Unjust Aftermath: Post-Noriega Panama

Special Report: Twenty-four years ago, the United States invaded Panama to capture Gen. Manuel Noriega on drug charges. Operation Just Cause promised the country a new day free of dictatorship and drug-tainted corruption, but it didn’t work out that way, as Jonathan Marshall describes.

By Jonathan Marshall

Operation Just Cause, the invasion of Panama in December 1989, marked a critical turning point in U.S. foreign and military policy. As the first large commitment of U.S. armed forces after the Vietnam debacle, it set the stage for the massive intervention in the Persian Gulf region a year later.[i] It also represented a dramatic escalation in Washington’s “war on drugs,” turning a mostly rhetorical metaphor into bloody reality.[ii]

Many accounts have chronicled the war of nerves leading up to the invasion. Only a handful, on the other hand, have covered the aftermath, particularly with respect to drugs.[iii] Reporters who came to Panama with the troops soon returned home when the brief excitement was over. Attention turned to Noriega’s historic trial and conviction in Miami for conspiring to aid the Medellín Cartel and its criminal allies. For much of the media, and even for most scholars, Panama without Noriega was just another Central American backwater.[iv]

 

But a close look at the evolution of Panama’s connection to the drug trade in the immediate years after Noriega sheds light on several important questions. Does the public rationale for the invasion hold up to historical scrutiny? Did the Bush administration’s policies in the aftermath of Noriega’s ouster comport any better than earlier U.S. support for Noriega with its expressed commitment to fighting drugs by any and all means necessary? Finally, does the militant strategy of neutralizing drug “kingpins” appreciably affect the flow of narcotics to the United States?

It will surprise few students of the drug trade that Noriega’s downfall, like that of many bigger traffickers before and after, did nothing to hold back the rising tide of cocaine that flowed north from the Andean nations. What may be more surprising was Washington’s willingness to replace Noriega with civilian leaders who had an unambiguous (if not technically criminal) record of serving Colombia’s biggest drug lords by protecting their secret financial assets in Panamanian banks.

Key members of the new government had in the 1980s worked for dirty banks that Noriega, in a remarkable display of cooperation with U.S. law enforcement, actually closed down or put at risk. Some evidence suggests, in fact, that Washington’s new allies had opposed Noriega as much for his crackdown on drug money laundering as for his violations of democratic and human rights.

Needless to say, this framing is entirely at odds with the official version of events, which served to justify Washington’s reversal of policy toward Noriega. This article suggests that the war on drugs was a secondary policy priority even in the one theater where the United States resorted to a major show of force in its name.

The Noriega Legacy

To better understand the stance of Panama’s post-invasion government toward drug-related crimes, it pays to reexamine some of the widely ignored or forgotten clashes between the Noriega regime and the major Colombian “cartels.”[v] So great was their animosity that some notorious drug traffickers were actually pleased to see Noriega ousted, and likely also pleased by Washington’s choice of his successors.

Noriega played a double game, apparently protecting some favored smugglers while earning Washington’s gratitude for helping the Drug Enforcement Administration (DEA) target the vital financial infrastructure of the major drug cartels.[vi] This was a matter of the highest importance to U.S. law enforcement.

As the House Committee on Foreign Affairs noted in 1985, “With more than one hundred banks, the U.S. dollar as the national currency, and strict bank secrecy laws, Panama is an ideal haven for laundering narcotics money. Unlimited amounts of money may be brought into and out of the country with no reporting requirements, and money laundering is not a crime.”[vii] A study by the U.S. Treasury estimated that nearly a billion dollars a year in drug cash flowed each year between Miami and Panama.[viii]

In a landmark case in 1985, Noriega permitted the closure of First Interamericas Bank, owned by one of the leaders of the Cali Cartel who was fighting extradition from Spain on drug charges in the United States. The bank laundered tens of millions of dollars for the Medellín Cartel as well.[ix] As we will see, several leading members of the post-Noriega government sat on the bank’s board of directors.

One of the high points of Noriega’s cooperation was Operation Pisces, a three-year undercover probe that Attorney General Edwin Meese called “the largest and most successful undercover investigation in federal drug law enforcement history.” Among those indicted were Medellín Cartel kingpins Pablo Escobar and Fabio Ochoa.[x] Panama contributed 40 arrests and seized $12 million from accounts in 18 local banks.[xi]

These money laundering cases garnered Noriega numerous friends in the DEA, but cost him important allies at home. Indeed, these local antagonists played a critical role in fomenting domestic opposition to Noriega’s rule. The reason was simple: Panama’s financial services sector accounted for about a tenth of the country’s gross domestic product and employed more than 8,000 people. They formed what the Wall Street Journal called “the nucleus of a thriving middle class.”[xii]

Noriega threatened this politically powerful sector when he opened negotiations with Washington in 1984 over a Mutual Legal Assistance Treaty that would make it easier for U.S. authorities to request privileged financial information in criminal cases.

“The negotiations, and the publication of the draft treaty in early 1985, caused squeals of indignant protest from the opposition, many of whose most prominent members were bankers,” noted John Dinges, one of Noriega’s biographers. “La Prensa, in banner headlines, said the proposed law put ‘at grave risk’ the secrecy ‘that is considered the pillar on which the International Financial Center of Panama rests.’”[xiii]

The opposition protested even louder when Panama’s legislative assembly finally passed a law to crack down on money laundering in December 1986.[xiv] A few months later Panama’s attorney general ordered the seizure of 52 accounts at 18 Panamanian banks as part of Operation Pisces, and threatened uncooperative bank managers with arrest.[xv] One local banker warned, “this could end the Panamanian banking system, because people will no longer believe they can count on bank secrecy.”[xvi]

Within two months, spooked investors withdrew as much as $4 billion of the country’s $39 billion in bank deposits. Newsday reported that Panama’s cooperation with the DEA in Operation Pisces had “sparked the most serious banking crisis in Panama’s history,” creating the greatest single “threat to military strongman Gen. Manuel A. Noriega.”

A Western diplomat said of Noriega, “The bankers can bring him down. They are complaining in Washington and they’ve got a lot of clout.” Opposition leader Ricardo Arias Calderón (the country’s future vice president) spoke for that powerful lobby when he declared, “I believe the continuation in power of General Noriega is a danger to the Panamanian economy.”[xvii]

The demonstrations organized that summer by Panama’s business elite, with wide popular support and reflecting many grievances beyond financial secrecy issues, began his long slide from power.[xviii]

Major cartel leaders also wanted Noriega ousted, viewing him as an “obstacle to the functioning” of their money laundering operations in Panama.[xix] A lawyer for the bosses of the Cali Cartel complained that his clients were “frustrated by the problems” Noriega created for them in Panama.[xx]

Cali leaders later got their revenge when they provided $1.25 million to bribe a trafficker associated with the Medellín cartel to become a key witness against Noriega in his Miami trial.[xxi]

Noriega might have survived for many more years had he not been caught up in the anti-crack hysteria stoked by the U.S. media in mid-1980s.[xxii] This public alarm was channeled against Noriega by an unlikely pair of allies on the Senate Foreign Relations Committee: the right-wing Sen. Jesse Helms, who deplored Noriega’s cozy relations with Cuba and plans to take control of the canal, and the liberal Sen. John Kerry, who relished exposing the hypocrisy of the Reagan administration’s war on drugs.[xxiii]

Testimony against Noriega before that committee convinced reporters and the general public of his guilt. With each juicy revelation, Noriega turned increasingly from an administration asset into a liability. His 1988 indictments in Miami and Tampa sealed Noriega’s fate. They silenced most of his remaining allies in the Pentagon and CIA and all but forced presidential candidate George Bush, who had been Noriega’s paymaster while director of the CIA, to demand that Noriega leave power.[xxiv]

The Latin strongman’s cocky and bombastic refusal posed an intolerable challenge to the administration’s authority and credibility, a miscalculation that cost both his career and his freedom.

The Endara Government

On Jan. 3, 1990, with the surrender of Noriega to armed DEA agents, President George H. W. Bush declared that his mission to safeguard American lives, restore democracy, protect the canal, and “bring Noriega to justice” had been fully accomplished.

Although many governments in Latin America and abroad decried the violation of Panama’s sovereignty, Bush asserted that Noriega’s “apprehension and return to the United States should send a clear signal that the United States is serious in its determination that those charged with promoting the distribution of drugs cannot escape the scrutiny of justice.”[xxv] U.S. Ambassador Deane Hinton bluntly called the invasion “the biggest drug bust in history.”[xxvi]

Two weeks earlier, as U.S. troops were just beginning their assault, the Bush administration swore in the new government of Panama at Fort Clayton.[xxvii] Its pro-U.S. leaders, President Guillermo Endara and Vice Presidents Ricardo Arias Calderón and Guillermo Ford, had won a popular vote the previous May as heads of the Democratic Opposition Civic Alliance, which enjoyed strong backing from Panama’s financial sector.

However, Noriega’s electoral commission annulled their victory, based in part on public disclosure that the Bush administration had covertly earmarked more than $10 million to bankroll Endara’s ticket.[xxviii] Compounding that embarrassment was the  arrest in Georgia, on cocaine conspiracy and money laundering charges, of the CIA’s bagman, a wealthy Panamanian businessman and close friend of Endara, just one month before the election.[xxix] A pro-Noriega newspaper trumpeted the headline, “Cocaine Cash Pays for the Opposition Campaign.”[xxx]

Operation Just Cause finally gave Endara and his running mates, who had been physically attacked by Noriega’s paramilitary “Dignity Battalions” after the May election, their long awaited revenge. But the sweet taste quickly vanished. With Noriega gone, they faced a host of overwhelming challenges, including restarting an economy shattered by economic sanctions, capital flight, war damage, and a more than a billion dollars’ worth of damage from post-conflict looting.[xxxi] To rebuild, Endara needed Washington to provide generous financial assistance.

The Bush administration lost no time trying to help. As part of its overall public relations campaign to justify the war, the administration praised Panama’s new civilian government as a clean break from the past. With the war barely over, Justice Department officials lauded “attempts” by Panamanian officials to freeze hundreds of bank accounts suspected of links to drug trafficking.[xxxii]

American officials said they “hoped” Panama would now rescind some of its strict bank secrecy measures, but carefully disclaimed any intent to “impose a bunch of stuff” on the occupied country.

The Panamanian side did remarkably little to encourage those hopes, however. A senior aide to President Endara said cagily, “it’s too early to say what we’re going to do,” and Vice President and Minister of Justice Ricardo Arías Calderón privately bristled at Washington’s proposals.^[xxxiii]

The president of the country’s banking association insisted, “Anything we do to affect confidentiality of the system would destroy the banking center. They want us to simply open our books and we cannot let them do that. We think we have enough safeguards now to prevent money laundering.”[xxxiv]

Vice President Ford also maintained that Panama had sufficient controls on money laundering in place.[xxxv] He was understandably touchy. The pro-Noriega press had previously trumpeted the fact that Ford was a co-founder, with Carlos Rodriguez Fernandez-Miranda, who became Endara’s ambassador to the United States, of Miami’s Dadeland Bank, which was part-owned by a Panamanian who laundered tens of millions of dollars for a leading Cuban-American marijuana smuggler.[xxxvi]

Ford’s younger brother, Henry, had provided personal protection services in Panama for Ramón Milian Rodríguez, an infamous courier of drug cash arrested by U.S. authorities in 1983 based on investigative leads from Noriega’s detectives. Ford said he never questioned the source of Milian’s cash.[xxxvii]

Still, President Bush continued to endorse Panama’s anti-drug efforts, citing them as one justification for his request to Congress for $1 billion in aid to rebuild the shattered country. Vice President Dan Quayle held a joint press conference with President Endara to announce plans for anti-drug cooperation, declaring that the new government’s attitude toward the drug war had undergone a “tremendous change” since Noriega’s ouster.[xxxviii]

But their fine spirit of cooperation faded quickly when President Endara opined that his country’s banking laws needed only “minor changes.” Panama’s Controller General, Ruben Carles, chimed in, “We don’t have to change our whole legal system because of drugs.”

One frustrated U.S. official warned that Panama’s failure to cooperate “will lead to a very difficult situation.” He explained: “If Congress says the Panamanians aren’t doing what they’re supposed to be doing, there isn’t going to be any more aid.”[xxxix]

Having paid little attention to postwar planning, the Bush administration was unprepared after Operation Just Cause to help sincere Panamanians fight money laundering. “We weren’t entirely blameless ourselves,” admitted Greg Passic, former head of financial operations for the DEA.

No one in the administration had bothered to decide which of several competing agencies would take charge of investigating money laundering in Panama after the invasion. Eventually, DEA and CIA got the nod. “It took six months before we got a team down there to deal with the problem,” Passic said. “We were slow to respond when Panamanians were willing to help us out.”[xl]

With the money laundering controversy bubbling into public view, a few U.S. reporters began taking note of the curious background of Panama’s new leaders.[xli] Of particular note was the remarkable rise to power of individuals linked to First Interamericas Bank, a major repository of Cali and Medellín cash until the Noriega regime shut it down in 1985.

As the Boston Globe reported, the bank’s former directors included the country’s new attorney general, Rogelio Cruz; the new Treasury Minister, Mario Galindo; and the new president of the Supreme Court, Carlos Lucas Lopez. All of them denied wrongdoing.

“These damn fools got hooked in these transactions innocently,” said Controller General Carles. Former finance minister Ernesto Perez Balladares was less reassuring: “There is not a bank or a banker in Panama who hasn’t accepted deposits from a dubious source. Everybody does it.” Or as Vice President Ford put it, “If you want a perfect government, you’ve come to the wrong country.”[xlii]

The next day the New York Times cited concerns by DEA and the Justice Department that “the business connections and friendships” of Panama’s leaders “make it difficult to believe that any real crackdown against money laundering is likely,” adding:

“Many senior leaders in the Government, while never accused of money laundering, have had strong ties to corrupt banks. Several of the banks have been indicted for money laundering or been shut because of pressure from the United States. President Endara has for years been a director of Banco Interocenico de Panama, one of the two dozen Panamanian banks named in a case based on a Federal Bureau of Investigation case code-named Cashweb/Expressway.

“F.B.I. agents posing as money launderers were given large amounts of cash in that case by Colombians in the United States who instructed them to transfer the funds to these 24 banks.”[xliii]

The White House, for its part, said nothing to embarrass its protégés, or tarnish the myth of Operation Just Cause. President Bush on March 1 again certified that Panama was “taking adequate steps” to fight the twin evils of drug trafficking and money laundering, making it possible to lift trade sanctions.^[xliv] Bush invited Endara a few months later to the White House to sign drug enforcement agreements permitting U.S. military personnel, including Coast Guard, to board Panamanian ships and enter the country’s territorial waters on anti-drug missions.

A third agreement concerned the regulation of precursor chemicals. In a plea for Congress to lift aid restrictions, Bush said, “We must help ensure that unfulfilled expectations do not weaken foundations of democracy so recently restored.”[xlv] In early July, Congress finally came through with about $200 million in aid,mainly earmarked for foreign debt repayment rather than reconstruction.[xlvi]

Ironically, Panama’s economic misery and the government’s severely limited resources were stimulating a resurgence of drug trafficking in the country. The New York Times reported that “illegal drug shipments through the rough Panamanian hinterlands and through the capital are, if anything, more open and abundant than before.”

Said one foreign diplomat, “The Government is just outmanned, outgunned and outmaneuvered.”[xlvii] The demoralized head of Panama’s drug police lamented, “There are hundreds of isolated beaches, farms and uninhabited islands being used by traffickers as safehouses for drugs, and we have only a 40-man force to fight them.”[xlviii]

Panama’s meager forces still managed to seize four tons of cocaine in just the first nine months of 1990, a third more than in the previous year. U.S. officials were more alarmed than impressed, however.

“If you are seizing this much with a . . . small, untrained narcotics force, the conclusion’s got to be there’s probably a lot that nobody’s getting,” said Ambassador Hinton. The chief of Panama’s anti-narcotics police said traffickers were flocking to his country because “they think it’s safer to put (drugs) in Panama, where they know there’s a reorganization process, than in Colombia where there’s a fight against drug trafficking.”^[xlix]

Serious disarray in Panama’s law enforcement ranks made matters worse. Attorney General Rogelio Cruz fired one special prosecutor who accused the head of the corrupt Judicial Technical Police of involvement in a kidnap-murder plot involving millions of dollars in drug profits. (The same prosecutor also accused Cruz himself of improper dealings with the violent Medellín kingpin José Gonzalo Rodriguez Gacha.)[l]

Then a dozen major drug traffickers, including a Calí-based smuggler arrested with 800 pounds of cocaine, managed to escape from Panama’s jails, evidently with official help.[li] Later that summer, in a span of just two weeks, the government fired two successive heads of the National Police.^[lii]

The Endara government also embarrassed when Panama’s El Siglo newspaper published a long article, from DEA sources, on President Endara’s close ties to Banco Interoceánico de Panama, an institution implicated in money laundering. (The bank issued a vigorous rebuttal in La Prensa and filed a libel suit claiming that it was the victim of attempted extortion by El Siglo.)[liii]

North Americans subsequently learned from the Baltimore Sun that Endara effectively owned two percent of the bank’s stock through a family trust. According to the paper, Attorney General Rogelio Cruz had dismissed warnings by the DEA back in January 1990 that Medellín drug lord Rodriguez Gacha had deposited more than $12 million in the bank shortly before the invasion.

Said Mayin Correa, a popular journalist and mayor of Panama City, “It is a pity that we fought so hard to get rid of a corrupt, narco dictatorship and now we find the same things are happening again.”[liv]

How much did Endara know, and when did he know it? His claims of ignorance did not convince one U.S. reporter writing in 1991: “At the time of the alleged money laundering, Endara served in the sensitive post of secretary of the board of directors. With enormous fiduciary responsibilities, it was his job to attend, participate in, and record all high-level management meetings. When most Panamanian banks had stopped making any large cash loans, Interbanco showered several million dollars in loans on its preferred customer, Celso Fernandez Espina, to buy a Panamanian hotel.

“Spanish drug investigators have directly linked Espina to both the Cali and Medellin cartels. Endara has publicly claimed that he had no knowledge of the activities of the bank’s individuals clients. ‘How can he not know where [. . . ] the bank’s money is going when he’s secretary of the board,’ asks one midlevel bank manager. ‘Especially considering the bank’s total declared capital was only $10 million.’

“U.S. ambassador Deane Hinton says, ‘I’m personally convinced Endara is an honest man.’ . . . But even Hinton’s own staff is incredulous, creating a deep rift inside the embassy. ‘Just how long can Endara play dumb?’ asks a dissident U.S. official. ‘Evidence is sufficiently strong so that a broad sector of the business elite no longer believes his denials.’”[lv]

Endara’s defenders and even impartial observers accused the Bush administration of leaking damaging stories to pressure Panama’s leaders into signing a legal assistance treaty.

As one Panamanian academic told a reporter, “Just as your government knew about Noriega’s drug dealing and kept quiet so long as he was politically useful, Washington also knew about the new government’s connections for years but supported them anyway. And now when it needs to turn up the pressure to get [the banking agreement] signed, the embassy starts to let the cat out of the bag. As you can understand, this tends to make us Panamanians just a little bit cynical about your intentions here.”[lvi]

Relations between the two countries had sunk remarkably far only a few short months after their celebration of a victory for democracy and the rule of law. The United States now demanded that its interests trump democracy in Panama, while Panama’s leaders refused to become enforcers of North American laws.

One U.S. Senate staffer said bluntly, “It’s time for our Panamanian friends to realize that we did not remove Noriega so that the same conditions could prevail.” Witnesses in Panama reported public shouting matches between Ambassador Hinton and Foreign Minister Linares.”[lvii]

Hinton responded that “some Panamanians are very emotional people” who ignore the facts and “have an emotional reaction that the big gringos are imposing this.” He added, “If these people had been smart, they would have settled this a long time ago” and collected “a lot of money” in the form of U.S. aid.[lviii]

Endara lashed back at his critics. He filed a slander complaint against a local newspaper columnist who had dared to write about the president’s ties to Banco Interoceánico. Attorney General Cruz then ordered the journalist’s arrest for “crimes of calumny and insult.” This provocation triggered demonstrations and protests against Endara by many Panamanian journalists, including the prominent anti-Noriega publisher of La Prensa.[lix]

In an attempt at damage limitation, Panama’s national banking commission appointed a trustee to take over management of Interbanco at the end of October 1990. The commission said the bank suffered “some liquidity deficiencies” but claimed the institution was untainted by money laundering. The intervention was the first by the commission since 1985, when it shut down First Interamericas Bank.[lx]

Meanwhile, the war of words continued, with President Endara telling the Wall Street Journal in December 1990, “We are not going to plunge a knife into our banking system even if the U.S. stands on its head and jumps up and down.”^[lxi] U.S. officials, in turn, said off the record they believed their counterparts in Panama were covering up for dirty banks they had been associated with as lawyers or directors.^[lxii] Privately they advised President Endara that one of Panama’s main treaty negotiators was implicated in a $1 million money-laundering investigation.^[lxiii]

The State Department’s narcotics bureau reported early in 1991 that Panama was still awash in cocaine. While praising the Endara government for taking “a strong and vocal stance against the illegal drug trade,” the report also noted Washington’s “concern” over reports of official corruption in Panama and its “great concern” over the failure to conclude a mutual legal assistance agreement.

“The Endara government has a mixed record on combatting money laundering,” the report observed. “. . . Despite the removal of the Noriega regime, the money laundering infrastructure remains largely in place, and credible reports indicate that some banks in Panama and the Colon Free Zone continue to accept large cash deposits and launder drug money.”

It cited evidence that Colombian traffickers were moving tens of millions of dollars a year through Panama’s banks.[lxiv] A Justice Department official lamented that Panama was now “less able to deal with narcotics trafficking than it was under Noriega.”^[lxv] A gram of top-quality cocaine in Panama cost only $2 on the street, down from $35 under Noriega.^[lxvi]

At the beginning of April 1991, the head of the Democratic Revolutionary Party, a center-left party associated with Noriega, cited a DEA court affidavit in a Miami cocaine smuggling case against Cuban exiles Augusto Guillermo Falcón and Salvador Magluta, said to be the largest in U.S. history, to accuse President Endara’s law firm of associating with money launderers.

The affidavit named six shell companies used by Falcón and Magluta to launder their drug profits through Panamanian banks and buy property in the Miami area; all employed Endara as treasurer and his other two law partners as director-president and secretary. Endara said he was unaware of the true owners of those corporations, and handled all their business through a Miami-based friend (who had the misfortune to be murdered by Colombian assassins in 1989).

Diplomats speaking off the record said they did not suspect Endara of “direct involvement” in crimes, but acknowledged that “the revelations do not shed good light on his legal judgment or his choice of friends.” However, the attorney for the two indicted drug smugglers charged that Endara and his law partner Hernán Delgado met directly with his clients and “knew they were dealing with traffickers.”[lxvii]

Endara soon came under attack from his former allies in the Christian Democratic Party as well. Vowing to respond to them “blow by blow,” he provoked a political crisis by firing all five party members from his cabinet. The party’s leaders in turn promised “to bring out in the open the truth” about Endara’s connections to the accused Florida traffickers.[lxviii] Death threats soon forced the DEA agent who swore the affidavit to leave the country.[lxix]

On April 11, 1991, Panama and the United States finally settled on a legal assistance treaty targeting money laundering in drug cases. Although superficially a victory for Washington, the treaty left banks relatively untouched in cases involving tax evasion and other non-drug-related crimes. The agreement also did nothing to lift the veil on shell companies that hid their true owners behind nominees, typically corporate lawyers like Endara and his partners. Nor did the treaty cover deposits via wire and computer transfers.[lxx]

Still, Vice President Ford told reporters the treaty would “send a loud and clear message to the world that in Panama we are not condoning the crime of money laundering and the drugs problem.”[lxxi]

The announcement boosted the reputation of Panama’s government only briefly. The next month, as the head of the Bush administration’s Office of National Drug Control Policy was in Panama to praise the new spirit of collaboration, Panama’s director of Customs came under fire for alleged embezzlement, extortion and tax evasion. He in turn accused his accuser, the agency’s chief of investigations, of trying to block a probe of departmental corruption that had already implicated the chief of the drug squad at Tocumen International Airport for possessing more than a pound of cocaine.

An informant claimed the airport official was merely one of a large number of agents from Customs, Treasury and the Technical Judicial Police who were running hundreds of pounds of cocaine through the facility to the United States on behalf of the Medellín and Calí cartels.[lxxii]

Meanwhile, Panama’s bankers did not let the new legal assistance treaty stand in the way of their profits from the burgeoning cocaine market. “Fueled by returning domestic flight capital and drug money, bank deposits are now close to $21 billion, compared with their 1989 low of $8.5 billion,” reported James Henry in July 1991. “The demand for shell companies, used as ‘fronts’ for dubious activities all over the world, fell from 1,500 a month in 1986 to only 800 a month in late 1989, but it is now back to more than 1,300 a month.”[lxxiii]

Panama’s money laundering now surfaced as a big issue in Europe as well as the United States. Spanish police complained that senior Panamanian government officials had been guilty for months of “covering up the personal assets and business activities” of major Spanish cocaine traffickers who had long been “using Panama as a haven and cover for their activities.”

Attorney General Cruz was said to be notably unresponsive to Spanish requests to examine their local bank accounts. It also emerged that Panama’s chief Interpol liaison had tipped off a notorious Spanish drug lord about the arrival of police from his country, giving him time to hide evidence of his money laundering.[lxxiv]

Panamanian reformers gave vent to frustration and disillusionment over the growth of corruption. Miguel Antonio Bernal, a law professor and activist for human rights and democracy in Panama, charged that in the 18 months since the U.S. invasion, “my country has not taken a single meaningful step toward democracy or order. Under the American-installed government of President Guillermo Endara, Panama is reeling backwards so fast that it is on the verge of disintegrating. Street crime has quadrupled. Murders are up 50 percent. Drugs are more plentiful than ever. . . . Inside government, corruption and nepotism rule.”[lxxv]

As the year ended, one observer of the drug trade reported, “U.S. officials believe as much as half a ton of cocaine still flows daily through Panama, mainly en route to the U.S.”^[lxxvi] Spinning the facts, a State Department press release at the end of 1991 nonetheless claimed that “a country which was once our adversary in the war on drugs has now begun helping us defeat this menace.”^[lxxvii] Or as Vice President Arias put it, though Panama undoubtedly still had its share of corrupt officials, “nobody can now say that the government is a willing accomplice.”^[lxxviii]

That boast must have seemed feeble when several of Panama’s senior drug enforcement officials brought criminal charges against Attorney General Cruz in the fall of 1992 for unfreezing $38 million in bank accounts allegedly used by the Cali cartel to launder drug profits. Panama’s Supreme Court eventually found Cruz guilty of abuse of authority but handed him a mere one-year suspended sentence. He later turned up as legal counsel for the Cali Cartel’s top trafficker in Panama, who smuggled tons of cocaine north to the United States in the post-Noriega era under cover of a fishing fleet.[lxxix]

After all this, even Vice President Arias was too disgusted to defend the regime. “The filthy, polluting waters of drug trafficking and money laundering are still flowing through the country,” he said in early 1993. “This is an enormous pitfall on our road to democracy.” A report by the Panamanian Committee for Human Rights echoed his statement, charging that Panamanian society was now “immersed in a culture of corruption that reaches into the government sector as well as civil society itself.”[lxxx]

Conclusion

Popular depictions of Operation Just Cause at the time resembled some 1950s Westerns, with their depictions of virtuous lawmen bringing murderous villains to justice (usually at the end of a noose, not in an air conditioned jail cell). Just as that era’s audiences left theaters comforted that law and order had been restored to Dodge City, so most North Americans in 1990 likely assumed that President Bush’s timely intervention had saved Panama from the grip of evil drug lords.

But even as the United States was congratulating itself on winning the war on drugs in Panama, cocaine continued pouring through the country toward North America. In retrospect, Just Cause was a hollow victory for law enforcement.

A year and a half after Noriega’s arrest, unnamed “U.S. experts” told Time magazine that “the unexpected result . . . is that the rival Cali cartel established a base in Panama and has since inundated the country, along with Mexico, Guatemala and the Caribbean, with vast quantities of cocaine destined for the U.S. and Europe.”[lxxxi]

The signing of a mutual legal assistance treaty in 1991 solved nothing, either. Nine years later, the G-7 Financial Action Task Force on Money Laundering declared Panama non-cooperative in the fight against money laundering, and the U.S. Treasury Department’s Financial Crimes Enforcement condemned “serious deficiencies” in Panama’s enforcement commitment.[lxxxii]

Panama passed new legislation to avoid being further blacklisted, but to this day it remains a “transshipment crossroads for illicit trafficking,” whose official record is marred by “a weak regulatory framework, the existence of bearer share corporations, a lack of collaboration among government agencies, inconsistent enforcement of laws and regulations, and a weak judicial system susceptible to corruption and favoritism,” in the words of the State Department.[lxxxiii]

This dismal record puts the lie, once again, to the “kingpin” theory of drug crime, popularized by some politicians, law enforcement officials and reporters seeking headlines. Serious law enforcement professionals and students of drug policy know that the arrest of “kingpins” like Noriega creates high drama but never has any lasting effect on the supply of drugs.[lxxxiv]

The world drug market is far too pluralistic to be shut down in the face of strong market demand. To its credit, the DEA itself warned within days of Operation Just Cause against any unrealistic expectation that the change of regime would noticeably curb the drug traffic.

“No single event, no matter how significant it is, will result in the immediate impact on availability of drugs in the United States,”’ said Frank Shults, a spokesman for the agency. “There are numerous financial centers throughout the world. Drug traffickers are very flexible in their ability to move their money. They will no doubt exploit whatever markets they are able to.”[lxxxv]

Events in post-Noriega Panama also cast further doubt on the sincerity of the U.S. “war on drugs.” As many critics charged in the late 1980s, Washington’s longstanding support for Noriega exposed the hypocrisy of its anti-drug rhetoric. The yawning gap between words and reality affirmed that drug issues rarely trump other strategic and political interests when it comes to foreign policy.

For the Reagan administration, the future of the Panama Canal and U.S. military bases, the specter of leftist insurgencies in Central America, and regional intelligence operations involving Cuban and other targets were all national security considerations that dominated drug matters until the late 1980s, when a well-organized anti-Noriega lobby took advantage of popular alarm over the crack epidemic to push the drug issue onto center stage.

The Bush administration succeeded in disarming domestic criticism by handcuffing the alleged mastermind of Panama’s drug traffic as the culmination of Operation Just Cause. But as we have seen, once the spotlight receded, the Bush White House embraced the new pro-American government, drug ties and all, as readily as previous administrations had accommodated themselves to Noriega.

Without the glare of political and media attention that forced action against Noriega, the White House shifted its primary focus away from drugs to dramatic events in the former Soviet bloc and the Persian Gulf that strategists deemed far more important to national security.

The steady campaign to pressure the Endara government to sign a mutual legal assistance treaty, fueled in part by Congress, shows that Washington had some genuine interest in Panama’s drug issues. But its interest was ambivalent at best.

Indeed, the Bush administration’s sponsorship of the Endara government was deeply cynical, given how many of its members had long-standing ties to money-laundering banks. These connections were no secret; the administration simply chose to ignore them. Trumping that issue, apparently, was the reliably pro-U.S. cast of the new government, which Washington had every hope would be more pliant than Noriega on a range of issues.

“Did America oust one alleged crony of drug dealers and replace him with another?” An American news magazine finally raised that question two years after Noriega’s ouster. It revealed that the same question had arisen much earlier in Washington: “Before Operation Just Cause in December 1989, a senior U.S. official expressed concern to Endara that some of his business dealings may have involved drugs and that ‘the appearance of any association with drugs would be damaging.’ But this official was satisfied with Endara’s explanations and only in early 1990 did the DEA raise the Falcon-Magluta matter.”[lxxxvi]

U.S support for the Endara government compounded the very cynicism created by Washington’s earlier support for Noriega. Richard Gregorie, the former assistant U.S. attorney who brought the Miami indictment against Noriega, said “Endara might have known, along with half a dozen others” about the true purpose of the Falcon-Magluta shell companies. “But we won’t pursue it because it’s against the dictates of the State Department.”[lxxxvii]

Once installed in power by Washington, Panama’s tainted leaders could not be discredited without discrediting the military operation waged by the Bush administration in the name of justice and democracy.

More haunting than such reactions in the United States, however, was the sense of betrayal felt by many opponents of the Noriega regime who had risked their livelihoods and even their lives for the cause of democracy and the rule of law. As the new government’s shady ties were unveiled, and as it attacked journalists who dared to expose the truth, some of those critics wondered if their righteous cause had been hijacked.

A bitter new joke began making the rounds in Panama, recited by journalists and academics. It said of the Americans, “They took Ali Baba and left us with the 40 thieves.”[lxxxviii]

Jonathan Marshall, an independent scholar, is the author of many articles and books on the international drug traffic, including The Lebanese Connection: Corruption, Civil War, and the International Drug Traffic (Stanford: Stanford University Press, 2012) and, with Peter Dale Scott, Cocaine Politics: Drugs, Armies, and the CIA in Central America (Berkeley: University of California Press, 1991 and 1998). [Marshall thanks John Dinges, William O. Walker III, Peter Dale Scott, and Matthew Pembleton for commenting on an earlier draft of this article.]