WHAT CASEY KNEW - THE CIA AND THE SECRET CONTRA NETWORK

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000707050003-3
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 22, 2016
• Document Release Date: January 3, 2012
• Sequence Number: 3
• Publication Date: December 16, 1986
• Content Type: OPEN SOURCE

Declassified and Approved For Release 2012/01/03: CIA-RDP90-00965R000707050003-3
AKUULL wrtutu 16 December 1986
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WHAT CASEY KNEW
The CIA and the Secret Contra Network
T~
he Voice has learned that
Central Intelligence Agen-
cy cy director William Casey
routinely received intelli-
gence reports about and
monitored missions by the
supply network that, in vi-
olation of U.S. law, deliv-
ered hundreds of tons of
T
"closely monitored the aerial supply net.
work" and "maintained regular contact
with crew members about how the opera-
tion was run." The Post said that Steele
was instructed by the U.S. ambassador to
El Salvador, Edwin Corr, to keep track of
the contra flights.
And on Monday, The New York Times
quoted Americans who had served on
and would then be introduced to some-
one who was said to work for the U.S.
government. But we knew who they real-
ly work for."
Southern Air frequently flies to places
in which the agency has a keen interest.
In one two-month period this year alone.
according to Department of Transporta-
tion records, the company's Lockheed L-
100 cargo planes made 271 flights to and
from Luanda, Angola, and other cities in
the African nation whose Marxist govern-
ment is currently engaged in a civil war
with UNITA rebels backed by South Af-
rica-and the CIA.
Southern Air spokesman William
Kress says the firm has a contract with a
European firm called IAS-Guernsey
weapons to the contras
over the past year. The se-
cret operations supplying military aid to
the contras from the llopango airbase in
El Salvador-which led to the capture of
downed pilot Eugene Hasenfus-were
monitored by at least two CIA agents
who reported through channels to Casey.
Both men served under U.S. government
cover identities, one as a military officer
and the other as a Foreign Service officer
in the San Salvador embassy, according
to high-level administration sources in
Washington.
As the recipient of such intelligence
information, it was Casey's duty to in-
form other top administration officials
about the progress of the secret aerial
supply program. Among those whom Ca-
sey briefed about the illegal contra sup-
ply operation, according to administra-
tion officials, was President Reagan
himself. These sources emphasize that
this information does not show that ei-
ther Casey or Reagan knew about the
diversion of funds from the Iranian arms
shipments to the contra program. And
the CIA last week issued an unusual pub-
lic statement denying that it had any role
in the use of Iranian funds to aid the
contras. But it is scarcely believeable
that Casey, who had intimate knowledge
of the operation itself, would not have
learned how it was paid for.
saistance to the contras by U.S. in-
telligence agencies was specifically
prohibited by Congress in 1984
when it passed the Boland Amend-
ent. The law, which remained in
effect until this fall, made it illegal for
the CIA to provide such aid either "di-
rectly or indirectly." The evidence in-
creasingly indicates, however, that the
contras were aided by the agency both
directly and indirectly.
Other recent reports indicate that offi-
cials of the Reagan administration out-
side the CIA also monitored the program.
On Friday The Washington Post report.
ad that the senior U.S. military adviser in
El Salvador, army colonel James Steele,
] ~ DAsant aLtw
Planes and pilots involved in the secret
contra airdrop program have been linked
to Southern Air Transport, Lnc., a Mi-
ami-based air cargo company described
by its owners as a "former CIA propri-
etary," which became a private business
in 1973, when the CIA sold it.
On October 14, Southern Air chairman
James Bastian responded to recent pub-
licity with a three-page letter to the com-
pany's 200-odd employees. "First," he
wrote, "Southern Air is not owned by the
CIA and is not performing any services
for the CIA and to the best of its knowl-
edge is not performing any services with
any company connected with the CIA.
Any statement to the contrary is simply
not true.
"Second, the C-123 aircraft which
crashed in Central America, and any oth-
er aircraft identified with that operation,
were not and are not owned by Southern
Air 'Transport, and were not and are not
being operated by Southern Air Trans-
port, nor were the operators of those air-
craft controlled or directed by Southern
Air through any other entity. "
Contrary to Bastian's claims, however,
Southern Air has long continued to pro-
vide cover to the CIA for some of its
covert operations. According to individ-
uals who have worked in flight crews and
as pilots on some of Southern Air's over-
seas flights, there were CIA operatives
working among them, and they knew it.
"There were individuals on the flights
who not only worked for Southern. They
also worked for the government," a long-
time Southern Air employee told the
Voice. "Everybody knows that, but no-
body ever talks about it." The same em-
ployee said other employees-though not
CIA operatives-were also asked to pro-
vide information to the agency.
"If somebody flew to a part of the
world that the agency was interested in,"
he said, "that person could expect to be
debriefed when he returned to Miami,
which serves Angola's diamond industry.
But DOT records show that Southern Air
often flies to Menongue, a town in south-
central Angola far from the northern dia-
mond region, that happens to be a major
staging area for government attacks on
the CIA-backed rebels. In other words,
Southern Air is operating behind the mil-
itary lines of a regime targeted by the
agency for destabilization.
In 1983 Southern Air reportedly trans-
ported arms to the contras on behalf of
the CIA, which was then legal. CBS News
reported that on April 9, 1983, the firm
carried 22 tons of small arms to a Hondu-
ran military base, which were later
shipped to the contras. Both Southern
Air and the U.S. government denied that
report.
Finally, Southern Air was involved in
the recent arms shipments to Iran. Rea-
gan administration officials say that the
company made at least two shipments of
arms to the Middle East that were des-
tined for the Iranians. On May 28, a
Southern Air plane transported former
National Security Adviser Robert
McFarlane, then-NSC aide Oliver North,
and George Cave, a former CIA official,
to a meeting with Iranian officials to dis-
cuss arms deals and the release of Ame can hostages in Lebanon. Aboard the
same plane warasophistieafndjrOW
Was and
asnm
b M- i
govetnme I -
ongress enacted the Boland
Amendment following the early
1984 disclosure of the CIA's min-
ing of Corinto harbor in Nic
__
a
internaional law. The amendment ana
sented President Reagan anCIdire
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tor William Casey, who had created the
contra army and political directorate,
with a problem whose clandestine solu-
tions are now beginning to come to light:
how to step around the law and provide
money, arms, aircraft, trained personnel,
and staging areas for the contras. The
other possibility-to obey the law and
seek a negotiated solution with the San-
dinista government-was obviously never
considered.
Yet the contra assistance program had
to be undertaken without openly violat-
ing the Boland Amendment and other
U.S. laws, notably the Neutrality Act,
which forbids U.S. nationals from partici-
pating in warfare against a government
with which the United States is at peace,
and the Arms Export Control Act, which
regulates the We of weaponry abroad.
Open defiance of the law would have led
to a constitutional crisis and public out-
rage, especially since most Americans did
not favor military action against the San-
dinista government.
Until the recent disclosures of direct
White House, CIA, State Department
and National Security Council involve-
ment began to emerge, many reporters
believed that aid efforts for the contras
were being run by retired General John
K. Singlaub, head of the U.S. affiliate of
the World Anti-Compsesist League, or
WA L, an organizatip{Ljd up by the
C1h in the 'We and long sins ted
European neo-Nazis, South American
fascists and death squad figures, and dic-
tators from around the world. Singlaub
boasted that he had the approval of both
the president and the CIA director, not
to mention NSC deputy North, for his
activities, which he said included fun-
draising in the United States for nonle-
thal aid and abroad for weapons ship-
ments. Singlaub told reporters that he
kept North informed of his missions, and
interpreted North's silence during these
briefings as assent.
The Singlaub story was plausible be-
cause of the general's own background in
covert operations, which spanned OSS
missions during World War II in Europe
and Asia, a stint with the CIA in Korea,
and a key role in Vietnam as head of the
so-called Studies and Observation Group,
which conducted covert air missions into
North Vietnam, Cambodia, and Laos
(some of which may have violated U.S.
law). WACL, moreover, was in many
ways the perfect vehicle for raising for-
eign funds for the contras, since most of
its own support came from right-wing
dictatorships in Thiwan, South Korea,
and Saudi Arabia. The League also had
longstanding ties to the Reverend Sun
Myung Moon's immensely wealthy Unifi-
cation Church, sponsor of a WACL pre-
cursor in Asia, and thus to CAUSA, the
church's political affiliate which has been
active in Honduras, Guatemala, and El
Salvador. At last year's WACL confer-
ence in Dallas (see "The Old Right's New
Crusade," Voice, October 22, 1985J, Sing-
laub told two reporters that he had
opened Swiss bank accounts for foreign
contributions to the contra cause.
Recent revelations throw a different
light on Singlaub's role, however. Con-
gressional investigators and informed
journalists now believe that he may have
been, in spy parlance, a "cutout" whose
function was to divert attention from the
far more significant activities of Oliver
North and other key players. There is
little doubt, given his credentials, that
Singlaub provided military advice to ci-
vilian contra leader Adolfo Calero and
rebel commander Enrique Bermudez, a
former Somoza military attache. He also
played a part in domestic and foreign
politics as a tireless propagandist for
"rolling back Soviet imperialism." But
there is considerable doubt that Sing-
laub's fund-raising actually accounted for
the $25 million he was claiming from pri-
vate sources in 1985. It's far more likely,
close observers now believe, that those
funds came from such sources as the sale
of weapons to Iran and contributions
from foreign governments solicited by
top American officials-all potential vio-
lations of U.S. law.
Specific revelations about the contra
supply operations in El Salvador and
Costa Rica have directed attention to in-
dividuals who cultivated a lower profile
than General Singlaub. Details of the co-
vert program have been emerging steadi-
ly in recent weeks:
? North and his associates were instru.
mental in setting up the aerial supply
program. North and retired air force ma-
jor general Richard V. Secord used an
informal network of several former CIA
and other intelligence operatives to over-
see this program.
? Attorney General Edwin Meese has
said that between $10 million and $30
million in profits from arms sales to Iran
may have been diverted for use by the
contras. This diversion is the subject of
current investigations by both the Justice
Department and the Senate Intelligence
Committee. Saudi Arabia and other
right-wing governments, reportedly solic-
ited by top administration officials, may
also have funneled money into these
accounts.
? Southern Air T)ranaport was deeply
involved in the North network, providing
planes, pilots, and flight crews.
? Reagan administration omcials, in-
cluding- CIA director William Casey,
including the president.
The man who apparently directed
the clandestine air supply opera-
tions was Secord. On Monday, Sec.
retary of State George Shultz iden.
tified Secord as a key figure in the
Iran arms-hostages deal, and Swiss au-
thorities said that Secord and North were
being investigated by the U.S. for their
role in diverting the Iranian profits to the
contras through Swiss accounts.
Secord was the chief U.S. Air Force
official in Iran from 1975 to 1978. As a
top adviser to Secretary of Defense Ca-
spar Weinberger, Secord also lobbied for
the sale of the AWACS strategic control
aircraft to Saudi Arabia in 1981, as did
Oliver North. According to Peter Maas's
Manhunt, an account of the capture and
conviction of rogue CIA agent Edwin
Wilson, Secord helped to direct the secret
air war waged by the CIA in Laos in the
late '60s. Maas also writes that Secord
had a close business and personal rela-
tionship with Wilson, and appeared as a
defense witness at Wilson's 198.3 trial.
Secord resigned from active duty soon
after his ties to Wilson became known.
Secord's involvement with the supply
network dates back as early as July 1984,
one month after CIA funds for the con-
tras ran out. Aircraft registration records
kept by the Federal Aviation Administra-
tion show that on July 26, 1984, a firm
called American Marketing and Consult-
ing, Inc., purchased a Short-Tl;keoff-and-
Landing plane called a Maule from the
plane's Georgia manufacturer, Maule Air.
The FAA records list Secord as president
of American Marketing and Consulting;
the vice-president is listed as Robert Li-
lac, a one-time senior National Security
Council officer who, until he left the
NSC, was Oliver North's immediate su-
pervisor as director of political-military
affairs. When Lilac resigned, North as-
sumed his poet, which North held until
his own resignation last month. Curious-
ly, the NSC denied to the Voice last
Monday that it had any record of Lilac's
service there.
In October 1985, according to FAA rec-
ords, American Marketing and Consult-
ing-Secord's front company-sold the
plane, which is ideal for use in Central
American jungle settings, to a shadowy
Panamanian outfit, NRAF, Inc. By that
time, according to eyewitness accounts,
the Maule was already in use by the con-
tra network. Last Thursday, a federal
grand jury in Georgia subpoenaed the
records of Maule, Inc., regarding the age
of one plane to Secord and three planes
sold to others. Federal investigators be-
lieve that all four may have been des-
tined for use in the contra Beet.
A second Mauls, according to FAA rec-
ords, was sent to NRA,IM But a notation
on the bottom of a letter from Maul. Air
The notation said a copy of the letter was
being sent to "Dick Secord."
According to an employee of Maule
Air, one of the planes that ended up in
the clandestine contra fleet was paid for
with a check from CSF, Inc. This Zurich-
based firm, whose initials stand for Com-
pagnie de Services Flduciaires, has been
linked to the transfer of funds from the
Iranian arms sales to secret Swiss
accounts.
Since April or June of this year, a Se-
cord deputy-retired colonel Robert
Dutton-managed the contra supply op-
eration. Another former military officer
with intelligence responsibilities, retired
air force lieutenant colonel Richard
Gadd, apparently preceded Dutton.
Gadd once worked closely in the Penta-
gon with Secord.
continued
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Before he retired in November 1982,
Gadd's last assignment was as liaison be-
tween the Joint Special Operations Cen-
ter at Fort Bragg, North Carolina, and
the Joint Special Operations Agency, a
Pentagon unit set up by the Reagan ad-
ministration to develop a unified special
forces command for the army's Green Be-
rets, the air force's Commandos, and the
navy's SEALS. Sources say Gadd's posi-
tion gave him frequent contact with the
CIA, which worked closely with the spe-
cial operatons agency.
After he left the Pentagon, Gadd be-
came president' and treasurer of a firm
called American Management Corpora-
tion, located in a Washington, D.C., sub-
urb. Phone records from San Salvador
"safe houses" identified with the contra
aerial network show that calls were regu-
larly made earlier this year to the Ameri-
can Management office, to Gadd's home,
and to the home of retired colonel C. L.
Stearns, a Gadd assistant.
During the same period, another com-
pany headed by Gadd was awarded a
$100,000 contract from the State Depart-
ment's Nicaraguan Humanitarian Assis-
tance Office to ship nonlethal aid to the
contras. This was under a congressionally
approved $27 million program of food
and other humanitarian assistance, al-
though military aid was still banned. The
State Department's decision to award the
contract to Gadd's firm, AIRMACH, Inc.,
was a curious one, since at the time AIR-
MACH had no planes or full-time em-
ployees.
Tb fulfill the contract, AIRMACH sub-
contracted to Southern Air Transport,
Inc., a company notorious for its ties to
covert intelligence operations for more
than two decades. Southern Air was first
purchased by the CIA in August 1960 to
supplement the operations of the legend-
ary CIA-owned company Air America.
which conducted numerous airlifts in
Southeast Asia during the Vietnam War.
Fearing that the public procedures neces-
sary for Air America to obtain Pentagon
contracts would lead to its exposure as a
CIA front, the agency decided to buy
Southern Air instead for about $307,000.
During the period of CIA ownership, the
company's Pacific Division conducted
heavy air lift operatons for both the CIA
and the Pentagon in East Asia, while its
Atlantic Division "furnish(ed) support
for certain sensitive operatons" in the
Caribbean and South America, according
to the 1976 report of the Senate Select
Committee, known as the Church Com-
mittee after the late Idaho Democrat
Frank Church, which probed CIA domes-
tic operations. In 1972, the report said,
the agency decided that it no longer
needed full-time operational control of
the cargo firm.
The result was a directive from CIA
director Richard Helms that "on the rec-
ord (italics added) therefore, the Agency
should divest itself of the Southern Air
Transport complex entirely." On Decem-
ber 31, 1973, the company was sold to its
former owner, Stanley Williams, who had
been the nominal president of Southern
Air during its 13 years of ownership by
the CIA. This sale, from which the CIA
realized over $6 million, supposedly end-
ed the relationship between the agency
and its former airlift proprietary.
But in some sales of secretly owned
CIA businesses, as the Church Commit-
tee report noted, "transfer of the entity
was conditioned as an agreement that the
proprietary would continue to provide
goods or services to the CIA." The report
doesn't comment on whether such an
agreement was part of the Southern Air
We, but it asked: "Looking toward the
future, will new air proprietaries be es-
tablished? The CIA thinks not, but the
matter is not resolved. The ultimate
question is whether there will be future
United States involvement in covert
wars..."
Williams had reason to be grateful to
the CIA after the firm's sale. For one
thing, according to documents obtained
by the Voice, the agency initially agreed
to sell the company for about $300,000
less than a private appraisal commis-
sioned by the agency said it was worth.
In a secret 1973 memo obtained by the
Voice, then-CIA general counsel Law-
rence Houston wrote the director of the
agency urging that Williams' below-mar-
ket offer for Southern be accepted. He
noted in the memo that "There are cer-
tain values beyond price, both tangible
and intangible, which accrue to the gov-
ernment and the agency in the case of the
sale of assets to Mr. Williams."
Houston was later forced to testify in
litigation concerning the We of Southern
Air. Asked if the agency had sought com-
petitive bids for the cargo firm, he re-
plied, "It did not."
But despite all of the CIA's concessions
to Williams, he still had trouble raising
enough money to buy Southern Air. So
Houston helped Williams obtain a large
loan from Manufacturers Hanover rust,
a bank Houston admitted "has done sub-
stantial business for and with the agency
over the years." He denied that the bank
was doing a favor for the CIA in making
the loan to Williams.
Just when the deal seemed consum.
mated. three other U.S. air carriers filed
complaints with the now-defunct Civil
Aeronautics Board challenging the sale.
They alleged that Southern Air had en-
gaged in unfair competition, and that its
business had grown because of govern-
ment subsidies and favorable charter
routes granted by the government. These
objections were overcome when the CIA
voluntarily dropped Southern Air's CAB
certification, which covered the charter
routes. With the CAB and the objecting
competitors out of the way, the below-
market We to Williams was completed in
utter secrecy.
In other words, the new owner of a
potentially lucrative air carrier owed his
new business to the largesse of its former
CIA owners-who could bestow even
greater riches in the future.
Although there were some lean years
for Southern Air since the 1973 We. De.
partment of Transportation documents
show that the firm's business has grown
enormously during the past two years-
which coincides with its involvement in
the contra air operation. Much of its
business in recent years has been with
the Pentagon, including scores of flights,
both domestic and international. from
U.S. Air Force bases. One congressional
investigator believes that the administra-
tion may have steered business to South-
ern Air to reward it for covert services.
From 1981 to 1983, Southern Air was
doing mediocre business, losing money
during several quarters. Its total operat-
ing revenues in 1983 were $11.6 million.
But in 1984-the year the contra opera-
tion began-its operating revenues sud-
denly increased by 150 per cent, to $28
million. By December 1985, its annual
operating revenues had increased to $38
million; and for the 12 months reported
in the quarter ending last September 30,
the company had recorded another in-
crease, to $48 million. In lea than three
years, the company's revenues quadru-
pled, and its work force virtually
doubled.
ly aided infusion of new w~gov rn-
ment contracts since it became involved
with the contra air network. According to
Defense Department records, the Penta-
gon's Military Airlift Command awarded
$13.3 million in contracts to Southern Air
in 1986, and say they expect to award
another $42.4 million to the firm in the
next fiscal year.
W bile Secord and his associates
apparently were in charge of the
operation, and Southern Air
contributed its cargo planes and
crews, nothing would have hap-
pened without the involvement of key
field operatives. The four top officers
were all former CIA agents. William Coo-
per, for example, the pilot who died on
October 5 when a C-123 plane carrying
him and Eugene Hasenfus crashed in
Nicaragua, apparently ran the daily busi-
ness of the clandestine aerial network.
Cooper had been one of the CIA's chief
pilots in Southeast Asia during the Viet-
nam War, when he worked for Air Ameri-
ca-like Southern Air, a CIA proprietary.
Cooper recruited others like Hasenfus,
who also worked for Air America during
the Vietnam era.
Also running day-to-day operations
was a Cuban exile known to the flight
crews as Ramon Medina. Medina has
since been positively identified as Luis
Posada Carriles, a Bay of Pigs veteran
and a contract agent for the CIA from
1961 to 1967. Posada is wanted in Vene-
zuela as a convicted terrorist for his role
in the October 6, 1976, bombing of a Cu-
bans airlines DC-8 which was flying be-
tween Barbados and Havana. Minutes af-
ter the plane took off, a bomb planted
aboard exploded, killing all 73 persons
aboard. Posada and three other Cuban
exiles living in Venezuela were accused of
planting the bomb and were subsequent-
ly convicted. In August 1985, Posada es-
caped from a Venezuelan prison and
within a year was working at the Ilopango
airbase, supervising the contra air
operations.
Woo
3
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Two other bay of rigs veterans and;
former CIA operatives also helped: Ra
fael Quintero, who arranged flights and'
determined where supplies were to be
dropped inside Nicaraguan territory-, and
Felix Rodriguez, who, under the pseud.
onym Max Gomez, served as liaison to
the Salvadoran Air Force. Rodriguez is
famed for his part in the Bolivian Army's
capture and execution of Cuban revolu-
tionary Ernesto r-.e G
ie9
ti
e....a i
u
67 He
n
operation by Donald Gregg, national se-
curity adviser to Vice-President George
Bush. Gregg himself served in the CIA
for 31 years, including the period when
Bush himself was the CIA director. And
Gregg was reportedly the CIA station
Singlaub was the chief of U.S. forces i'
there.
The CIA is deeply implicated in the
law and the will of Congress in its war
against Nicaragua. The contra operation
is not the first covert war perpetrated by
the agency without benefit of democratic
consent. Unless the Congress and the
courts expose and punish those responsi-
ble, it will not be the last. ^
rending for some of the research on this
article was provided by the Center for
New Democratic Processes in Minneapo- General John K. Singlaub
lis. Research assistance provided by the
National Security Archive and Ellen
McGarrahan.
Lieutenant Colonel Oliver L. North
ContinU0 !
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CIA director William Casey: What did he know and who did he tell?
Southern Air Transport: the wings of the CIA
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