U.S. intelligence activities in Nicaragua
The CIA World Factbook describes a gradual ceding of British colonial rule, leading to violent opposition to governmental manipulation and corruption spread to all classes by 1978 and resulted in a short-lived civil war that brought the Marxist Sandinistas insurgency to power in 1979. Nicaraguan aid to leftist rebels in El Salvador caused the US to sponsor anti-Sandinista Contra insurgents through much of the 1980s, some of which, in the Iran-Contra Affair, was done after Congress explicitly barred the use of funds for the purpose. Free elections in 1990, 1996, and 2001, saw the Sandinistas defeated, but voting in 2006 announced the return of former Sandinista President Daniel Ortega Saavedra. Nicaragua's infrastructure and economy - hard hit by the earlier civil war and by Hurricane Mitch in 1998 - are slowly being rebuilt.
General CIA reference
Nicaragua has widespread underemployment, one of the highest degrees of income inequality in the world, and the third lowest per capita income in the Western Hemisphere. While the country has progressed toward macroeconomic stability in the past few years, annual GDP growth has been far too low to meet the country's needs, forcing the country to rely on international economic assistance to meet fiscal and debt financing obligations. In early 2004, Nicaragua secured some $4.5 billion in foreign debt reduction under the Highly Indebted Poor Countries (HIPC) initiative, and in October 2007, the International Monetary Fund (IMF) approved a new poverty reduction and growth facility (PRGF) program that should create fiscal space for social spending and investment. The continuity of a relationship with the IMF reinforces donor confidence, despite private sector concerns surrounding Ortega, which has dampened investment. The U.S.-Central America Free Trade Agreement (CAFTA) has been in effect since April 2006 and has expanded export opportunities for many agricultural and manufactured goods. Energy shortages fueled by high oil prices, however, are a serious bottleneck to growth.
Nicaragua filed 1999 and 2001 proceedings against Honduras and Colombia at the International Court of Justice]] (ICJ) over the maritime boundary and territorial claims in the western Caribbean Sea, final public hearings are scheduled for 2007; the 1992 ICJ ruling for El Salvador and Honduras advised a tripartite resolution to establish a maritime boundary in the Gulf of Fonseca, which considers Honduran access to the Pacific; there is another legal dispute over navigational rights of San Juan River on border with Costa Rica.
Nicaragua is a transshipment point for cocaine destined for the US and transshipment point for arms-for-drugs dealing 
Specific CIA activities
Eventually, the Congress of the United States viewed Reagan Administration's anti-Sandinista policies with extreme skepticism. Their efforts resulted in passage in late 1982 of an amendment introduced by Representative Edward Boland to the Fiscal Year 1983 Defense Appropriations bill. This first of a series of Boland Amendments prohibited the Central Intelligence Agency (CIA), the principal conduit of covert American support to the contras, from spending any money "for the purpose of overthrowing the government of Nicaragua."
The majority report stated, " The Central Intelligence Agency was the U.S. Government agency that assisted the contras. In accordance with Presidential decisions, known as findings, and with funds appropriated by Congress, the C.I.A. armed, clothed, fed and supervised the contras. Despite this assistance, the contras failed to win widespread popular support of military victories within Nicaragua." After the Boland Amendments were passed, however, CIA no longer supported the Sandanistas, although an unofficial and clandestine activity, the Iran-Contra Affair, was begun by some government officials and private citizens.
- See also: Iran-Contra Affair
Reagan's posture towards the Sandinista government was highly controversial. His Administration definitely circumvented the Boland Amendment, although it is not clear what he personally knew and ordered, and what was done in his name by White House staff and the then-DCI, William Casey.
A number of actions were taken by National Security Council staff, actions that the Boland Amendments had forbidden to the CIA. While the CIA, as an organization, was not allowed to act in this manner, Director of Central Intelligence William Casey took part in White House/NSC discussions and actions to follow the Reagan policy.
The NSC staff's efforts to assist the contras in the wake of Congress's withdrawal of funding took many forms. Initially it meant extending its earlier initiative to increase third-country contributions to the contras. Casey and McFarlane broached the subject of such funding at a June 25, 1984, meeting of the National Security Planning Group (NSPG), consisting of the President, Vice President Bush, Casey, (National Security Advisor) Robert McFarlane, Secretary of State George Shultz, Secretary of Defense Caspar Weinberger, United Nations Ambassador Jeane Kirkpatrick, Chairman of the Joint Chiefs of Staff Gen. John Vessey, and presidential adviser Edwin Meese . Shultz warned that any approach to a third country could be viewed as an "impeachable offense," and convinced the group that it needed a legal opinion from Attorney General William French Smith. McFarlane agreed and told the group not to approach any foreign country until the opinion was delivered. McFarlane said nothing about what he already had obtained from the Saudis.
Questions arose as to the propriety of certain actions taken by the National Security Council staff and the manner in which the decision to transfer arms to Iran had been made. Congress was never informed. A variety of intermediaries, both private and governmental, some with motives open to question, had central roles. The N.S.C. staff rather than the C.I.A. seemed to be running the operation. The President appeared to be unaware of key elements of the operation. The controversy threatened a crisis of confidence in the manner in which national security decisions are made and the role played by the N.S.C. staff.
As a supplement to the normal N.S.C. process, the Reagan Administration adopted comprehensive procedures for covert actions. These are contained in a classified document, NSDD-159, establishing the process for deciding, implementing, monitoring, and reviewing covert activities.
After the Boland Amendment was enacted, it became illegal under U.S. law to fund the Contras; National Security Adviser Robert MacFarlane, Deputy National Security Adviser Admiral John Poindexter, National Security Council staffer Col. Oliver North and others continued an illegal operation to fund the Contras, leading to the Iran-Contra scandal. At that point, members of the National Security Council staff continued covert operations forbidden to the CIA.
In 1984, U.S. officials began receiving reports of Contra cocaine trafficking. Three officials told journalists that they considered these reports "reliable." Former Panamanian deputy health minister Dr. Hugo Spadafora, who had fought with the Contra army, outlined charges of cocaine trafficking to a prominent Panamanian official and was later found murdered. The charges linked the Contra trafficking to Sebastian Gonzalez Mendiola, who was charged with cocaine trafficking on November 26, 1984, in Costa Rica.
The Iran Link
"After bribing his way out of prison in Venezuela in September 1985, Luis Posada Carrilles went directly to El Salvador to work on the illicit contra resupply operations being run by Lt. Col. Oliver North. Posada assumed the name "Ramon Medina," and worked as a deputy to another anti-Castro Cuban exile, Felix Rodriguez, who was in charge of a small airlift of arms and supplies to the contras in Southern Nicaragua. Rodriguez used the code name, Max Gomez. ...Posada and Rodriguez obtaining supplies for contra troops from a warehouse at Illopango airbase in San Salvador."
In 1985, another Contra leader "told U.S. authorities that his group was being paid $50,000 by Colombian traffickers for help with a 100-kilo cocaine shipment and that the money would go 'for the cause' of fighting the Nicaraguan government." A 1985 National Intelligence Estimate revealed cocaine trafficking links to a top commander working under Contra leader Eden Pastora. Pastora had complained about such charges as early as March 1985, claiming that "two 'political figures' in Washington told him last week that State Department and CIA personnel were spreading the rumor that he is linked to drug trafficking in order to isolate his movement."
On December 20, 1985, these and other charges were laid out in an Associated Press article after an extensive investigation which included interviews with "officials from the Drug Enforcement Administration (DEA), Customs Service, Federal Bureau of Investigation (FBI) and Costa Rica's Public Security Ministry, as well as rebels and Americans who work with them." Five American Contra supporters who worked with the rebels confirmed the charges, noting that "two Cuban-Americans used armed rebel troops to guard cocaine at clandestine airfields in northern Costa Rica. They identified the Cuban-Americans as members of the 2506 Brigade, an anti-Castro group that participated in the 1961 Bay of Pigs attack on Cuba. Several also said they supplied information about the smuggling to U.S. investigators." One of the Americans "said that in one ongoing operation, the cocaine is unloaded from planes at rebel airstrips and taken to an Atlantic coast port where it is concealed on shrimp boats that are later unloaded in the Miami area."
The U.S argued that "The United States initially provided substantial economic assistance to the Sandinista-dominated regime. We were largely instrumental in the OAS action delegitimizing the Somoza regime and laying the groundwork for installation for the new junta. Later, when the Sandinista role in the Salvadoran conflict became clear, we sought through a combination of private diplomatic contacts and suspension of assistance to convince Nicaragua to halt its subversion. Later still, economic measures and further diplomatic efforts were employed to try to effect changes in Sandinista behavior. Nicaragua's neighbors have asked for assistance against Nicaraguan aggression, and the United States has responded. Those countries have repeatedly and publicly made clear that they consider themselves to be the victims of aggression from Nicaragua, and that they desire United States assistance in meeting both subversive attacks and the conventional threat posed by the relatively immense Nicaraguan Armed Forces."
On March 16, 1986, the San Francisco Examiner published a report on the "1983 seizure of 430 pounds of cocaine from a Colombian freighter" in San Francisco which indicated that a "cocaine ring in the San Francisco Bay area helped finance Nicaragua's Contra rebels." Carlos Cabezas, convicted of conspiracy to traffic cocaine, said that the profits from his crimes "belonged to... the Contra revolution." He told the Examiner, "I just wanted to get the Communists out of my country." Julio Zavala, also convicted on trafficking charges, said "that he supplied $500,000 to two Costa Rican-based Contra groups and that the majority of it came from cocaine trafficking in the San Francisco Bay area, Miami and New Orleans."
Former CIA agent David MacMichael explained the inherent relationship between CIA activity in Latin America and drug trafficking: "Once you set up a covert operation to supply arms and money, it's very difficult to separate it from the kind of people who are involved in other forms of trade, and especially drugs. There is a limited number of planes, pilots and landing strips. By developing a system for supply of the Contras, the US built a road for drug supply into the US."
The Office of the Inspector General, of the US Department of Justice, investigated the "CIA-Contra-Crack Cocaine" matter, and planned to issue a report in 1997. See Nicaragua 1998 for information on the initial suppression of this report and the actions taken by the Inspector General.
On December 17, 1997, I signed our completed report entitled, The CIA-Contra-Crack Cocaine Controversy: A Review of the Justice Department's Investigations and Prosecutions. This 407-page report was the culmination of a comprehensive 15-month investigation by the Office of Inspector General (OIG) into allegations first raised in the San Jose Mercury News that U.S. government officials -- including Central Intelligence Agency (CIA) and Department of Justice (DOJ) employees -- either ignored or protected drug dealers in Southern California who were associated with the Nicaraguan Contras. We originally planned to publicly release the report the following day, December 18, 1997.
However, the Attorney General, citing law enforcement concerns, invoked Section 8E of the Inspector General Act to defer the release of our report. This was the first time that publication of one of our reports has been prevented in this manner. Given the extraordinary nature of the Attorney General's action and the significant interest in why our report was not released in December 1997, we believe it necessary to describe the sequence of events that resulted in the Attorney General's decision not to permit the report to be publicly disclosed until now.
The report we are releasing today is the same report that we completed on December 17 and planned to release on December 18. It has not been changed in any way.
Inspector General Bromwich stated, in the epilogue, that the key issue causing the scheduled release to be deferred was the apparently lenient treatment given to an Nicaraguan, accused of drug dealing by the San Jose Mercury News. This individual, Oscar Danilo Blandon, fled to the United States soon after the Sandinistas came to power. The articles said Blandon was a major supplier to Ricky Ross, a major cocaine dealer in Los Angeles. The question addressed by the Inspector General is why Blandon received much more lenient sentencing for drug crimes than did Ross.
One of the primary issues raised in the Mercury News series was why Blandon received such lenient treatment from the government. The articles and the public discussion that ensued also focused on the disparity between Blandon's sentence and the prison sentence of life without parole received by Ross upon his conviction on federal drug charges in 1996 -- a case developed by Blandon acting on behalf of the DEA. The articles suggested that the difference between the treatment of Blandon and Ross might be attributable to Blandon's alleged ties to the CIA or the Contras.
[the OIG did not] find that he had any ties to the CIA, that the CIA intervened in his case in any way, or that any connections to the Contras affected his treatment. We explored the facts surrounding Blandon's sentence reductions and found through our interviews of DEA and federal prosecutors that his reductions in sentence were based on his substantial cooperation with prosecutors and investigators, not ties to the Contras or the CIA. We made no attempt independently to measure the value of Blandon's cooperation; instead we sought to determine whether his cooperation was the reason for his lenient treatment.
"The OIG interviewed Blandon in February 1997 (with the DEA's knowledge), DEA agents who worked with him, and federal prosecutors in San Diego who handled his case. ...we learned the extent of Blandon's cooperation and that he continued to cooperate with the DEA after he was released from prison in September 1994. We also learned that after the Mercury News articles focused attention on Blandon and his activities in late 1996, the DEA stopped using him as an informant."
Our investigation, which began in October 1996, was nearing completion of the investigatory phase in the summer of 1997. In August 1997 we were told by the DEA that it was considering reactivating Blandon and using him as an informant in a criminal investigation. We were asked by the DEA whether we had found any reason to believe that Blandon had perjured himself in interviews with us or in his testimony in a closed session of the Senate Select Committee on Intelligence in October 1996. We replied that we had no such evidence.
In November 1997, we provided a draft of our report to the DEA, the DOJ Criminal Division, and the United States Attorney's Office for the Southern District of California (USAO). We asked them to review the document and provide us any comments regarding the report or disclosure of informant or other law enforcement information. We requested these comments by December 5 because we intended to release the report in mid-December.
On December 8, 1997, we learned for the very first time that the DEA, the Criminal Division, and the USAO objected to our release of information about Blandon's past cooperation with the DEA. We learned that Blandon had been reactivated as an informant in September 1997 to assist with an investigation of international drug dealers. According to the DEA, in order to protect his credibility in the face of the publicity generated by the Mercury News articles, Blandon had told the drug dealers that he had cooperated with the U.S. government in the case against Ricky Ross but had not cooperated against anyone else. As disclosed in our report, Blandon provided assistance to the government in investigations of many drug traffickers other than Ross.
The OIG attempted to negotiate with the DEA, DOJ Criminal Division, US Attorney's Office, and the office of the Deputy Attorney General. They objected on the grounds of risk to Blandon and the DEA investigation. Since the OIG said that it was already known that Blandon had cooperated with law enforcement was a matter of public record, and publication would cause him no additional risk. "We also argued that the report dealt with a matter of substantial public interest, and we expressed our concern that preventing release of the report would simply add fuel to the allegation that the Department was involved in a cover-up."
"the Deputy Attorney General decided to recommend that release of our report be deferred while the DEA pursued its drug investigation. On January 23, 1998, the Attorney General issued a letter invoking her authority under the Inspector General Act to delay public release of our report based on those same representations. On July 14, 1998, the Attorney General wrote us a letter stating "the law enforcement concerns that caused me to make my determination no longer warrant deferral of the public release of your report." Her letter stated that we could therefore release the report. We are doing so now, with no changes from the original.
We believe that the decision to reactivate Blandon as an informant was undertaken without adequate notice or consultation about its impact on our ability to discuss in the report the critical issue of Blandon's past cooperation with the government. This was an important part of our investigation and report.
According to the OIG, the order to defer the release was based on the Attorney General's assessment of the risk to the investigation and Blandon "versus the benefit of timely release of a report that addressed a topic of significant public concern."
- Central Intelligence Agency, Nicaragua, The World Factbook
- Lawrence Walsh (4 August 1993), Final Report of the Independent Counsel for Iran/Contra Matters
- Congressional Committee Investigating Iran Contra majority report, 18 November 1987
- Excerpts from the Tower Commission's Reports
- Kornbluh, Peter (9 June 2005), The Posada File: Part II, vol. National Security Archive Electronic Briefing Book No. 157
- Brian Barger and Robert Parry, "Reports Link Nicaraguan Rebels to Cocaine Trafficking," Associated Press (December 20, 1985).
- John E. Newhagen, "Commander Zero blasts CIA, State Department," United Press International (March 25, 1985).
- Walters, Vernon A. (Oct, 1986), "Nicaragua's role in revolutionary internationalism", US Department of State Bulletin
- "Report: Cocaine Ring Finances Contras," Associated Press (March 16, 1986).
- John Lichfield and Tim Cornwell, "'America has fought the wrong war': Did US policy in central America in the 1980s assist the growth of the Colombian cocaine cartels?" The Independent (26 August 1989) p. 8.
- The sad decline of Michael Mukasey. Salon.com (2007).
- US Department of Justice, Office of the Inspector General, Michael R. Bromwich (December 1997), The CIA-Contra-Crack Cocaine Controversy: A Review of the Justice Department's Investigations and Prosecutions
- US Department of Justice, Office of the Inspector General, Michael R. Bromwich (December 1997), The CIA-Contra-Crack Cocaine Controversy: A Review of the Justice Department's Investigations and Prosecutions: Epilogue, July 1998