran and former brigadier-general of the Georgia National Guard, worked as a consultant for the branch in Washington.25
The board of directors and administrative staff members of Nugan Hand represented a who's who of prominent CIA officials. A partial list is as follows:
Dr. Guy Parker—an expert from the RAND Corporation, a CIA think tank, who served as a financial consultant;
Major General Richard Secord—director of the Defense Security Assistance Agency, who worked closely with Ted Shackley in smuggling heroin money out of Vietnam in large suitcases. The money was stored in a bank account that was accessible only to Secord, Shackley, and CIA agent Thomas G. Clines;
Walter McDonald—retired CIA deputy director and head of the Annapolis branch;
Dale Holmgreen—former chairman of the CIA's Civil Air Transport and manager of the Taiwan branch;
Theodore Shackley—former CIA deputy director for clandestine operations;
Richard L. Armitage—special consultant to the Pentagon in Thailand who oversaw the transfer of heroin profits from Indonesia to Shackley's account in Tehran, Iran;
Patry Loomis—former CIA advisor to the Provincial Reconnaissance Unit in Vietnam;
Robert “Red” Jansen—former CIA station chief in Bangkok, who represented Nugan Hand in Thailand.26
THE MAN NOBODY KNEW
William Colby served as legal consul. After organizing the Gladio unit in Scandinavia,27 he was dispatched by the Agency to Rome, where he worked with the Vatican in thwarting the growth of the Italian Communist Party.28 His budget for black ops in Italy was $25 million a year. Colby was the ultimate Vatican insider. He became keenly aware of the not-so-holy ghosts within the Holy See. He once famously remarked that the global intelligence services maintained by the Vatican left the CIA in the shade.29
As the commander of the CIA station in Saigon, Colby ran intelligence operations during the Vietnam War, including Operation Phoenix, a Stalin-like program that resulted in the assassination of an estimated forty thousand South Vietnamese civilians who were suspected of collaborating with the Viet Cong. From September 1973 to January 1976, he served as the director of the CIA. He was removed from this position by President Ford after revelations of domestic spying by the Agency captured national headlines. Four years later, his business card was found in Frank Nugan's pocket.30
No doubt Colby, who was deeply involved with Gladio, realized the need to establish a new laundry for drug money in Australia. The worldwide demand for heroin had surpassed the wildest dreams of Lucky Luciano. New heroin laboratorie
s had sprung up in Burma, Thailand, and Laos to produce the paste that was shipped on to Hong Kong and Palermo for further refinement. The annual income from the 40 percent tax, which Shan United Army commander Khun Sa imposed on the ten to twenty laboratories along the Thai-Burma border in northern Burma, amounted to $200 million a year.31
A SPOOK'S SPOOK
Throughout his career, Colby remained loyal to the Vatican. Like so many of his fellow spooks, he was a member of the Sovereign Military Order of Malta (SMOM) and held clandestine meetings with fellow knight Gelli.32 Colby also had strong ties to the Mafia. After the shutdown of Nugan Hand, he worked with members of the Giannini crime family to set up Household International in Chicago, another CIA financial front.33 Household conducted ongoing business with the gangster-infiltrated First National Bank of Cicero and the Vatican-controlled Continental Bank—both of which are now defunct.34
A spook's spook, Colby met with a mysterious end. Late one stormy night in May 1996, he stepped away from a half-eaten supper of clams and white wine at his riverside home in Rock Point, Maryland, apparently gripped by a sudden desire to go fishing minus his usual life jacket. Despite continuous sweeps, it took a week for divers to find his body, which remained a few feet from the empty skiff.35
THE DRUG BUST
By 1978, the Nugan Hand Bank was doing billions in business, but all good things must come to an end. Within a year, the operation came to a screeching halt, due, in part, to the delayed repercussion from the fall of Saigon on April 30, 1975. Once the major gateway to the world market for Laotian heroin laboratories, Saigon now became a dead end for Southeast Asia's drug traffic, thanks to the antidrug policies of the Viet Cong. Crude opium still crossed the border from Laos to service the city's declining addict population, but choice No. 4 heroin was no longer available. The syndicates that had produced the high-grade product moved to markets in Europe and the United States.36
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