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CRJ 875: Crime and Public Policy
Module 9: State-Organized Crime as a Case Study Of Criminal Policy
In his Presidential address to the American Society of Criminology, William Chambliss raised the issue of what he called "State-Organized Crime" (Chambliss, 1988). Chambliss defined state-organized crime as "acts committed by state or government officials in the pursuit of their job as representatives of the government" (Chambliss, 1988: 327). In Chambliss' view governments often engage in smuggling (arms and drugs), assassination conspiracies, terrorist acts, and other crimes in order to further their foreign policy objectives. While these actions may be seen as having immediate benefits (despite their illegality), they often have unanticipated and unintended outcomes, sometimes referred to in intelligence circles as "blowback." In this section we will examine the issue of state- organized crime as it relates to the United States and some of the "blowback" which law enforcement agencies have had to cope with as a result of these state-organized crime activities.
When governments commit acts that are defined by their own laws as criminal or when government officials break the law as part of their job, they engage in state-organized crime (Chambliss, 1986). While the state rarely makes public its criminality or keeps tabulations on the number of illegal acts it has committed, it is clear from both a historical and contemporary perspective that state organized crime is neither new nor rare. State-organized crime is particularly apparent in the covert operations of intelligence agencies.
Any government operation that is shielded from the public and hidden from Congressional oversight over a long period of time will inevitably become reliant on criminal activity to support and fund the operation. Covert operations provide the perfect setting for organized criminal activity simply because they are clandestine operations conducted with state sanction (Chambliss, 1986). Covert intelligence activities avoid the usual law enforcement scrutiny and surveillance. Passage through customs can be facilitated through official channels. Normal financial accounting procedures are not followed in covert operations. Investigators from law enforcement agencies can be diverted by claims of "national security." And finally, organizers of such operations recruit individuals with the skills necessary to carry them out, most of which are criminal skills. It is typical for covert operators to work with well-established criminal undergrounds and for the government sponsoring the covert operation to at the very least tolerate and often abet the criminal activities of its organized crime allies.
In recent years, intelligence agencies in the United States have sought and received assistance from drug traffickers. While it is, of course, outrageously hypocritical for a government waging a drug war against its own citizens to seek assistance from drug traffickers, it is not surprising. After all, as Chambliss (1986) points out, the characteristics of successful drug trafficking are the same qualities that are essential to successful intelligence operations. Both activities require the movement of bulky commodities, money and couriers quickly and secretly. Both activities require great discretion and allegiance from temporary workers employed for illicit and covert activities. And both activities require the use of force and violence to assure the security of the operation.
State-Sponsored Terrorism and U.S. Foreign Policy
Iran: The CIA engaged in a massive conspiracy to overthrow the democratically elected prime minister of Iran, Mohammed Mossadegh, in 1953 (Beirne and Messerscmidt, 1991: 258-259; Prados, 1986; Simon and Eitzen, 1986). Following his election, Mossedagh had nationalized several foreign-owned oil companies. His government had offered compensation to the oil companies. But the Eisenhower administration was not tolerant of any independence by foreign leaders and began a campaign to overthrow the Mossedagh government and replace it with the monarchy of Shah Reza Pahlavi. In return for U.S. support for the coup d'etat, the Shah promised U.S. oil companies control over 50 percent of Iran's oil production. After removing the democratic government in Iran and placing the Shah in power, the CIA helped create, train, and finance SAVAK, a vicious secret police force loyal to the Shah. SAVAK arrested over 1,500 people a month during the Shah's reign. On June 5, 1953, SAVAK murdered about 6,000 Iranian citizens in one day (Simon and Eitzen,. 1986: 158). Torture was frequently used on prisoners, and Amnesty International declared, "No country in the world has a worse record in human rights than Iran" (Beirne and Messerscmidt, 1991: 258).
While American oil companies and arms merchants profited from the Shah's reign (Iran purchased $17 billion in military equipment from the U.S.), the ultimate costs of the coup can only by calculated by considering the impact of the 1979 Islamic revolution which replaced the Shah's regime. The government of the Ayatollah Khomeni which took over was virulently anti-American, heavily engaged in the sponsorship of terrorism, responsible for the seizure of American hostages, and part of a bizarre conspiracy involving U.S. intelligence during the Reagan administration.
Guatemala: Fresh from its dubious success in Iran, the CIA intervened in the internal affairs of Guatemala the following year. In 1954 the CIA orchestrated a military coup which removed the democratically elected leader of Guatemala, Jacobo Arbenz, from power (Beirne and Messerchmidt, 1991: 259; Herman, 1982: 176). Arbenz was committed to democracy and had received 65 percent of the vote in Guatemala's election. His crime, however, was that he favored land reform. Guatemala was a country in which 3 percent of the landowners owned 70 percent of the agricultural land. After his election Arbenz nationalized 1.5 million acres of arable land, including land owned by the U.S.- based United Fruit Company. United Fruit insisted that the government act against Arbenz, and the CIA financed a rebel "army" in Honduras. On July 8, 1954, Arbenz fled the country. The U.S.- sponsored dictator immediately canceled the land reform program, ended literacy programs, fired teachers, ordered the burning of "subversive" books, and broke up the peasants' agricultural cooperatives. For the next 30 years, Guatemala was ruled by a vicious military dictatorship which had been imposed on the citizens and was propped up by U.S. military forces.
Cuba: In 1959, Fidel Castro overthrew Cuban dictator Fulgencio Batista. Batista had been friendly to U.S. corporations and to U.S. organized crime interests who had run massive gambling, prostitution, and narcotics operations out of Havana (Beirne and Messerschmidt, 1991: 259-261; Kruger, 1980; Hinckle and Turner, 1981). Once again, the Eisenhower administration elected to use the CIA to try to resolve the problem. As a first step, the CIA began to train anti-Castro Cuban exiles in terrorist tactics in what was known as "Operation 40." Operation 40 involved terrorist attacks on Cuba, attempted assassinations of Cuban leaders, and an alliance with organized crime figures Sam Giancana, Santo Trafficante, and Johnny Roselli in a series of assassination plots against Castro himself.
In April, 1961, the CIA-trained Cuban exiles attempted an invasion of Cuba at the Bay of Pigs. The invasion was a military disaster, and much of the military force was captured or killed. The failure of the Bay of Pigs invasion forced a change in tactics against Cuba. Operation 40 was replaced by JM/WAVE, an operation involving some 300 CIA agents and 4,000-6,000 Cuban exiles. JM/WAVE engaged in a series of terrorist attacks on Cuba, targeting sugar and oil refineries and factories. It also continued the assassination campaign begun earlier under Operation 40.
In 1965, JM/WAVE was disbanded, as a direct result of the discovery that its aircraft were engaged in narcotics smuggling, leaving thousands of highly-trained, politically fanatic Cuban exiles in place in the United States. The "blowback" from JM/WAVE was considerable. Some of these CIA- trained exiles turned to terrorism, engaging in 25-30 bombings in Dade County, Florida, alone in 1975 and assassinating diplomats around the world (Herman, 1982). Other JM/WAVE participants, having been trained in smuggling techniques and violence by the CIA, turned to organized crime, creating large gambling syndicates in New Jersey and Florida and forming the infrastructure for massive cocaine trafficking by Cuban and Colombian organized crime groups.
Chile: In 1972 the CIA targeted yet another democratically- elected government for overthrow, presumably as part of America's overall foreign policy commitment to democracy around the world. This time the target was the elected president of Chile, Salvador Allende. (Beirne and Messerschmidt, 1991: 263; Simon and Eitzen, 1986). In 1970 Allende had been elected president, and immediately IT&T. which had significant mining investments in Chile, and the CIA worked to destabilize the economy and his government. Their plans did great damage to the Chilean economy but failed to bring the Allende government down. In 1973, the tactics changed when the CIA conspired with the Chilean military to overthrow Allende in a coup d'etat. Allende, along with 30,000 Chilean citizens, was killed in the coup. The democratic institutions Allende had created were dismantled, and General Pinochet, a man who saw himself as the successor to Adolph Hitler, began an unprecedented regime of repression. The Pinochet regime incarcerated over 100,000 Chileans and murdered another 20,000.
Operation Condor: In one of the most disturbing examples of state-organized crime involving the U.S. government, the CIA, along with secret police agencies from six Latin American countries, entered into a conspiracy to identify, monitor, and assassinate political dissidents in those countries. The terror campaign was orchestrated by Pinochet's secret police, the DINA, but was abetted by the governments of Argentina, Bolivia, Brazil, Paraguay, Uruguay, and the United States. Hundreds of people were abducted and murdered during Operation Condor (Herman, 1982).
U.S. Intelligence Agency Collaboration with Organized Crime
Active alliances between various organized crime groups and the U.S. government can be traced, at least, to World War II, when the Office of Naval Intelligence asked new York organized crime figures Meyer Lansky, Albert Anastasia, and "Lucky" Luciano to assist them with counter-intelligence operations on the New York waterfront:
Such escapades allegedly began during World War II when the underworld figures in control of the New York docks were contracted by navy intelligence officials in order to ensure that German submarines or foreign agents did not infiltrate the area. It was thought that waterfront pimps and prostitutes could act as a sort of counter- intelligence corps. The man whose aid was sought for this purpose was Lucky Luciano; he was reportedly quite successful in preventing sabotage or any other outbreak of trouble on the New York docks during the war. Despite his arrest and conviction for compulsory prostitution in 1936, Luciano was granted parole and given exile for life in 1954 in exchange for the aid he provided from his prison cell during the war (Simon and Eitzen, 1993: 81).
The OSS in Italy and Marseilles: The military also sought assistance from organized crime during World War II in the invasion of Sicily. New York organized crime syndicates sent their members door-to-door in Italian neighborhoods collecting recent letters, maps, photographs, and postcards from Sicily to assist military intelligence (Messick, 1976). In addition, Vito Genovese, who was living in self-imposed exile in Italy, decided to play both sides against the middle. While he had spent a great deal of money and effort currying favor with Mussolini, he now saw an opportunity to ingratiate himself to the U.S. government. Genovese acted as an "unofficial advisor to the American military government," following the invasion (Pearce, 1976: 149; Simon and Eitzen, 1993: 81). Genovese assisted the military in finding and installing right-wing politicians loyal to organized crime in official positions in Italy as a buffer against popular support for socialist political parties. This collaboration continued in the post-war 1950s, as the government perceived a new threat on the horizon - Communism. Both organized crime and U.S. foreign policy interests were well-served by this alliance with Genovese. Italian politicians opposed to the socialists and Communists were assisted in maintaining power by organized crime, and organized crime was virtually given a "crime-committing license" by the government for almost four decades.
In the early 1950s, the intelligence community once again sought the assistance of organized crime figures, this time in France. France was engaged in a war to prevent its colony of Vietnam from gaining independence. However, socialist dockworkers in Marseilles refused to load ships with military supplies bound for Vietnam. U.S. foreign policy was threatened in two ways. First, policies dedicated to the containment of communism would be impaired in the French did not resist Ho Chi Minh and Viet Minh in Vietnam. Second, the government of France, a major U.S. ally was itself threatened by a possible socialist-Communist electoral alliance, and Communist Party domination of the trade unions. Attacking the French longshoremen, one of the most powerful leftist unions, served both ends. U.S. intelligence officers contacted Corsican organized crime syndicates heavily involved in prostitution and waterfront corruption to assist them in breaking the French dockworkers union. The Corsicans created "goon squads," which attacked union picket lines, harassed and even assassinated union leaders, and eventually broke the union, thereby allowing the French to resume their war in Vietnam and providing the prologue for their own involvement a decade later. The payoff to the Corsican gangsters was of enormous value. They were granted the right to use Marseilles as a center for heroin trafficking, not only giving Corsican crime groups a new and very profitable enterprise, but creating the infamous "French Connection," which would supply much of America's heroin needs for the next twenty years (Pearce, 1976: 150).
The CIA in Southeast Asia: Links between U.S. intelligence agencies and drug smugglers occurred at least as early as the 1950s. The CIA provided direct support to Kuomintang (Chinese Nationalist) opium growers in Thailand and Burma. Ostensibly this aid was given in the hope that these small scattered armies would someday attack Communist China. The CIA set up two front-companies to provide air support for the Kuomintang opium trade - - Civil Air Transport and Sea Supply Corporation. These companies supplied military aid to the Nationalist Chinese and flew their opium out of the Golden Triangle to Thailand or Taiwan. CIA assistance for these opium-growing warlords was largely responsible for the explosion of heroin addiction in the United States in the 1960s when the number of known addicts grew from about 65,000 to over 500,000 (McCoy, 1972; Kwitny, 1987). The world's largest opium merchant, Chang Chi-fu, has operated for several decades as a CIA "client." Another Golden Triangle heroin czar, Li Wen-huan, has been given direct financial, military, and logistical assistance by the CIA. A third major heroin traffickers Lu Hsu-shui was protected from a DEA investigation on orders from the CIA (Mills, 1986).
During the Vietnam War, the CIA supplied, financed, and supported a renegade Laotian army made up of members of the Hmong (or Meo) tribe. General Vang Pao commanded this 36,000 man secret army in a war against the Pathet Lao in an attempt to disrupt North Vietnamese supply routes to Viet Cong guerrillas in South Vietnam. Vang Pao's army was under the command of veteran CIA officers and was totally supplied, financed, and equipped by U.S. funds. As part of his "assistance" to U.S. intelligence, Vang Pao's army carried out a brutal assassination program of village leaders. Vang Pao's Hmong tribesmen were traditionally opium poppy farmers. The war interfered with their opium trade, so the CIA supplied them with aircraft from a CIA proprietary company called Air America to transport their opium from the Laotian hills to a massive CIA base at Long Tieng, Laos. At Long Tieng, Vang Pao had established a massive heroin refinery. DEA's Far East regional director, John J. O'Neill, said, "I have no doubt that Air America was used to transport opium" (Kwitney, 1987: 51). Some of the Laotian heroin was transported to South Vietnam, where it was sold to U.S. troops, 20% of whom came home addicted to heroin.
The CIA in Southwest Asia: In the 1980s the CIA also began operations in support of the Mujahadeen, a fundamentalist Moslem group of rebels fighting Soviet troops in Afghanistan. Like his Nicaraguan "freedom fighters" (discussed below), Reagan's Mujahadeen allies financed their war through drug trafficking, in this case heroin. Mujahadeen leaders supervised the growing of the opium poppy and with the assistance of the CIA, which had reopened trade routes to supply the Mujahadeen with weapons, smuggled the drug onto the world market. The net result of CIA assistance to the Afghani rebels was that the areas of Afghanistan and Pakistan they control had become "the world's leading source of heroin exports to the United States and Europe" by 1986, according to a State Department report.
The CIA and Money Laundering in Florida and the Caribbean Basin: CIA associates in the Caribbean, including the paymaster for the ill-fated Bay of Pigs invasion, played key roles in the operations of Castle Bank, a Florida money laundry for organized crime's drug money. Another Florida bank with strong intelligence-community connections, the Bank of Perrine, has been used by Colombians to launder money from their burgeoning cocaine business. In the early 1970s, the CIA and organized crime played a key role in establishing and operating the World Finance Corporation, a Florida-based company involved in laundering drug money and supporting terrorist activities (Lernoux, 1984).
The Nugan-Hand Bank: Much of the opium profits from CIA involvement with drug traffickers in the Golden Triangle were laundered through the Nugan Hand Bank in Australia. A network of high-ranking U.S. military officers and intelligence officers had links to the Nugan-Hand Bank, which was charged by an Australian commission of investigation with narcotics trafficking, gun-running, money laundering, and massive fraud (Kwitny, 1987, New York Times, March 8, 1987). In his investigation of the Nugan- Hand Bank, Jonathan Kwitny charges that the bank laundered billions of dollars, helped finance the heroin trade in the Golden Triangle and engaged in tax fraud and theft (Kwitny, 1987: 76). Who were the officers of this "heroin" bank? The president of Nugan-Hand was retired U.S. Admiral Earl F. Yates. Its legal counsel was former CIA director William Colby. Consultants for the bank included former deputy CIA director Walter McDonald; former National Security Council advisor Guy Parker, and Andrew Lowe, one of Australia's largest heroin traffickers.
The Bank of Credit and Commerce International: The close relationship between the U.S. government, the financial community, and organized crime is nowhere clearer than in the activities of the Bank of Credit and Commerce International (BCCI) (Kappeler, Blumberg, and Potter, 1993: 237-238). BCCI was the seventh-largest privately owned bank in the world. It had over four hundred branch offices operating in seventy-three countries. Among its many criminal activities was the laundering of at least $14 billion for the Colombian cocaine cartels; the facilitating of financial transactions for Panamanian president Manuel Noriega and international arms merchant Adnan Khashoggi; the funneling of cash to the contras for illegal arms deals and contra-backed drug trafficking; and the assisting of Phillipine President Ferdinand Marcos in transferring his personal fortune, accrued through corruption and graft, out of the Philippines.
Despite the enormity of BCCI's crimes and its vital role in drug trafficking, the U.S. Justice Department was more than reluctant to investigate. In fact, the Justice Department had complete information on BCCI's drug and arms operations and its illegal holdings in the United States for over three years before it even initiated an inquiry. Perhaps the reluctance of American law enforcement to interfere with such a major organized crime entity can be explained by the proliferation of what some have perceived as BCCI's "friends" in the U.S. government holding high office.
Cuban Organized Crime Groups: When the Cuban dictatorship of Fulgencio Batista was overthrown by Fidel Castro in 1959, U.S. intelligence agencies began a massive covert operation to remove Castro from power. To assist in military and terrorist attacks on Cuba, the U.S. government recruited former Batista allies in the Cuban refugee community in the U.S. and members of organized crime. Organized criminals had a major stake in Cuba. Prior to the revolution, they had operated in a partnership with Batista which had made Havana a major haven for gambling, prostitution, and drug trafficking. After the revolution organized crime figures were imprisoned and/or exiled from Cuba, thereby costing organized crime millions of dollars in illicit revenue.
At first the CIA, anti-Castro Cubans, and the mob collaborated on plans for an invasion of Cuba by Cuban refugees. The clandestine army created for this purpose was known as Brigade 2506 and was placed under the direction of Manuel Artime, an anti-Castro Cuban leader in Miami. In 1962, Brigade 2506 launched a disastrous invasion at the Bay of Pigs. With their invasion force shattered and defeated, the CIA and its allies turned to other tactics to destablize the Cuban government.
The anti-Castro Cubans were reorganized in several secret operations whose main objective was to conduct acts of terror aimed at Cuba. Oil refineries and sugar refineries were bombed, sugar shipments poisoned, and the Cuban infrastructure disrupted through terrorist attacks. But the public participation of Batista allies and organized crime figures in these efforts were a source of major embarrassment to the U.S. government. In the early 1970s, the anti-Castro terror campaign was called off when one of the planes being used by the anti-Castro Cubans crashed in California with several kilos of cocaine and heroin abroad (New York Times, January 1, 1975).
Organized Crime, The CIA and the Savings and Loan Scandal
The savings and loan scandal of the 1980s has been depicted in a myriad of ways. To some, it is "the greatest ... scandal in American history" (Thomas, 1991: 30). To others it is the single greatest case of fraud in the history of crime (Seattle Times, June 11, 1991). Some analysts see it as the natural result of the ethos of greed promulgated by the Reagan administration (Simon and Eitzen, 1993: 50). And to some it was a premeditated conspiracy to move covert funds out of the country for use by the U.S. Intelligence Agency (Bainerman, 1992: 275). All of these depictions of the S & L scandal contain elements of truth. But to a large degree, the savings and loan scandal was simply business as usual. What was unusual about it was not that it happened, or who was involved, but that it was so blatant and coarse a criminal act that exposure became inevitable. But with its exposure, three basic but usually ignored "truths" about organized crime were once again demonstrated with startlingly clarity:
There is precious little difference between those people who society designates as respectable and law abiding and those people society castigates as hoodlums and thugs.
The world of corporate finance and corporate capital is as criminogenic and probably more criminogenic than any poverty-wracked slum neighborhood.
The distinctions drawn between business, politics, and organized crime are at best artificial and in reality irrelevant. Rather than being dysfunctions, corporate crime, white-collar crime, organized crime, and political corruption are mainstays of American political-economic life.
It is not our intent to discuss the unethical and even illegal business practices of the failed savings and loans and their governmental collaborators. The outlandish salaries paid by S & L executives to themselves, the subsidies to the thrifts from Congress which rewarded incompetence and fraud, the land "flips" which resulted in real estate being sold back and forth in an endless "kiting" scheme, and the political manipulation designed to delay the scandal until after the 1988 presidential elections are all immensely interesting and important. But they are subjects for others' inquiries. Our interest is in the savings and loans as living, breathing organisms that fused criminal corporations, organized crime, and the CIA into a single entity that served the interests of the political and economic elite in America. Let us begin by quickly summarizing the most blatant examples of collaboration between financial institutions, the mob, and the intelligence community.
First National Bank of Maryland: For two years, 1983-1985, the First National Bank of Maryland was used by Associated Traders, a CIA proprietary company, to make payments for covert operations. Associated traders used its accounts at First National to supply $23 million in arms for covert operations in Afghanistan, Angola, Chad, and Nicaragua (Bainerman, 1992; 276-277; Covert Action 35, 1990).
The links between the First National Bank of Maryland and the CIA were exposed in a lawsuit filed in Federal District Court by Robert Maxwell, a high-ranking bank officer. Maxwell charged in that suit that he had been asked to commit crimes on behalf of the CIA. Specifically, he charged that he was asked to conceal Associated Traders' business activities, which by law he was required to specify on all letters of credit. Maxwell alleged that he had been physically threatened and forced to leave his job after asking that his superiors supply him with a letter stating that the activities he was being asked to engage in were legal. In responding to Maxwell's lawsuit, attorneys for the bank state that "a relationship between First National and the CIA and Associated Traders was classified information which could neither be confirmed nor denied (Bainerman, 1992: 276-277; Washington Business Journal, February 5, 1990).
Palmer National Bank: The Washington, D.C.-based Palmer National Bank was founded in 1983 on the basis of a $2.8 million loan from Herman K. Beebe to Harvey D. McLean, Jr. McLean was a Shreveport Louisiana businessman who owned Paris (Texas) Savings and Loan. Herman Beebe played a key role in the savings and loan scandal. Houston Post reporter Pete Brewton linked Beebe to a dozen failed S & L's, and Stephen Pizzo, Mary Fricker, and Paul Muolo, in their investigation of the S & L fiasco, called Beebe's banks "potentially the most powerful and corrupt banking network ever seen in the U.S." Altogether, Herman Beebe controlled, directly or indirectly, at least 55 banks and 29 S & L's in eight states. What is particularly interesting about Beebe's participation in these banks and savings and loans is his unique background. Herman Beebe had served nine months in federal prison for bank fraud and had impeccable credentials as a financier for New Orleans-based organized crime figures, including Vincent and Carlos Marcello (Bainerman, 1992: 277-278; Brewton, 1993: 170- 179).
Harvey McLean's partner in the Palmer National Bank was Stefan Halper. Halper had served as George Bush's foreign policy director during the 1980 presidential primaries. During the general election campaign, Halper was in charge of a highly secretive operations center, consisting of Halper and several ex- CIA operatives who kept close tabs on Jimmy Carter's foreign policy activities, particularly Carter's attempt to free U.S. hostages in Iran. Halper was later linked both to the "Debategate" scandal, in which it is alleged that Carter's briefing papers for his debates with Ronald Reagan were stolen, and with "The October Surprise," in which it is alleged that representatives of the Reagan campaign tried to thwart U.S. efforts to free the Iranian hostages until after the presidential election. Halper also set up a legal defense fund for Oliver North.
During the Iran-Contra Affair, Palmer National was the bank of record for the National Endowment for the Preservation of Liberty, a front group run by Oliver North and Carl "Spitz" Channell, which was used to send money and weapons to the contras.
Indian Springs Bank: Another bank with clear connections to the CIA was the Indian Springs Bank of Kansas City, Kansas (Bainerman, 1992: 279-280; Brewton, 1993: 197-200). The fourth largest stockholder in Indian Springs was Iranian expatriate Farhad Azima, who was also the owner of an air charter company called Global International Air. The Indian Springs bank had made several unsecured loans to Global International Air, totaling $600,000 in violation of the bank's $349,00 borrower limit. In 1983 Global International filed for bankruptcy, and Indian Springs followed suit in 1984. The president of Indiana Springs was killed in 1983 in a car fire that started in the vehicle's back seat and was regarded by law enforcement officials as of suspicious origins.
Global International Air was part of Oliver North's logistical network which shipped arms for the U.S. government on several occasions, including a shipment of 23 tons of TOW missiles to Iran by Race Aviation, another company owned by Azima. Pete Brewton, in his investigation of the Indian Springs bank collapse was told that FBI had not followed up on Indian Springs because the CIA informed them that Azima was "off limits" (Houston Post, February 8, 1990). Similarly the assistant U.S. Attorney handling the Indian Springs investigation was told to "back off from a key figure in the collapse because he had ties to the CIA."
Azima did indeed have ties to the CIA. His relationship with the agency goes back to the late 1970s when he supplied air and logistical support to EATSCO (Egyptian American Transport and Services Corporation), a company owned by former CIA agents Thomas Clines, Theodore Shackley, and Richard Secord. EATSCO was prominently involved in the activities of former CIA agent Edwin Wilson, who shipped arms illegally to Libya. Azima was also closely tied to the Republican party. He had contributed $81,000 to the Reagan campaign.
Global International also had other unsavory connections. In 1981, Global International made a payment to organized crime figure Anthony Russo, a convicted felon with a record that included conspiracy, bribery, and prostitution charges. Russo was the lawyer of Kansas City organized crime figures, an employee of Indian Springs, and a member of the board of Global International. Russo later explained that the money had been used to escort Liberian dictator Samuel Doe on a "goodwill trip" to the U.S.
Global International's planes based in Miami were maintained by Southern Air Transport, another CIA proprietary company. According to Franck Van Geyso, an employee of Global International, pilots for Global International ferried arms into South and Central America and returned to Florida with drugs. Indian Springs also made a loan of $400,000 to Morris Shenker, owner of the Dunes Hotel in Las Vegas, former attorney for Jimmy Hoffa, and close associate of Nick Civella and other Kansas City organized crime figures. At the time the loan to Shenker was made, he, Civella, and other Kansas City mobsters were under indictment for skimming $280,000 from Las Vegas' Tropicana Casino.
Vision Banc Savings: In March, 1986, Robert L. Corson purchased the Kleberg County Savings and Loan of Kingsville, Texas, for $6 million, and changed its name to Vision Banc Savings (Bainerman, 1992: 280-281; Brewton, 1993: 333-351). Harris County, Texas, judge Jon Lindsey vouched for Corson's character in order to gain permission from state regulators for the bank purchase. Lindsey was the chairman of the Bush campaign in 1988 in Harris County and later received a $10,000 campaign contribution and a free trip to Las Vegas from Corson (Houston Post, February 11, 1990).
Corson was well-known to federal law enforcement agents as a "known money launderer" and a "mule for the agency," meaning that he moved large amounts of cash from country to country. When Corson purchased Vision Banc, it had assets in excess of $70 million. Within four months it was bankrupt. Vision Banc engaged in a number of questionable deals under Corson leadership, but none more so that its $20 million loan to Miami Lawyer Lawrence Freeman to finance a real estate deal (Houston Post, February 4, 1990). Freeman was a convicted money launderer who had cleaned dirty money for Jack Devoe's Bahamas-to-Florida cocaine smuggling syndicate and for Santo Trafficante's Florida- based organized crime syndicate. Freeman was a law partner of CIA-operative and Bay of Pigs paymaster Paul Helliwell. Corson, in a separate Florida real estate venture costing $200 million, was indicted on a series of charges.
Hill Financial Savings: Vision Banc was not the only financial institution involved in Freeman's Florida land deals. Hill Financial Savings of Red Hill, Pennsylvania, put in an additional $80 million (Brewton, 1993: 346-348) . The Florida land deals were only one of a series of bad investments by Hill Financial which led to collapse. The failure of Hill Financial, alone, cost the U.S. treasury $1.9 billion.
Sunshine State Bank: The cast of characters surrounding the Sunshine State Bank of Miami also included spies, White House operatives, and organized criminals (Bainermann, 1992: 281; Brewton, 1993: 310- 312, 320-323). The owner of the Sunshine State Bank, Ray Corona, was convicted in 1987 of racketeering, conspiracy, and mail fraud. Corona purchased Sunshine in 1978 with $1.1 million in drug trafficking profits supplied by Jose Antonio "Tony" Fernandez, who was subsequently indicted on charges of smuggling 1.5 million pounds of marijuana into the U.S.
Among Corona's customers and business associates were Leonard Pelullo, Steve Samos, and Guillermo Hernandez-Cartaya. Pelullo was a well-known associate of organized crime figures in Philadelphia, who had attempted to use S & L money to broker a major purchase of an Atlantic City Casino as a mob frontman. Pelullo was charged with fraud for his activities at American Savings in California. Steve Samos was a convicted drug trafficker who helped Corona to set up Sunshine State Bank as a drug money laundry. Samos also helped set up front companies that funneled money and weapons to the Contras. Guillermo Hernandez-Cartaya was a veteran CIA operative who had played a key role in the Bay of Pigs of invasion. He also had a long career as a money launderer in the Caribbean and in Texas on behalf of both the CIA and major drug trafficking syndicates.
Mario Renda, Lender to the Mob: Mario Renda was a Long Island money broker who brokered deposits to various savings and loans in return for their agreement to loan money to phony companies (Brewton, 1993: 45-47; 188-190; Pizzo et al. 1989: 466-471). Renda and his associates received finders fees of 2 to 6 percent on the loans, most of which went to individuals with strong organized crime connections who subsequently defaulted on them. Renda brokered deals to 160 Savings and Loans throughout the country, 104 of which eventually failed. Renda was convicted of $16 million from an S & L and for tax fraud.
Renda also served CIA and National Security Council interests as a money broker helping arrange for the laundering of drug money through various savings and loans on behalf of the CIA. He then obtained loans from the same S & L's, which were funneled to the Contras. An organized crime-related stockbroker, a drug pilot, and Renda were all convicted in the drug money laundering case.
Full-Service Banking: All told at least twenty-two of the failed S & L's can be tied to joint money laundering ventures by the CIA and organized crime figures (Glassman, 1990: 16-21; Farnham, 1990: 90-108; Weinberg, 1990: 33; Pizzo, et al., 1989: 466-471). If the savings and loan scandals of the 1980s reveal anything, they demonstrate what has often been stated as a maxim in organized crime research: that corruption linking government, business, and syndicates is the reality of the day-to-day organization of crime. Investigations of organized crime in the United States, Europe, and Asia have all uncovered organized crime networks operating with virtual immunity from law enforcement and prosecution. Chambliss' study of organized crime in Seattle exposed a syndicate that involved participation by a former governor of the state, the county prosecutor, the police chief, the sheriff, at least 50 law enforcement officers, leading business people, including contractors, realtors, banks, and corporation executives, and, of course, a supporting cast of drug pushers, pimps, gamblers, and racketeers (Chambliss, 1978). The Chambliss study is not the exception but the rule. Other sociological inquires in Detroit, Texas, Pennsylvania, New Jersey, and New York have all revealed similar patterns (Albini, 1971; Block, 1984; Block and Chambliss, 1981; Block and Scarpitti,1985; Jenkins and Potter, 1989; 1986; Potter and Jenkins, 1985; Potter, 1994). As Chambliss comments:
In the everyday language of the police, the press, and popular opinion, "organized crime" refers to a tightly knit group of people, usually alien and often Italian, that run a crime business structured along the lines of feudal relationships. This conception bears little relationship to the reality of organized crime today. Nonetheless, criminologists have discovered the existence of organizations whose activities focus on the smuggling of illegal commodities into and out of countries (cocaine out of Colombia and into the United States and guns and arms out of the United States and into the Middle East, for example); other organizations, sometimes employing some of the same people, are organized to provide services such as gambling, prostitution, illegal dumping of toxic wastes, arson, usury, and occasionally murder. These organizations typically cut across ethnic and cultural lines, are run like businesses, and consist of networks of people including police, politicians, and ordinary citizens investing in illegal enterprises for a high return on their money.
Discussion Questions:
1. In what ways does the savings and loan scandal represent collusion between organized crime and legitimate commerce?
2. Discuss in what ways state organized crime can be characterized as terrorism.
3. To what extent is America's drug problem a direct result of government policy? How can the state's drug war be explained in this context?
CRJ 875: Crime and Public Policy
Gary W. Potter, Professor, Criminal Justice and Police Studies
padpotte@acs.eku.edu
Eastern Kentucky University
