The United States and Drugs in Thailand and Burma 米国とタイ・ビルマの麻薬

Operation Paper: The United States and Drugs in Thailand and Burma 米国とタイ・ビルマの麻薬

Peter Dale Scott

Operation Paper: The United States official State Department policy of and Drugs in Thailand and Burma containment. My book sees the expanding offensive efforts in Southeast Asia, after Peter Dale Scott switching from Li Mi’s forces to the CIA’s Thai proxy army PARU, as a watershed in the This Chapter 3 from my newly published conversion of America’s post-war defense American War Machine describes America’s establishment, which was concerned above all Operation Paper, a November 1950 program to with preserving the status quo in western arm and supply the Kuomintang remnant Europe, into today’s offensive American War troops of General Li Mi in Burma. Operation Machine, with actions centered on Southeast Paper itself was relatively short-lived, but it and Central Asia. had two long-term consequences that have not been adequately discussed. The writing of American War Machine has given me a clearer picture of America’s overall The first is that the CIA was launched into its responsibility for the huge increases in global fifty-year history of indirectly facilitating and drug trafficking since World War II. This is overseeing forces engaged in vastly expanding exemplified by the more than doubling of the production of opiates, in successive areas Afghan opium drug production since the U.S. not previously major in the international traffic. invaded that country in 2001. But the U.S. This is a history that stretches, almostresponsibility for the present dominant role of continuously, from Thailand and BurmaAfghanistan in the global heroin traffic has through Laos until the 1970s, and then to merely replicated what had happened earlier in present-day Afghanistan. Burma, Thailand, and Laos between the late 1940s and the 1970s. These countries also only The second is that the resulting drug proceeds became factors in the international drug traffic helped supplement the CIA’s efforts to develop as a result of CIA assistance (after the French, its own Asian proxy armies, initially defensive in the case of Laos) to what would otherwise but increasingly offensive. This led in 1959 to have been only local traffickers. • the initiation of armed conflict in the previously neutral and Buddhist nation of Laos, an unwinnable hot war that soon spread to It is not too much to conclude that, Vietnam. for such larger reasons of policy, U.S. authorities actually suborned The decision to launch Operation Paper was at times an increase of illicit heroin made by a small cabal inside the Office of traffic. Policy Coordination (OPC), notably Desmond Fitzgerald and Richard Stilwell in conjunction An understanding of this with former OSS Chief William Donovan, who phenomenon must inform future favored the rollback of communism over the scholarly work on drug trafficking

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in Asia.1 questions that the archival records presently available cannot definitively answer. If opium could be useful in Some of most relevant records, chiefly those of achieving victory, the pattern was the Office of Policy Coordination (OPC) that 2 clear. We would use opium. initiated Operation Paper, are still closed to public view. Others, such as those of the World Commerce Corporation (WCC) or of the Willis Thailand and Drugs: A Personal Preface Bird import-export firm in Bangkok, would It is now clearly established that in November probably tell us little even if we had them. And 1950, President Truman, faced with large some of the most important events, such as the numbers of Chinese communist troops pouring path by which Thai Opium Monopoly into Korea, approved an operation, code-named opium soon reached the streets of Boston, were Operation Paper, to prepare remnantprobably never documented at all. Kuomintang (KMT) forces in Burma for a The topic of this chapter is a major one in the countervailing invasion of Yunnan. It is clear postwar history of China, Southeast Asia, and also that these troops, the so-called 93rd the global drug traffic. With needed U.S. Division under KMT General Li Mi, were support, above all in the form of airlift and already involved in drug trafficking. It is clear arms, Li Mi’s irregulars were soon finally that, as we shall see, Truman belatedly marketing, in the words of their U.S. overseer approved a supply operation to drug traffickers Richard Stilwell (chief of OPC Far that had already been in existence for some time. East), “almost a third of the world’s opium supply.”3 Burton Hersh, who transmits Stilwell’s comment, adds his own remark that Li Mi’s troops “developed over time into an important commercial asset for the CIA.” Based on what is currently known, I would express the relationship differently: Li Mi’s drug-trafficking troops continued to be of major importance to the CIA—but as self- supporting, off-the-books allies in the struggle to secure Southeast Asia against communist advances, not as a source of income for the CIA itself.

Overview

In the 1950s, after World War II, the chances seemed greater than ever before for a more peaceful, orderly, legal, and open world. Even the world’s two great superpowers, the United States and the Soviet Union, had agreed on rules and procedures for mediating their The purpose of this chapter is to explore the serious differences through a neutral body, the process that led up to Truman’s validation of a United Nations. The United States was then program to use drug proxies in Burma. It will wealthy enough to finance postwar be an exercise in deep history, raisingreconstruction in devastated Europe and later

2 8 | 44 | 2 APJ | JF fund international programs in fields such as out of Southeast Asia, helped institutionalize health and agriculture in the newly liberated what became a CIA habit of turning to drug- former colonies of the Third World. supported off-the-books assets for fighting wars wherever there appeared to be a threat to But the United Nations was not destined to America’s access to oil and other resources—in remain the theater for the resolution ofIndochina from the 1950s through the 1970s, in international conflict. One major reason for this Afghanistan and Central America in the 1980s, was that the Soviet Union, the United States, in Colombia in the 1990s, and again in and then, after 1949, China all pursued covert Afghanistan in 2001.7 policies, low key at first, that brought them increasingly into conflict and proxy war.

The Marxist-Leninist nations of the Soviet Union and China lent support to other Marxist- Leninist parties and movements, some of them insurrectionary, in other parts of the world. Washington’s often inaccurate perception saw these parties and movements as proxies for Soviet and/or Chinese power. Thus, much of the Cold War came to be fought covertly in areas, like Southeast Asia, about which both the United States and the Soviet Union were stunningly ignorant.

From the very beginning of the postwar era, Washington looked for proxies of its own to Harvesting opium in Karenni state, Burma combat the threat it perceived of world revolution. Some of these proxies are now virtually forgotten, such as the Ukrainian The use of drug proxies, at odds with guerrillas, originally organized by Hitler’s SS, Washington’s official antidrug policies, had to who fought an OPC-backed losingremain secret. This meant that in practice battle against Russia into the early 1950s. major programs with long-term consequences Some, like the mafias in Italy and Marseille, were initiated and administered by small soon outgrew their U.S. support to become de cliques with U.S. intelligence ties that were facto regional players in their own right. almost invisible in Washington and still less visible to the American people. These cliques of But one of America’s early proxy armies, the like-minded individuals, at ease in working with remnants of Nationalist Chinese KMT forces in traffickers and other criminals, were in turn Burma and later Thailand, would continue to part of a cabal supported by elite groups at receive U.S. support into the 1960s. Like the high levels. mafias in Europe and the yakuza in Japan, these drug proxies had the advantage The U.S. use of the drug traffic from the KMT for secrecy of being off-the-bookstroops in Burma had momentous consequences assets, largely self-supporting through their for the whole of Southeast Asia. For the drug dealing, and firmly anticommunist. OPC infrastructure for the KMT troops (Sea Supply Inc., see below) was expanded and The OPC and CIA’s initial support of this modified, with support from William Donovan program, by reestablishing a major drug traffic and Allen Dulles, to develop and support an

3 8 | 44 | 2 APJ | JF indigenous guerrilla force in Thailand, PARU. them. Failures (as in Vietnam) are PARU, far less publicized than the KMT troops, remembered even more vividly as reasons to did as much or more to influence U.S. history. prove that one is not a loser. For PARU’s success in helping to guarantee the independence of Thailand encouraged the It is thus important to analyze this recurring United States in the 1960s to use PARU in Laos pattern of success leading to costly failure, to and Vietnam as well. Thus, PARU’s early free ourselves from it. For it is clear that the successes led the United States, incrementally, price of imperial overstretch has been into first covert and eventually overt warfare in increasing over time. Laos and Vietnam. We shall see that, according With this end in mind, I shall now explore key to its American organizer James William [“Bill”] moments in the off-the-books story of Southeast Lair, PARU, like the KMT forces, was in its Asian drug proxies and the cliques that have early stage at least partly financed by drugs. managed them, a trail that leads from Thailand In short, some Americans had a predictable and after World War II to the U.S. occupations of almost continuous habit of turning to the drug Iraq and Afghanistan today. traffic for off-the-books assets. This recourse The Origins of the CIA Drug Connection in began as a curious exception to the larger U.S. Thailand policy of seeking political resolution of international conflicts through the United To understand the CIA’s involvement in the Nations. It also pitted the regular U.S.Southeast Asian drug traffic after World War II, diplomats of the State Department against the one must go back to nineteenth-century opium Cold Warriors of the secret agency, OPC, that policies of the British Empire. Siamese had these drug assets at its disposal. This was government efforts to prohibit the smoking of not the only time that a small U.S. bureaucratic opium ended in 1852, when King Mongkut cabal, facing internal opposition but enjoying (Rama IV), bowing to British high-level backing, could launch anpressures, established a Royal Opium operation that became far larger than originally Franchise, which was then farmed out to authorized. The pattern was repeated, with Siamese Chinese.9 Three years later, under the remarkable similarities, in Afghanistan in 1979. terms of the unequal Bowring Treaty, Siam Once again, as in Thailand, the original stated accepted British opium free of duty, with the goal was the defense of the local nation and the proviso that it was to be sold only to the Royal containment of the communist troopsFranchise. (A year later, in 1856, a similar threatening to subdue it. Once again this goal agreement was negotiated with the United was achieved. But once again the success of States.) The opium farm became a source of the initial defensive campaign created a wealth and power to the royal government and momentum for expansion into a campaign of also to the Chinese secret societies or triads offensive rollback that led to our present that operated it. Opium dependency also had unpromising confrontation with more and more the effect of easing Siam into the ways of elements of Islam.8 Western capitalism by bringing “peasants into the cash economy as modern The cumulative history of these U.S.consumers.”10 interventions, both defensive (successful) and offensive (catastrophic), has built and still Until it was finally abolished in 1959, proceeds builds on itself. Successes are seen asfrom the Opium Franchise (as in other parts of opportunities to move forward: it is hard for Southeast Asia) provided up to 20 percent of mediocre minds not to draw bad lessons from Siamese government revenue.11 This is one

4 8 | 44 | 2 APJ | JF reason why the opium franchise ceased to be traffic, quickly agreed to cease hostilities. farmed out to Chinese businessmen in 1907 (According to an Office of Strategic Services and became (as again in other parts of [OSS] observer, the warlord generals of Southeast Asia) a government monopoly. Yunnan, Lung Yun, and his cousin Lu Another was the desire to reduce the influence Han, commander of the 93rd Division, were of Chinese secret societies andbusy smuggling opium from Yunnan across the encourage Chinese assimilation into Siam. As a border into Burma and Thailand.17) result, the power of the secret societies did generally decline in the twentieth century, An OSS team of Seri Thai (Free Thais), led by except for a revival under the JapaneseLieutenant Colonel Khap Kunchon (Kharb occupation during World War II. By this time Kunjara) and ostensibly under the direction of the KMT, operating under cover, was the most OSS Kunming, made contact with both sides in powerful force in the Bangkok ChineseMarch–April 1944.18 When Khap arrived at the community, with overlapping links to Tai Li’s 93rd Division Headquarters, “he discovered KMT intelligence network and also the drug that an informal ceasefire had been observed traffic.12 along the border between southern Yunnan and the Shan States [in Burma] since early 1943 Although the official source of opium for the with the arrangement being cemented from Siamese franchise was India, the relatively high time to time by gifts of Thai whisky, cigarettes cost of Indian opium encouraged more and and guns presented to officers of the 93rd more smuggling of opium from the Shan states Division by their Thai counterparts.”19 of eastern Burma. With the gradual outlawing of the opium traffic in the early twentieth Khap, with the permission of his OSS superior century, the British banned the use of Shan Nicol Smith, sent a message from Menghai to a opium inside Burma but continued to tax the former student of his now with the Thai Shan states as before. In this way the British Northern Army in Kengtung.20 “The letter tacitly encouraged the export of Shan opium stressed the need for Thai forces to to the Thai market.13 switch sides at the appropriate moment and asked for the names of Thai officers in the area When Thailand declared war against Britain in who would be willing to cooperate with the January 1942, Shan opium became the only Allies.”21 Khap’s letter, with its apparent OSS source for the lucrative monopoly. This helps endorsement, reached Phibun in Bangkok and explain the 1942 invasion of the opium- led to an uninterrupted postwar collaboration producing Shan states by the Thaibetween the Northern Army and the 93rd Northern (Prayap) army, in parallel to the Division.22 Japanese expulsion of the British from Burma.14 In January 1943, as it became clearer that Khap, however, was a controversial figure Japan would not win the war, the Thai premier inside OSS, mistrusted above all for his Phibun Songkhram used the Northern Army dealings with Tai Li. We learn from Reynolds’s in Kengtung, with its control of Shan opium, to well-documented history that Tai Li and Khap, open relations with the Chinese armies they in conjunction with the original OSS China had been fighting, which had by now retreated chief Milton Miles, had been concertedly across the Yunnan–Burma frontier.15 One of pushing a plan to turn the Thai Northern Army these was the 93rd Division, at Meng Hai in the against the Japanese.23 But John Coughlin, Thai Lü district of SipsongphannaMiles’s successor as OSS chief in China, (Xishuangbanna) in Yunnan.16 The two sides, consulted some months later with Donovan in both engaged in the same lucrative opium Washington and expressed doubts about the

5 8 | 44 | 2 APJ | JF scheme. A follow-up memo Theto Northern Army–93rd Division–KMT Donovan questioned Khap’s motives: connection had enormous consequences. For the next three decades, Shan opium would be the source of revenue and power for the KMT I . . . doubt that he can be trusted. . in Burma and both the KMT and the Northern . . I feel that he will make deals Army in Bangkok. All of Thailand’s military with Tai Li of which I will not be leaders between 1947 and 1975—Phin informed. . . . I am at a loss to Chunhawan, his son-in-law Phao Sriyanon, Sarit figure out Tai Li’s extreme interest Thanarat, Thanom Kittikachorn, Prapat in him, unless there is some Charusathien, and Kriangsak agreement between them that I Chomanand—were officers from the Northern know nothing about.24 Army. Successively their regimes dominated and profited from the opium Like his sources, Reynolds’s archival history is supplied by the KMT 93rd Division that 26 tactfully silent on the topic of opium. But Tai after the war reestablished itself in Burma. Li’s opium connection to the KMT in Thailand This was true from the military coup in and Burma was well known to OSS and may Bangkok of November 1947 until Kriangsak’s 27 well have been on Coughlin’s mind.25 resignation in 1980. A series of coups d’état—in 1947, 1951, 1957, and 1975—can be analyzed in part as conflicts over control of the drug trade.28

As in Indonesia and other Asian countries, the generals’ business affairs were handled by local Chinese. The Chinese banking partner of Phin Chunhawan and Phao Sriyanon was Chin Sophonpanich, a member of the Free Thai movement who in the postwar years enabled Phao to die as “one of the richest men in the world.”29 When in 1957 Sarit displaced Phao and took over both the government and the drug trade, both Phao and Chin had to flee the country.30

The United States Helps Rebuild the Postwar Drug Connection

To appreciate the significance of the connection we are discussing, we must keep in mind that, by 1956, the KMT had been driven from the Chinese mainland and that Chinese production of opium, even in remote mountainous Yunnan, had been virtually eliminated. The disruptions of a world war and revolution had created an opportunity to terminate the opium problem in the Far East. KMT forces in Burma, 1953 Instead, U.S. covert support for the Thai and

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KMT drug traffickers converted Southeast Asia, what he did before the creation of OPC in for more than two decades, into the world’s 1948. Speculation abounds as to the original major source of opium and heroin. source of funds available to Helliwell in this earlier period, ranging from the following: The origins of the U.S. interface with these drug traffickers in Thailand and Burma are obscure. They appear, however, to have 1. The deep pockets of the involved principally four men: William overworld figures in the WCC. Donovan; his British ally Sir William Citing Daniel Harkins, a former Stephenson, the organizer with Donovan of the USG investigator, John Loftus and World Commerce Corporation (WCC); Paul Mark Aarons claimed that Nazi Helliwell; and Willis Bird (both veterans of OSS money, laundered and manipulated China). After World War II, Sir William by Allen Dulles and Sir William Stephenson’s WCC “became very active in Stephenson through the WCC, Bangkok,” and Stephenson himself established reached Thailand after the war. a strong personal relationship with King Rama When Harkins informed Congress, IX.31 he “was suddenly fired and sent back [from Thailand] to the United 35 Stephenson recruited James Thompson, the last States on the next ship.” OSS commander in Bangkok, to stay on in Bangkok as the local WCC representative. This 2. The looted gold and other resources collected by Admiral led to the WCC’s financing of Thompson’s Thai 36 Silk Company, a successful commercial Yamashita and others in Japan or enterprise that also covered Thompson’s of the SS in Germany. repeated trips to the northeastern Thai border 3. The drug trade itself. Further with Laos, the so-called Isan, where communist research is needed to establish insurrection was most feared and where future when the financial world of Paul CIA operations would be concentrated.32 One Helliwell began to overlap with would like to know whether WCC similarly that of Meyer Lansky and the launched the import-export business of Willis underworld. The banks discussed Bird, of whom much more shortly. in the chapter 7, which are outward signs of this connection In the same postwar period, Paul Helliwell, who (Miami National Bank and Bank of earlier had been OSS chief of Special Perrine), were not established until Intelligence in Kunming, Yunnan, served as Far a decade or more later. Still to be East Division chief of the Strategic Service established is whether the Eastern Unit, the successor organization to OSS.33 In Development this capacity he allegedly “became the man Company represented by Helliwell who controlled the pipe-line of covert funds for was the firm of this name that in secret operations throughout East Asia after 34 the 1940s cooperated with Lansky the war.” Eventually, Helliwell would be and others in the supply of arms to responsible for the incorporation in America of the nascent state of Israel.37 the CIA proprietaries, Sea Supply Inc. and Civil Air Transport (CAT) Inc. (later Air America), which would provide support to both Phao Of these the best available evidence points Sriyanon of the Northern Army in Thailand and tentatively to Nazi gold. We shall see that the KMT drug camps in Burma. It is unclear Helliwell acquired a banking partner in Florida,

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E. P. Barry, who had been the postwar head of the early cold war. Among those OSS Counterintelligence (X-2) in Vienna, which who kept close watch over oversaw the recovery of SS gold in Operation events were William J. Donovan, Safehaven.38 And it is not questioned that in wartime head of the OSS, and December 1947 the National Security Willis H. Bird, who worked with Council (NSC) created a Special Procedures the OSS in China. . . . After the Group “that, among other things, laundered war, Bird, . . . still a reserve over $10 million in captured Axis funds to colonel in military intelligence, ran influence the [Italian] election [of 1948].”39 an import-export house in Note that this authorization was before NSC Bangkok. Following the November 10/2 of June 18, 1948, first funded covert [1947 Thailand coup] Bird . . . operations under what soon became OPC. implored Donovan: “Should there be any agency that is trying to take What matters is that, for some time before the the place of O.S.S., . . . please have first known official U.S. authorizations in them get in touch with us as soon 1949–1950, funds were reaching Helliwell’s as possible. By the time Phibun former OSS China ally Willis Bird in Bangkok. returned as Prime Minister, There Bird ran a trading company supplying Donovan was telling the Pentagon arms and materiel to Phin Chunhawan and and the State Department that Phin’s son-in-law, Phao Sriyanon, who in 1950 Bird was a reliable source whose became director-general of the Thai Police information about growing Soviet Department. By 1951 OPC funds for Bird were activities in Thailand were being handled by a CIA proprietary firm, Sea credible.42 Supply Inc., which had been incorporated by Paul Helliwell in his civilian capacity as a lawyer in Miami. As noted earlier, Helliwell also became general counsel for the Miami Bird’s wishes were soon answered by NSC 10/2 of June 18, 1948, bank that Meyer Lansky allegedly used to which created the OPC. launder proceeds from the Asian drug traffic. Washington swiftly agreed that Some sources claim that in the 1940s, Thailand would play an important Donovan, whose link to the WCC was by 1946 role as a frontline ally in the Cold his only known intelligence connection, also War. In 1948, U.S. intelligence visited Bangkok.40 Stephenson’s biographer, units began arming and training a William Stevenson, writes that because separate army under General MacArthur had cut Donovan out of the Pacific Phao, which became known as the during World War II, Donovan Thai Border Police (BPP). The “therefore turned Siam [i.e., Thailand] into a relationship was cemented in 1949 base from which to run [postwar] as the communists captured power secret operations against the new Soviet threat in China. The generals in Asia.”41 demonstrated their anticommunist credentials by echoing U.S. propaganda and killing William Walker agrees that by alleged leftists. At midyear a CIA 1947–1948, the United States [OPC] team arrived in Bangkok to increasingly defined for Thailand a train the BPP for covert support of place in Western strategic policy in the Kuomintang in its continuing

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war against the Chinese conflict and even conspiratorial disagreement communists on the Burma-China over official U.S. policy toward the border. Later in the year the new Chinese People’s Republic. As the United States began to arm and historian Bruce Cumings has shown, both the train the Thai army and to KMT-financed China Lobby and many provide the kingdom general Republicans, like Donovan, as well as General economic aid.43 MacArthur in Japan, were furious at the failure of Secretary of State Dean Acheson to continue support for Chiang Kai-shek after the founding of the People’s Republic in October 1949.47 Up Walker notes how the collapse of until the June 1950 outbreak of war in Korea, the KMT forces in China led Acheson refused to guarantee even the security Washington to subordinate its of Taiwan.48 antinarcotics policies to the containment of communism: By the fall of 1949 . . . reports reached the State Department about the inroads communism was making within the Chinese community in Thailand as well as the involvement of the Thai army with opium. Since the army virtually controlled the nature of Thailand’s security relationship with the West, foreign promotion of opium control had to take a back seat to other policy priorities.44

On March 9, 1950, when Truman was asked to approve $10 million in military aid for Thailand, Acheson’s supporting memo noted that $5 million had already been approved by Truman Claire Chennault with Chiang Kai-shek and for the Thai “constabulary.”45 This presumably Mme Chiang came from the OPC’s secret budget: I can find no other reference to the $5 million in State Department published records, and two years The key public lobbyist for backing the KMT in later a U.S. aid official in Washington, Edwin Burma and Yunnan was General Claire Martin, wrote in a secret memo that the Thai Chennault, original owner of the airline the Police force under General Phao “is receiving OPC took over. Chennault deserves to be no American military aid.”46 remembered as an early postwar proponent of using off-the-books assets: his “Chennault Plan” Cliques, the Mob, the KMT, and Operation envisaged essentially self-financing KMT Paper armies, backed by a covert U.S. logistical airline, in support of U.S. foreign policy.49 The U.S. decision to back the KMT troops—the Because by this time Chennault was serving in so-called Li Mi project or Operation Paper—was Washington as Chiang Kai-shek’s military made at a time of intense interbureaucratic representative, he was viewed by U.S.

9 8 | 44 | 2 APJ | JF officials with increasing suspicion if notLike Chiang Kai-shek, Chennault also had distaste.50 Yet his longtime associate,support from Henry Luce of Time-Life in friend, and business ally Thomas (“Tommy the America and both General MacArthur and his Cork”) Corcoran, who after 1950 was a intelligence chief, Major General Charles registered foreign agent for Taiwan, managed Willoughby, in Japan. Their plans to put Chennault in contact with senior OPC for maintaining and reestablishing the KMT in officers, including Richard Stilwell, chief of the China were in 1949 already beginning to Far East Division of the OPC.51 diverge significantly from those of Truman and his State Department.59 Former OSS Chief There were other private interests with a stake William Donovan, now outside the government in Operation Paper. In 1972 I noted that the and promoting the KMT, also promoted both two principal figures inside the United States Chiang Kai-shek and Chennault,60 as did who backed Chennault, Paul Helliwell and Chennault’s wartime associate William Pawley, Thomas Corcoran, were both attorneys for a freewheeling overseas investor who, like the OSS-related insurance companies of C. V. Helliwell, reputedly had links to mob drug Starr in the Far East.52 (Starr, who had traffickers.61 operated out of Shanghai before the war, helped OSS China establish a network both Donovan’s support for Chennault was part of there and globally.53) The C. V. Starr companies his general advocacy of rollback against (later the massive AIG group) allegedly had communism and his interest in guerrilla “close financial ties” with Chinesearmies—a strongly held ideology that, as we 54 shall see, led to his appointment as ambassador Nationalists in Taiwan, and in any case they to Thailand in 1953. His intellectual ally in this would of course have had a financial was the former Trotskyite James Burnham, interest both in restoring the KMT to power in another protégé of Henry Luce by then in the China and in consolidating a Western presence OPC (and a prototype of the neoconservatives in Southeast Asia.55 At the time of Corcoran’s half a century later). Burnham wrote in his lobbying, Starr’s American International book (“published with great Luce fanfare in Assurance Company was expanding from its early 1950”) of “rolling back” communism and Hong Kong base to Malaysia, Singapore, and of supporting Chiang Kai-shek to, at some Thailand. In 2006, that company was “the No. 1 56 future point, “throw the Communists back out life insurer in Southeast Asia.” And its parent 62 of China.” AIG, before AIG’s spectacular collapse in 2008, was listed by Forbes as the eighteenth-The Belated Authorization of Operation largest public company in the world. Paper

Corcoran was also the attorney in Washington In the midst of this turmoil, OPC Chief Frank for Chiang Kai-shek’s brother-in-law T. V. Wisner began in the summer of 1948 to Soong, the backer of the China Lobby who refinance and eventually take over Chennault’s some believed to be the “wealthiest man in the airline, CAT, which Chiang Kai-shek’s friend 57 world.” It is likely that Soong and theClaire Chennault had organized with postwar KMT helped develop the Chennault Plan. A UN relief funds to airlift supplies to the KMT complementary plan for supporting thearmies in China. Wisner “negotiated with remnants of General Li Mi’s KMT armies in Corcoran for the purchase of CAT [in which Burma was developed in 1949 by the army’s Corcoran as well as Chennault had a financial civilian adviser, Ting Tsuo-shou, afterinterest]. In March [1950], using a ‘cutout’ discussions on Taiwan with Chiang Kai-shek.58 banker or middleman, the CIA paid CAT

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$350,000 to clear up arrearages, $400,000 for Allen Dulles to oversee both the OPC and the future operations, and a $1 million option on CIA’s rival Office of Special Operations (OSO, the business.”63 the successor to the Strategic Service Unit).69 Yet in November 1950, only one month after his Richard Stilwell, Far Eastern chief of the OPC appointment as director, Smith tried and failed and the future overseer of Operation Paper, to kill Operation Paper when the proposal was dickered with Corcoran over the purchase belatedly submitted by the OPC (backed by the price.64 The details were finalized in March Joint Chiefs) for Truman’s approval: 1950, shortly before the outbreak of the Korean War in June generated for CAT Inc. a huge volume of new business.65 Alfred Cox, The JCS [Joint Chiefs of Staff] in OPC station chief in Hong Kong and the chief April 1950 issued a series of executive officer (CEO) of CAT Inc., directed recommendations, including a the supply operation to Li Mi.66 programme of covert assistance to local anti-communist forces. This According to an unfavorable assessment by proposal received additional Lieutenant Colonel William Corson, a former stimulus following the Korean marine intelligence officer on special War and especially after assignment with the CIA, the OPC, Communist China entered that conflict. Shortly after the People’s Republic’s (PRC’s) intervention, in late summer 1950, recruited (or the Central Intelligence rather hired) a batch of Chinese Agency’s (CIA’s) Office of Policy Nationalist soldiers [who] were Co-ordination (OPC) proposed a transported by the OPC to programme to divert the PRC’s northern Burma, where they were military from the Korean expected to launch guerrilla raids peninsula. The plan called for U.S. into China. At the time this aid to the 93rd, followed by an dubious project was initiated no invasion of Yunnan by Li’s men. consideration was given to the Interestingly, the CIA’s director, facts that (a) Truman had declined Walter Bedell Smith, opposed the Chiang’s offer to participate in the plan, considering it too risky. Korean War . . . (b) But President Harry S. Truman Burmese neutrality was violated by saw merit in the OPC proposal and this action; and (c) the troops approved it. The programme provided by Chiang were utterly became known as Operation lacking in qualifications for such a Paper.70 purpose.67

It is not clear whether, when Truman approved Shortly afterward, in October 1950, Truman Operation Paper in November 1950, his appointed a new and more assertive CIA secretary of state, Dean Acheson, was even director, Walter Bedell Smith. Within a week aware of it. It is a matter of record that the U.S. Smith took the first steps to make the OPC and embassies in Burma and Thailand knew nothing Wisner answerable for the first time, at least on of the authorization until well into 1951, when paper, to the CIA.68 Smith ultimately succeeded they learned of it from the British and in his vigorous campaign to bring Wisner and eventually from Phibun himself.71 The scholar the OPC under his control, partly by bringing in Victor Kaufman reports that he “was unable to

11 8 | 44 | 2 APJ | JF turn up any evidence at the Truman discovered in northern Burma an Library, the National Archives or in the American military officer from the volumes of FRUS Foreign[ Relations of Bangkok embassy in Burma the United States] to determine whether in fact without authorization.79] In the fall, Acheson knew of the operation and, if so, at the . . . Office of Policy what point.”72 Coordination (OPC) drafted a daring plan for them to invade Both MacArthur and Chennault had ambitious Yunnan. The CIA’s director, Walter designs for the CAT-supported KMT troops in Bedell Smith, opposed the risky Burma. With the outbreak of the Korean War scheme, but Truman [in November in 1950, CAT played an important role in 1950] rejected his warning. . . . In 73 airlifting supplies to the U.S. troops. But both January 1951, the CIA initiated its MacArthur and Chennault spoke publicly of project, code-named Operation trapping communist China in what Chennault Paper. It aimed to prepare the called a “giant pincers”—simultaneous attacks 74 Kuomintang (KMT) forces in from Korea and from Burma. 80 Burma for an invasion of Yunnan. The OPC kicked in by helping to build up a major airstrip at the chief KMT base at Mong The futility of Li Mi’s military jabs against Hsat, Burma, followed by a regular shuttle China was obvious to Washington by 1952. Yet 75 transport of American arms. However, Li Mi’s Federal Bureau of Narcotics (FBN) Chief Harry attempts to invade Yunnan in 1951 and 1952 Anslinger continued to cover up the Li Mi-Thai (three according to McCoy, seven according to drug connection for the next decade. The Lintner) were swiftly repelled by localannual trafficking reports of the FBN recorded militiamen with heavy casualties after advances one seizure of distinctive Thai Government 76 of no more than sixty miles. CIA advisers Monopoly opium in 1949 and on “several accompanied the incursions, and some of them occasions” more in 1950. But after the 77 were killed. initiation of Operation Paper in 1951, the FBN over a decade listed only one seizure of Thai American journalists and historians like to drugs (from two seamen), until it attribute the CIA’s Operation Paper, in support began reporting Thai drug seizures again in of Li Mi and the opium-growing 93rd Division 1962.81 in Burma, to President Truman’s authorization in November 1950, following the outbreak of Meanwhile, Anslinger, who “had established a the Korean War in June 1950 and above all the working relationship with the CIA by the early Chinese crossing of the Yalu River.78 But as 1950s . . . blamed the PRC [People’s Republic historian Daniel Fineman points out, Truman of China, as opposed to their enemy the KMT] was merely authorizing an arms shipments for orchestrating the annual movement of some program that had already begun months two hundred to four hundred tons of opium earlier: from Yunnan to Bangkok.”82 This protection of the world’s leading drug traffickers (who Shortly after the writing of the were also CIA proxies) did not cease with [April 1950] JCS memorandum, the Anslinger, nor even when the FBN, by then United States began supplying thoroughly corrupted from such cover-ups, was arms and matériel to the [KMT] replaced in 1968 by the Bureau of Narcotics troops. [The Burmese protested in and Dangerous Drugs and finally in 1973 by the August 1950 that they had Drug Enforcement Administration. As I write in

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2010, the U.S. media are blaming the drug Did Some People Intend to Develop the traffic in Afghanistan on the Taliban-ledDrug Traffic with Operation Paper? insurgency, but UN statistics (examined later in this book) suggest that insurgents receive less The decision to arm Li Mi was obviously than 12 percent of the total drug revenues in controversial and known to only a few. Some of Afghanistan’s totally drug-corrupted economy. those backing the OPC’s support of a pro-KMT airline and troops may have envisaged from the outset that the 93rd Division would continue, as during the war, to act as drug traffickers. The key figure, Paul Helliwell, may have had a dual interest, inasmuch as he not only was a former OSS officer but also at some point became the legal counsel in Florida for the small Miami National Bank used after 1956 by Meyer Lansky to launder illegal funds.83 We shall see in the next chapter that Helliwell also went on to represent Phao’s drug-financed government in the United States and to receive funds from that source.84

It is possible that in the mind of Helliwell, with his still ill-understood links to the underworld and Meyer Lansky, Li Mi’s troops were not being used to invade China so much as to restore the war-dislocated international drug traffic that supported the anticommunist KMT and the comprador capitalist activities of its supporters throughout Southeast Asia.85 (As a military historian has commented, “Li Mi was more Mafia or war lord than Chinese Nationalist. Relying on his troops to bring down Mao was an OPC pipe dream.”86) Harry Anslinger It is possible also that other networks associated with the drug traffic became part of As we saw in the previous chapter, Anslinger’s the infrastructure of the Li Mi operation. This tenure at the FBN was when the CIA also question can be asked of some of the ragtag forged anticommunist drug alliances in Europe group of pilots associated with Chennault’s in the 1940s with the Italian Mafia in Sicily and airlines in Asia, some of whom were rumored to the Corsican Mafia in Marseilles. Thehave seized this opportunity for drug KMT drug support operation was longer lived 87 trafficking. According to William R. Corson (a and had more lasting consequences in America marine colonel assigned at one point to the as well as in Southeast Asia. It converted the CIA), Golden Triangle of Burma–Thailand–Laos, which before the war had been marginal to the global drug economy, into what was for two The opium grown by the ChiNat decades the dominant opium-growing area of guerrillas . . . was transported by the world. OPC contract aircraft from the

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forward base to Bangkok for sale Thailand (Mae Salong) are struck by to buyers from thethe mosque one sees there.94 various “connections.” The pilots who flew these bushtype aircraft I suspect that Chennault may have known that and often served as agents or go- none of the elements in the reconstituted 93rd betweens with the guerrilla leaders Division “had made great records of military 95 and the opium buyers were accomplishment” during World War II, that a motley band of men. Some were the 93rd had been engaged in drug trafficking 96 ex-Nazis, others part of the band of when based at Jinghong during World War II, expatriates who emerge in foreign and that when the 93rd Division moved into countries following any war.88 northern Burma and Laos in 1946, it was “in reality, to seize the opium harvest there.”97 That the 93rd Division settled into The FBN by this time was aware that Margaret managing the postwar drug traffic out of Chung, the attending physician to the pilots of Burma should have come as no Chennault’s wartime airline, was involved with surprise. Chennault was close to Madame Bugsy Siegel’s friend Virginia Hill “in the Chiang Kai-shek, T. V. Soong, and the KMT, 89 narcotic traffic in San Francisco.” During which had been supporting itself from opium World War II, when the Office of Naval revenues since the 1930s.98 Linked to drug Intelligence through the OSS approached Dr. trafficking both in Thailand (through the Tai Li Chung for some specific intelligence on China, spy network) and in America, the KMT, after she “volunteered that she could supply detailed expulsion from Yunnan, desperately needed a information . . . ‘from some of the smugglers in new opium supply to maintain its contacts with 90 San Francisco.’” the opiumtrafficking triads and other former assets of Tai Li in Southeast Asia.99 One has to ask what was in the mind of Chennault. Chennault himself was onceFrom the time of the inception of the KMT investigated for smuggling activities, “but no government in the 1920s, KMT officials had official action was taken because he was been caught smuggling opium and heroin into 91 politically untouchable.” I have no reason to the United States.100 As noted earlier, an FBN suspect that Chennault wished to profitsupervisor reported in 1946 that “in a recent personally from the drug traffic. But his Kuomintang Convention in Mexico City a wide objective in opposing Chinese communists was solicitation of funds for the future operation of to split off ethically divergent provinces like the opium trade was noted.” In July 1947 the Xinjiang, Tibet, and above all Yunnan. State Department reported that the Chinese Nationalist government was “selling opium in a Chennault’s top priority was Yunnan, with its desperate attempt to pay troops still fighting long-established Haw (or Hui) Muslim minority, the Communists.”101 The New York Times many of whom (especially in southwestern reported on July 23, 1949, the seizure in Hong Yunnan) traditionally dominated the opium Kong of twenty-two pounds of heroin that had 92 trade into Thailand. The troops of arrived from a CIA-supplied Kuomintang the reconstituted 93rd Division were principally outpost in Kunming.102 But the loss of Yunnan in 93 Haws from Yunnan. To this day, one Thai 1949–1950 meant that the KMT would have to name for the KMT Yunnanese minority in develop a new source of supply. northern Thailand is gaan beng gaaosipsaam (“93rd Division”), and visitors to the former The key to the survival of the KMT was of base of the KMT general Duan Xiwen in course its establishment and protection after

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1949 on the island of Taiwan. Chennault and replace that being lost in Yunnan had the result his airline CAT helped move the KMTof sustaining a social fabric and an economy leadership and its resources to its new base that was capitalist and anticommunist.107 and to deny the new Chinese People’s Republic the Chinese civil air fleet (whichI would add today that the opium traffic was an became embroiled in a protracted Hong Kong even more important element in an legal battle where CAT was represented by anticommunist strategy for Southeast Asia as a William Donovan).103 By 1950 one ofsource of income. We have already seen that Chennault’s wartime pilots, Satiris (or Soteris for a century, the Thai state had relied on its or Sortiris) Fassoulis ran a firm, Commerce revenues from the state opium monopoly; in International China, Inc., that privately1953 “the Thai representative at the April CND supplied arms and military advisers to Chiang [Commission on Narcotic Drugs] session had Kai-shek on Taiwan. Bruce Cumings speculates admitted that his country could not afford to that he may have done so for the OPC at a time give up the revenue from the opium 108 when Acheson was publicly refusing to commit business.” the United States to the defense of Taiwan.104 Just as important was the role of opium profits in promoting capitalism among the Chinese Finally, all those handling Operation Paper in businessmen of Southeast Asia (the agenda of and for the OPC (Fitzgerald, Helliwell, Joost, Sir William Stephenson and the WCC). Whether CAT Inc. CEO Alfred Cox, and Bird) had had the Chinese who dominated business in the experience in the area during World War II. If region would turn their allegiance to Beijing they had not wanted Li Mi and CAT to become depended on the availability of funds for involved in restoring the KMT drug traffic, it alternative business opportunities. Here Phao’s would have been imperative for them to ensure banker, Chin Sophonpanich, became a source that the KMT on Taiwan had no control over of funds for top anticommunist CAT’s operations. But Wisner and Helliwell did businessmen not only in Thailand but also in the exact opposite: when they took over the Malaysia and Indonesia: CAT airline, they gave majority control of the CAT planes to the KMT-linked Kincheng Bank 105 on Taiwan. Thereafter for many years Chin Sophonpanich created the CAT planes would fly arms into Li Mi’s camp largest bank in south-east Asia and for the CIA and then fly drugs out for the KMT. one that was extremely profitable. A report by the International The opium traffic may well have seemed Monetary Fund in 1973 claimed attractive to OPC for strategic as well as that Bangkok Bank’s privileged financial reasons. As Alfred McCoy has position allowed it to make returns observed, Phao’s pro-KMT activities in Thailand on its capital in excess of 100 per “were a part of a larger CIA effort to combat cent a year (a claim denounced by the growing popularity of the People’s Republic Chin’s lieutenants). What was not among the wealthy, influential in dispute was that the bank’s overseas Chinese community throughout bulging deposit base could not be Southeast Asia.”106 I have noted elsewhere that lent out at optimum rates in the KMT reached these communities in part Thailand alone. This is where Chin through triads and other secret societies revolutionised the south-east Asian (especially in Malaya) that had traditionally banking scene. He personally been involved in the opium traffic. Thus, the travelled between Hong Kong, restoration of an opium supply in Burma to Singapore, Kuala Lumpur and

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Jakarta, identifying and courting Committee.” Bypassing the U.S. the new generation of putative embassy altogether, the Naresuan Committee post colonial tycoons. . . . Chin created a parallel, parastatal channel banked the key godfathers outside for U.S.–Thai governmental relations between Hong Kong—Robert Kuok in OPC and Phao’s BPP: Malaysia, Liem Sioe Liong [Sudono Salim] in Indonesia, the Chearavanonts in Thailand—as Bird organized in 1950 a secret well as other players in Singapore committee of leading military and and Hong Kong. . . . Chin was political figures to develop an closely linked to the Thai heroin anticommunist strategy and, more trade through his role as personal importantly, lobby the United financier to the narcotics kingpin States for increased military Phao Sriyanon, and to other assistance. The group, dubbed the politicians involved in running the Naresuan Committee, included drug business.109 police strongman Phao Sriyanon, Sarit Thanarat, Phin Choonhawan, Phao’s father-in-law, air force chief Chin thus followed the example of the Khaw Fuen Ronnaphakat, and Bird’s family opium farmers in nineteenth-century [Anglo-Thai] brother-in-law, [air Siam, whose commercial influence also force colonel] Sitthi [Savetsila, eventually “extended across Siam’s southern later Thailand’s foreign minister borders into Malaya and the Netherlands East for a decade]. . . . Bird and the Indies” into legitimate industries, such as tin generals established their mines and a shipping company.110 committee to bypass the ambassador and . . . work through America had another reason to accept Li Mi’s [Bird’s] old OSS buddies now smuggling activities: as a source of badly employed by the CIA [sic, i.e., needed Burmese tungsten. According to OPC].112 Jonathan Marshall, there is fragmentary evidence that OPC/CIA support for his remnant army was “also to facilitate Western control of Thomas Lobe, ignoring Bird, writes that it was Burma’s tungsten resources.”111 the “Thai military clique” who organized the committee. But from his own prose we learn Creation of an Off-the-Books Force without that the initiative may have been neither theirs Accountability nor Bird’s alone but in implementation of a new strategy of support to the KMT in Burma, The OPC aid to Thai police greatly augmented designed by the OPC and JCS in Washington: the influence of both Phao Sriyanon, who received it, and Willis Bird, the OSS veteran through which it passed and who was already a A high-ranking U.S. military officer supplier for the Thai military and police. Seeing and a CIA [OPC] official came to the gap between the generals who had Bangkok [in 1950] to review the organized the military coup of 1947 and U.S. political situation.113 . . . Through Ambassador Stanton, who still worked to the “[Naresuan] Anti-Communist support civilian politicians, Bird worked with Committee,” secret negotiations Phao and the generals of the 1947 Coup ensued between Phao and the Group to create in 1950 a secret “Naresuan CIA [OPC]. The U.S. representative

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explained the need for a South-East Asia) Supply paramilitary force that could both Company as a cover for the defend Thai borders and cross over operation. The CIA [OPC], the into Thailand’sagency on the American neighbors— Vietnam, Laos, Burma, end responsible for the assistance, Cambodia, and China—for secret opened a Sea Supply office in missions. . . . The CIA’s new police Bangkok. . . . By the beginning of were to be special: an elite force 1951, Sea Supply was receiving outside the normal chain arms shipments for distribution. . . of command of both the Thai . The CIA [OPC] appointed Bird’s security bureaucracy and the firm general agent for Sea Supply TNPD [Thai National Police in Bangkok.116 department]. Phao and Phibun agreed to this arrangement because of the increase in armed Sea Supply’s arms from Bird soon reached not power that this new national police only the Thai police and BPP but also, starting meant vis-à-vis the armed in early 1951, the KMT 93rd Division in Burma, 114 forces. which was still supporting itself, as during the war, from the opium traffic.117 General Li Mi, the postwar commander of the 93rd Division, This was in keeping with the JCS call in April would consult with Bird and Phao in Bangkok 1950 for a new “program of special covert about the arms that he needed for the KMT operations designed to interfere with base at Mong Hsat in Burma and that had Communist activities in Southeast Asia,” noting “the evidences of renewed vitality and apparent already begun to reach him months before the increased effectiveness of the Chinesecreation of the Bangkok Sea Supply office in 118 Nationalist forces.”115 January 1951. The airline supplying the KMT base at Mong Hsat in Burma from Bangkok was Action was taken immediately: Helliwell’s other OPC proprietary, CAT Inc., which in 1959 changed its name to become the well-known Air America. The deliberately [Bird’s] CIA [i.e., OPC] contacts informal arrangement for Sea Supply served to sent an observer to meet the mask the sensitive arms shipments to a KMT committee and, impressed with the opium base.119 resolve the Thais manifested, got Washington to agree to a large covert assistance program. Because they considered the matter urgent, planners on both the Thai and American sides decided to forgo a formal agreement on the terms of the aid. Instead, Paul Helliwell, an OSS friend of Bird [from China] now practicing law in Florida [as well as military reserve officer and OPC operative], incorporated a dummy firm in Miami named the Sea (i.e.

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Air America U-10D Helio Courier aircraft recorded reply, was an urgent one. Bird’s in Laos on a covert mountaintop landing backing of the so-called Coup Group (Phin strip (LS) "Lima site" Choonhavan, Phao Sriyanon, and Sarit Thanarat), reinforced by the obvious U.S. support for Bird through Operation Paper and In the complex legal takeover of Chennault’s Sea Supply, encouraged these military men, in airline, his assets developed into three separate their November 1951 “Silent Coup,” to defy components: planes (the Taiwanese civilian Stanton, dissolve the Thai parliament, and airline In the complex legal takeover of replace the postwar Thai constitution with one Chennault’s airline, his assets developed into based on the much more reactionary three separate components: planes (the constitution of 1932.125 Taiwanese civilian airline Civil Air Transport or CATCL), pilots (later Air America), and ground- The KMT Drug Legacy for Southeast Asia support operations (Air Asia). Of these the planes only 40 percent were owned by the CIA; When the OPC airline CAT began its covert the remaining 60 percent continued to be flights to Burma in the 1950s, the area owned by KMT financiers (with alleged links to produced about eighty tons of opium a year. In T.V. Soong and Mme. Chiang K ai-shek), who ten years’ time, production had at least had relocated to Taiwan and were associated 120 quadrupled, and at one point during the with the Kincheng Bank. The Kincheng Bank Vietnam War, the output from the Golden was under the control of the so-called Political Triangle reached 1,200 tons a year. By 1971, Science Clique of the KMT, whose member there were also at least seven heroin labs in the Chen Yi was the first postwar KMT governor of region, one of which, close to the CIA base of Taiwan.121 Ban Houei Sai in Laos, produced an estimated 126 The OPC’s organizational arrangements for its 3.6 tons of heroin a year. proprietary CAT, which left 60 percent of the The end of the Vietnam War did not interrupt company owning the CAT planes in KMT hands, the flow of CIA-protected heroin to America guaranteed that CAT’s activities were immune from the KMT remnants of the former 93rd to being reined in by Washington.122 Division, now relocated in northern Thailand In fact Helliwell, Bird, and Bird’s Thai brother- under Generals Li Wenhuan and Duan in-law Sitthi Savetsila all avoided the U.S. Xiwen (Tuan Hsi-wen). The two generals, by embassy and instead plotted strategy for the then officially integrated into the defense KMT armies at the Taiwanese embassy. There forces of Thailand, still enjoyed a special the real headquarters for Operation Paper relationship to and protection from the CIA. was the private office of Taiwanese Defense With this protection, Li Wenhuan, from his base Attaché Chen Zengshi, a graduate of China’s in Tam Ngob, became, according to James Whampoa Military Academy.123 Mills, “one of the most powerful narcotics traffickers on earth . . . controlling Bird’s energetic promotion of Phao, precisely at the opium from which is refined a a time when the U.S. embassy was trying to major percentage of heroin entering the United reduce Phao’s corrupt influence, led to a 1951 States.”127 embassy memorandum of protest to Washington about Bird’s activities. “Why is From the very outset of Operation Paper, the this man Bird allowed to deal with the Police consequences were felt in America itself. As I Chief [Phao]?” the memo asked.124 The have shown elsewhere, most of the KMT-Thai question, for which there is no publiclyopium and heroin was distributed in America

18 8 | 44 | 2 APJ | JF by KMT-linked tongs with long-term ties to the According to R. Harris Smith, American mafia.128 Thus, Anslinger’s rhetoric served to protect the primary organized crime Bedell Smith . . . summoned the networks distributing Asian narcotics in OPC’s Far East director, Richard America. Far more than the CIA drug alliances Stilwell, and, in the words of an in Europe, the CIA’s drug project in agency eyewitness, gave him such Asia contributed to the drug crisis that afflicted a “violent tongue lashing” that “the America during the Vietnam War and from colonel went down the hall in which America still suffers. Furthermore, U.S. tears.” . . . [T]he Burma debacle protection of leading KMT drug traffickers led was the worst in a string of OPC to the neutralization of domestic drug affronts that confirmed his enforcement at a high level. It has also inflicted decision to abolish the office. In decades of militarized oppression on the tribes 1952 he merged the OPC with the of eastern Myanmar (Burma), perhaps the CIA’s Office of Special Operations principal victims of this story. [to create a new Directorate of Plans].133 By the end of 1951, Truman, convinced that the KMT forces in Burma were more of a threat to his containment policy than an asset, “had What precipitated this decision was an event come to the conclusion that the irregulars had remembered inside the agency as the “Thailand 129 to be removed.” Direct U.S. support to Li Mi flap.” Its precise nature remains unknown, but ended, forcing the KMT troops to focus even central to it was a drugs-related in-house more actively on proceeds from opium, soon murder. Allen Dulles’s biographer recounts supplemented by profits from morphine labs as that in 1952 Walter Bedell Smith “had to send well. But nevertheless, in June 1952, as we top officials of both clandestine branches [the shall see, 100 Thai graduates from theCIA’s OSO and OPC] out to untangle a mess of BPP training camp were in Burma training Li opium trading under the cover of efforts to 130 Mi’s troops in jungle warfare. After a topple the Chinese communists.”134 (I heard skirmish in 1953, the Burma army recovered from a former CIA officer that an OSO officer the corpses of three white men, with no investigating drug flows through Thailand was identification except for some documents with murdered by an OPC officer.135) Years later, at addresses in Washington and New York.131 a secret Council on Foreign Affairs meeting in Operation Paper was by now leading a life of 1968 to review official intelligence its own, independent not just of Ambassador operations, former CIA officer Richard Bissell Stanton but even of the president. referred back to the CIA–OPC flap as “a total disaster organizationally.”136 A much-publicized evacuation of troops to Taiwan in 1953–1954 was a charade, despite But what was an organizational disaster may be five months of strenuous negotiations by seen as having benefited the political objectives William Donovan, by then Eisenhower’sof the wealthy New York Republicans in OPC ambassador in Thailand. Old men, boys, and (including Wisner, Fitzgerald, Burnham, and hill tribesmen were airlifted by CAT from others) who constituted an overworld enclave Thailand and replaced by fresh troops,committed to rollback inside the Truman new arms, and a new commander.132 establishment committed to containment. (Recall that Wisner had surrounded himself in The fiasco of Operation Paper led in 1952 to the OPC with men who, in the words of the final absorption of the OPC into the CIA. Wisner’s ex-wife, “had money enough of their

19 8 | 44 | 2 APJ | JF own to be able to come down” toKong. Meanwhile, for at least seven years, the Washington.137) This enclave was already BPP would “capture” KMT opium in staged experimenting with attempts to launch the raids, and turn it over to the Thai Opium rollback policy that Eisenhower and John Monopoly. The “reward” for doing so, one- Foster Dulles would call for in the 1952 eighth the retail value, financed the BPP.143 election campaign.138

Truman, understandably and rightly, The police force that exists in mistrusted this enclave of overworld Wall Thailand today is for all intents and Street Republicans that the CIA and OPC had purposes the same one that was injected into his administration. The four built by Pol. Gen. Phao Sriyanond directors Truman appointed to oversee central in the 1950s. . . . It took intelligence—Sidney Souers, Hoyt Vandenberg, on paramilitary functions through Roscoe Hillenkoetter, and Walter Bedell new special units, including the Smith—were all from the military and all (like border police. It ran the drug Truman himself) from the central United trade, carried out abductions and States.139 This was in striking contrast to the six killings with impunity, and known deputy directors below them, whose was used as a political base for background was that of New York City or (in Phao and his associates. one case) Boston, law and/or finance, and (in all Successive attempts to reform the cases but one) the Social Register.140 police, particularly from the 1970s onwards, have all met with failure But Bedell Smith, Truman’s choice to control despite almost universal the CIA, inadvertently set the stage for acknowledgment that something overworld triumph in the agency when, in must be done.145 January 1951, he brought in Allen Dulles (Wall Street Republican, Social Register, and OSS) “to control Frank Wisner.”141 And with the The last sentence could equally be applied to Republican election victory of 1952,America with respect to the CIA’s involvement Bedell Smith’s intentions in abolishing the OPC in the global drug connection. were completely reversed. Desmond Fitzgerald of the OPC, who had been responsible for the controversial Operation Paper, became chief of the CIA’s Far East Division.142 American arms Peter Dale Scott, a former Canadian diplomat and supplies continued to reach Li Mi’s troops, and English Professor at the University of no longer directly from OPC but now indirectly California, Berkeley, is the author of Drugs Oil through either the BPP in Thailand or the KMT and War, The Road to 9/11, The War in Taiwan. Conspiracy: JFK, 9/11, and the Deep Politics of War. His American War Machine: Deep Politics, The CIA support for Phao began to wane in the CIA Global Drug Connection and the Road 1955–1956, especially after a staged BPP to Afghanistan from which the present article is seizure of twenty tons of opium on the Thai excerpted, has just been published. border was exposed by a dramatic story in the Saturday Evening Post.144 But the role of the Recommended citation: Peter Dale Scott, BPP in the drug trade changed little, as is "Operation Paper: The United States and Drugs indicated in a recent report from thein Thailand and Burma," The Asia-Pacific Asian Human Rights Commission in Hong Journal, 44-2-10, November 1, 2010.

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Notes Palgrave Macmillan, 2002), 234.

1 William O. Walker III, “Drug Trafficking in 10 Carl A. Trocki, “Drugs, Taxes, and Chinese Asia,” Journal of Interamerican Studies and Capitalism in Southeast Asia,” inOpium World Affairs 34, no. 3 (1992): 204. Regimes: China, Britain, and Japan, 1839–1952, ed. Timothy Brook and Bob Tadashi 2 William Peers [OSS/CIA] and Dean Brellis, Wakabayashi (Berkeley: University of California Behind the Burma Road (Boston: Little, Brown, Press, 2000), 99. 1963), 64. 11 McCoy, The Politics of Heroin, 102; James C. 3 Burton Hersh, The Old Boys: The American Ingram, Economic Change in Thailand, Elite and the Origins of the CIA (New York: 1850–1970 (Stanford, CA: Stanford University Scribner’s, 1992), 300. Press, 1971), 177.

4 Peter Dale Scott, “Mae Salong,” inMosaic 12 Skinner, Chinese Society in Thailand, 166–67, Orpheus (Montreal: McGill-Queen’s University 236–44, 264–65. Press, 2009), 45. 13 Cf. Robert Maule, “British Policy Discussions 5 Peter Dale Scott, “Wat Pa Nanachat,” in on the Opium Question in the Federated Shan Mosaic Orpheus, 56. States, 1937–1948,” Journal of Southeast Asian Studies 33 (June 2002): 203–24. 6 Note Omitted. 14 One often reads that the Northern Army 7 I write about this practice in Drugs, Oil, and invasion of the Shan states was in support of War: The United States in Afghanistan,the Japanese invasion of Burma. In fact, the Colombia, and Indochina (Lanham, MD: Japanese army (which may have had its own Rowman & Littlefield, 2003). designs on Shan opium) refused for some months to allow the Thai army to move until 8 There are analogies also with the history of the refusal was overruled for political reasons U.S. involvement in Iraq, though here the by officials in Tokyo. See E. Bruce Reynolds, analogies are not so easily drawn. The most Thailand and Japan’s Southern Advance: relevant point is that U.S. success in the 1940–1945 (New York: St. Martin’s, 1994), defense of Kuwait during the 1990–1991 Gulf 115–17. War once again produced internal pressures, dominated by the neoconservative clique and 15 McCoy, The Politics of Heroin, 105. Cf. E. the Cheney–Rumsfeld–Project for the New Bruce Reynolds, “‘International Orphans’—The American Century cabal, which ultimately Chinese in Thailand during World War II,” pushed the United States into another rollback Journal of Southeast Asian Studies 28 campaign, the current invasion of Iraq itself. (September 1997): 365–88: “In an effort to distance himself from the Japanese, Premier 9 G. William Skinner,Chinese Society in Phibun initiated secret contacts with Thailand: An Analytical History (Ithaca, NY: Nationalist China through the Thai army in the Cornell University Press, 1957), 166–67; Alfred Shan States and developed a scheme to W. McCoy, The Politics of Heroin: CIA transfer the capital to the northern town of Complicity in the Global Drug Trade (Chicago: Petchabun with the idea of ultimately turning Lawrence Hill Books/Chicago Review Press, against the Japanese and linking up militarily 2003), 101; Bertil Lintner, Blood Brothers: The with Nationalist China.” Under orders from Criminal Underworld of Asia (New York: Thai Premier Phibun, rapprochement of the

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Northern Army in Kengtung with the KMT RoutledgeCurzon, 2003], 134; Janet C. began in January 1943 with a symbolic release Sturgeon, Border Landscapes: The Politics of of prisoners followed by a cease fireAkha Land Use in China and Thailand [Seattle: (“Thailand and the Second World War”). University of Washington Press, 2005], 82).

20 16 E. Bruce Reynolds, Thailand’s Secret War: Stowe, Siam Becomes Thailand, 282–83. I The Free Thai, OSS, and SOE during World have discovered no indication as to whether War II (Cambridge: Cambridge University Nicol Smith, the American leader of the OSS Press, 2005), 170–71. mission, was aware of the implications of the talks for the future of the Shan opium trade. 17 McCoy, The Politics of Heroin, 162–63, citing 21 Archimedes L. A. Patti, Why Vietnam (Berkeley: Reynolds, Thailand’s Secret War, 171, University of California Press, 1980), 216–17, 175–76. 265, 354–55, 487. Lung Yun’s son, Lung Shing, 22 Reynolds, Thailand’s Secret War, 171; denied to James Mills that his father was a Brailey, Thailand and the Fall of Singapore, smuggler: “My family’s been painted as the 100; Maochun Yu, OSS in China: Prelude to biggest drug runner. This is nonsense. The Cold War (New Haven, CT: Yale University government in the old days put a tax on opium, Press, 1996), 117; John B. Haseman, The Thai which is true. It’s been doing that for the past Resistance Movement (Chiang Mai: Silkworm hundred years. You can’t pin it on my family for Books, 2002), 62–63; Stowe,Siam Becomes that” (James Mills,The Underground Thailand, 282; Nicol Smith and Blake Clark, Empire: Where Crime and Governments Into Siam: Underground Kingdom Embrace [New York: Dell, 1986], 737). (Indianapolis: Bobbs-Merrill, 1946), 146.

18 According to Smith, General Lu himself took The directions given by Washington to the responsibility for delivering a message from OSS mission were to establish contact with OSS promising amnesty to the Northern Army; Phibun’s political enemy, Pridi Phanomyong. according to Haseman, the letter “was However, the mission’s leader, Khap Kunchon, delivered to front-line Thai positions, who was secretly a Phibun loyalist with a history of passed it in turn to Sawaeng [Thappasut, a sensitive missions, and this complication helps former student of Khap’s], MG Han to explain Khap’s motive and success in [Songkhram], LTG Chira [Wichitsongkhram], promoting the Thai–KMT talks (Nigel J. Brailey, and to Marshal Phibul.” Thailand and the Fall of Singapore: A Frustrated Asian Revolution [Boulder, CO: 23 Miles, Donovan’s first OSS chief for China, Westview Press, 1986], 100). became more and more closely allied with the controversial Tai Li in a semiautonomous 19 Judith A. Stowe, Siam Becomes Thailand: A network, SACO. In December 1943 Donovan, Story of Intrigue (Honolulu: University of alerted to the situation, replaced Miles as OSS Hawai‘i Press, 1991), 282. The border itself, a China chief with Colonel John Coughlin product of Sino–British negotiations in the (Richard Harris Smith, OSS: The Secret History nineteenth century, was an artifact, dividing of America’s First Central Intelligence Agency the historically connected principalities of the [Berkeley: University of California Press, 1972], Thai Lü in Sipsongpanna (southern Yunnan) 246–58). from those of the Thai Yai (Shans) in Burma (Stephen Sparkes and Signe Howell, The House 24 Reynolds, Thailand’s Secret War, 191–92, in Southeast Asia: A Changing Social, Economic citing documents of September 1944, cf. 175; and Political Domain [London: Stowe, Siam Becomes Thailand, 270.

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25 Cf. Jonathan Marshall, “Opium, Tungsten, In 1970, Thompson’s biographer, William and the Search for National Secu- rity,Warren, described the funding of Thompson’s 1940–52,” in Drug Control Policy: Essays in company in some detail but made no reference Historical and Comparative Perspective, ed. to the WCC (William Warren, Jim Thompson: William O. Walker III (University Park:The Unsolved Mystery [Singapore: Archipelago Pennsylvania State University Press, 1992), 96: Press, 1998], 66–67). Former CIA “Americans . . . knew that [Tai Li’s] agents officer Richard Harris Smith wrote that protected Tu’s huge opium convoys”; Douglas Thompson was later “frequently reported to Valentine, The Strength of the Wolf: The Secret have CIA connections” (Smith, OSS, 313n). Joe History of America’s War on Drugs (London: Trento, without citing any sources, places Jim Verso, 2004), 47: “It was an open secret that Thompson at the center of this chapter’s Tai Li’s agents escorted opium caravans from narrative: “Jim Thompson . . . (who in fact was Yunnan to Saigon and used Red Crossa CIA officer) had recruited General Phao, head operations as a front for selling opium to the of the Thai police, to accept the KMT army’s Japanese.” drugs for distribution” (Joseph J. Trento,The Secret History of the CIA [New York: Random 26 After the final KMT defeat of 1949, the 93rd House/Forum, 2001], 346). Thompson Division received other remnants from the KMT disappeared mysteriously in Malaysia in 1967; 8th and 26th Armies and a new commander, his sister, who investigated the disappearance, General Li Mi of the KMT Eighth Army (Bertil was brutally murdered in America a few Lintner, Burma in Revolt: Opium and months later. Insurgency since 1948 [Chiang Mai: Silkworm Books, 1999], 111–15). 33 Valentine, The Strength of the Wolf, 155. Helliwell in Kunming used opium, which was in 27 McCoy, The Politics of Heroin, 106, 188–91, effect the local hard currency, to purchase 415–20. intelligence (Wall Street Journal, April 18,

28 1980). Thomas Lobe,United States National Security Policy and Aid to the Thailand Police 34 Sterling Seagrave, The Marcos Dynasty (New (Denver: Graduate School of International York: Harper and Row, 1988), 361. Studies, University of Denver, 1977), 27. 35 John Loftus and Mark Aarons,The Secret 29 Lintner, Burma in Revolt, 192. War against the Jews (New York: St. Martin’s, 30 Lintner, Blood Brothers, 241–44. After Sarit 1994), 110–11. died in 1963, Chin was able to return to 36 The best evidence of this, the M-fund Thailand. reported on by Chalmers Johnson, is discussed 31 William Stevenson, The Revolutionary King: in the next chapter. Cf. Sterling and Peggy The True-Life Sequel to The King and I Seagrave, Gold Warriors: America’s Secret (London: Constable and Robinson, 2001), 4, Recovery of Yamashita’s Gold (London: Verso, 162, 195. The king personally translated 2003), 3. The Seagraves link Helliwell to the Stevenson’s biography of Sir Williammovement of Japanese gold out of the Stephenson into Thai. Philippines, and they suggest, by hearsay but without evidence, that both Sea Supply Inc. and 32 Anthony Cave Brown, The Last Hero: Wild Civil Air Transport were thus funded (147–48, Bill Donovan (New York: Times Books, 1982), 152). Although many of their startling 797; Stevenson, The Revolutionary King, 162. allegations are beyond my competence to

23 8 | 44 | 2 APJ | JF assess or even believe, there are at least two army over the opium traffic. In 1947, Donovan that I have verified from my own research. I am was a registered foreign agent for the civilian persuaded that in the first postwar months Thai government, representing them in when the United States was already supporting negotiations over the post-war border with and using the SS war criminal KlausFrench Indochina. Valentine reports that in Barbie, the operation was paid by SS funds. mid-1947, “Donovan traveled to Bangkok to And I have seen secret documentary proof that unite the squabbling factions in a strategic a large sum of gold was indeed later deposited alliance against the Communists” and that the in a Swiss bank account in the name of KMT businessmen in Bangkok who managed a famous Southeast Asian leader, as claimed by the flow of narcotics from Thailand to Hong the Seagraves. Kong and Macao “benefited greatly from Donovan’s intervention” (Valentine, The 37 Leonard Slater, The Pledge (New York: Strength of the Wolf, 70). He notes also Pocket Books, 1971), 175. An attorney once that “by mid-1947 Kuomintang narcotics were made the statement that Burton Kanterreaching America through Mexico.” (Helliwell’s partner in the money-laundering What actually happened in November 1947 in Castle Bank) “was introduced to Helliwell by Thailand was the ousting of Pridi’s General William J. Donovan. . . . Kanter denied civilian government in a military coup. Soon that. ‘I personally never met Donovan. I believe afterward the first of Thailand’s postwar I may have spoken to him once at Paul military dictators, Phibun, took office. Not long Helliwell’s request’” (Pete Brewton, The Mafia, after Phibun’s accession, Thailand CIA and George Bush [New York: S.P.I. Books, quietly abandoned the antiopium campaign 1992], 296). announced in 1948, whereby all opium smoking would have ended by 1953 (Francis W. 38 In the course of Operation Safehaven, the Belanger, Drugs, the U.S., and Khun Sa U.S. Third Army took an SS major “on several [Bangkok: Editions Duang Kamol, 1989], trips to Italy and Austria, and, as a result of 75–90). these preliminary trips, over $500,000 in gold, 41 Stevenson, The Revolutionary King, 50–51. as well as jewels, were recovered” (Anthony

Cave Brown, The Secret War Report of the OSS 42 William O. Walker III, Opium and Foreign [New York: Berkeley, 1976], 565–66). Policy: The Anglo-American Search for Order in Asia, 1912–1954 (Chapel Hill: University of 39 Amy B. Zegart,Flawed by Design: The North Carolina Press, 1991), 184–85, citing Evolution of the CIA, JCS, and NSC (Stanford, letters from Bird, April 5, 1948, and Donovan, CA: Stanford University Press, 1999), 189, April 14, 1948 (Donovan Papers, box 73a, citing Christopher Andrew, For the President’s Military History Institute, U.S. Army, Carlisle Eyes Only (New York: HarperCollins, 1995), Barracks, Pennsylvania). 172; see also U.S. Congress, Senate, 94th Cong., 2nd sess., Select Committee to Study 43 Paul M. Handley, The King Never Smiles: A Governmental Operations with Respect to Biography of Thailand’s Bhumipol Adulyadej Intelligence Activities, Final Report, April 26, (New Haven, CT: Yale University Press, 2006), 1976, Senate Report No. 94-755, 28–29. 105.

40 Stevenson, The Revolutionary King, 50. 44 Walker, Opium and Foreign Policy, 185. Douglas Valentine claims that in mid-1947, Donovan intervened in Bangkok politics to 45 Foreign Relations of the United States, resolve a conflict between the police and the 1949–1951 (hereinafter FRUS) (Washington,

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DC: Government Printing Office), vol. 6, 40–41; Nazi insurance titans and suspected memo of March 9, 1950, from Dean Acheson, collaborators in the insurance business. . . . The secretary of state. men behind the insurance unit were OSS head William “Wild Bill” Donovan and California- 46 FRUS, 1952–1954, vol. 12, 651, memo of born insurance magnate Cornelius V. Starr. October 7, 1952, from Edwin M. Martin, special Starr had started out selling insurance to assistant to the secretary for mutual security Chinese in Shanghai in 1919. . . . Starr sent affairs, to John H. Ohly, assistant director for insurance agents into Asia and Europe even program, Office of the Director of Mutual before the bombs stopped falling and built what Security (emphasis added). eventually became AIG, which today has its world headquarters in the same downtown New 47 Shortly before his dismissal on April 11, York building where the tiny OSS unit toiled in 1951, MacArthur in Tokyo issued a statement the deepest secrecy.” calling for a “decision by the United Nations to depart from its tolerant effort to contain the 52 Peter Dale Scott, The War Conspiracy: JFK, war to the area of Korea, through an expansion 9/11, and the Deep Politics of War (Ipswich, of our military operations to its coastal areas MA: Mary Ferrell Foundation Press, 2008), and interior bases [to] doom Red China to risk 46–47, 263–64. William Youngman, Corcoran’s the imminent military collapse” (Lintner, Blood law partner and a key member of Chennault’s Brothers, 237). support team in Washington during and after

48 the war, was by 1960 president of a C. V. Starr Bruce Cumings, The Origins of the Korean company in Saigon. War, vol. 2 (Princeton, NJ: Princeton University Press, 1990). Donovan in this period became 53 Smith, OSS, 267. vice chairman of the Committee to Defend

America by Aiding Anti-Communist China. 54 Smith, OSS, 267n.

49 Martha Byrd, Chennault: Giving Wings to the 55 It is possible that other backers of the Tiger (Tuscaloosa: University of Alabama Press, Chennault Plan allied themselves, 1987), 325–28; William M. Leary, Perilous like Helliwell, with organized crime. In those Missions: Civil Air Transport and CIA Covert early postwar years, one of the C. V. Operations in Asia, 1946–1955 (Tuscaloosa: Starr companies, U.S. Life, was the recipient of University of Alabama Press, 1984), 67–68; dubious Teamster insurance contracts through Scott, Drugs, Oil, and War, 2. the intervention of the mob-linked business 50 Jack Samson, Chennault, 62. agents Paul and Allan Dorfman (Scott, Drugs, Oil, and War, 197; Scott, The War Conspiracy, 51 John Prados, Safe for Democracy: The Secret 279). One of the principal supporters of Wars of the CIA (Chicago: Ivan R. Dee, 2006), Chennault’s airline on the U.S. West Coast, Dr. 125. Cf. Los Angeles Times, September 22, Margaret Chung, was suspected of drug 2000: “Newly declassified U.S. intelligence files trafficking after her frequent trips to Mexico tell the remarkable story of the ultra-secret City with Virginia Hill, a courier for Meyer Insurance Intelligence Unit, a component of the Lansky and Bugsy Siegel. See Ed Reid,The Office of Strategic Services, a forerunner of the Mistress and the Mafia: The Virginia Hill Story CIA, and its elite counterintelligence branch (New York: Bantam, 1972), 42, 90; Peter Dale X-2. Though rarely numbering more than a Scott, “Opium and Empire: McCoy on Heroin in half dozen agents, the unit gatheredSoutheast Asia,” Bulletin of Concerned Asian intelligence on the enemy’s insurance industry, Scholars, September 1973, 49–56.

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56 Ronald Shelp with Al Ehrbar, Fallen Giant: 62 Cumings, The Origins of the Korean War, The Amazing Story of Hank Greenberg and the 119–21, 796; James Burnham,The Coming History of AIG (Hoboken, NJ: Wiley, 2006), 60. Defeat of Communism (New York: John Day, 1951), 256–66. 57 Encyclopaedia Britannica. The money splashed around in Washington by the “China 63 David McKean, Peddling Influence: Thomas Lobby” was attributed at the time chiefly to the “Tommy the Cork” Corcoran and the Birth of wealthy linen and lace merchant Joseph Modern Lobbying (Hanover, NH: Steerforth, Kohlberg, the so-called China Lobby man. But it 2004), 216. has often been suspected that he was fronting 64 for others. Hersh, The Old Boys, 299.

65 58 Lintner, Burma in Revolt, 111–14. As early as McKean,Peddling Influence, 216; 1950, Ting was also actively promoting the Christopher Robbins, Air America (New York: concept of an Anti-Communist League to Putnam’s, 1979), 48–49, 56–57, 70; Byrd, support KMT resistance (134, 234). The KMT’s Chennault, 333; Alan A. Block,Masters of Paradise: Organized Crime and the Internal ensuing Asian Peoples’ Anti-Communist League Revenue Service in the Bahamas (New (later known as the World Anti-Communist Brunswick, NJ: Transaction, 1991), 169. League) became intimately involved with support for the KMT troops in Burma. In 1971 66 Curtis Peebles, Twilight Warriors: Covert Air the chief Laotian delegate to the World Anti- Operations against the USSR (Annapolis, MD: Communist League, Prince Sopsaisana, was Naval Institute Press, 2005), 88–89. detained with sixty kilos of top-grade heroin in his luggage (Scott, Drugs, Oil, and War, 163, 67 William R. Corson, The Armies of Ignorance: 194–95). The Rise of the American Intelligence Empire (New York: Dial Press/James Wade, 1977), 59 MacArthur advised the State Department in 320–21. 1949 that the United States should place “500 fighter planes in the hands of some ‘war horse’ 68 Hersh, The Old Boys, 284. Cf. Samuel similar to Chennault” and further support the Halpern (a former CIA officer) in Ralph S. KMT with U.S. volunteers (memo ofWeber, Spymasters: Ten CIA Officers in Their conversation, September 5, 1949, FRUS, 1949, Own Words (Wilmington, DE: Scholarly vol. 9, 544–46; Cumings, The Origins of the Resources, 1999), 117: “Bedell suddenly said, Korean War, 103; Byrd,Chennault , 344). ‘They’re under my command.’ . . . He did it, and Chennault in turn told Senator Knowland that he did it in the first seven days of his tenure as Congress should ap- point MacArthur aDCI [director of the CIA].” supreme commander for the entire Far East. 69 Corson, The Armies of Ignorance, 319; Daniel 60 Donovan suggested that Chennault become Fineman, A Special Relationship: The United minister of defense in a reconstituted KMT States and Military Government in Thailand, government. At some point Chennault and 1947–1958 (Honolulu: University of Hawai‘i Donovan met privately with Willoughby in Press, 1997), 137; Henry G. Gole,General Japan (Cumings, The Origins of the Korean William E. DePuy: Preparing the Army for War, 513). Modern War (Lexington: University Press of Kentucky, 2008), 80: “CIA Director Walter 61 Valentine, The Strength of the Wolf, 260; Bedell Smith opposed the plan, but President Cumings, The Origins of the Korean War, 133. Truman approved it, overruled the Director,

26 8 | 44 | 2 APJ | JF and ordered the strictest secrecy about it.” the Kuomintang Intervention in Burma (Ithaca, NY: Cornell University Southeast Asia Program, 70 Victor S. Kaufman, “Trouble in the Golden Data Paper no. 93, 1973), 42; Chennault on Triangle: The United States, Taiwan and the April 23, 1958, in U.S. Congress, House 93rd Nationalist Division,” China Quarterly, no. Committee on Un-American Activities, 166 (June 2001): 441, citing Memorandum, International Communism (Communist Bradley to Secretary of Defense, April 10, 1950, Encroachment in the Far East), “Consultations and Annex to NSC 48/3, “United States with Maj.-Gen. Claire Lee Chennault, United Objectives, Policies, and Courses of Action in States Army,” 85th Cong., 2nd sess., 9–10. Asia,” May 2, 1951. President’s Secretary’s File, National Security File—Meetings, box 212, 75 Leary, Perilous Missions, 129–30. Leary Harry S. Truman Library, Independence, states that U.S. personnel delivered the arms Missouri. Cf. Sam Halpern, in Weber,only as far as northern Thailand, with the last Spymasters, 119: “The Pentagon came up with leg of delivery handled by the Thai Border this bright plan, as I understand it; at least, I Police. But there are numerous contemporary was told this by my [CIA/OSO] boss, Lloyd reports of U.S. personnel at Mong Hsat in George, who was Chief of the Far East Division Burma who helped unload the planes and at the time.” reload them with opium (Scott, Drugs, Oil, and War, 60; Corson, The Armies of Ignorance, 71 Kaufman, “Trouble in the Golden Triangle,” 320–22). Lintner reproduces a photograph of 442–43; Fineman, A Special Relationship, three American civilians who were killed in 141–42. action with the KMT in Burma in 1953 (Lintner, 72 Kaufman, “Trouble in the Golden Triangle,” Burma in Revolt, 168). On April 1, 1953, 443: “Whether . . . Secretary of State Dean the Rangoon Nation reported a captured letter Acheson . . . knew of Operation Paper is from Major General Li’s uncertain. Acheson was present at discussions headquarters, discussing “European instructors regarding the use of covert operations against for the training of students.”

China. . . . Yet since mid-1950, the secretary of 76 state had been working to remove the McCoy, The Politics of Heroin, 169–71; irregulars. Therefore, either Acheson knew of Lintner, Blood Brothers, 238. Despite this the operation and did not inform hismilitary fiasco, the KMT troops contributed to subordinates, or he too did not have the entire the survival of noncommunist Chinese picture.” In apparent contradiction, William communities in Southeast Asia both by serving Walker writes that “Acheson had participated as a protective shield and by sustaining the from the start in the decision-making process traditional social fabric of drug-financed KMT relating to NSC 48/5, so he was familiar with Triads in Southeast Asia. See McCoy,The the discussions about using covertPolitics of Heroin, 185–86; Scott, Drugs, Oil, operations against China’s southern flank” and War, 60, 192–93. (Opium and Foreign Policy, 203). But NSC 77 48/5, primarily a policy paper on Korea, dates Donald F. Cooper, Thailand: Dictatorship of from May 17, 1951, half a year later. Democracy? (Montreux: Minerva Press, 1995), 120. 73 Leary, Perilous Missions, 116–17. 78 E.g., McCoy, The Politics of Heroin, 165–69. 74 Lintner, Blood Brothers, 237, citing Cf. Tim Weiner, Legacy of Ashes: The History of MacArthur on March 21, 1951, in Robert H. the CIA (New York: Doubleday, 2007), 60: “The Taylor, Foreign and Domestic Consequences of final theater for the CIA in the Korean War lay

27 8 | 44 | 2 APJ | JF in Burma. In early 1951, as the Chinese Committee (under the CIA’s labor asset Jay Communists chased General MacArthur’s Lovestone). troops south, the Pentagon thought the Chinese 83 Nationalists could take some pressure off Scott, Drugs, Oil, and War, 7, 60–61, 198, MacArthur by opening a second front. . . . 207, citing Penny Lernoux, In Banks We Trust The CIA began [sic] flying Chinese Nationalist (Garden City, NY: Anchor/Doubleday, 1984), soldiers into Thailand . . . and dropping them 42–44, 84. along with pallets of guns and ammunition into 84 northern Burma.” Cf. Walker,Opium and Fineman, A Special Relationship, 215.

Foreign Policy, 200: “Some aid was already 85 reaching KMT forces in Burma . . . months I explore this question in Scott, Drugs, Oil, before the January 1951 NSC meeting.” and War, 60–64.

86 79 Fineman, A Special Relationship, 289n25. Gole, General William E. DePuy, 80.

87 80 Fineman, A Special Relationship, 137. Chennault himself was investigated for such smuggling activities, “but no official action was 81 U.S. Treasury Department, Bureau oftaken because he was politically untouchable” Narcotics, Traffic in Opium and(Marshall, “Opium, Tungsten, and the Search Other Dangerous Drugs (Washington, DC: for National Security, 1940–52,” 92); cf. Government Printing Office, 1949), 13;Barbara Tuchman, Stilwell and the American (1950), 3; (1954), 12. Through the same Experience in China, 1911–1945, 7–78; Paul decade, the FBN, by direction of the U.S. State Frillmann and Graham Peck,China: The Department, acknowledged to UN Narcotics Remembered Life (Boston: Houghton Mifflin, Conferences that Thailand was a source for 1968), 152. opium and heroin reaching the United States 88 Corson, The Armies of Ignorance, 322. (Scott, Drugs, Oil, and War, 191, 203, citing UN Documents E/CN.7/213, E/CN.7/283, 22, and 89 Valentine, The Strength of the Wolf, 71, E/CN.7//303/Rev.1, 34; cf. Walker, Opium and quoting Reid, The Mistress and the Mafia, 42. Foreign Policy, 201 [State Department]). When the FBN Traffic in Opium reports began to 90 Marshall, “Opium, Tungsten, and the Search acknowledge Thai drug seizures again in for National Security, 1940–52,” 98, citing OSS 1962, the Kennedy administration had already CID 126155, April 19, 1945. initiated serious efforts to remove the bulk of the KMT troops from the region (Kaufman, 91 Marshall, “Opium, Tungsten, and the Search “Trouble in the Golden Triangle,” 452). for National Security, 1940–52.”

82 Walker, Opium and Foreign Policy, 206, cf. 92 Andrew Forbes and David Henley, The Haw: 213–15. Cf. also Valentine, The Strength of the Traders of the Golden Triangle (Bangkok: Teak Wolf, 133, 150–52. Anslinger was not alone in House, 1997). blaming heroin flows on mainland China. He was joined in the attack by two others with CIA 93 Cooper, Thailand, 116. connections: Edward Hunter (a veteran of OSS China and OPC who in turn was fed94 Wen-chin Chang, “Identification of information regularly by Chennault) and Leadership among the KMT Yunnanese Chinese Richard L. G. Deverall of the Americanin Northern Thailand, Journal of Southeast Federation of Labor’s Free Trade Union Asian Studies 33 (2002): 125. Chang calls this

28 8 | 44 | 2 APJ | JF name “a popular misnomer” on the grounds citing Melvin L. Hanks, NARC: The Adventures that the KMT villages have been expanding and of a Federal Agent (New York: Hastings House, “slowly casting off their former military1973), 37, 162–66; Brook and Wakabayashi, legacy.” Opium Regimes, 263. For an overview of U.S. knowledge of KMT drug trafficking, see 95 Taylor, Foreign and Domestic Consequences Marshall, “Opium and the Politics of of the Kuomintang Intervention in Burma, 10. Gangsterism in Nationalist China, 1927–1945.”

96 McCoy, The Politics of Heroin, 162–63. 101 Valentine, The Strength of the Wolf, 72–73, citing Terry A. Talent report of November 15, 97 Sucheng Chan, Hmong Means Free: Life in 1946; Douglas Clark Kinder and William O. Laos and America (Philadelphia: Temple Walker III, “Stable Force in a Storm: Harry J. University Press, 1994), 1942; cf. John T. Anslinger and United States Narcotics Policy, McAlister, Viet Nam: The Origins of Revolution 1930–1962,” Journal of American History, (Garden City, NY: Doubleday, 1971), 228; March 1986, 919. Scott, The War Conspiracy, 267. 102 Valentine, The Strength of the Wolf, 77. 98 Timothy Brook and Bob Tadashi

Wakabayashi, eds.,Opium Regimes: 103 Victor S. Kaufman, Confronting Communism: China, Britain, and Japan, 1839–1952 U.S. and British Policies toward China (Berkeley: University of California Press, 2000), (Columbia: University of Missouri Press, 2001), 261–79; Jonathan Marshall, “Opium and the 20–21. Politics of Gangsterism in Nationalist China, 1927–1945,” Bulletin of Concerned 104 Cumings, The Origins of the Korean War, Asian Scholars, July–September 1976, 19–48; 508–25; Robert Accinelli,Crisis and Laura Tyson Li, Madame Chiang Kai-shek: Commitment: United States Policy toward China’s Eternal First Lady (New York: Taiwan, 1950–1955 (Chapel Hill: University of Atlantic Monthly Press, 2006), 107, citing North Carolina Press, 1996), 271–72; Ross Y. Nelson T. Johnson to Stanley K. Hornbeck, May Koen, The China Lobby in American Politics 31, 1934, box 23, Johnson Papers, Library of (New York: Harper and Row, 1974), 46, 48–51. Congress. Elsewhere I have described Commerce 99 In global surveys of the opium traffic, one International China as a subsidiary of the WCC. regularly reads of the importance of Teochew Since then, I have learned that it was a firm (Chiu chau) triads in the postwar Thai drug founded in Shanghai in 1930. I now doubt the milieu (e.g., Martin Booth, Dragon Syndicates: alleged WCC connection. Later, Fassoulis was The Global Phenomenon of the Triads [New indicted in a huge organized crime York: Carroll and Graf, 1999], 176–77; McCoy, conspiracy to defraud banks in a stock swindle The Politics of Heroin, 389, 396). Although (New York Times, September 12, 1969; Peter triads are central to trafficking in Hong Kong, Dale Scott, Deep Politics and the Death of JFK and today possibly inside China, I question [Berkeley: University of California Press, 1998], whether the Teochew in Thailand, although 168–69, 178). By 2005, Fassoulis was worth they certainly are prominent in the drug trade $150 million as chairman and CEO of CIC there, are still as dominated by triads as they International, the successor to Commerce were before World War II. Cf. Skinner,International China; his company, now Chinese Society in Thailand, 264–67. supplying the U.S. armed services, was predicted to do $870 million of business (“The 100 Valentine, The Strength of the Wolf, 14, 50 Wealthiest Greeks in America,”National

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Herald, March 29, 2008). There have been 168), and aviation was the key to the BPP speculations that the “U.S. Central Intelligence strategy of defending the Thai frontier because Agency . . . may actually support CICthe Thai road system was still primitive in the International, Ltd. so it remains in business as border areas. Because Bird included in this one of its many brokers for arms, technology committee his brother-in-law, Air Force Colonel components, logistics on transactionsSitthi Savetsila, Sitthi became one of Phao’s significant to intelligence operations” Paul( closest aides-de-camp and his translator. In the Collin, “Global Economic Brinkmanship”). 1980s he served for a decade as foreign minister in the last Thai military government. 105 Scott, Drugs, Oil, and War, 188. 113 I have not been able to establish the identity 106 McCoy, The Politics of Heroin, 185. of this OPC officer. One possibility is Desmond Fitzgerald, who became the overseer and 107 Scott, Drugs, Oil, and War, 192–93. champion of Sea Supply, Operation Paper, the Anslinger’s protection of the KMT traffic BPP, and (still to be discussed) PARU. Another had the additional consequence ofpossibility is Paul Helliwell. strengthening and protecting pro-KMT tongs in America. In 1959, when a pro-KMT Hip Sing 114 Lobe, United States National Security Policy tong network distributing drugs was broken up and Aid to the Thailand Police, 19–20. in San Francisco, a leading FBN official with OSS–CIA connections, George White,115 Fineman, A Special Relationship, 137; blamed the drug shipment on communist China McCoy, The Politics of Heroin, 165. while allowing the ringleader to escape to Taiwan (Scott, Drugs, Oil, and War, 63; 116 Fineman, A Special Relationship, 134, Valentine, The Strength of the Wolf, 195). emphasis added.

108 Walker, Opium and Foreign Policy, 214. 117 McCoy, The Politics of Heroin, 168–69: Sherman Joost, the OPC officer who headed 109 Joe Studwell, Asian Godfathers: Money and Sea Supply in Bangkok, “had led Kachin Power in Hong Kong and Southeast Asia (New guerrillas in Burma during the war as a York: Atlantic Monthly Press, 2007), 95–96. commander of OSS Detachment 101.”

110 J. W. Cushman, “The Khaw Group: Chinese 118 Walker, Opium and Foreign Policy, 200, Business in Early Twentieth- Century Penang,” 205. Journal of Southeast Asian Studies 17 (1986): 58; cf. Trocki, “Drugs, Taxes, and Chinese 119 McCoy, The Politics of Heroin, 168. Capitalism in Southeast Asia,” 99–100. 120 Scott, Drugs, Oil, and War, 187–89, 201–2; 111 Marshall, “Opium, Tungsten, and the Search Robbins, Air America, 48–49, 56–57, 70; Leary, for National Security, 1940–52,” 106. The KMT Perilous Missions, 110–12. obtained the tungsten from Karen rebels controlling a major mine at Mawchj in121 Chen Han-Seng, “Monopoly and Civil War in exchange for modern arms provided by the China,” Institute of Pacific Relations,Far CIA. Eastern Survey 15, no. 20 (October 9, 1946): 308. 112 Fineman, A Special Relationship, 133, 153. Bird at the time was a “private aviation 122 Scott, Drugs, Oil, and War, 187–89. CAT was contractor” (McCoy, The Politics of Heroin, not the only airline supplying Li Mi. There was

30 8 | 44 | 2 APJ | JF also Trans-Asiatic Airlines, described as “a CIA Shan states led thousands of hill tribesmen to outfit operating along the Burma-China border flee to northern Thailand, where opium against the People’s Republic of China” and production also increased. based in Manila (Roland G. Simbulan, “The CIA 127 in Manila,” Nathan Hale Institute Mills, Underground Empire, 789. Mills also for Intelligence and Military Affairs, August 18, quotes General Tuan as saying that the Thai 2000). On April 10, 1948, Borderan Police “were totally corrupt and operating agreement was signed in Thailand responsible for transportation of narcotics.” between the new Thai government of Phibun Mills comments, “This was of some interest, and Trans-Asiatic Airlines (Siam) Limited (Far since the BPP, a CIA creation, was known to be Eastern Economic Review 35 [1962]: controlled by SRF, the Bangkok CIA station” 329). Note that this was two months before (Mills, Underground Empire, 780). For details NSC 10/2 formally directed the CIA toon the CIA–BPP relationship in the 1980s, see conduct “covert” rather than merelyValentine’s account (from Drug Enforcement “psychological” operations and five months Administration sources), The Strength of the before the creation of the OPC in September Pack, 254–55. 1948. 128 Scott, Drugs, Oil, and War, 62–63, 193. 123 Lintner, Burma in Revolt, 146. 129 Kaufman, “Trouble in the Golden Triangle,” 124 FRUS, 1951, , vol. 6, pt. 2, 1634; Fineman, A 443. Special Relationship, 150–51. The memo 130 Fineman, A Special Relationship, 141. described Bird as “the character who handed over a lot of military equipment to the Police, 131 Rangoon Nation, March 30, 1953; Cooper, without any authorization as far as I can Thailand, 123; McCoy, The Politics of Heroin, determine, and whose status with CAS [local 174; Lintner, Burma in Revolt, 139. CIA] is ambiguous, to say the least.” 132 McCoy, The Politics of Heroin, 174–76; 125 Fineman, A Special Relationship, 133, 153. Leary, Perilous Missions, 195–96; Lintner, Handley’s otherwise well-informed account Blood Brothers, 238; Life, December 7, 1953, wholly ignores Bird’s role in preparing for the 61. coup (The King Never Smiles, 113–15). 133 McCoy, The Politics of Heroin, 177–78. 126 Scott, Drugs, Oil, and War, 40, citing McCoy, The Politics of Heroin, 162, 286–87. McCoy’s 134 Peter Grose, Gentleman Spy: The Life of estimate of the KMT’s impact on expanding Allen Dulles (Boston: Richard Todd/ Houghton production is extremely conservative.Mifflin, 1994), 324. According to Bertil Lintner, the foremost authority on the Shan states of Burma, “The 135 According to McCoy (The Politics of Heroin, annual production increased from a mere 30 178), a CAT pilot named Jack Killam “was tons at the time of independence [1945] to 600 murdered in 1951 after an opium deal went tons in the mid-1950s” (Bertil Lintner, “Heroin wrong and was buried in an unmarked grave by and Highland Insurgency,” in War on Drugs: CIA [i.e., OPC] agent Sherman Joost”—the head Studies in the Failure of U.S. Narcoticsof Sea Supply. Joseph Trento, citing CIA officer Policy, ed. Alfred W. McCoy and Alan A. Block Robert Crowley, gives the almost certainly [Boulder, CO: Westview Press, 1992],bowd-lerized version that two “drunk and 288). Furthermore, the KMT exploitation of the violent” CAT pilots “shot it out in

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Bangkok” (Trento, The Secret History of the 138 A perhaps unanswerable deep historical CIA, 347). According to William Corson, question is whether some of these men, and “Several theories have been advanced by those especially Helliwell, were aware that KMT familiar with the Killam case to suggest that profits from the revived drug traffic out of the trafficking in drugs in Southeast Asia was Burma were funding the China Lobby’s heavy used by the CIA as a self-financing device to attack on the Truman administration in general pay for services and persons whose hire would and on Dean Acheson and George C. Marshall not have been approved in Washington . . . or in particular. (We shall see that in the later that it amounted to the actions of ‘rogue’ 1950s, Donovan and Helliwell received funds intelligence agents” (Corson, The Armies of from Phao Sriyanon for the lobbying of Ignorance, 323). One consequence of these Congress, supplanting those of the moribund intrigues was that, as we have seen, OPC was China Lobby. Cf. Fineman,A Special abolished. At this time OPC Far East Director Relationship, 214–15.) Citing John Loftus and Richard Stilwell was rebuked severely by CIA others, Anthony Summers has written that Director Bedell Smith and transferred to the Allen Dulles, before joining the CIA, had military. In the Pentagon, “by the end of 1981, contributed to the young Richard Nixon’s first Stilwell was running one of the most secret election campaign and possibly had operations of the government” in conjunction also supplied him with the explosive with ex-CIA officer Theodore Shackley, a information that made Nixon famous: that protégé of Stilwell’s former OPC deputy, former State Department officer Alger Hiss had Desmond Fitzgerald (Joseph J. Trento, Prelude known the communist Whittaker Chambers (Anthony Summers with Robbyn to Terror: The Rogue CIA and the Legacy of Swann, The Arrogance of Power: The Secret America’s Private Intelligence Network World of Richard Nixon [New York: Viking, [New York: Carroll and Graf, 2005], 213). 2000], 62–63). Stilwell was advising on the creation of the

U.S. Joint Special Operations Command. 139 Sydney Souers (the first director, Central Intelligence Group, 1946) was born in Dayton, 136 Marchetti and Marks, CIA and the Cult, 383. Ohio. Hoyt Vandenberg (director, Central

137 Intelligence Group, 1946–1947) was born in Hersh, The Old Boys, 301, quoting Polly Milwaukee, Wisconsin. Roscoe Hillenkoetter (Mrs. Clayton) Fritchey. Other men prominent (the third and first director of the CIA, in the cabal responsible for Operation Paper 1947–1949) was born in St. Louis. Walter were also Republican activists. One was Paul Bedell Smith (the fourth director of the CIA, Helliwell, who became very prominent in 1949–1953) was born in Indianapolis. Florida Republican Party politics, thanks in part to funds he received from Thailand as the 140 For the details, see Scott,The War Thai consul general in Miami. Harry Anslinger Conspiracy, 261. The one from Boston, Robert was a staunch Republican and owed his Amory, was no less Social Register, and his appointment as the first director of the FBN to brother, Cleveland Amory, wrote a best-seller, his marriage to a niece of the Republican Party Who Killed Society, 1960). magnate (and Treasury Secretary) Andrew Mellon (Valentine, The Strength of the 141 Weiner, Legacy of Ashes, 52–53. It may be Wolf, 16). Donovan, married to a New York relevant that Bedell Smith himself was a right- heiress and an OPC consultant in the late wing Republican who reportedly once told Truman years, had a lifelong history of activism Eisenhower that Nelson Rockefeller “was a in New York Republican Party politics. Communist” (Smith, OSS, 367).

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142 McCoy, The Politics of Heroin, 165–78; cf. 42. Trento, The Secret History of the CIA, 71. 145 “Thailand: Not Rogue Cops but a Rogue 143 McCoy, The Politics of Heroin, 184. System,” a statement by the Asian Human Rights Commission, AHRC-STM-031-2008, 144 Darrell Berrigan, “They Smuggle Drugs by January 31, 2008. the Ton,” Saturday Evening Post, May 5, 1956,

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