The Asia-Pacific Journal | Japan Focus Volume 8 | Issue 44 | Number 2 | Article ID 3436 | Nov 01 2010

1

Operation Paper The United States and Drugs in Thailandand Burma　　米国とタイビルマの麻薬

Peter Dale Scott

Operation Paper The United Statesand Drugs in Thailand and Burma

Peter Dale Scott

This Chapter 3 from my newly publishedAmerican War Machine describes AmericarsquosOperation Paper a November 1950 program toarm and supply the Kuomintang remnanttroops of General Li Mi in Burma OperationPaper itself was relatively short-lived but ithad two long-term consequences that have notbeen adequately discussed

The first is that the CIA was launched into itsfifty-year history of indirectly facilitating andoverseeing forces engaged in vastly expandingthe production of opiates in successive areasnot previously major in the international trafficThis is a history that stretches almostcontinuously from Thailand and Burmathrough Laos until the 1970s and then topresent-day Afghanistan

The second is that the resulting drug proceedshelped supplement the CIArsquos efforts to developits own Asian proxy armies initially defensivebut increasingly offensive This led in 1959 tothe initiation of armed conflict in the previouslyneutral and Buddhist nation of Laos anunwinnable hot war that soon spread toVietnam

The decision to launch Operation Paper wasmade by a small cabal inside the Office ofPolicy Coordination (OPC) notably DesmondFitzgerald and Richard Stilwell in conjunctionwith former OSS Chief William Donovan whofavored the rollback of communism over the

of f ic ia l S tate Department po l icy o fcontainment My book sees the expandingoffensive efforts in Southeast Asia afterswitching from Li Mirsquos forces to the CIArsquos Thaiproxy army PARU as a watershed in theconversion of Americarsquos post-war defenseestablishment which was concerned above allwith preserving the status quo in westernEurope into todayrsquos offensive American WarMachine with actions centered on Southeastand Central Asia

The writing of American War Machine hasgiven me a clearer picture of Americarsquos overallresponsibility for the huge increases in globaldrug trafficking since World War II This isexemplified by the more than doubling ofAfghan opium drug production since the USinvaded that country in 2001 But the USresponsibility for the present dominant role ofAfghanistan in the global heroin traffic hasmerely replicated what had happened earlier inBurma Thailand and Laos between the late1940s and the 1970s These countries also onlybecame factors in the international drug trafficas a result of CIA assistance (after the Frenchin the case of Laos) to what would otherwisehave been only local traffickers bull

It is not too much to conclude thatfor such larger reasons of policyUS authorities actually subornedat times an increase of illicit herointraffic

A n u n d e r s t a n d i n g o f t h i sphenomenon must inform futurescholarly work on drug trafficking

APJ | JF 8 | 44 | 2

2

in Asia1

I f opium could be useful inachieving victory the pattern wasclear We would use opium2

Thailand and Drugs A Personal Preface

It is now clearly established that in November1950 President Truman faced with largenumbers of Chinese communist troops pouringinto Korea approved an operation code-namedOperation Paper to prepare remnantKuomintang (KMT) forces in Burma for acountervailing invasion of Yunnan It is clearalso that these troops the so-called 93rdDivision under KMT General Li Mi werealready involved in drug trafficking It is clearfinally that as we shall see Truman belatedlyapproved a supply operation to drug traffickersthat had already been in existence for sometime

The purpose of this chapter is to explore theprocess that led up to Trumanrsquos validation of aprogram to use drug proxies in Burma It willbe an exercise in deep history raising

quest ions that the archiva l recordspresently available cannot definitively answerSome of most relevant records chiefly those ofthe Office of Policy Coordination (OPC) thatinitiated Operation Paper are still closed topublic view Others such as those of the WorldCommerce Corporation (WCC) or of the WillisBird import-export firm in Bangkok wouldprobably tell us little even if we had them Andsome of the most important events such as thepath by which Thai Opium Monopolyopium soon reached the streets of Boston wereprobably never documented at all

The topic of this chapter is a major one in thepostwar history of China Southeast Asia andthe global drug traffic With needed USsupport above all in the form of airlift andarms L i Mi rsquo s i r regu lars were soonmarketing in the words of their US overseerR ichard S t i lwe l l ( ch ie f o f OPC FarEast) ldquoalmost a third of the worldrsquos opiums u p p l y rdquo 3 B u r t o n H e r s h w h otransmits Stilwellrsquos comment adds his ownremark that Li Mirsquos troops ldquodeveloped overtime into an important commercial asset for theCIArdquo Based on what is currently known Iwould express the relationship differently LiMirsquos drug-trafficking troops continued to be ofmajor importance to the CIAmdashbut as self-supporting off-the-books allies in the struggleto secure Southeast Asia against communistadvances not as a source of income for the CIAitself

Overview

In the 1950s after World War II the chancesseemed greater than ever before for a morepeaceful orderly legal and open world Eventhe worldrsquos two great superpowers the UnitedStates and the Soviet Union had agreed onrules and procedures for mediating theirserious differences through a neutral body theUnited Nations The United States was thenweal thy enough to f inance postwarreconstruction in devastated Europe and later

APJ | JF 8 | 44 | 2

3

fund international programs in fields such ashealth and agriculture in the newly liberatedformer colonies of the Third World

But the United Nations was not destined toremain the theater for the resolution ofinternational conflict One major reason for thiswas that the Soviet Union the United Statesand then after 1949 China all pursued covertpolicies low key at first that brought themincreasingly into conflict and proxy war

The Marxist-Leninist nations of the SovietUnion and China lent support to other Marxist-Leninist parties and movements some of theminsurrectionary in other parts of the worldWashingtonrsquos often inaccurate perception sawthese parties and movements as proxies forSoviet andor Chinese power Thus much of theCold War came to be fought covertly in areaslike Southeast Asia about which both theUni ted States and the Sov ie t Unionwere stunningly ignorant

From the very beginning of the postwar eraWashington looked for proxies of its own tocombat the threat it perceived of worldrevolution Some of these proxies are nowvirtually forgotten such as the Ukrainianguerrillas originally organized by Hitlerrsquos SSw h o f o u g h t a n O P C - b a c k e d l o s i n gbattle against Russia into the early 1950sSome like the mafias in Italy and Marseillesoon outgrew their US support to become defacto regional players in their own right

But one of Americarsquos early proxy armies theremnants of Nationalist Chinese KMT forces inBurma and later Thailand would continue toreceive US support into the 1960s Like themaf ias in Europe and the yakuza inJapan these drug proxies had the advantagefo r sec recy o f be ing o f f - the -booksassets largely self-supporting through theirdrug dealing and firmly anticommunist

The OPC and CIArsquos initial support of thisprogram by reestablishing a major drug traffic

out of Southeast Asia helped institutionalizewhat became a CIA habit of turning to drug-supported off-the-books assets for fighting warswherever there appeared to be a threat toAmericarsquos access to oil and other resourcesmdashinIndochina from the 1950s through the 1970s inAfghanistan and Central America in the 1980sin Colombia in the 1990s and again inAfghanistan in 20017

Harvesting opium in Karenni stateBurma

The use of drug proxies at odds withWashingtonrsquos official antidrug policies had toremain secret This meant that in practicemajor programs with long-term consequenceswere initiated and administered by smallcliques with US intelligence ties that werealmost invisible in Washington and still lessvisible to the American people These cliques oflike-minded individuals at ease in working withtraffickers and other criminals were in turnpart of a cabal supported by elite groups athigh levels

The US use of the drug traffic from the KMTtroops in Burma had momentous consequencesfor the whole of Southeast Asia For theOPC infrastructure for the KMT troops (SeaSupply Inc see below) was expanded andmodified with support from William Donovan

APJ | JF 8 | 44 | 2

4

and Allen Dulles to develop and support anindigenous guerrilla force in Thailand PARUPARU far less publicized than the KMT troopsdid as much or more to influence US historyFor PARUrsquos success in helping to guarantee theindependence of Thailand encouraged theUnited States in the 1960s to use PARU in Laosand Vietnam as well Thus PARUrsquos earlysuccesses led the United States incrementallyinto first covert and eventually overt warfare inLaos and Vietnam We shall see that accordingto its American organizer James William [ldquoBillrdquo]Lair PARU like the KMT forces was in itsearly stage at least partly financed by drugs

In short some Americans had a predictable andalmost continuous habit of turning to the drugtraffic for off-the-books assets This recoursebegan as a curious exception to the larger USpolicy of seeking polit ical resolutionof international conflicts through the UnitedNations It also pitted the regular USdiplomats of the State Department against theCold Warriors of the secret agency OPC thathad these drug assets at its disposal This wasnot the only time that a small US bureaucraticcabal facing internal opposition but enjoyinghigh- level backing could launch anoperation that became far larger than originallyauthorized The pattern was repeated withremarkable similarities in Afghanistan in 1979Once again as in Thailand the original statedgoal was the defense of the local nation and thecontainment of the communist troopsthreatening to subdue it Once again this goalwas achieved But once again the success ofthe initial defensive campaign created amomentum for expansion into a campaign ofoffensive rollback that led to our presentunpromising confrontation with more and moreelements of Islam8

The cumulative history of these USinterventions both defensive (successful) andoffensive (catastrophic) has built and stillbuilds on itself Successes are seen asopportunities to move forward it is hard for

mediocre minds not to draw bad lessons fromthem Fa i lu res ( as in V ie tnam) a reremembered even more vividly as reasons toprove that one is not a loser

It is thus important to analyze this recurringpattern of success leading to costly failure tofree ourselves from it For it is clear that theprice of imperial overstretch has beenincreasing over time

With this end in mind I shall now explore keymoments in the off-the-books story of SoutheastAsian drug proxies and the cliques that havemanaged them a trail that leads from Thailandafter World War II to the US occupations ofIraq and Afghanistan today

The Origins of the CIA Drug Connection inThailand

To understand the CIArsquos involvement in theSoutheast Asian drug traffic after World War IIone must go back to nineteenth-century opiumpolicies of the British Empire Siamesegovernment efforts to prohibit the smoking ofopium ended in 1852 when King Mongkut( R a m a I V ) b o w i n g t o B r i t i s hpressures established a Royal OpiumFranchise which was then farmed out toSiamese Chinese9 Three years later under theterms of the unequal Bowring Treaty Siamaccepted British opium free of duty with theproviso that it was to be sold only to the RoyalFranchise (A year later in 1856 a similaragreement was negotiated with the UnitedStates) The opium farm became a source ofwealth and power to the royal government andalso to the Chinese secret societies or triadsthat operated it Opium dependency also hadthe effect of easing Siam into the ways ofWestern capitalism by bringing ldquopeasantsi n t o t h e c a s h e c o n o m y a s m o d e r nconsumersrdquo 1 0

Until it was finally abolished in 1959 proceedsfrom the Opium Franchise (as in other parts ofSoutheast Asia) provided up to 20 percent of

APJ | JF 8 | 44 | 2

5

Siamese government revenue11 This is onereason why the opium franchise ceased to befarmed out to Chinese businessmen in 1907and became (as again in other parts ofSoutheast Asia) a government monopolyAnother was the desire to reduce the influenceo f C h i n e s e s e c r e t s o c i e t i e s a n dencourage Chinese assimilation into Siam As aresult the power of the secret societies didgenerally decline in the twentieth centuryexcept for a revival under the Japaneseoccupation during World War II By this timethe KMT operating under cover was the mostpowerful force in the Bangkok Chinesecommunity with overlapping links to Tai LirsquosKMT intelligence network and also the drugtraffic12

Although the official source of opium for theSiamese franchise was India the relatively highcost of Indian opium encouraged more andmore smuggling of opium from the Shan statesof eastern Burma With the gradual outlawingof the opium traffic in the early twentiethcentury the British banned the use of Shanopium inside Burma but continued to tax theShan states as before In this way the Britishtacitly encouraged the export of Shan opiumto the Thai market13

When Thailand declared war against Britain inJanuary 1942 Shan opium became the onlysource for the lucrative monopoly This helpsexplain the 1942 invasion of the opium-produc ing Shan s ta te s by the Tha iNorthern (Prayap) army in parallel to theJapanese expulsion of the British from Burma14

In January 1943 as it became clearer thatJapan would not win the war the Thai premierPhibun Songkhram used the Northern Armyin Kengtung with its control of Shan opium toopen relations with the Chinese armies theyhad been fighting which had by now retreatedacross the YunnanndashBurma frontier15 One ofthese was the 93rd Division at Meng Hai in theTha i Luuml d i s t r i c t o f S ipsongphanna(Xishuangbanna) in Yunnan16 The two sides

both engaged in the same lucrative opiumtraffic quickly agreed to cease hostilities(According to an Office of Strategic Services[OSS] observer the warlord generals ofYunnan Lung Yun and his cousin LuHan commander of the 93rd Division werebusy smuggling opium from Yunnan across theborder into Burma and Thailand17)

An OSS team of Seri Thai (Free Thais) led byLieutenant Colonel Khap Kunchon (KharbKunjara) and ostensibly under the direction ofOSS Kunming made contact with both sides inMarchndashApril 194418 When Khap arrived at the93rd Division Headquarters ldquohe discoveredthat an informal ceasefire had been observedalong the border between southern Yunnan andthe Shan States [in Burma] since early 1943with the arrangement being cemented fromtime to time by gifts of Thai whisky cigarettesand guns presented to officers of the 93rdDivision by their Thai counterpartsrdquo19

Khap with the permission of his OSS superiorNicol Smith sent a message from Menghai to aformer student of his now with the ThaiNorthern Army in Kengtung20 ldquoThe letterstressed the need for Thai forces toswitch sides at the appropriate moment andasked for the names of Thai officers in the areawho would be willing to cooperate with theAlliesrdquo21 Khaprsquos letter with its apparent OSSendorsement reached Phibun in Bangkok andled to an uninterrupted postwar collaborationbetween the Northern Army and the 93rdDivision22

Khap however was a controversial figureinside OSS mistrusted above all for hisdealings with Tai Li We learn from Reynoldsrsquoswell-documented history that Tai Li and Khapin conjunction with the original OSS Chinachief Milton Miles had been concertedlypushing a plan to turn the Thai Northern Armyagainst the Japanese23 But John CoughlinMilesrsquos successor as OSS chief in Chinaconsulted some months later with Donovan in

APJ | JF 8 | 44 | 2

6

Washington and expressed doubts about thes c h e m e A f o l l o w - u p m e m o t oDonovan questioned Khaprsquos motives

I doubt that he can be trusted I feel that he will make dealswith Tai Li of which I will not beinformed I am at a loss tofigure out Tai Lirsquos extreme interestin him unless there is someagreement between them that Iknow nothing about24

Like his sources Reynoldsrsquos archival history istactfully silent on the topic of opium But TaiLirsquos opium connection to the KMT in Thailandand Burma was well known to OSS and maywell have been on Coughlinrsquos mind25

KMT forces in Burma 1953

The Northern Armyndash93rd DivisionndashKMTconnection had enormous consequences Forthe next three decades Shan opium would bethe source of revenue and power for the KMTin Burma and both the KMT and the NorthernArmy in Bangkok All of Thailandrsquos militaryleaders between 1947 and 1975mdashPhinChunhawan his son-in-law Phao Sriyanon SaritThanarat Thanom Kittikachorn PrapatC h a r u s a t h i e n a n d K r i a n g s a kChomanandmdashwere officers from the NorthernA r m y S u c c e s s i v e l y t h e i r r e g i m e sdominated and profited from the opiumsupplied by the KMT 93rd Division thatafter the war reestablished itself in Burma26

This was true from the military coup inBangkok of November 1947 until Kriangsakrsquosresignation in 198027 A series of coupsdrsquoeacutetatmdashin 1947 1951 1957 and 1975mdashcan beanalyzed in part as conflicts over control of thedrug trade28

As in Indonesia and other Asian countries thegeneralsrsquo business affairs were handled by localChinese The Chinese banking partner of PhinChunhawan and Phao Sriyanon was ChinSophonpanich a member of the Free Thaimovement who in the postwar years enabledPhao to die as ldquoone of the richest men in theworldrdquo29 When in 1957 Sarit displaced Phaoand took over both the government and thedrug trade both Phao and Chin had to fleethe country30

The United States Helps Rebuild thePostwar Drug Connection

To appreciate the signif icance of theconnection we are discussing we must keep inmind that by 1956 the KMT had been drivenfrom the Chinese mainland and that Chineseproduction of opium even in remotemountainous Yunnan had been virtuallyeliminated The disruptions of a world war

APJ | JF 8 | 44 | 2

7

and revolution had created an opportunity toterminate the opium problem in the Far EastInstead US covert support for the Thai andKMT drug traffickers converted Southeast Asiafor more than two decades into the worldrsquosmajor source of opium and heroin

The origins of the US interface with thesedrug traffickers in Thailand and Burma areobscure They appear however to haveinvolved principally four men WilliamDonovan his Brit ish al ly Sir Wil l iamStephenson the organizer with Donovan of theWorld Commerce Corporation (WCC) PaulHelliwell and Willis Bird (both veterans of OSSChina) After World War II Sir WilliamStephensonrsquos WCC ldquobecame very active inBangkokrdquo and Stephenson himself establisheda strong personal relationship with King RamaIX31

Stephenson recruited James Thompson the lastOSS commander in Bangkok to stay on inBangkok as the local WCC representative Thisled to the WCCrsquos financing of Thompsonrsquos ThaiSilk Company a successful commercialenterprise that also covered Thompsonrsquosrepeated trips to the northeastern Thai borderwith Laos the so-called Isan where communistinsurrection was most feared and where futureCIA operations would be concentrated32 Onewould like to know whether WCC similarlylaunched the import-export business of WillisBird of whom much more shortly

In the same postwar period Paul Helliwell whoearlier had been OSS chief of SpecialIntelligence in Kunming Yunnan served as FarEast Division chief of the Strategic ServiceUnit the successor organization to OSS33 Inthis capacity he allegedly ldquobecame the manwho controlled the pipe-line of covert funds forsecret operations throughout East Asia afterthe warrdquo34 Eventually Helliwell would beresponsible for the incorporation in America ofthe CIA proprietaries Sea Supply Inc and CivilAir Transport (CAT) Inc (later Air America)

which would provide support to both PhaoSriyanon of the Northern Army in Thailand andthe KMT drug camps in Burma It is unclearwhat he did before the creation of OPC in1948 Speculation abounds as to the originalsource of funds available to Helliwell in thisearlier period ranging from the following

1 The deep pockets of theoverworld figures in the WCCCiting Daniel Harkins a formerUSG investigator John Loftus andMark Aarons claimed that Nazimoney laundered and manipulatedby Allen Dulles and Sir WilliamStephenson through the WCCreached Thailand after the warWhen Harkins informed Congresshe ldquowas suddenly fired and sentback [from Thailand] to the UnitedStates on the next shiprdquo35

2 The looted gold and otherresources collected by AdmiralYamashita and others in Japan36 orof the SS in Germany

3 The drug trade itself Furtherresearch is needed to establishwhen the financial world of PaulHelliwell began to overlap withthat of Meyer Lansky and theunderworld The banks discussedin the chapter 7 which areoutward signs of this connection(Miami National Bank and Bank ofPerrine) were not established untila decade or more later Still to beestablished is whether the EasternD e v e l o p m e n tCompany represented by Helliwellwas the firm of this name that inthe 1940s cooperated with Lanskyand others in the supply of arms tothe nascent state of Israel37

APJ | JF 8 | 44 | 2

8

Of these the best available evidence pointstentatively to Nazi gold We shall see thatHelliwell acquired a banking partner in FloridaE P Barry who had been the postwar head ofOSS Counterintelligence (X-2) in Vienna whichoversaw the recovery of SS gold in OperationSafehaven38 And it is not questioned that inDecember 1947 the National SecurityCouncil (NSC) created a Special ProceduresGroup ldquothat among other things launderedover $10 million in captured Axis funds toinfluence the [Italian] election [of 1948]rdquo39

Note that this authorization was before NSC102 of June 18 1948 first funded covertoperations under what soon became OPC

What matters is that for some time before thefirst known official US authorizations in1949ndash1950 funds were reaching Helliwellrsquosformer OSS China ally Willis Bird in BangkokThere Bird ran a trading company supplyingarms and materiel to Phin Chunhawan andPhinrsquos son-in-law Phao Sriyanon who in 1950became director-general of the Thai PoliceDepartment By 1951 OPC funds for Bird werebeing handled by a CIA proprietary firm SeaSupply Inc which had been incorporated byPaul Helliwell in his civilian capacity asa lawyer in Miami As noted earlier Helliwellalso became general counsel for the Miamibank that Meyer Lansky allegedly used tolaunder proceeds from the Asian drug traffic

Some sources claim that in the 1940sDonovan whose link to the WCC was by 1946his only known intelligence connection alsovisited Bangkok40 Stephensonrsquos biographerWilliam Stevenson writes that becauseMacArthur had cut Donovan out of the Pacificd u r i n g W o r l d W a r I I D o n o v a nldquotherefore turned Siam [ie Thailand] into ab a s e f r o m w h i c h t o r u n [ p o s t w a r ]secret operations against the new Soviet threatin Asiardquo41

William Walker agrees that by

1947ndash1948 the United Statesincreasingly defined for Thailand aplace in Western strategic policy inthe early cold war Among thosewho kept c lose watch overevents were William J Donovanwartime head of the OSS andWillis H Bird who worked withthe OSS in China After thewar Bird still a reservecolonel in military intelligence ranan import -expor t house inBangkok Following the November[1947 Thailand coup] Bird implored Donovan ldquoShould therebe any agency that is trying to takethe place of OSS please havethem get in touch with us as soonas possible By the time Phibunreturned as Prime MinisterDonovan was telling the Pentagonand the State Department thatBird was a reliable source whoseinformation about growing Sovietact iv i t ies in Thai land werecredible 4 2

Birdrsquos wishes were soon answeredby NSC 102 of June 18 1948w h i c h c r e a t e d t h e O P C Washington swiftly agreed thatThailand would play an importantrole as a frontline ally in the ColdWar In 1948 US intelligenceunits began arming and training aseparate army under GeneralPhao which became known as theThai Border Police (BPP) Therelationship was cemented in 1949as the communists captured poweri n C h i n a T h e g e n e r a l sdemonstrated their anticommunistc r e d e n t i a l s b y e c h o i n gUS propaganda and kill ingalleged leftists At midyear a CIA

APJ | JF 8 | 44 | 2

9

[OPC] team arrived in Bangkok totrain the BPP for covert support ofthe Kuomintang in its continuingw a r a g a i n s t t h e C h i n e s ecommunists on the Burma-Chinaborder Later in the year theUnited States began to arm andtra in the Tha i army and toprovide the kingdom generaleconomic aid43

Walker notes how the collapse ofthe KMT forces in China ledWashington to subordinate itsantinarcotics policies to thecontainment of communism By thefall of 1949 reports reached theState Department about theinroads communism was makingwithin the Chinese community inT h a i l a n d a s w e l l a s t h einvolvement of the Thai army witho p i u m S i n c e t h e a r m yvirtually controlled the nature ofThailandrsquos security relationshipwith the West foreign promotionof opium control had to take a backseat to other policy priorities44

On March 9 1950 when Truman was asked toapprove $10 million in military aid for ThailandAchesonrsquos supporting memo noted that $5million had already been approved by Trumanfor the Thai ldquoconstabularyrdquo45 This presumablycame from the OPCrsquos secret budget I can findno other reference to the $5 million in StateDepartment published records and two yearslater a US aid official in Washington EdwinMartin wrote in a secret memo that the ThaiPolice force under General Phao ldquois receivingno American military aidrdquo46

Cliques the Mob the KMT and OperationPaper

The US decision to back the KMT troopsmdashtheso-called Li Mi project or Operation Papermdashwasmade at a time of intense interbureaucraticconflict and even conspiratorial disagreementover o f f ic ia l US po l icy toward thenew Chinese Peoplersquos Republic As thehistorian Bruce Cumings has shown both theKMT-financed China Lobby and manyRepublicans like Donovan as well as GeneralMacArthur in Japan were furious at the failureof Secretary of State Dean Acheson to continuesupport for Chiang Kai-shek after the foundingof the Peoplersquos Republic in October 194947 Upuntil the June 1950 outbreak of war in KoreaAcheson refused to guarantee even the securityof Taiwan48

Claire Chennault with Chiang Kai-shekand Mme Chiang

The key public lobbyist for backing the KMT inBurma and Yunnan was General ClaireChennault original owner of the airline theOPC took over Chennault deserves to beremembered as an early postwar proponent ofusing off-the-books assets his ldquoChennault Planrdquoenvisaged essentially self-financing KMTarmies backed by a covert US logisticalairline in support of US foreign policy49

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

2

in Asia1

I f opium could be useful inachieving victory the pattern wasclear We would use opium2

Thailand and Drugs A Personal Preface

It is now clearly established that in November1950 President Truman faced with largenumbers of Chinese communist troops pouringinto Korea approved an operation code-namedOperation Paper to prepare remnantKuomintang (KMT) forces in Burma for acountervailing invasion of Yunnan It is clearalso that these troops the so-called 93rdDivision under KMT General Li Mi werealready involved in drug trafficking It is clearfinally that as we shall see Truman belatedlyapproved a supply operation to drug traffickersthat had already been in existence for sometime

The purpose of this chapter is to explore theprocess that led up to Trumanrsquos validation of aprogram to use drug proxies in Burma It willbe an exercise in deep history raising

quest ions that the archiva l recordspresently available cannot definitively answerSome of most relevant records chiefly those ofthe Office of Policy Coordination (OPC) thatinitiated Operation Paper are still closed topublic view Others such as those of the WorldCommerce Corporation (WCC) or of the WillisBird import-export firm in Bangkok wouldprobably tell us little even if we had them Andsome of the most important events such as thepath by which Thai Opium Monopolyopium soon reached the streets of Boston wereprobably never documented at all

The topic of this chapter is a major one in thepostwar history of China Southeast Asia andthe global drug traffic With needed USsupport above all in the form of airlift andarms L i Mi rsquo s i r regu lars were soonmarketing in the words of their US overseerR ichard S t i lwe l l ( ch ie f o f OPC FarEast) ldquoalmost a third of the worldrsquos opiums u p p l y rdquo 3 B u r t o n H e r s h w h otransmits Stilwellrsquos comment adds his ownremark that Li Mirsquos troops ldquodeveloped overtime into an important commercial asset for theCIArdquo Based on what is currently known Iwould express the relationship differently LiMirsquos drug-trafficking troops continued to be ofmajor importance to the CIAmdashbut as self-supporting off-the-books allies in the struggleto secure Southeast Asia against communistadvances not as a source of income for the CIAitself

Overview

In the 1950s after World War II the chancesseemed greater than ever before for a morepeaceful orderly legal and open world Eventhe worldrsquos two great superpowers the UnitedStates and the Soviet Union had agreed onrules and procedures for mediating theirserious differences through a neutral body theUnited Nations The United States was thenweal thy enough to f inance postwarreconstruction in devastated Europe and later

APJ | JF 8 | 44 | 2

3

fund international programs in fields such ashealth and agriculture in the newly liberatedformer colonies of the Third World

But the United Nations was not destined toremain the theater for the resolution ofinternational conflict One major reason for thiswas that the Soviet Union the United Statesand then after 1949 China all pursued covertpolicies low key at first that brought themincreasingly into conflict and proxy war

The Marxist-Leninist nations of the SovietUnion and China lent support to other Marxist-Leninist parties and movements some of theminsurrectionary in other parts of the worldWashingtonrsquos often inaccurate perception sawthese parties and movements as proxies forSoviet andor Chinese power Thus much of theCold War came to be fought covertly in areaslike Southeast Asia about which both theUni ted States and the Sov ie t Unionwere stunningly ignorant

From the very beginning of the postwar eraWashington looked for proxies of its own tocombat the threat it perceived of worldrevolution Some of these proxies are nowvirtually forgotten such as the Ukrainianguerrillas originally organized by Hitlerrsquos SSw h o f o u g h t a n O P C - b a c k e d l o s i n gbattle against Russia into the early 1950sSome like the mafias in Italy and Marseillesoon outgrew their US support to become defacto regional players in their own right

But one of Americarsquos early proxy armies theremnants of Nationalist Chinese KMT forces inBurma and later Thailand would continue toreceive US support into the 1960s Like themaf ias in Europe and the yakuza inJapan these drug proxies had the advantagefo r sec recy o f be ing o f f - the -booksassets largely self-supporting through theirdrug dealing and firmly anticommunist

The OPC and CIArsquos initial support of thisprogram by reestablishing a major drug traffic

out of Southeast Asia helped institutionalizewhat became a CIA habit of turning to drug-supported off-the-books assets for fighting warswherever there appeared to be a threat toAmericarsquos access to oil and other resourcesmdashinIndochina from the 1950s through the 1970s inAfghanistan and Central America in the 1980sin Colombia in the 1990s and again inAfghanistan in 20017

Harvesting opium in Karenni stateBurma

The use of drug proxies at odds withWashingtonrsquos official antidrug policies had toremain secret This meant that in practicemajor programs with long-term consequenceswere initiated and administered by smallcliques with US intelligence ties that werealmost invisible in Washington and still lessvisible to the American people These cliques oflike-minded individuals at ease in working withtraffickers and other criminals were in turnpart of a cabal supported by elite groups athigh levels

The US use of the drug traffic from the KMTtroops in Burma had momentous consequencesfor the whole of Southeast Asia For theOPC infrastructure for the KMT troops (SeaSupply Inc see below) was expanded andmodified with support from William Donovan

APJ | JF 8 | 44 | 2

4

and Allen Dulles to develop and support anindigenous guerrilla force in Thailand PARUPARU far less publicized than the KMT troopsdid as much or more to influence US historyFor PARUrsquos success in helping to guarantee theindependence of Thailand encouraged theUnited States in the 1960s to use PARU in Laosand Vietnam as well Thus PARUrsquos earlysuccesses led the United States incrementallyinto first covert and eventually overt warfare inLaos and Vietnam We shall see that accordingto its American organizer James William [ldquoBillrdquo]Lair PARU like the KMT forces was in itsearly stage at least partly financed by drugs

In short some Americans had a predictable andalmost continuous habit of turning to the drugtraffic for off-the-books assets This recoursebegan as a curious exception to the larger USpolicy of seeking polit ical resolutionof international conflicts through the UnitedNations It also pitted the regular USdiplomats of the State Department against theCold Warriors of the secret agency OPC thathad these drug assets at its disposal This wasnot the only time that a small US bureaucraticcabal facing internal opposition but enjoyinghigh- level backing could launch anoperation that became far larger than originallyauthorized The pattern was repeated withremarkable similarities in Afghanistan in 1979Once again as in Thailand the original statedgoal was the defense of the local nation and thecontainment of the communist troopsthreatening to subdue it Once again this goalwas achieved But once again the success ofthe initial defensive campaign created amomentum for expansion into a campaign ofoffensive rollback that led to our presentunpromising confrontation with more and moreelements of Islam8

The cumulative history of these USinterventions both defensive (successful) andoffensive (catastrophic) has built and stillbuilds on itself Successes are seen asopportunities to move forward it is hard for

mediocre minds not to draw bad lessons fromthem Fa i lu res ( as in V ie tnam) a reremembered even more vividly as reasons toprove that one is not a loser

It is thus important to analyze this recurringpattern of success leading to costly failure tofree ourselves from it For it is clear that theprice of imperial overstretch has beenincreasing over time

With this end in mind I shall now explore keymoments in the off-the-books story of SoutheastAsian drug proxies and the cliques that havemanaged them a trail that leads from Thailandafter World War II to the US occupations ofIraq and Afghanistan today

The Origins of the CIA Drug Connection inThailand

To understand the CIArsquos involvement in theSoutheast Asian drug traffic after World War IIone must go back to nineteenth-century opiumpolicies of the British Empire Siamesegovernment efforts to prohibit the smoking ofopium ended in 1852 when King Mongkut( R a m a I V ) b o w i n g t o B r i t i s hpressures established a Royal OpiumFranchise which was then farmed out toSiamese Chinese9 Three years later under theterms of the unequal Bowring Treaty Siamaccepted British opium free of duty with theproviso that it was to be sold only to the RoyalFranchise (A year later in 1856 a similaragreement was negotiated with the UnitedStates) The opium farm became a source ofwealth and power to the royal government andalso to the Chinese secret societies or triadsthat operated it Opium dependency also hadthe effect of easing Siam into the ways ofWestern capitalism by bringing ldquopeasantsi n t o t h e c a s h e c o n o m y a s m o d e r nconsumersrdquo 1 0

Until it was finally abolished in 1959 proceedsfrom the Opium Franchise (as in other parts ofSoutheast Asia) provided up to 20 percent of

APJ | JF 8 | 44 | 2

5

Siamese government revenue11 This is onereason why the opium franchise ceased to befarmed out to Chinese businessmen in 1907and became (as again in other parts ofSoutheast Asia) a government monopolyAnother was the desire to reduce the influenceo f C h i n e s e s e c r e t s o c i e t i e s a n dencourage Chinese assimilation into Siam As aresult the power of the secret societies didgenerally decline in the twentieth centuryexcept for a revival under the Japaneseoccupation during World War II By this timethe KMT operating under cover was the mostpowerful force in the Bangkok Chinesecommunity with overlapping links to Tai LirsquosKMT intelligence network and also the drugtraffic12

Although the official source of opium for theSiamese franchise was India the relatively highcost of Indian opium encouraged more andmore smuggling of opium from the Shan statesof eastern Burma With the gradual outlawingof the opium traffic in the early twentiethcentury the British banned the use of Shanopium inside Burma but continued to tax theShan states as before In this way the Britishtacitly encouraged the export of Shan opiumto the Thai market13

When Thailand declared war against Britain inJanuary 1942 Shan opium became the onlysource for the lucrative monopoly This helpsexplain the 1942 invasion of the opium-produc ing Shan s ta te s by the Tha iNorthern (Prayap) army in parallel to theJapanese expulsion of the British from Burma14

In January 1943 as it became clearer thatJapan would not win the war the Thai premierPhibun Songkhram used the Northern Armyin Kengtung with its control of Shan opium toopen relations with the Chinese armies theyhad been fighting which had by now retreatedacross the YunnanndashBurma frontier15 One ofthese was the 93rd Division at Meng Hai in theTha i Luuml d i s t r i c t o f S ipsongphanna(Xishuangbanna) in Yunnan16 The two sides

both engaged in the same lucrative opiumtraffic quickly agreed to cease hostilities(According to an Office of Strategic Services[OSS] observer the warlord generals ofYunnan Lung Yun and his cousin LuHan commander of the 93rd Division werebusy smuggling opium from Yunnan across theborder into Burma and Thailand17)

An OSS team of Seri Thai (Free Thais) led byLieutenant Colonel Khap Kunchon (KharbKunjara) and ostensibly under the direction ofOSS Kunming made contact with both sides inMarchndashApril 194418 When Khap arrived at the93rd Division Headquarters ldquohe discoveredthat an informal ceasefire had been observedalong the border between southern Yunnan andthe Shan States [in Burma] since early 1943with the arrangement being cemented fromtime to time by gifts of Thai whisky cigarettesand guns presented to officers of the 93rdDivision by their Thai counterpartsrdquo19

Khap with the permission of his OSS superiorNicol Smith sent a message from Menghai to aformer student of his now with the ThaiNorthern Army in Kengtung20 ldquoThe letterstressed the need for Thai forces toswitch sides at the appropriate moment andasked for the names of Thai officers in the areawho would be willing to cooperate with theAlliesrdquo21 Khaprsquos letter with its apparent OSSendorsement reached Phibun in Bangkok andled to an uninterrupted postwar collaborationbetween the Northern Army and the 93rdDivision22

Khap however was a controversial figureinside OSS mistrusted above all for hisdealings with Tai Li We learn from Reynoldsrsquoswell-documented history that Tai Li and Khapin conjunction with the original OSS Chinachief Milton Miles had been concertedlypushing a plan to turn the Thai Northern Armyagainst the Japanese23 But John CoughlinMilesrsquos successor as OSS chief in Chinaconsulted some months later with Donovan in

APJ | JF 8 | 44 | 2

6

Washington and expressed doubts about thes c h e m e A f o l l o w - u p m e m o t oDonovan questioned Khaprsquos motives

I doubt that he can be trusted I feel that he will make dealswith Tai Li of which I will not beinformed I am at a loss tofigure out Tai Lirsquos extreme interestin him unless there is someagreement between them that Iknow nothing about24

Like his sources Reynoldsrsquos archival history istactfully silent on the topic of opium But TaiLirsquos opium connection to the KMT in Thailandand Burma was well known to OSS and maywell have been on Coughlinrsquos mind25

KMT forces in Burma 1953

The Northern Armyndash93rd DivisionndashKMTconnection had enormous consequences Forthe next three decades Shan opium would bethe source of revenue and power for the KMTin Burma and both the KMT and the NorthernArmy in Bangkok All of Thailandrsquos militaryleaders between 1947 and 1975mdashPhinChunhawan his son-in-law Phao Sriyanon SaritThanarat Thanom Kittikachorn PrapatC h a r u s a t h i e n a n d K r i a n g s a kChomanandmdashwere officers from the NorthernA r m y S u c c e s s i v e l y t h e i r r e g i m e sdominated and profited from the opiumsupplied by the KMT 93rd Division thatafter the war reestablished itself in Burma26

This was true from the military coup inBangkok of November 1947 until Kriangsakrsquosresignation in 198027 A series of coupsdrsquoeacutetatmdashin 1947 1951 1957 and 1975mdashcan beanalyzed in part as conflicts over control of thedrug trade28

As in Indonesia and other Asian countries thegeneralsrsquo business affairs were handled by localChinese The Chinese banking partner of PhinChunhawan and Phao Sriyanon was ChinSophonpanich a member of the Free Thaimovement who in the postwar years enabledPhao to die as ldquoone of the richest men in theworldrdquo29 When in 1957 Sarit displaced Phaoand took over both the government and thedrug trade both Phao and Chin had to fleethe country30

The United States Helps Rebuild thePostwar Drug Connection

To appreciate the signif icance of theconnection we are discussing we must keep inmind that by 1956 the KMT had been drivenfrom the Chinese mainland and that Chineseproduction of opium even in remotemountainous Yunnan had been virtuallyeliminated The disruptions of a world war

APJ | JF 8 | 44 | 2

7

and revolution had created an opportunity toterminate the opium problem in the Far EastInstead US covert support for the Thai andKMT drug traffickers converted Southeast Asiafor more than two decades into the worldrsquosmajor source of opium and heroin

The origins of the US interface with thesedrug traffickers in Thailand and Burma areobscure They appear however to haveinvolved principally four men WilliamDonovan his Brit ish al ly Sir Wil l iamStephenson the organizer with Donovan of theWorld Commerce Corporation (WCC) PaulHelliwell and Willis Bird (both veterans of OSSChina) After World War II Sir WilliamStephensonrsquos WCC ldquobecame very active inBangkokrdquo and Stephenson himself establisheda strong personal relationship with King RamaIX31

Stephenson recruited James Thompson the lastOSS commander in Bangkok to stay on inBangkok as the local WCC representative Thisled to the WCCrsquos financing of Thompsonrsquos ThaiSilk Company a successful commercialenterprise that also covered Thompsonrsquosrepeated trips to the northeastern Thai borderwith Laos the so-called Isan where communistinsurrection was most feared and where futureCIA operations would be concentrated32 Onewould like to know whether WCC similarlylaunched the import-export business of WillisBird of whom much more shortly

In the same postwar period Paul Helliwell whoearlier had been OSS chief of SpecialIntelligence in Kunming Yunnan served as FarEast Division chief of the Strategic ServiceUnit the successor organization to OSS33 Inthis capacity he allegedly ldquobecame the manwho controlled the pipe-line of covert funds forsecret operations throughout East Asia afterthe warrdquo34 Eventually Helliwell would beresponsible for the incorporation in America ofthe CIA proprietaries Sea Supply Inc and CivilAir Transport (CAT) Inc (later Air America)

which would provide support to both PhaoSriyanon of the Northern Army in Thailand andthe KMT drug camps in Burma It is unclearwhat he did before the creation of OPC in1948 Speculation abounds as to the originalsource of funds available to Helliwell in thisearlier period ranging from the following

1 The deep pockets of theoverworld figures in the WCCCiting Daniel Harkins a formerUSG investigator John Loftus andMark Aarons claimed that Nazimoney laundered and manipulatedby Allen Dulles and Sir WilliamStephenson through the WCCreached Thailand after the warWhen Harkins informed Congresshe ldquowas suddenly fired and sentback [from Thailand] to the UnitedStates on the next shiprdquo35

2 The looted gold and otherresources collected by AdmiralYamashita and others in Japan36 orof the SS in Germany

3 The drug trade itself Furtherresearch is needed to establishwhen the financial world of PaulHelliwell began to overlap withthat of Meyer Lansky and theunderworld The banks discussedin the chapter 7 which areoutward signs of this connection(Miami National Bank and Bank ofPerrine) were not established untila decade or more later Still to beestablished is whether the EasternD e v e l o p m e n tCompany represented by Helliwellwas the firm of this name that inthe 1940s cooperated with Lanskyand others in the supply of arms tothe nascent state of Israel37

APJ | JF 8 | 44 | 2

8

Of these the best available evidence pointstentatively to Nazi gold We shall see thatHelliwell acquired a banking partner in FloridaE P Barry who had been the postwar head ofOSS Counterintelligence (X-2) in Vienna whichoversaw the recovery of SS gold in OperationSafehaven38 And it is not questioned that inDecember 1947 the National SecurityCouncil (NSC) created a Special ProceduresGroup ldquothat among other things launderedover $10 million in captured Axis funds toinfluence the [Italian] election [of 1948]rdquo39

Note that this authorization was before NSC102 of June 18 1948 first funded covertoperations under what soon became OPC

What matters is that for some time before thefirst known official US authorizations in1949ndash1950 funds were reaching Helliwellrsquosformer OSS China ally Willis Bird in BangkokThere Bird ran a trading company supplyingarms and materiel to Phin Chunhawan andPhinrsquos son-in-law Phao Sriyanon who in 1950became director-general of the Thai PoliceDepartment By 1951 OPC funds for Bird werebeing handled by a CIA proprietary firm SeaSupply Inc which had been incorporated byPaul Helliwell in his civilian capacity asa lawyer in Miami As noted earlier Helliwellalso became general counsel for the Miamibank that Meyer Lansky allegedly used tolaunder proceeds from the Asian drug traffic

Some sources claim that in the 1940sDonovan whose link to the WCC was by 1946his only known intelligence connection alsovisited Bangkok40 Stephensonrsquos biographerWilliam Stevenson writes that becauseMacArthur had cut Donovan out of the Pacificd u r i n g W o r l d W a r I I D o n o v a nldquotherefore turned Siam [ie Thailand] into ab a s e f r o m w h i c h t o r u n [ p o s t w a r ]secret operations against the new Soviet threatin Asiardquo41

William Walker agrees that by

1947ndash1948 the United Statesincreasingly defined for Thailand aplace in Western strategic policy inthe early cold war Among thosewho kept c lose watch overevents were William J Donovanwartime head of the OSS andWillis H Bird who worked withthe OSS in China After thewar Bird still a reservecolonel in military intelligence ranan import -expor t house inBangkok Following the November[1947 Thailand coup] Bird implored Donovan ldquoShould therebe any agency that is trying to takethe place of OSS please havethem get in touch with us as soonas possible By the time Phibunreturned as Prime MinisterDonovan was telling the Pentagonand the State Department thatBird was a reliable source whoseinformation about growing Sovietact iv i t ies in Thai land werecredible 4 2

Birdrsquos wishes were soon answeredby NSC 102 of June 18 1948w h i c h c r e a t e d t h e O P C Washington swiftly agreed thatThailand would play an importantrole as a frontline ally in the ColdWar In 1948 US intelligenceunits began arming and training aseparate army under GeneralPhao which became known as theThai Border Police (BPP) Therelationship was cemented in 1949as the communists captured poweri n C h i n a T h e g e n e r a l sdemonstrated their anticommunistc r e d e n t i a l s b y e c h o i n gUS propaganda and kill ingalleged leftists At midyear a CIA

APJ | JF 8 | 44 | 2

9

[OPC] team arrived in Bangkok totrain the BPP for covert support ofthe Kuomintang in its continuingw a r a g a i n s t t h e C h i n e s ecommunists on the Burma-Chinaborder Later in the year theUnited States began to arm andtra in the Tha i army and toprovide the kingdom generaleconomic aid43

Walker notes how the collapse ofthe KMT forces in China ledWashington to subordinate itsantinarcotics policies to thecontainment of communism By thefall of 1949 reports reached theState Department about theinroads communism was makingwithin the Chinese community inT h a i l a n d a s w e l l a s t h einvolvement of the Thai army witho p i u m S i n c e t h e a r m yvirtually controlled the nature ofThailandrsquos security relationshipwith the West foreign promotionof opium control had to take a backseat to other policy priorities44

On March 9 1950 when Truman was asked toapprove $10 million in military aid for ThailandAchesonrsquos supporting memo noted that $5million had already been approved by Trumanfor the Thai ldquoconstabularyrdquo45 This presumablycame from the OPCrsquos secret budget I can findno other reference to the $5 million in StateDepartment published records and two yearslater a US aid official in Washington EdwinMartin wrote in a secret memo that the ThaiPolice force under General Phao ldquois receivingno American military aidrdquo46

Cliques the Mob the KMT and OperationPaper

The US decision to back the KMT troopsmdashtheso-called Li Mi project or Operation Papermdashwasmade at a time of intense interbureaucraticconflict and even conspiratorial disagreementover o f f ic ia l US po l icy toward thenew Chinese Peoplersquos Republic As thehistorian Bruce Cumings has shown both theKMT-financed China Lobby and manyRepublicans like Donovan as well as GeneralMacArthur in Japan were furious at the failureof Secretary of State Dean Acheson to continuesupport for Chiang Kai-shek after the foundingof the Peoplersquos Republic in October 194947 Upuntil the June 1950 outbreak of war in KoreaAcheson refused to guarantee even the securityof Taiwan48

Claire Chennault with Chiang Kai-shekand Mme Chiang

The key public lobbyist for backing the KMT inBurma and Yunnan was General ClaireChennault original owner of the airline theOPC took over Chennault deserves to beremembered as an early postwar proponent ofusing off-the-books assets his ldquoChennault Planrdquoenvisaged essentially self-financing KMTarmies backed by a covert US logisticalairline in support of US foreign policy49

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

3

fund international programs in fields such ashealth and agriculture in the newly liberatedformer colonies of the Third World

But the United Nations was not destined toremain the theater for the resolution ofinternational conflict One major reason for thiswas that the Soviet Union the United Statesand then after 1949 China all pursued covertpolicies low key at first that brought themincreasingly into conflict and proxy war

The Marxist-Leninist nations of the SovietUnion and China lent support to other Marxist-Leninist parties and movements some of theminsurrectionary in other parts of the worldWashingtonrsquos often inaccurate perception sawthese parties and movements as proxies forSoviet andor Chinese power Thus much of theCold War came to be fought covertly in areaslike Southeast Asia about which both theUni ted States and the Sov ie t Unionwere stunningly ignorant

From the very beginning of the postwar eraWashington looked for proxies of its own tocombat the threat it perceived of worldrevolution Some of these proxies are nowvirtually forgotten such as the Ukrainianguerrillas originally organized by Hitlerrsquos SSw h o f o u g h t a n O P C - b a c k e d l o s i n gbattle against Russia into the early 1950sSome like the mafias in Italy and Marseillesoon outgrew their US support to become defacto regional players in their own right

But one of Americarsquos early proxy armies theremnants of Nationalist Chinese KMT forces inBurma and later Thailand would continue toreceive US support into the 1960s Like themaf ias in Europe and the yakuza inJapan these drug proxies had the advantagefo r sec recy o f be ing o f f - the -booksassets largely self-supporting through theirdrug dealing and firmly anticommunist

The OPC and CIArsquos initial support of thisprogram by reestablishing a major drug traffic

out of Southeast Asia helped institutionalizewhat became a CIA habit of turning to drug-supported off-the-books assets for fighting warswherever there appeared to be a threat toAmericarsquos access to oil and other resourcesmdashinIndochina from the 1950s through the 1970s inAfghanistan and Central America in the 1980sin Colombia in the 1990s and again inAfghanistan in 20017

Harvesting opium in Karenni stateBurma

The use of drug proxies at odds withWashingtonrsquos official antidrug policies had toremain secret This meant that in practicemajor programs with long-term consequenceswere initiated and administered by smallcliques with US intelligence ties that werealmost invisible in Washington and still lessvisible to the American people These cliques oflike-minded individuals at ease in working withtraffickers and other criminals were in turnpart of a cabal supported by elite groups athigh levels

The US use of the drug traffic from the KMTtroops in Burma had momentous consequencesfor the whole of Southeast Asia For theOPC infrastructure for the KMT troops (SeaSupply Inc see below) was expanded andmodified with support from William Donovan

APJ | JF 8 | 44 | 2

4

and Allen Dulles to develop and support anindigenous guerrilla force in Thailand PARUPARU far less publicized than the KMT troopsdid as much or more to influence US historyFor PARUrsquos success in helping to guarantee theindependence of Thailand encouraged theUnited States in the 1960s to use PARU in Laosand Vietnam as well Thus PARUrsquos earlysuccesses led the United States incrementallyinto first covert and eventually overt warfare inLaos and Vietnam We shall see that accordingto its American organizer James William [ldquoBillrdquo]Lair PARU like the KMT forces was in itsearly stage at least partly financed by drugs

In short some Americans had a predictable andalmost continuous habit of turning to the drugtraffic for off-the-books assets This recoursebegan as a curious exception to the larger USpolicy of seeking polit ical resolutionof international conflicts through the UnitedNations It also pitted the regular USdiplomats of the State Department against theCold Warriors of the secret agency OPC thathad these drug assets at its disposal This wasnot the only time that a small US bureaucraticcabal facing internal opposition but enjoyinghigh- level backing could launch anoperation that became far larger than originallyauthorized The pattern was repeated withremarkable similarities in Afghanistan in 1979Once again as in Thailand the original statedgoal was the defense of the local nation and thecontainment of the communist troopsthreatening to subdue it Once again this goalwas achieved But once again the success ofthe initial defensive campaign created amomentum for expansion into a campaign ofoffensive rollback that led to our presentunpromising confrontation with more and moreelements of Islam8

The cumulative history of these USinterventions both defensive (successful) andoffensive (catastrophic) has built and stillbuilds on itself Successes are seen asopportunities to move forward it is hard for

mediocre minds not to draw bad lessons fromthem Fa i lu res ( as in V ie tnam) a reremembered even more vividly as reasons toprove that one is not a loser

It is thus important to analyze this recurringpattern of success leading to costly failure tofree ourselves from it For it is clear that theprice of imperial overstretch has beenincreasing over time

With this end in mind I shall now explore keymoments in the off-the-books story of SoutheastAsian drug proxies and the cliques that havemanaged them a trail that leads from Thailandafter World War II to the US occupations ofIraq and Afghanistan today

The Origins of the CIA Drug Connection inThailand

To understand the CIArsquos involvement in theSoutheast Asian drug traffic after World War IIone must go back to nineteenth-century opiumpolicies of the British Empire Siamesegovernment efforts to prohibit the smoking ofopium ended in 1852 when King Mongkut( R a m a I V ) b o w i n g t o B r i t i s hpressures established a Royal OpiumFranchise which was then farmed out toSiamese Chinese9 Three years later under theterms of the unequal Bowring Treaty Siamaccepted British opium free of duty with theproviso that it was to be sold only to the RoyalFranchise (A year later in 1856 a similaragreement was negotiated with the UnitedStates) The opium farm became a source ofwealth and power to the royal government andalso to the Chinese secret societies or triadsthat operated it Opium dependency also hadthe effect of easing Siam into the ways ofWestern capitalism by bringing ldquopeasantsi n t o t h e c a s h e c o n o m y a s m o d e r nconsumersrdquo 1 0

Until it was finally abolished in 1959 proceedsfrom the Opium Franchise (as in other parts ofSoutheast Asia) provided up to 20 percent of

APJ | JF 8 | 44 | 2

5

Siamese government revenue11 This is onereason why the opium franchise ceased to befarmed out to Chinese businessmen in 1907and became (as again in other parts ofSoutheast Asia) a government monopolyAnother was the desire to reduce the influenceo f C h i n e s e s e c r e t s o c i e t i e s a n dencourage Chinese assimilation into Siam As aresult the power of the secret societies didgenerally decline in the twentieth centuryexcept for a revival under the Japaneseoccupation during World War II By this timethe KMT operating under cover was the mostpowerful force in the Bangkok Chinesecommunity with overlapping links to Tai LirsquosKMT intelligence network and also the drugtraffic12

Although the official source of opium for theSiamese franchise was India the relatively highcost of Indian opium encouraged more andmore smuggling of opium from the Shan statesof eastern Burma With the gradual outlawingof the opium traffic in the early twentiethcentury the British banned the use of Shanopium inside Burma but continued to tax theShan states as before In this way the Britishtacitly encouraged the export of Shan opiumto the Thai market13

When Thailand declared war against Britain inJanuary 1942 Shan opium became the onlysource for the lucrative monopoly This helpsexplain the 1942 invasion of the opium-produc ing Shan s ta te s by the Tha iNorthern (Prayap) army in parallel to theJapanese expulsion of the British from Burma14

In January 1943 as it became clearer thatJapan would not win the war the Thai premierPhibun Songkhram used the Northern Armyin Kengtung with its control of Shan opium toopen relations with the Chinese armies theyhad been fighting which had by now retreatedacross the YunnanndashBurma frontier15 One ofthese was the 93rd Division at Meng Hai in theTha i Luuml d i s t r i c t o f S ipsongphanna(Xishuangbanna) in Yunnan16 The two sides

both engaged in the same lucrative opiumtraffic quickly agreed to cease hostilities(According to an Office of Strategic Services[OSS] observer the warlord generals ofYunnan Lung Yun and his cousin LuHan commander of the 93rd Division werebusy smuggling opium from Yunnan across theborder into Burma and Thailand17)

An OSS team of Seri Thai (Free Thais) led byLieutenant Colonel Khap Kunchon (KharbKunjara) and ostensibly under the direction ofOSS Kunming made contact with both sides inMarchndashApril 194418 When Khap arrived at the93rd Division Headquarters ldquohe discoveredthat an informal ceasefire had been observedalong the border between southern Yunnan andthe Shan States [in Burma] since early 1943with the arrangement being cemented fromtime to time by gifts of Thai whisky cigarettesand guns presented to officers of the 93rdDivision by their Thai counterpartsrdquo19

Khap with the permission of his OSS superiorNicol Smith sent a message from Menghai to aformer student of his now with the ThaiNorthern Army in Kengtung20 ldquoThe letterstressed the need for Thai forces toswitch sides at the appropriate moment andasked for the names of Thai officers in the areawho would be willing to cooperate with theAlliesrdquo21 Khaprsquos letter with its apparent OSSendorsement reached Phibun in Bangkok andled to an uninterrupted postwar collaborationbetween the Northern Army and the 93rdDivision22

Khap however was a controversial figureinside OSS mistrusted above all for hisdealings with Tai Li We learn from Reynoldsrsquoswell-documented history that Tai Li and Khapin conjunction with the original OSS Chinachief Milton Miles had been concertedlypushing a plan to turn the Thai Northern Armyagainst the Japanese23 But John CoughlinMilesrsquos successor as OSS chief in Chinaconsulted some months later with Donovan in

APJ | JF 8 | 44 | 2

6

Washington and expressed doubts about thes c h e m e A f o l l o w - u p m e m o t oDonovan questioned Khaprsquos motives

I doubt that he can be trusted I feel that he will make dealswith Tai Li of which I will not beinformed I am at a loss tofigure out Tai Lirsquos extreme interestin him unless there is someagreement between them that Iknow nothing about24

Like his sources Reynoldsrsquos archival history istactfully silent on the topic of opium But TaiLirsquos opium connection to the KMT in Thailandand Burma was well known to OSS and maywell have been on Coughlinrsquos mind25

KMT forces in Burma 1953

The Northern Armyndash93rd DivisionndashKMTconnection had enormous consequences Forthe next three decades Shan opium would bethe source of revenue and power for the KMTin Burma and both the KMT and the NorthernArmy in Bangkok All of Thailandrsquos militaryleaders between 1947 and 1975mdashPhinChunhawan his son-in-law Phao Sriyanon SaritThanarat Thanom Kittikachorn PrapatC h a r u s a t h i e n a n d K r i a n g s a kChomanandmdashwere officers from the NorthernA r m y S u c c e s s i v e l y t h e i r r e g i m e sdominated and profited from the opiumsupplied by the KMT 93rd Division thatafter the war reestablished itself in Burma26

This was true from the military coup inBangkok of November 1947 until Kriangsakrsquosresignation in 198027 A series of coupsdrsquoeacutetatmdashin 1947 1951 1957 and 1975mdashcan beanalyzed in part as conflicts over control of thedrug trade28

As in Indonesia and other Asian countries thegeneralsrsquo business affairs were handled by localChinese The Chinese banking partner of PhinChunhawan and Phao Sriyanon was ChinSophonpanich a member of the Free Thaimovement who in the postwar years enabledPhao to die as ldquoone of the richest men in theworldrdquo29 When in 1957 Sarit displaced Phaoand took over both the government and thedrug trade both Phao and Chin had to fleethe country30

The United States Helps Rebuild thePostwar Drug Connection

To appreciate the signif icance of theconnection we are discussing we must keep inmind that by 1956 the KMT had been drivenfrom the Chinese mainland and that Chineseproduction of opium even in remotemountainous Yunnan had been virtuallyeliminated The disruptions of a world war

APJ | JF 8 | 44 | 2

7

and revolution had created an opportunity toterminate the opium problem in the Far EastInstead US covert support for the Thai andKMT drug traffickers converted Southeast Asiafor more than two decades into the worldrsquosmajor source of opium and heroin

The origins of the US interface with thesedrug traffickers in Thailand and Burma areobscure They appear however to haveinvolved principally four men WilliamDonovan his Brit ish al ly Sir Wil l iamStephenson the organizer with Donovan of theWorld Commerce Corporation (WCC) PaulHelliwell and Willis Bird (both veterans of OSSChina) After World War II Sir WilliamStephensonrsquos WCC ldquobecame very active inBangkokrdquo and Stephenson himself establisheda strong personal relationship with King RamaIX31

Stephenson recruited James Thompson the lastOSS commander in Bangkok to stay on inBangkok as the local WCC representative Thisled to the WCCrsquos financing of Thompsonrsquos ThaiSilk Company a successful commercialenterprise that also covered Thompsonrsquosrepeated trips to the northeastern Thai borderwith Laos the so-called Isan where communistinsurrection was most feared and where futureCIA operations would be concentrated32 Onewould like to know whether WCC similarlylaunched the import-export business of WillisBird of whom much more shortly

In the same postwar period Paul Helliwell whoearlier had been OSS chief of SpecialIntelligence in Kunming Yunnan served as FarEast Division chief of the Strategic ServiceUnit the successor organization to OSS33 Inthis capacity he allegedly ldquobecame the manwho controlled the pipe-line of covert funds forsecret operations throughout East Asia afterthe warrdquo34 Eventually Helliwell would beresponsible for the incorporation in America ofthe CIA proprietaries Sea Supply Inc and CivilAir Transport (CAT) Inc (later Air America)

which would provide support to both PhaoSriyanon of the Northern Army in Thailand andthe KMT drug camps in Burma It is unclearwhat he did before the creation of OPC in1948 Speculation abounds as to the originalsource of funds available to Helliwell in thisearlier period ranging from the following

1 The deep pockets of theoverworld figures in the WCCCiting Daniel Harkins a formerUSG investigator John Loftus andMark Aarons claimed that Nazimoney laundered and manipulatedby Allen Dulles and Sir WilliamStephenson through the WCCreached Thailand after the warWhen Harkins informed Congresshe ldquowas suddenly fired and sentback [from Thailand] to the UnitedStates on the next shiprdquo35

2 The looted gold and otherresources collected by AdmiralYamashita and others in Japan36 orof the SS in Germany

3 The drug trade itself Furtherresearch is needed to establishwhen the financial world of PaulHelliwell began to overlap withthat of Meyer Lansky and theunderworld The banks discussedin the chapter 7 which areoutward signs of this connection(Miami National Bank and Bank ofPerrine) were not established untila decade or more later Still to beestablished is whether the EasternD e v e l o p m e n tCompany represented by Helliwellwas the firm of this name that inthe 1940s cooperated with Lanskyand others in the supply of arms tothe nascent state of Israel37

APJ | JF 8 | 44 | 2

8

Of these the best available evidence pointstentatively to Nazi gold We shall see thatHelliwell acquired a banking partner in FloridaE P Barry who had been the postwar head ofOSS Counterintelligence (X-2) in Vienna whichoversaw the recovery of SS gold in OperationSafehaven38 And it is not questioned that inDecember 1947 the National SecurityCouncil (NSC) created a Special ProceduresGroup ldquothat among other things launderedover $10 million in captured Axis funds toinfluence the [Italian] election [of 1948]rdquo39

Note that this authorization was before NSC102 of June 18 1948 first funded covertoperations under what soon became OPC

What matters is that for some time before thefirst known official US authorizations in1949ndash1950 funds were reaching Helliwellrsquosformer OSS China ally Willis Bird in BangkokThere Bird ran a trading company supplyingarms and materiel to Phin Chunhawan andPhinrsquos son-in-law Phao Sriyanon who in 1950became director-general of the Thai PoliceDepartment By 1951 OPC funds for Bird werebeing handled by a CIA proprietary firm SeaSupply Inc which had been incorporated byPaul Helliwell in his civilian capacity asa lawyer in Miami As noted earlier Helliwellalso became general counsel for the Miamibank that Meyer Lansky allegedly used tolaunder proceeds from the Asian drug traffic

Some sources claim that in the 1940sDonovan whose link to the WCC was by 1946his only known intelligence connection alsovisited Bangkok40 Stephensonrsquos biographerWilliam Stevenson writes that becauseMacArthur had cut Donovan out of the Pacificd u r i n g W o r l d W a r I I D o n o v a nldquotherefore turned Siam [ie Thailand] into ab a s e f r o m w h i c h t o r u n [ p o s t w a r ]secret operations against the new Soviet threatin Asiardquo41

William Walker agrees that by

1947ndash1948 the United Statesincreasingly defined for Thailand aplace in Western strategic policy inthe early cold war Among thosewho kept c lose watch overevents were William J Donovanwartime head of the OSS andWillis H Bird who worked withthe OSS in China After thewar Bird still a reservecolonel in military intelligence ranan import -expor t house inBangkok Following the November[1947 Thailand coup] Bird implored Donovan ldquoShould therebe any agency that is trying to takethe place of OSS please havethem get in touch with us as soonas possible By the time Phibunreturned as Prime MinisterDonovan was telling the Pentagonand the State Department thatBird was a reliable source whoseinformation about growing Sovietact iv i t ies in Thai land werecredible 4 2

Birdrsquos wishes were soon answeredby NSC 102 of June 18 1948w h i c h c r e a t e d t h e O P C Washington swiftly agreed thatThailand would play an importantrole as a frontline ally in the ColdWar In 1948 US intelligenceunits began arming and training aseparate army under GeneralPhao which became known as theThai Border Police (BPP) Therelationship was cemented in 1949as the communists captured poweri n C h i n a T h e g e n e r a l sdemonstrated their anticommunistc r e d e n t i a l s b y e c h o i n gUS propaganda and kill ingalleged leftists At midyear a CIA

APJ | JF 8 | 44 | 2

9

[OPC] team arrived in Bangkok totrain the BPP for covert support ofthe Kuomintang in its continuingw a r a g a i n s t t h e C h i n e s ecommunists on the Burma-Chinaborder Later in the year theUnited States began to arm andtra in the Tha i army and toprovide the kingdom generaleconomic aid43

Walker notes how the collapse ofthe KMT forces in China ledWashington to subordinate itsantinarcotics policies to thecontainment of communism By thefall of 1949 reports reached theState Department about theinroads communism was makingwithin the Chinese community inT h a i l a n d a s w e l l a s t h einvolvement of the Thai army witho p i u m S i n c e t h e a r m yvirtually controlled the nature ofThailandrsquos security relationshipwith the West foreign promotionof opium control had to take a backseat to other policy priorities44

On March 9 1950 when Truman was asked toapprove $10 million in military aid for ThailandAchesonrsquos supporting memo noted that $5million had already been approved by Trumanfor the Thai ldquoconstabularyrdquo45 This presumablycame from the OPCrsquos secret budget I can findno other reference to the $5 million in StateDepartment published records and two yearslater a US aid official in Washington EdwinMartin wrote in a secret memo that the ThaiPolice force under General Phao ldquois receivingno American military aidrdquo46

Cliques the Mob the KMT and OperationPaper

The US decision to back the KMT troopsmdashtheso-called Li Mi project or Operation Papermdashwasmade at a time of intense interbureaucraticconflict and even conspiratorial disagreementover o f f ic ia l US po l icy toward thenew Chinese Peoplersquos Republic As thehistorian Bruce Cumings has shown both theKMT-financed China Lobby and manyRepublicans like Donovan as well as GeneralMacArthur in Japan were furious at the failureof Secretary of State Dean Acheson to continuesupport for Chiang Kai-shek after the foundingof the Peoplersquos Republic in October 194947 Upuntil the June 1950 outbreak of war in KoreaAcheson refused to guarantee even the securityof Taiwan48

Claire Chennault with Chiang Kai-shekand Mme Chiang

The key public lobbyist for backing the KMT inBurma and Yunnan was General ClaireChennault original owner of the airline theOPC took over Chennault deserves to beremembered as an early postwar proponent ofusing off-the-books assets his ldquoChennault Planrdquoenvisaged essentially self-financing KMTarmies backed by a covert US logisticalairline in support of US foreign policy49

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

4

and Allen Dulles to develop and support anindigenous guerrilla force in Thailand PARUPARU far less publicized than the KMT troopsdid as much or more to influence US historyFor PARUrsquos success in helping to guarantee theindependence of Thailand encouraged theUnited States in the 1960s to use PARU in Laosand Vietnam as well Thus PARUrsquos earlysuccesses led the United States incrementallyinto first covert and eventually overt warfare inLaos and Vietnam We shall see that accordingto its American organizer James William [ldquoBillrdquo]Lair PARU like the KMT forces was in itsearly stage at least partly financed by drugs

In short some Americans had a predictable andalmost continuous habit of turning to the drugtraffic for off-the-books assets This recoursebegan as a curious exception to the larger USpolicy of seeking polit ical resolutionof international conflicts through the UnitedNations It also pitted the regular USdiplomats of the State Department against theCold Warriors of the secret agency OPC thathad these drug assets at its disposal This wasnot the only time that a small US bureaucraticcabal facing internal opposition but enjoyinghigh- level backing could launch anoperation that became far larger than originallyauthorized The pattern was repeated withremarkable similarities in Afghanistan in 1979Once again as in Thailand the original statedgoal was the defense of the local nation and thecontainment of the communist troopsthreatening to subdue it Once again this goalwas achieved But once again the success ofthe initial defensive campaign created amomentum for expansion into a campaign ofoffensive rollback that led to our presentunpromising confrontation with more and moreelements of Islam8

The cumulative history of these USinterventions both defensive (successful) andoffensive (catastrophic) has built and stillbuilds on itself Successes are seen asopportunities to move forward it is hard for

mediocre minds not to draw bad lessons fromthem Fa i lu res ( as in V ie tnam) a reremembered even more vividly as reasons toprove that one is not a loser

It is thus important to analyze this recurringpattern of success leading to costly failure tofree ourselves from it For it is clear that theprice of imperial overstretch has beenincreasing over time

With this end in mind I shall now explore keymoments in the off-the-books story of SoutheastAsian drug proxies and the cliques that havemanaged them a trail that leads from Thailandafter World War II to the US occupations ofIraq and Afghanistan today

The Origins of the CIA Drug Connection inThailand

To understand the CIArsquos involvement in theSoutheast Asian drug traffic after World War IIone must go back to nineteenth-century opiumpolicies of the British Empire Siamesegovernment efforts to prohibit the smoking ofopium ended in 1852 when King Mongkut( R a m a I V ) b o w i n g t o B r i t i s hpressures established a Royal OpiumFranchise which was then farmed out toSiamese Chinese9 Three years later under theterms of the unequal Bowring Treaty Siamaccepted British opium free of duty with theproviso that it was to be sold only to the RoyalFranchise (A year later in 1856 a similaragreement was negotiated with the UnitedStates) The opium farm became a source ofwealth and power to the royal government andalso to the Chinese secret societies or triadsthat operated it Opium dependency also hadthe effect of easing Siam into the ways ofWestern capitalism by bringing ldquopeasantsi n t o t h e c a s h e c o n o m y a s m o d e r nconsumersrdquo 1 0

Until it was finally abolished in 1959 proceedsfrom the Opium Franchise (as in other parts ofSoutheast Asia) provided up to 20 percent of

APJ | JF 8 | 44 | 2

5

Siamese government revenue11 This is onereason why the opium franchise ceased to befarmed out to Chinese businessmen in 1907and became (as again in other parts ofSoutheast Asia) a government monopolyAnother was the desire to reduce the influenceo f C h i n e s e s e c r e t s o c i e t i e s a n dencourage Chinese assimilation into Siam As aresult the power of the secret societies didgenerally decline in the twentieth centuryexcept for a revival under the Japaneseoccupation during World War II By this timethe KMT operating under cover was the mostpowerful force in the Bangkok Chinesecommunity with overlapping links to Tai LirsquosKMT intelligence network and also the drugtraffic12

Although the official source of opium for theSiamese franchise was India the relatively highcost of Indian opium encouraged more andmore smuggling of opium from the Shan statesof eastern Burma With the gradual outlawingof the opium traffic in the early twentiethcentury the British banned the use of Shanopium inside Burma but continued to tax theShan states as before In this way the Britishtacitly encouraged the export of Shan opiumto the Thai market13

When Thailand declared war against Britain inJanuary 1942 Shan opium became the onlysource for the lucrative monopoly This helpsexplain the 1942 invasion of the opium-produc ing Shan s ta te s by the Tha iNorthern (Prayap) army in parallel to theJapanese expulsion of the British from Burma14

In January 1943 as it became clearer thatJapan would not win the war the Thai premierPhibun Songkhram used the Northern Armyin Kengtung with its control of Shan opium toopen relations with the Chinese armies theyhad been fighting which had by now retreatedacross the YunnanndashBurma frontier15 One ofthese was the 93rd Division at Meng Hai in theTha i Luuml d i s t r i c t o f S ipsongphanna(Xishuangbanna) in Yunnan16 The two sides

both engaged in the same lucrative opiumtraffic quickly agreed to cease hostilities(According to an Office of Strategic Services[OSS] observer the warlord generals ofYunnan Lung Yun and his cousin LuHan commander of the 93rd Division werebusy smuggling opium from Yunnan across theborder into Burma and Thailand17)

An OSS team of Seri Thai (Free Thais) led byLieutenant Colonel Khap Kunchon (KharbKunjara) and ostensibly under the direction ofOSS Kunming made contact with both sides inMarchndashApril 194418 When Khap arrived at the93rd Division Headquarters ldquohe discoveredthat an informal ceasefire had been observedalong the border between southern Yunnan andthe Shan States [in Burma] since early 1943with the arrangement being cemented fromtime to time by gifts of Thai whisky cigarettesand guns presented to officers of the 93rdDivision by their Thai counterpartsrdquo19

Khap with the permission of his OSS superiorNicol Smith sent a message from Menghai to aformer student of his now with the ThaiNorthern Army in Kengtung20 ldquoThe letterstressed the need for Thai forces toswitch sides at the appropriate moment andasked for the names of Thai officers in the areawho would be willing to cooperate with theAlliesrdquo21 Khaprsquos letter with its apparent OSSendorsement reached Phibun in Bangkok andled to an uninterrupted postwar collaborationbetween the Northern Army and the 93rdDivision22

Khap however was a controversial figureinside OSS mistrusted above all for hisdealings with Tai Li We learn from Reynoldsrsquoswell-documented history that Tai Li and Khapin conjunction with the original OSS Chinachief Milton Miles had been concertedlypushing a plan to turn the Thai Northern Armyagainst the Japanese23 But John CoughlinMilesrsquos successor as OSS chief in Chinaconsulted some months later with Donovan in

APJ | JF 8 | 44 | 2

6

Washington and expressed doubts about thes c h e m e A f o l l o w - u p m e m o t oDonovan questioned Khaprsquos motives

I doubt that he can be trusted I feel that he will make dealswith Tai Li of which I will not beinformed I am at a loss tofigure out Tai Lirsquos extreme interestin him unless there is someagreement between them that Iknow nothing about24

Like his sources Reynoldsrsquos archival history istactfully silent on the topic of opium But TaiLirsquos opium connection to the KMT in Thailandand Burma was well known to OSS and maywell have been on Coughlinrsquos mind25

KMT forces in Burma 1953

The Northern Armyndash93rd DivisionndashKMTconnection had enormous consequences Forthe next three decades Shan opium would bethe source of revenue and power for the KMTin Burma and both the KMT and the NorthernArmy in Bangkok All of Thailandrsquos militaryleaders between 1947 and 1975mdashPhinChunhawan his son-in-law Phao Sriyanon SaritThanarat Thanom Kittikachorn PrapatC h a r u s a t h i e n a n d K r i a n g s a kChomanandmdashwere officers from the NorthernA r m y S u c c e s s i v e l y t h e i r r e g i m e sdominated and profited from the opiumsupplied by the KMT 93rd Division thatafter the war reestablished itself in Burma26

This was true from the military coup inBangkok of November 1947 until Kriangsakrsquosresignation in 198027 A series of coupsdrsquoeacutetatmdashin 1947 1951 1957 and 1975mdashcan beanalyzed in part as conflicts over control of thedrug trade28

As in Indonesia and other Asian countries thegeneralsrsquo business affairs were handled by localChinese The Chinese banking partner of PhinChunhawan and Phao Sriyanon was ChinSophonpanich a member of the Free Thaimovement who in the postwar years enabledPhao to die as ldquoone of the richest men in theworldrdquo29 When in 1957 Sarit displaced Phaoand took over both the government and thedrug trade both Phao and Chin had to fleethe country30

The United States Helps Rebuild thePostwar Drug Connection

To appreciate the signif icance of theconnection we are discussing we must keep inmind that by 1956 the KMT had been drivenfrom the Chinese mainland and that Chineseproduction of opium even in remotemountainous Yunnan had been virtuallyeliminated The disruptions of a world war

APJ | JF 8 | 44 | 2

7

and revolution had created an opportunity toterminate the opium problem in the Far EastInstead US covert support for the Thai andKMT drug traffickers converted Southeast Asiafor more than two decades into the worldrsquosmajor source of opium and heroin

The origins of the US interface with thesedrug traffickers in Thailand and Burma areobscure They appear however to haveinvolved principally four men WilliamDonovan his Brit ish al ly Sir Wil l iamStephenson the organizer with Donovan of theWorld Commerce Corporation (WCC) PaulHelliwell and Willis Bird (both veterans of OSSChina) After World War II Sir WilliamStephensonrsquos WCC ldquobecame very active inBangkokrdquo and Stephenson himself establisheda strong personal relationship with King RamaIX31

Stephenson recruited James Thompson the lastOSS commander in Bangkok to stay on inBangkok as the local WCC representative Thisled to the WCCrsquos financing of Thompsonrsquos ThaiSilk Company a successful commercialenterprise that also covered Thompsonrsquosrepeated trips to the northeastern Thai borderwith Laos the so-called Isan where communistinsurrection was most feared and where futureCIA operations would be concentrated32 Onewould like to know whether WCC similarlylaunched the import-export business of WillisBird of whom much more shortly

In the same postwar period Paul Helliwell whoearlier had been OSS chief of SpecialIntelligence in Kunming Yunnan served as FarEast Division chief of the Strategic ServiceUnit the successor organization to OSS33 Inthis capacity he allegedly ldquobecame the manwho controlled the pipe-line of covert funds forsecret operations throughout East Asia afterthe warrdquo34 Eventually Helliwell would beresponsible for the incorporation in America ofthe CIA proprietaries Sea Supply Inc and CivilAir Transport (CAT) Inc (later Air America)

which would provide support to both PhaoSriyanon of the Northern Army in Thailand andthe KMT drug camps in Burma It is unclearwhat he did before the creation of OPC in1948 Speculation abounds as to the originalsource of funds available to Helliwell in thisearlier period ranging from the following

1 The deep pockets of theoverworld figures in the WCCCiting Daniel Harkins a formerUSG investigator John Loftus andMark Aarons claimed that Nazimoney laundered and manipulatedby Allen Dulles and Sir WilliamStephenson through the WCCreached Thailand after the warWhen Harkins informed Congresshe ldquowas suddenly fired and sentback [from Thailand] to the UnitedStates on the next shiprdquo35

2 The looted gold and otherresources collected by AdmiralYamashita and others in Japan36 orof the SS in Germany

3 The drug trade itself Furtherresearch is needed to establishwhen the financial world of PaulHelliwell began to overlap withthat of Meyer Lansky and theunderworld The banks discussedin the chapter 7 which areoutward signs of this connection(Miami National Bank and Bank ofPerrine) were not established untila decade or more later Still to beestablished is whether the EasternD e v e l o p m e n tCompany represented by Helliwellwas the firm of this name that inthe 1940s cooperated with Lanskyand others in the supply of arms tothe nascent state of Israel37

APJ | JF 8 | 44 | 2

8

Of these the best available evidence pointstentatively to Nazi gold We shall see thatHelliwell acquired a banking partner in FloridaE P Barry who had been the postwar head ofOSS Counterintelligence (X-2) in Vienna whichoversaw the recovery of SS gold in OperationSafehaven38 And it is not questioned that inDecember 1947 the National SecurityCouncil (NSC) created a Special ProceduresGroup ldquothat among other things launderedover $10 million in captured Axis funds toinfluence the [Italian] election [of 1948]rdquo39

Note that this authorization was before NSC102 of June 18 1948 first funded covertoperations under what soon became OPC

What matters is that for some time before thefirst known official US authorizations in1949ndash1950 funds were reaching Helliwellrsquosformer OSS China ally Willis Bird in BangkokThere Bird ran a trading company supplyingarms and materiel to Phin Chunhawan andPhinrsquos son-in-law Phao Sriyanon who in 1950became director-general of the Thai PoliceDepartment By 1951 OPC funds for Bird werebeing handled by a CIA proprietary firm SeaSupply Inc which had been incorporated byPaul Helliwell in his civilian capacity asa lawyer in Miami As noted earlier Helliwellalso became general counsel for the Miamibank that Meyer Lansky allegedly used tolaunder proceeds from the Asian drug traffic

Some sources claim that in the 1940sDonovan whose link to the WCC was by 1946his only known intelligence connection alsovisited Bangkok40 Stephensonrsquos biographerWilliam Stevenson writes that becauseMacArthur had cut Donovan out of the Pacificd u r i n g W o r l d W a r I I D o n o v a nldquotherefore turned Siam [ie Thailand] into ab a s e f r o m w h i c h t o r u n [ p o s t w a r ]secret operations against the new Soviet threatin Asiardquo41

William Walker agrees that by

1947ndash1948 the United Statesincreasingly defined for Thailand aplace in Western strategic policy inthe early cold war Among thosewho kept c lose watch overevents were William J Donovanwartime head of the OSS andWillis H Bird who worked withthe OSS in China After thewar Bird still a reservecolonel in military intelligence ranan import -expor t house inBangkok Following the November[1947 Thailand coup] Bird implored Donovan ldquoShould therebe any agency that is trying to takethe place of OSS please havethem get in touch with us as soonas possible By the time Phibunreturned as Prime MinisterDonovan was telling the Pentagonand the State Department thatBird was a reliable source whoseinformation about growing Sovietact iv i t ies in Thai land werecredible 4 2

Birdrsquos wishes were soon answeredby NSC 102 of June 18 1948w h i c h c r e a t e d t h e O P C Washington swiftly agreed thatThailand would play an importantrole as a frontline ally in the ColdWar In 1948 US intelligenceunits began arming and training aseparate army under GeneralPhao which became known as theThai Border Police (BPP) Therelationship was cemented in 1949as the communists captured poweri n C h i n a T h e g e n e r a l sdemonstrated their anticommunistc r e d e n t i a l s b y e c h o i n gUS propaganda and kill ingalleged leftists At midyear a CIA

APJ | JF 8 | 44 | 2

9

[OPC] team arrived in Bangkok totrain the BPP for covert support ofthe Kuomintang in its continuingw a r a g a i n s t t h e C h i n e s ecommunists on the Burma-Chinaborder Later in the year theUnited States began to arm andtra in the Tha i army and toprovide the kingdom generaleconomic aid43

Walker notes how the collapse ofthe KMT forces in China ledWashington to subordinate itsantinarcotics policies to thecontainment of communism By thefall of 1949 reports reached theState Department about theinroads communism was makingwithin the Chinese community inT h a i l a n d a s w e l l a s t h einvolvement of the Thai army witho p i u m S i n c e t h e a r m yvirtually controlled the nature ofThailandrsquos security relationshipwith the West foreign promotionof opium control had to take a backseat to other policy priorities44

On March 9 1950 when Truman was asked toapprove $10 million in military aid for ThailandAchesonrsquos supporting memo noted that $5million had already been approved by Trumanfor the Thai ldquoconstabularyrdquo45 This presumablycame from the OPCrsquos secret budget I can findno other reference to the $5 million in StateDepartment published records and two yearslater a US aid official in Washington EdwinMartin wrote in a secret memo that the ThaiPolice force under General Phao ldquois receivingno American military aidrdquo46

Cliques the Mob the KMT and OperationPaper

The US decision to back the KMT troopsmdashtheso-called Li Mi project or Operation Papermdashwasmade at a time of intense interbureaucraticconflict and even conspiratorial disagreementover o f f ic ia l US po l icy toward thenew Chinese Peoplersquos Republic As thehistorian Bruce Cumings has shown both theKMT-financed China Lobby and manyRepublicans like Donovan as well as GeneralMacArthur in Japan were furious at the failureof Secretary of State Dean Acheson to continuesupport for Chiang Kai-shek after the foundingof the Peoplersquos Republic in October 194947 Upuntil the June 1950 outbreak of war in KoreaAcheson refused to guarantee even the securityof Taiwan48

Claire Chennault with Chiang Kai-shekand Mme Chiang

The key public lobbyist for backing the KMT inBurma and Yunnan was General ClaireChennault original owner of the airline theOPC took over Chennault deserves to beremembered as an early postwar proponent ofusing off-the-books assets his ldquoChennault Planrdquoenvisaged essentially self-financing KMTarmies backed by a covert US logisticalairline in support of US foreign policy49

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

5

Siamese government revenue11 This is onereason why the opium franchise ceased to befarmed out to Chinese businessmen in 1907and became (as again in other parts ofSoutheast Asia) a government monopolyAnother was the desire to reduce the influenceo f C h i n e s e s e c r e t s o c i e t i e s a n dencourage Chinese assimilation into Siam As aresult the power of the secret societies didgenerally decline in the twentieth centuryexcept for a revival under the Japaneseoccupation during World War II By this timethe KMT operating under cover was the mostpowerful force in the Bangkok Chinesecommunity with overlapping links to Tai LirsquosKMT intelligence network and also the drugtraffic12

Although the official source of opium for theSiamese franchise was India the relatively highcost of Indian opium encouraged more andmore smuggling of opium from the Shan statesof eastern Burma With the gradual outlawingof the opium traffic in the early twentiethcentury the British banned the use of Shanopium inside Burma but continued to tax theShan states as before In this way the Britishtacitly encouraged the export of Shan opiumto the Thai market13

When Thailand declared war against Britain inJanuary 1942 Shan opium became the onlysource for the lucrative monopoly This helpsexplain the 1942 invasion of the opium-produc ing Shan s ta te s by the Tha iNorthern (Prayap) army in parallel to theJapanese expulsion of the British from Burma14

In January 1943 as it became clearer thatJapan would not win the war the Thai premierPhibun Songkhram used the Northern Armyin Kengtung with its control of Shan opium toopen relations with the Chinese armies theyhad been fighting which had by now retreatedacross the YunnanndashBurma frontier15 One ofthese was the 93rd Division at Meng Hai in theTha i Luuml d i s t r i c t o f S ipsongphanna(Xishuangbanna) in Yunnan16 The two sides

both engaged in the same lucrative opiumtraffic quickly agreed to cease hostilities(According to an Office of Strategic Services[OSS] observer the warlord generals ofYunnan Lung Yun and his cousin LuHan commander of the 93rd Division werebusy smuggling opium from Yunnan across theborder into Burma and Thailand17)

An OSS team of Seri Thai (Free Thais) led byLieutenant Colonel Khap Kunchon (KharbKunjara) and ostensibly under the direction ofOSS Kunming made contact with both sides inMarchndashApril 194418 When Khap arrived at the93rd Division Headquarters ldquohe discoveredthat an informal ceasefire had been observedalong the border between southern Yunnan andthe Shan States [in Burma] since early 1943with the arrangement being cemented fromtime to time by gifts of Thai whisky cigarettesand guns presented to officers of the 93rdDivision by their Thai counterpartsrdquo19

Khap with the permission of his OSS superiorNicol Smith sent a message from Menghai to aformer student of his now with the ThaiNorthern Army in Kengtung20 ldquoThe letterstressed the need for Thai forces toswitch sides at the appropriate moment andasked for the names of Thai officers in the areawho would be willing to cooperate with theAlliesrdquo21 Khaprsquos letter with its apparent OSSendorsement reached Phibun in Bangkok andled to an uninterrupted postwar collaborationbetween the Northern Army and the 93rdDivision22

Khap however was a controversial figureinside OSS mistrusted above all for hisdealings with Tai Li We learn from Reynoldsrsquoswell-documented history that Tai Li and Khapin conjunction with the original OSS Chinachief Milton Miles had been concertedlypushing a plan to turn the Thai Northern Armyagainst the Japanese23 But John CoughlinMilesrsquos successor as OSS chief in Chinaconsulted some months later with Donovan in

APJ | JF 8 | 44 | 2

6

Washington and expressed doubts about thes c h e m e A f o l l o w - u p m e m o t oDonovan questioned Khaprsquos motives

I doubt that he can be trusted I feel that he will make dealswith Tai Li of which I will not beinformed I am at a loss tofigure out Tai Lirsquos extreme interestin him unless there is someagreement between them that Iknow nothing about24

Like his sources Reynoldsrsquos archival history istactfully silent on the topic of opium But TaiLirsquos opium connection to the KMT in Thailandand Burma was well known to OSS and maywell have been on Coughlinrsquos mind25

KMT forces in Burma 1953

The Northern Armyndash93rd DivisionndashKMTconnection had enormous consequences Forthe next three decades Shan opium would bethe source of revenue and power for the KMTin Burma and both the KMT and the NorthernArmy in Bangkok All of Thailandrsquos militaryleaders between 1947 and 1975mdashPhinChunhawan his son-in-law Phao Sriyanon SaritThanarat Thanom Kittikachorn PrapatC h a r u s a t h i e n a n d K r i a n g s a kChomanandmdashwere officers from the NorthernA r m y S u c c e s s i v e l y t h e i r r e g i m e sdominated and profited from the opiumsupplied by the KMT 93rd Division thatafter the war reestablished itself in Burma26

This was true from the military coup inBangkok of November 1947 until Kriangsakrsquosresignation in 198027 A series of coupsdrsquoeacutetatmdashin 1947 1951 1957 and 1975mdashcan beanalyzed in part as conflicts over control of thedrug trade28

As in Indonesia and other Asian countries thegeneralsrsquo business affairs were handled by localChinese The Chinese banking partner of PhinChunhawan and Phao Sriyanon was ChinSophonpanich a member of the Free Thaimovement who in the postwar years enabledPhao to die as ldquoone of the richest men in theworldrdquo29 When in 1957 Sarit displaced Phaoand took over both the government and thedrug trade both Phao and Chin had to fleethe country30

The United States Helps Rebuild thePostwar Drug Connection

To appreciate the signif icance of theconnection we are discussing we must keep inmind that by 1956 the KMT had been drivenfrom the Chinese mainland and that Chineseproduction of opium even in remotemountainous Yunnan had been virtuallyeliminated The disruptions of a world war

APJ | JF 8 | 44 | 2

7

and revolution had created an opportunity toterminate the opium problem in the Far EastInstead US covert support for the Thai andKMT drug traffickers converted Southeast Asiafor more than two decades into the worldrsquosmajor source of opium and heroin

The origins of the US interface with thesedrug traffickers in Thailand and Burma areobscure They appear however to haveinvolved principally four men WilliamDonovan his Brit ish al ly Sir Wil l iamStephenson the organizer with Donovan of theWorld Commerce Corporation (WCC) PaulHelliwell and Willis Bird (both veterans of OSSChina) After World War II Sir WilliamStephensonrsquos WCC ldquobecame very active inBangkokrdquo and Stephenson himself establisheda strong personal relationship with King RamaIX31

Stephenson recruited James Thompson the lastOSS commander in Bangkok to stay on inBangkok as the local WCC representative Thisled to the WCCrsquos financing of Thompsonrsquos ThaiSilk Company a successful commercialenterprise that also covered Thompsonrsquosrepeated trips to the northeastern Thai borderwith Laos the so-called Isan where communistinsurrection was most feared and where futureCIA operations would be concentrated32 Onewould like to know whether WCC similarlylaunched the import-export business of WillisBird of whom much more shortly

In the same postwar period Paul Helliwell whoearlier had been OSS chief of SpecialIntelligence in Kunming Yunnan served as FarEast Division chief of the Strategic ServiceUnit the successor organization to OSS33 Inthis capacity he allegedly ldquobecame the manwho controlled the pipe-line of covert funds forsecret operations throughout East Asia afterthe warrdquo34 Eventually Helliwell would beresponsible for the incorporation in America ofthe CIA proprietaries Sea Supply Inc and CivilAir Transport (CAT) Inc (later Air America)

which would provide support to both PhaoSriyanon of the Northern Army in Thailand andthe KMT drug camps in Burma It is unclearwhat he did before the creation of OPC in1948 Speculation abounds as to the originalsource of funds available to Helliwell in thisearlier period ranging from the following

1 The deep pockets of theoverworld figures in the WCCCiting Daniel Harkins a formerUSG investigator John Loftus andMark Aarons claimed that Nazimoney laundered and manipulatedby Allen Dulles and Sir WilliamStephenson through the WCCreached Thailand after the warWhen Harkins informed Congresshe ldquowas suddenly fired and sentback [from Thailand] to the UnitedStates on the next shiprdquo35

2 The looted gold and otherresources collected by AdmiralYamashita and others in Japan36 orof the SS in Germany

3 The drug trade itself Furtherresearch is needed to establishwhen the financial world of PaulHelliwell began to overlap withthat of Meyer Lansky and theunderworld The banks discussedin the chapter 7 which areoutward signs of this connection(Miami National Bank and Bank ofPerrine) were not established untila decade or more later Still to beestablished is whether the EasternD e v e l o p m e n tCompany represented by Helliwellwas the firm of this name that inthe 1940s cooperated with Lanskyand others in the supply of arms tothe nascent state of Israel37

APJ | JF 8 | 44 | 2

8

Of these the best available evidence pointstentatively to Nazi gold We shall see thatHelliwell acquired a banking partner in FloridaE P Barry who had been the postwar head ofOSS Counterintelligence (X-2) in Vienna whichoversaw the recovery of SS gold in OperationSafehaven38 And it is not questioned that inDecember 1947 the National SecurityCouncil (NSC) created a Special ProceduresGroup ldquothat among other things launderedover $10 million in captured Axis funds toinfluence the [Italian] election [of 1948]rdquo39

Note that this authorization was before NSC102 of June 18 1948 first funded covertoperations under what soon became OPC

What matters is that for some time before thefirst known official US authorizations in1949ndash1950 funds were reaching Helliwellrsquosformer OSS China ally Willis Bird in BangkokThere Bird ran a trading company supplyingarms and materiel to Phin Chunhawan andPhinrsquos son-in-law Phao Sriyanon who in 1950became director-general of the Thai PoliceDepartment By 1951 OPC funds for Bird werebeing handled by a CIA proprietary firm SeaSupply Inc which had been incorporated byPaul Helliwell in his civilian capacity asa lawyer in Miami As noted earlier Helliwellalso became general counsel for the Miamibank that Meyer Lansky allegedly used tolaunder proceeds from the Asian drug traffic

Some sources claim that in the 1940sDonovan whose link to the WCC was by 1946his only known intelligence connection alsovisited Bangkok40 Stephensonrsquos biographerWilliam Stevenson writes that becauseMacArthur had cut Donovan out of the Pacificd u r i n g W o r l d W a r I I D o n o v a nldquotherefore turned Siam [ie Thailand] into ab a s e f r o m w h i c h t o r u n [ p o s t w a r ]secret operations against the new Soviet threatin Asiardquo41

William Walker agrees that by

1947ndash1948 the United Statesincreasingly defined for Thailand aplace in Western strategic policy inthe early cold war Among thosewho kept c lose watch overevents were William J Donovanwartime head of the OSS andWillis H Bird who worked withthe OSS in China After thewar Bird still a reservecolonel in military intelligence ranan import -expor t house inBangkok Following the November[1947 Thailand coup] Bird implored Donovan ldquoShould therebe any agency that is trying to takethe place of OSS please havethem get in touch with us as soonas possible By the time Phibunreturned as Prime MinisterDonovan was telling the Pentagonand the State Department thatBird was a reliable source whoseinformation about growing Sovietact iv i t ies in Thai land werecredible 4 2

Birdrsquos wishes were soon answeredby NSC 102 of June 18 1948w h i c h c r e a t e d t h e O P C Washington swiftly agreed thatThailand would play an importantrole as a frontline ally in the ColdWar In 1948 US intelligenceunits began arming and training aseparate army under GeneralPhao which became known as theThai Border Police (BPP) Therelationship was cemented in 1949as the communists captured poweri n C h i n a T h e g e n e r a l sdemonstrated their anticommunistc r e d e n t i a l s b y e c h o i n gUS propaganda and kill ingalleged leftists At midyear a CIA

APJ | JF 8 | 44 | 2

9

[OPC] team arrived in Bangkok totrain the BPP for covert support ofthe Kuomintang in its continuingw a r a g a i n s t t h e C h i n e s ecommunists on the Burma-Chinaborder Later in the year theUnited States began to arm andtra in the Tha i army and toprovide the kingdom generaleconomic aid43

Walker notes how the collapse ofthe KMT forces in China ledWashington to subordinate itsantinarcotics policies to thecontainment of communism By thefall of 1949 reports reached theState Department about theinroads communism was makingwithin the Chinese community inT h a i l a n d a s w e l l a s t h einvolvement of the Thai army witho p i u m S i n c e t h e a r m yvirtually controlled the nature ofThailandrsquos security relationshipwith the West foreign promotionof opium control had to take a backseat to other policy priorities44

On March 9 1950 when Truman was asked toapprove $10 million in military aid for ThailandAchesonrsquos supporting memo noted that $5million had already been approved by Trumanfor the Thai ldquoconstabularyrdquo45 This presumablycame from the OPCrsquos secret budget I can findno other reference to the $5 million in StateDepartment published records and two yearslater a US aid official in Washington EdwinMartin wrote in a secret memo that the ThaiPolice force under General Phao ldquois receivingno American military aidrdquo46

Cliques the Mob the KMT and OperationPaper

The US decision to back the KMT troopsmdashtheso-called Li Mi project or Operation Papermdashwasmade at a time of intense interbureaucraticconflict and even conspiratorial disagreementover o f f ic ia l US po l icy toward thenew Chinese Peoplersquos Republic As thehistorian Bruce Cumings has shown both theKMT-financed China Lobby and manyRepublicans like Donovan as well as GeneralMacArthur in Japan were furious at the failureof Secretary of State Dean Acheson to continuesupport for Chiang Kai-shek after the foundingof the Peoplersquos Republic in October 194947 Upuntil the June 1950 outbreak of war in KoreaAcheson refused to guarantee even the securityof Taiwan48

Claire Chennault with Chiang Kai-shekand Mme Chiang

The key public lobbyist for backing the KMT inBurma and Yunnan was General ClaireChennault original owner of the airline theOPC took over Chennault deserves to beremembered as an early postwar proponent ofusing off-the-books assets his ldquoChennault Planrdquoenvisaged essentially self-financing KMTarmies backed by a covert US logisticalairline in support of US foreign policy49

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

6

Washington and expressed doubts about thes c h e m e A f o l l o w - u p m e m o t oDonovan questioned Khaprsquos motives

I doubt that he can be trusted I feel that he will make dealswith Tai Li of which I will not beinformed I am at a loss tofigure out Tai Lirsquos extreme interestin him unless there is someagreement between them that Iknow nothing about24

Like his sources Reynoldsrsquos archival history istactfully silent on the topic of opium But TaiLirsquos opium connection to the KMT in Thailandand Burma was well known to OSS and maywell have been on Coughlinrsquos mind25

KMT forces in Burma 1953

The Northern Armyndash93rd DivisionndashKMTconnection had enormous consequences Forthe next three decades Shan opium would bethe source of revenue and power for the KMTin Burma and both the KMT and the NorthernArmy in Bangkok All of Thailandrsquos militaryleaders between 1947 and 1975mdashPhinChunhawan his son-in-law Phao Sriyanon SaritThanarat Thanom Kittikachorn PrapatC h a r u s a t h i e n a n d K r i a n g s a kChomanandmdashwere officers from the NorthernA r m y S u c c e s s i v e l y t h e i r r e g i m e sdominated and profited from the opiumsupplied by the KMT 93rd Division thatafter the war reestablished itself in Burma26

This was true from the military coup inBangkok of November 1947 until Kriangsakrsquosresignation in 198027 A series of coupsdrsquoeacutetatmdashin 1947 1951 1957 and 1975mdashcan beanalyzed in part as conflicts over control of thedrug trade28

As in Indonesia and other Asian countries thegeneralsrsquo business affairs were handled by localChinese The Chinese banking partner of PhinChunhawan and Phao Sriyanon was ChinSophonpanich a member of the Free Thaimovement who in the postwar years enabledPhao to die as ldquoone of the richest men in theworldrdquo29 When in 1957 Sarit displaced Phaoand took over both the government and thedrug trade both Phao and Chin had to fleethe country30

The United States Helps Rebuild thePostwar Drug Connection

To appreciate the signif icance of theconnection we are discussing we must keep inmind that by 1956 the KMT had been drivenfrom the Chinese mainland and that Chineseproduction of opium even in remotemountainous Yunnan had been virtuallyeliminated The disruptions of a world war

APJ | JF 8 | 44 | 2

7

and revolution had created an opportunity toterminate the opium problem in the Far EastInstead US covert support for the Thai andKMT drug traffickers converted Southeast Asiafor more than two decades into the worldrsquosmajor source of opium and heroin

The origins of the US interface with thesedrug traffickers in Thailand and Burma areobscure They appear however to haveinvolved principally four men WilliamDonovan his Brit ish al ly Sir Wil l iamStephenson the organizer with Donovan of theWorld Commerce Corporation (WCC) PaulHelliwell and Willis Bird (both veterans of OSSChina) After World War II Sir WilliamStephensonrsquos WCC ldquobecame very active inBangkokrdquo and Stephenson himself establisheda strong personal relationship with King RamaIX31

Stephenson recruited James Thompson the lastOSS commander in Bangkok to stay on inBangkok as the local WCC representative Thisled to the WCCrsquos financing of Thompsonrsquos ThaiSilk Company a successful commercialenterprise that also covered Thompsonrsquosrepeated trips to the northeastern Thai borderwith Laos the so-called Isan where communistinsurrection was most feared and where futureCIA operations would be concentrated32 Onewould like to know whether WCC similarlylaunched the import-export business of WillisBird of whom much more shortly

In the same postwar period Paul Helliwell whoearlier had been OSS chief of SpecialIntelligence in Kunming Yunnan served as FarEast Division chief of the Strategic ServiceUnit the successor organization to OSS33 Inthis capacity he allegedly ldquobecame the manwho controlled the pipe-line of covert funds forsecret operations throughout East Asia afterthe warrdquo34 Eventually Helliwell would beresponsible for the incorporation in America ofthe CIA proprietaries Sea Supply Inc and CivilAir Transport (CAT) Inc (later Air America)

which would provide support to both PhaoSriyanon of the Northern Army in Thailand andthe KMT drug camps in Burma It is unclearwhat he did before the creation of OPC in1948 Speculation abounds as to the originalsource of funds available to Helliwell in thisearlier period ranging from the following

1 The deep pockets of theoverworld figures in the WCCCiting Daniel Harkins a formerUSG investigator John Loftus andMark Aarons claimed that Nazimoney laundered and manipulatedby Allen Dulles and Sir WilliamStephenson through the WCCreached Thailand after the warWhen Harkins informed Congresshe ldquowas suddenly fired and sentback [from Thailand] to the UnitedStates on the next shiprdquo35

2 The looted gold and otherresources collected by AdmiralYamashita and others in Japan36 orof the SS in Germany

3 The drug trade itself Furtherresearch is needed to establishwhen the financial world of PaulHelliwell began to overlap withthat of Meyer Lansky and theunderworld The banks discussedin the chapter 7 which areoutward signs of this connection(Miami National Bank and Bank ofPerrine) were not established untila decade or more later Still to beestablished is whether the EasternD e v e l o p m e n tCompany represented by Helliwellwas the firm of this name that inthe 1940s cooperated with Lanskyand others in the supply of arms tothe nascent state of Israel37

APJ | JF 8 | 44 | 2

8

Of these the best available evidence pointstentatively to Nazi gold We shall see thatHelliwell acquired a banking partner in FloridaE P Barry who had been the postwar head ofOSS Counterintelligence (X-2) in Vienna whichoversaw the recovery of SS gold in OperationSafehaven38 And it is not questioned that inDecember 1947 the National SecurityCouncil (NSC) created a Special ProceduresGroup ldquothat among other things launderedover $10 million in captured Axis funds toinfluence the [Italian] election [of 1948]rdquo39

Note that this authorization was before NSC102 of June 18 1948 first funded covertoperations under what soon became OPC

What matters is that for some time before thefirst known official US authorizations in1949ndash1950 funds were reaching Helliwellrsquosformer OSS China ally Willis Bird in BangkokThere Bird ran a trading company supplyingarms and materiel to Phin Chunhawan andPhinrsquos son-in-law Phao Sriyanon who in 1950became director-general of the Thai PoliceDepartment By 1951 OPC funds for Bird werebeing handled by a CIA proprietary firm SeaSupply Inc which had been incorporated byPaul Helliwell in his civilian capacity asa lawyer in Miami As noted earlier Helliwellalso became general counsel for the Miamibank that Meyer Lansky allegedly used tolaunder proceeds from the Asian drug traffic

Some sources claim that in the 1940sDonovan whose link to the WCC was by 1946his only known intelligence connection alsovisited Bangkok40 Stephensonrsquos biographerWilliam Stevenson writes that becauseMacArthur had cut Donovan out of the Pacificd u r i n g W o r l d W a r I I D o n o v a nldquotherefore turned Siam [ie Thailand] into ab a s e f r o m w h i c h t o r u n [ p o s t w a r ]secret operations against the new Soviet threatin Asiardquo41

William Walker agrees that by

1947ndash1948 the United Statesincreasingly defined for Thailand aplace in Western strategic policy inthe early cold war Among thosewho kept c lose watch overevents were William J Donovanwartime head of the OSS andWillis H Bird who worked withthe OSS in China After thewar Bird still a reservecolonel in military intelligence ranan import -expor t house inBangkok Following the November[1947 Thailand coup] Bird implored Donovan ldquoShould therebe any agency that is trying to takethe place of OSS please havethem get in touch with us as soonas possible By the time Phibunreturned as Prime MinisterDonovan was telling the Pentagonand the State Department thatBird was a reliable source whoseinformation about growing Sovietact iv i t ies in Thai land werecredible 4 2

Birdrsquos wishes were soon answeredby NSC 102 of June 18 1948w h i c h c r e a t e d t h e O P C Washington swiftly agreed thatThailand would play an importantrole as a frontline ally in the ColdWar In 1948 US intelligenceunits began arming and training aseparate army under GeneralPhao which became known as theThai Border Police (BPP) Therelationship was cemented in 1949as the communists captured poweri n C h i n a T h e g e n e r a l sdemonstrated their anticommunistc r e d e n t i a l s b y e c h o i n gUS propaganda and kill ingalleged leftists At midyear a CIA

APJ | JF 8 | 44 | 2

9

[OPC] team arrived in Bangkok totrain the BPP for covert support ofthe Kuomintang in its continuingw a r a g a i n s t t h e C h i n e s ecommunists on the Burma-Chinaborder Later in the year theUnited States began to arm andtra in the Tha i army and toprovide the kingdom generaleconomic aid43

Walker notes how the collapse ofthe KMT forces in China ledWashington to subordinate itsantinarcotics policies to thecontainment of communism By thefall of 1949 reports reached theState Department about theinroads communism was makingwithin the Chinese community inT h a i l a n d a s w e l l a s t h einvolvement of the Thai army witho p i u m S i n c e t h e a r m yvirtually controlled the nature ofThailandrsquos security relationshipwith the West foreign promotionof opium control had to take a backseat to other policy priorities44

On March 9 1950 when Truman was asked toapprove $10 million in military aid for ThailandAchesonrsquos supporting memo noted that $5million had already been approved by Trumanfor the Thai ldquoconstabularyrdquo45 This presumablycame from the OPCrsquos secret budget I can findno other reference to the $5 million in StateDepartment published records and two yearslater a US aid official in Washington EdwinMartin wrote in a secret memo that the ThaiPolice force under General Phao ldquois receivingno American military aidrdquo46

Cliques the Mob the KMT and OperationPaper

The US decision to back the KMT troopsmdashtheso-called Li Mi project or Operation Papermdashwasmade at a time of intense interbureaucraticconflict and even conspiratorial disagreementover o f f ic ia l US po l icy toward thenew Chinese Peoplersquos Republic As thehistorian Bruce Cumings has shown both theKMT-financed China Lobby and manyRepublicans like Donovan as well as GeneralMacArthur in Japan were furious at the failureof Secretary of State Dean Acheson to continuesupport for Chiang Kai-shek after the foundingof the Peoplersquos Republic in October 194947 Upuntil the June 1950 outbreak of war in KoreaAcheson refused to guarantee even the securityof Taiwan48

Claire Chennault with Chiang Kai-shekand Mme Chiang

The key public lobbyist for backing the KMT inBurma and Yunnan was General ClaireChennault original owner of the airline theOPC took over Chennault deserves to beremembered as an early postwar proponent ofusing off-the-books assets his ldquoChennault Planrdquoenvisaged essentially self-financing KMTarmies backed by a covert US logisticalairline in support of US foreign policy49

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

7

and revolution had created an opportunity toterminate the opium problem in the Far EastInstead US covert support for the Thai andKMT drug traffickers converted Southeast Asiafor more than two decades into the worldrsquosmajor source of opium and heroin

The origins of the US interface with thesedrug traffickers in Thailand and Burma areobscure They appear however to haveinvolved principally four men WilliamDonovan his Brit ish al ly Sir Wil l iamStephenson the organizer with Donovan of theWorld Commerce Corporation (WCC) PaulHelliwell and Willis Bird (both veterans of OSSChina) After World War II Sir WilliamStephensonrsquos WCC ldquobecame very active inBangkokrdquo and Stephenson himself establisheda strong personal relationship with King RamaIX31

Stephenson recruited James Thompson the lastOSS commander in Bangkok to stay on inBangkok as the local WCC representative Thisled to the WCCrsquos financing of Thompsonrsquos ThaiSilk Company a successful commercialenterprise that also covered Thompsonrsquosrepeated trips to the northeastern Thai borderwith Laos the so-called Isan where communistinsurrection was most feared and where futureCIA operations would be concentrated32 Onewould like to know whether WCC similarlylaunched the import-export business of WillisBird of whom much more shortly

In the same postwar period Paul Helliwell whoearlier had been OSS chief of SpecialIntelligence in Kunming Yunnan served as FarEast Division chief of the Strategic ServiceUnit the successor organization to OSS33 Inthis capacity he allegedly ldquobecame the manwho controlled the pipe-line of covert funds forsecret operations throughout East Asia afterthe warrdquo34 Eventually Helliwell would beresponsible for the incorporation in America ofthe CIA proprietaries Sea Supply Inc and CivilAir Transport (CAT) Inc (later Air America)

which would provide support to both PhaoSriyanon of the Northern Army in Thailand andthe KMT drug camps in Burma It is unclearwhat he did before the creation of OPC in1948 Speculation abounds as to the originalsource of funds available to Helliwell in thisearlier period ranging from the following

1 The deep pockets of theoverworld figures in the WCCCiting Daniel Harkins a formerUSG investigator John Loftus andMark Aarons claimed that Nazimoney laundered and manipulatedby Allen Dulles and Sir WilliamStephenson through the WCCreached Thailand after the warWhen Harkins informed Congresshe ldquowas suddenly fired and sentback [from Thailand] to the UnitedStates on the next shiprdquo35

2 The looted gold and otherresources collected by AdmiralYamashita and others in Japan36 orof the SS in Germany

3 The drug trade itself Furtherresearch is needed to establishwhen the financial world of PaulHelliwell began to overlap withthat of Meyer Lansky and theunderworld The banks discussedin the chapter 7 which areoutward signs of this connection(Miami National Bank and Bank ofPerrine) were not established untila decade or more later Still to beestablished is whether the EasternD e v e l o p m e n tCompany represented by Helliwellwas the firm of this name that inthe 1940s cooperated with Lanskyand others in the supply of arms tothe nascent state of Israel37

APJ | JF 8 | 44 | 2

8

Of these the best available evidence pointstentatively to Nazi gold We shall see thatHelliwell acquired a banking partner in FloridaE P Barry who had been the postwar head ofOSS Counterintelligence (X-2) in Vienna whichoversaw the recovery of SS gold in OperationSafehaven38 And it is not questioned that inDecember 1947 the National SecurityCouncil (NSC) created a Special ProceduresGroup ldquothat among other things launderedover $10 million in captured Axis funds toinfluence the [Italian] election [of 1948]rdquo39

Note that this authorization was before NSC102 of June 18 1948 first funded covertoperations under what soon became OPC

What matters is that for some time before thefirst known official US authorizations in1949ndash1950 funds were reaching Helliwellrsquosformer OSS China ally Willis Bird in BangkokThere Bird ran a trading company supplyingarms and materiel to Phin Chunhawan andPhinrsquos son-in-law Phao Sriyanon who in 1950became director-general of the Thai PoliceDepartment By 1951 OPC funds for Bird werebeing handled by a CIA proprietary firm SeaSupply Inc which had been incorporated byPaul Helliwell in his civilian capacity asa lawyer in Miami As noted earlier Helliwellalso became general counsel for the Miamibank that Meyer Lansky allegedly used tolaunder proceeds from the Asian drug traffic

Some sources claim that in the 1940sDonovan whose link to the WCC was by 1946his only known intelligence connection alsovisited Bangkok40 Stephensonrsquos biographerWilliam Stevenson writes that becauseMacArthur had cut Donovan out of the Pacificd u r i n g W o r l d W a r I I D o n o v a nldquotherefore turned Siam [ie Thailand] into ab a s e f r o m w h i c h t o r u n [ p o s t w a r ]secret operations against the new Soviet threatin Asiardquo41

William Walker agrees that by

1947ndash1948 the United Statesincreasingly defined for Thailand aplace in Western strategic policy inthe early cold war Among thosewho kept c lose watch overevents were William J Donovanwartime head of the OSS andWillis H Bird who worked withthe OSS in China After thewar Bird still a reservecolonel in military intelligence ranan import -expor t house inBangkok Following the November[1947 Thailand coup] Bird implored Donovan ldquoShould therebe any agency that is trying to takethe place of OSS please havethem get in touch with us as soonas possible By the time Phibunreturned as Prime MinisterDonovan was telling the Pentagonand the State Department thatBird was a reliable source whoseinformation about growing Sovietact iv i t ies in Thai land werecredible 4 2

Birdrsquos wishes were soon answeredby NSC 102 of June 18 1948w h i c h c r e a t e d t h e O P C Washington swiftly agreed thatThailand would play an importantrole as a frontline ally in the ColdWar In 1948 US intelligenceunits began arming and training aseparate army under GeneralPhao which became known as theThai Border Police (BPP) Therelationship was cemented in 1949as the communists captured poweri n C h i n a T h e g e n e r a l sdemonstrated their anticommunistc r e d e n t i a l s b y e c h o i n gUS propaganda and kill ingalleged leftists At midyear a CIA

APJ | JF 8 | 44 | 2

9

[OPC] team arrived in Bangkok totrain the BPP for covert support ofthe Kuomintang in its continuingw a r a g a i n s t t h e C h i n e s ecommunists on the Burma-Chinaborder Later in the year theUnited States began to arm andtra in the Tha i army and toprovide the kingdom generaleconomic aid43

Walker notes how the collapse ofthe KMT forces in China ledWashington to subordinate itsantinarcotics policies to thecontainment of communism By thefall of 1949 reports reached theState Department about theinroads communism was makingwithin the Chinese community inT h a i l a n d a s w e l l a s t h einvolvement of the Thai army witho p i u m S i n c e t h e a r m yvirtually controlled the nature ofThailandrsquos security relationshipwith the West foreign promotionof opium control had to take a backseat to other policy priorities44

On March 9 1950 when Truman was asked toapprove $10 million in military aid for ThailandAchesonrsquos supporting memo noted that $5million had already been approved by Trumanfor the Thai ldquoconstabularyrdquo45 This presumablycame from the OPCrsquos secret budget I can findno other reference to the $5 million in StateDepartment published records and two yearslater a US aid official in Washington EdwinMartin wrote in a secret memo that the ThaiPolice force under General Phao ldquois receivingno American military aidrdquo46

Cliques the Mob the KMT and OperationPaper

The US decision to back the KMT troopsmdashtheso-called Li Mi project or Operation Papermdashwasmade at a time of intense interbureaucraticconflict and even conspiratorial disagreementover o f f ic ia l US po l icy toward thenew Chinese Peoplersquos Republic As thehistorian Bruce Cumings has shown both theKMT-financed China Lobby and manyRepublicans like Donovan as well as GeneralMacArthur in Japan were furious at the failureof Secretary of State Dean Acheson to continuesupport for Chiang Kai-shek after the foundingof the Peoplersquos Republic in October 194947 Upuntil the June 1950 outbreak of war in KoreaAcheson refused to guarantee even the securityof Taiwan48

Claire Chennault with Chiang Kai-shekand Mme Chiang

The key public lobbyist for backing the KMT inBurma and Yunnan was General ClaireChennault original owner of the airline theOPC took over Chennault deserves to beremembered as an early postwar proponent ofusing off-the-books assets his ldquoChennault Planrdquoenvisaged essentially self-financing KMTarmies backed by a covert US logisticalairline in support of US foreign policy49

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

8

Of these the best available evidence pointstentatively to Nazi gold We shall see thatHelliwell acquired a banking partner in FloridaE P Barry who had been the postwar head ofOSS Counterintelligence (X-2) in Vienna whichoversaw the recovery of SS gold in OperationSafehaven38 And it is not questioned that inDecember 1947 the National SecurityCouncil (NSC) created a Special ProceduresGroup ldquothat among other things launderedover $10 million in captured Axis funds toinfluence the [Italian] election [of 1948]rdquo39

Note that this authorization was before NSC102 of June 18 1948 first funded covertoperations under what soon became OPC

What matters is that for some time before thefirst known official US authorizations in1949ndash1950 funds were reaching Helliwellrsquosformer OSS China ally Willis Bird in BangkokThere Bird ran a trading company supplyingarms and materiel to Phin Chunhawan andPhinrsquos son-in-law Phao Sriyanon who in 1950became director-general of the Thai PoliceDepartment By 1951 OPC funds for Bird werebeing handled by a CIA proprietary firm SeaSupply Inc which had been incorporated byPaul Helliwell in his civilian capacity asa lawyer in Miami As noted earlier Helliwellalso became general counsel for the Miamibank that Meyer Lansky allegedly used tolaunder proceeds from the Asian drug traffic

Some sources claim that in the 1940sDonovan whose link to the WCC was by 1946his only known intelligence connection alsovisited Bangkok40 Stephensonrsquos biographerWilliam Stevenson writes that becauseMacArthur had cut Donovan out of the Pacificd u r i n g W o r l d W a r I I D o n o v a nldquotherefore turned Siam [ie Thailand] into ab a s e f r o m w h i c h t o r u n [ p o s t w a r ]secret operations against the new Soviet threatin Asiardquo41

William Walker agrees that by

1947ndash1948 the United Statesincreasingly defined for Thailand aplace in Western strategic policy inthe early cold war Among thosewho kept c lose watch overevents were William J Donovanwartime head of the OSS andWillis H Bird who worked withthe OSS in China After thewar Bird still a reservecolonel in military intelligence ranan import -expor t house inBangkok Following the November[1947 Thailand coup] Bird implored Donovan ldquoShould therebe any agency that is trying to takethe place of OSS please havethem get in touch with us as soonas possible By the time Phibunreturned as Prime MinisterDonovan was telling the Pentagonand the State Department thatBird was a reliable source whoseinformation about growing Sovietact iv i t ies in Thai land werecredible 4 2

Birdrsquos wishes were soon answeredby NSC 102 of June 18 1948w h i c h c r e a t e d t h e O P C Washington swiftly agreed thatThailand would play an importantrole as a frontline ally in the ColdWar In 1948 US intelligenceunits began arming and training aseparate army under GeneralPhao which became known as theThai Border Police (BPP) Therelationship was cemented in 1949as the communists captured poweri n C h i n a T h e g e n e r a l sdemonstrated their anticommunistc r e d e n t i a l s b y e c h o i n gUS propaganda and kill ingalleged leftists At midyear a CIA

APJ | JF 8 | 44 | 2

9

[OPC] team arrived in Bangkok totrain the BPP for covert support ofthe Kuomintang in its continuingw a r a g a i n s t t h e C h i n e s ecommunists on the Burma-Chinaborder Later in the year theUnited States began to arm andtra in the Tha i army and toprovide the kingdom generaleconomic aid43

Walker notes how the collapse ofthe KMT forces in China ledWashington to subordinate itsantinarcotics policies to thecontainment of communism By thefall of 1949 reports reached theState Department about theinroads communism was makingwithin the Chinese community inT h a i l a n d a s w e l l a s t h einvolvement of the Thai army witho p i u m S i n c e t h e a r m yvirtually controlled the nature ofThailandrsquos security relationshipwith the West foreign promotionof opium control had to take a backseat to other policy priorities44

On March 9 1950 when Truman was asked toapprove $10 million in military aid for ThailandAchesonrsquos supporting memo noted that $5million had already been approved by Trumanfor the Thai ldquoconstabularyrdquo45 This presumablycame from the OPCrsquos secret budget I can findno other reference to the $5 million in StateDepartment published records and two yearslater a US aid official in Washington EdwinMartin wrote in a secret memo that the ThaiPolice force under General Phao ldquois receivingno American military aidrdquo46

Cliques the Mob the KMT and OperationPaper

The US decision to back the KMT troopsmdashtheso-called Li Mi project or Operation Papermdashwasmade at a time of intense interbureaucraticconflict and even conspiratorial disagreementover o f f ic ia l US po l icy toward thenew Chinese Peoplersquos Republic As thehistorian Bruce Cumings has shown both theKMT-financed China Lobby and manyRepublicans like Donovan as well as GeneralMacArthur in Japan were furious at the failureof Secretary of State Dean Acheson to continuesupport for Chiang Kai-shek after the foundingof the Peoplersquos Republic in October 194947 Upuntil the June 1950 outbreak of war in KoreaAcheson refused to guarantee even the securityof Taiwan48

Claire Chennault with Chiang Kai-shekand Mme Chiang

The key public lobbyist for backing the KMT inBurma and Yunnan was General ClaireChennault original owner of the airline theOPC took over Chennault deserves to beremembered as an early postwar proponent ofusing off-the-books assets his ldquoChennault Planrdquoenvisaged essentially self-financing KMTarmies backed by a covert US logisticalairline in support of US foreign policy49

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

9

[OPC] team arrived in Bangkok totrain the BPP for covert support ofthe Kuomintang in its continuingw a r a g a i n s t t h e C h i n e s ecommunists on the Burma-Chinaborder Later in the year theUnited States began to arm andtra in the Tha i army and toprovide the kingdom generaleconomic aid43

Walker notes how the collapse ofthe KMT forces in China ledWashington to subordinate itsantinarcotics policies to thecontainment of communism By thefall of 1949 reports reached theState Department about theinroads communism was makingwithin the Chinese community inT h a i l a n d a s w e l l a s t h einvolvement of the Thai army witho p i u m S i n c e t h e a r m yvirtually controlled the nature ofThailandrsquos security relationshipwith the West foreign promotionof opium control had to take a backseat to other policy priorities44

On March 9 1950 when Truman was asked toapprove $10 million in military aid for ThailandAchesonrsquos supporting memo noted that $5million had already been approved by Trumanfor the Thai ldquoconstabularyrdquo45 This presumablycame from the OPCrsquos secret budget I can findno other reference to the $5 million in StateDepartment published records and two yearslater a US aid official in Washington EdwinMartin wrote in a secret memo that the ThaiPolice force under General Phao ldquois receivingno American military aidrdquo46

Cliques the Mob the KMT and OperationPaper

The US decision to back the KMT troopsmdashtheso-called Li Mi project or Operation Papermdashwasmade at a time of intense interbureaucraticconflict and even conspiratorial disagreementover o f f ic ia l US po l icy toward thenew Chinese Peoplersquos Republic As thehistorian Bruce Cumings has shown both theKMT-financed China Lobby and manyRepublicans like Donovan as well as GeneralMacArthur in Japan were furious at the failureof Secretary of State Dean Acheson to continuesupport for Chiang Kai-shek after the foundingof the Peoplersquos Republic in October 194947 Upuntil the June 1950 outbreak of war in KoreaAcheson refused to guarantee even the securityof Taiwan48

Claire Chennault with Chiang Kai-shekand Mme Chiang

The key public lobbyist for backing the KMT inBurma and Yunnan was General ClaireChennault original owner of the airline theOPC took over Chennault deserves to beremembered as an early postwar proponent ofusing off-the-books assets his ldquoChennault Planrdquoenvisaged essentially self-financing KMTarmies backed by a covert US logisticalairline in support of US foreign policy49

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

10

Because by this time Chennault was serving inWashington as Chiang Kai-shekrsquos militaryrepresentative he was viewed by USofficials with increasing suspicion if notdistaste5 0 Yet his longtime associatefriend and business ally Thomas (ldquoTommy theCorkrdquo) Corcoran who after 1950 was aregistered foreign agent for Taiwan managedto put Chennault in contact with senior OPCofficers including Richard Stilwell chief of theFar East Division of the OPC51

There were other private interests with a stakein Operation Paper In 1972 I noted that thetwo principal figures inside the United Stateswho backed Chennault Paul Helliwell andThomas Corcoran were both attorneys forthe OSS-related insurance companies of C VStarr in the Far East52 (Starr who hadoperated out of Shanghai before the warhelped OSS China establish a network boththere and globally53) The C V Starr companies(later the massive AIG group) allegedly hadldquoc lose f inanc ia l t iesrdquo wi th Ch ineseNationalists in Taiwan54 and in any case theywould of course have had a f inancialinterest both in restoring the KMT to power inChina and in consolidating a Western presencein Southeast Asia55 At the time of Corcoranrsquoslobbying Starrrsquos American InternationalAssurance Company was expanding from itsHong Kong base to Malaysia Singapore andThailand In 2006 that company was ldquothe No 1life insurer in Southeast Asiardquo56 And its parentAIG before AIGrsquos spectacular collapse in 2008was listed by Forbes as the eighteenth-largest public company in the world

Corcoran was also the attorney in Washingtonfor Chiang Kai-shekrsquos brother-in-law T VSoong the backer of the China Lobby whosome believed to be the ldquowealthiest man in theworldrdquo57 It is likely that Soong and theKMT helped develop the Chennault Plan Acomplementary plan for supporting theremnants of General Li Mirsquos KMT armies inBurma was developed in 1949 by the armyrsquos

civilian adviser Ting Tsuo-shou afterdiscussions on Taiwan with Chiang Kai-shek58

Like Chiang Kai-shek Chennault also hadsupport from Henry Luce of Time-Life inAmerica and both General MacArthur and hisintelligence chief Major General CharlesW i l l o u g h b y i n J a p a n T h e i r p l a n sfor maintaining and reestablishing the KMT inChina were in 1949 already beginning todiverge significantly from those of Truman andhis State Department59 Former OSS ChiefWilliam Donovan now outside the governmentand promoting the KMT also promoted bothChiang Kai-shek and Chennault60 as didChennaultrsquos wartime associate William Pawleya freewheeling overseas investor who likeHelliwell reputedly had links to mob drugtraffickers61

Donovanrsquos support for Chennault was part ofhis general advocacy of rollback againstcommunism and his interest in guerrillaarmiesmdasha strongly held ideology that as weshall see led to his appointment as ambassadorto Thailand in 1953 His intellectual ally in thiswas the former Trotskyite James Burnhamanother proteacutegeacute of Henry Luce by then in theOPC (and a prototype of the neoconservativeshalf a century later) Burnham wrote in hisbook (ldquopublished with great Luce fanfare inearly 1950rdquo) of ldquorolling backrdquo communism andof supporting Chiang Kai-shek to at somefuture point ldquothrow the Communists back outof Chinardquo62

The Belated Authorization of OperationPaper

In the midst of this turmoil OPC Chief FrankWisner began in the summer of 1948 torefinance and eventually take over Chennaultrsquosairline CAT which Chiang Kai-shekrsquos friendClaire Chennault had organized with postwarUN relief funds to airlift supplies to the KMTarmies in China Wisner ldquonegotiated withCorcoran for the purchase of CAT [in which

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

11

Corcoran as well as Chennault had a financialinterest] In March [1950] using a lsquocutoutrsquobanker or middleman the CIA paid CAT$350000 to clear up arrearages $400000 forfuture operations and a $1 million option onthe businessrdquo63

Richard Stilwell Far Eastern chief of the OPCand the future overseer of Operation Paperdickered with Corcoran over the purchaseprice64 The details were finalized in March1950 shortly before the outbreak of theKorean War in June generated for CAT Inc ahuge volume of new business65 Alfred CoxOPC station chief in Hong Kong and the chiefexecutive officer (CEO) of CAT Inc directedthe supply operation to Li Mi66

According to an unfavorable assessment byLieutenant Colonel William Corson a formermarine intelligence officer on specialassignment with the CIA the OPC

in late summer 1950 recruited (orrather hired) a batch of ChineseNationalist soldiers [who] weretranspor ted by the OPC tonorthern Burma where they wereexpected to launch guerrilla raidsinto China At the t ime thisdubious project was initiated noconsideration was given to thefacts that (a) Truman had declinedChiangrsquos offer to participate in theK o r e a n W a r ( b )Burmese neutrality was violated bythis action and (c) the troopsprovided by Chiang were utterlylacking in qualifications for such apurpose67

Shortly afterward in October 1950 Trumanappointed a new and more assertive CIAdirector Walter Bedell Smith Within a weekSmith took the first steps to make the OPC andWisner answerable for the first time at least on

paper to the CIA68 Smith ultimately succeededin his vigorous campaign to bring Wisner andthe OPC under his control partly by bringing inAllen Dulles to oversee both the OPC and theCIArsquos rival Office of Special Operations (OSOthe successor to the Strategic Service Unit)69

Yet in November 1950 only one month after hisappointment as director Smith tried and failedto kill Operation Paper when the proposal wasbelatedly submitted by the OPC (backed by theJoint Chiefs) for Trumanrsquos approval

The JCS [Joint Chiefs of Staff] inApril 1950 issued a series ofrecommendations including aprogramme of covert assistance tolocal anti-communist forces Thisproposal received additionalstimulus following the KoreanW a r a n d e s p e c i a l l y a f t e rCommunist China entered thatconflict Shortly after the PeoplersquosRepublicrsquos (PRCrsquos) interventiont h e C e n t r a l I n t e l l i g e n c eAgencyrsquos (CIArsquos) Office of PolicyCo-ordination (OPC) proposed aprogramme to divert the PRCrsquosm i l i t a r y f r o m t h e K o r e a npeninsula The plan called for USaid to the 93rd followed by aninvasion of Yunnan by Lirsquos menInterestingly the CIArsquos directorWalter Bedell Smith opposed theplan considering it too riskyBut President Harry S Trumansaw merit in the OPC proposal andapproved it The programmebecame known as OperationPaper70

It is not clear whether when Truman approvedOperation Paper in November 1950 hissecretary of state Dean Acheson was evenaware of it It is a matter of record that the USembassies in Burma and Thailand knew nothingof the authorization until well into 1951 when

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

12

they learned of it from the British andeventually from Phibun himself71 The scholarVictor Kaufman reports that he ldquowas unable toturn up any ev idence at the TrumanLibrary the National Archives or in thevolumes of FRUS [Foreign Relations ofthe United States] to determine whether in factAcheson knew of the operation and if so atwhat pointrdquo72

Both MacArthur and Chennault had ambitiousdesigns for the CAT-supported KMT troops inBurma With the outbreak of the Korean Warin 1950 CAT played an important role inairlifting supplies to the US troops73 But bothMacArthur and Chennault spoke publicly oftrapping communist China in what Chennaultcalled a ldquogiant pincersrdquomdashsimultaneous attacksfrom Korea and from Burma74

The OPC kicked in by helping to build up amajor airstrip at the chief KMT base at MongHsat Burma followed by a regular shuttletransport of American arms75 However Li Mirsquosattempts to invade Yunnan in 1951 and 1952(three according to McCoy seven according toLintner) were swiftly repelled by localmilitiamen with heavy casualties after advancesof no more than sixty miles76 CIA advisersaccompanied the incursions and some of themwere killed77

American journalists and historians like toattribute the CIArsquos Operation Paper in supportof Li Mi and the opium-growing 93rd Divisionin Burma to President Trumanrsquos authorizationin November 1950 following the outbreak ofthe Korean War in June 1950 and above all theChinese crossing of the Yalu River78 But ashistorian Daniel Fineman points out Trumanwas merely authorizing an arms shipmentsprogram that had already begun monthsearlier

Shortly after the writing of the[April 1950] JCS memorandum the

United States began supplyingarms and mateacuteriel to the [KMT]troops [The Burmese protested inAugust 1950 that they haddiscovered in northern Burma anAmerican military officer from theBangkok embassy in Burmawithout authorization79] In the fallt h e O f f i c e o f P o l i c yCoordination (OPC) drafted adaring plan for them to invadeYunnan The CIArsquos director WalterBedell Smith opposed the riskyscheme but Truman [in November1950] rejected his warning InJanuary 1951 the CIA initiated itsproject code-named OperationPaper It aimed to prepare theKuomintang (KMT) forces inBurma for an invasion of Yunnan80

The futility of Li Mirsquos military jabs againstChina was obvious to Washington by 1952 YetFederal Bureau of Narcotics (FBN) Chief HarryAnslinger continued to cover up the Li Mi-Thaidrug connection for the next decade Theannual trafficking reports of the FBN recordedone seizure of distinctive Thai GovernmentMonopoly opium in 1949 and on ldquoseveraloccasionsrdquo more in 1950 But after theinitiation of Operation Paper in 1951 the FBNover a decade listed only one seizure of Thaid r u g s ( f r o m t w o s e a m e n ) u n t i l i tbegan reporting Thai drug seizures again in196281

Meanwhile Anslinger who ldquohad established aworking relationship with the CIA by the early1950s blamed the PRC [Peoplersquos Republicof China as opposed to their enemy the KMT]for orchestrating the annual movement of sometwo hundred to four hundred tons of opiumfrom Yunnan to Bangkokrdquo82 This protection ofthe worldrsquos leading drug traffickers (whowere also CIA proxies) did not cease withAnslinger nor even when the FBN by then

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

13

thoroughly corrupted from such cover-ups wasreplaced in 1968 by the Bureau of Narcoticsand Dangerous Drugs and finally in 1973 by theDrug Enforcement Administration As I write in2010 the US media are blaming the drugtraffic in Afghanistan on the Taliban-ledinsurgency but UN statistics (examined later inthis book) suggest that insurgents receive lessthan 12 percent of the total drug revenues inAfghanistanrsquos totally drug-corrupted economy

Harry Anslinger

As we saw in the previous chapter Anslingerrsquostenure at the FBN was when the CIA alsoforged anticommunist drug alliances in Europein the 1940s with the Italian Mafia in Sicily andthe Corsican Mafia in Marseilles TheKMT drug support operation was longer livedand had more lasting consequences in Americaas well as in Southeast Asia It converted theGolden Triangle of BurmandashThailandndashLaos

which before the war had been marginal to theglobal drug economy into what was for twodecades the dominant opium-growing area ofthe world

Did Some People Intend to Develop theDrug Traffic with Operation Paper

The decision to arm Li Mi was obviouslycontroversial and known to only a few Some ofthose backing the OPCrsquos support of a pro-KMTairline and troops may have envisaged from theoutset that the 93rd Division would continue asduring the war to act as drug traffickers Thekey figure Paul Helliwell may have had a dualinterest inasmuch as he not only was aformer OSS officer but also at some pointbecame the legal counsel in Florida for thesmall Miami National Bank used after 1956 byMeyer Lansky to launder illegal funds83 Weshall see in the next chapter that Helliwell alsowent on to represent Phaorsquos drug-financedgovernment in the United States and to receivefunds from that source84

It is possible that in the mind of Helliwell withhis still ill-understood links to the underworldand Meyer Lansky Li Mirsquos troops were notbeing used to invade China so much as torestore the war-dislocated international drugtraffic that supported the anticommunist KMTand the comprador capitalist activities of itssupporters throughout Southeast Asia85 (As amilitary historian has commented ldquoLi Mi wasmore Mafia or war lord than ChineseNationalist Relying on his troops to bring downMao was an OPC pipe dreamrdquo86)

It is possible also that other networksassociated with the drug traffic became part ofthe infrastructure of the Li Mi operation Thisquestion can be asked of some of the ragtaggroup of pilots associated with Chennaultrsquosairlines in Asia some of whom were rumored tohave seized this opportunity for drugtrafficking87 According to William R Corson (amarine colonel assigned at one point to the

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

14

CIA)

The opium grown by the ChiNatguerrillas was transported byOPC contract aircraft from theforward base to Bangkok for salet o b u y e r s f r o m t h evarious ldquoconnectionsrdquo The pilotswho flew these bushtype aircraftand often served as agents or go-betweens with the guerrilla leadersand the opium buyers werea motley band of men Some wereex-Nazis others part of the band ofexpatriates who emerge in foreigncountries following any war88

The FBN by this time was aware that MargaretChung the attending physician to the pilots ofChennaultrsquos wartime airline was involved withBugsy Siegelrsquos friend Virginia Hill ldquoin thenarcotic traffic in San Franciscordquo89 DuringWorld War II when the Office of NavalIntelligence through the OSS approached DrChung for some specific intelligence on Chinashe ldquovolunteered that she could supply detailedinformation lsquofrom some of the smugglers inSan Franciscorsquordquo90

One has to ask what was in the mind ofChennault Chennault himself was onceinvestigated for smuggling activities ldquobut noofficial action was taken because he waspolitically untouchablerdquo91 I have no reason tosuspect that Chennault wished to profitpersonally from the drug traffic But hisobjective in opposing Chinese communists wasto split off ethically divergent provinces likeXinjiang Tibet and above all Yunnan

Chennaultrsquos top priority was Yunnan with itslong-established Haw (or Hui) Muslim minoritymany of whom (especially in southwesternYunnan) traditionally dominated the opiumtrade into Thai land 9 2 The troops ofthe reconstituted 93rd Division were principally

Haws from Yunnan93 To this day one Thainame for the KMT Yunnanese minority innorthern Thailand is gaan beng gaaosipsaam(ldquo93rd Divisionrdquo) and visitors to the formerbase of the KMT general Duan Xiwen inThai land (Mae Salong) are struck bythe mosque one sees there 9 4

I suspect that Chennault may have known thatnone of the elements in the reconstituted 93rdDivision ldquohad made great records of militaryaccomplishmentrdquo during World War II95 thatthe 93rd had been engaged in drug traffickingwhen based at Jinghong during World War II96

and that when the 93rd Division moved intonorthern Burma and Laos in 1946 it was ldquoinreality to seize the opium harvest thererdquo97

That the 93rd D iv i s ion se t t led in tomanaging the postwar drug traffic out ofB u r m a s h o u l d h a v e c o m e a s n osurprise Chennault was close to MadameChiang Kai-shek T V Soong and the KMTwhich had been supporting itself from opiumrevenues since the 1930s98 Linked to drugtrafficking both in Thailand (through the Tai Lispy network) and in America the KMT afterexpulsion from Yunnan desperately needed anew opium supply to maintain its contacts withthe opiumtrafficking triads and other formerassets of Tai Li in Southeast Asia99

From the time of the inception of the KMTgovernment in the 1920s KMT officials hadbeen caught smuggling opium and heroin intothe United States100 As noted earlier an FBNsupervisor reported in 1946 that ldquoin a recentKuomintang Convention in Mexico City a widesolicitation of funds for the future operation ofthe opium trade was notedrdquo In July 1947 theState Department reported that the ChineseNationalist government was ldquoselling opium in adesperate attempt to pay troops still fightingthe Communistsrdquo101 The New York Timesreported on July 23 1949 the seizure in HongKong of twenty-two pounds of heroin that hadarrived from a CIA-supplied Kuomintangoutpost in Kunming102 But the loss of Yunnan in

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

15

1949ndash1950 meant that the KMT would have todevelop a new source of supply

The key to the survival of the KMT was ofcourse its establishment and protection after1949 on the island of Taiwan Chennault andhis air l ine CAT helped move the KMTleadership and its resources to its new baseand to deny the new Chinese Peoplersquos Republict h e C h i n e s e c i v i l a i r f l e e t ( w h i c hbecame embroiled in a protracted Hong Konglegal battle where CAT was represented byWil l iam Donovan) 1 0 3 By 1950 one ofChennaultrsquos wartime pilots Satiris (or Soterisor Sortiris) Fassoulis ran a firm CommerceInternational China Inc that privatelysupplied arms and military advisers to ChiangKai-shek on Taiwan Bruce Cumings speculatesthat he may have done so for the OPC at a timewhen Acheson was publicly refusing to committhe United States to the defense of Taiwan104

Finally all those handling Operation Paper inand for the OPC (Fitzgerald Helliwell JoostCAT Inc CEO Alfred Cox and Bird) had hadexperience in the area during World War II Ifthey had not wanted Li Mi and CAT to be- comeinvolved in restoring the KMT drug traffic itwould have been imperative for them to ensurethat the KMT on Taiwan had no control overCATrsquos operations But Wisner and Helliwell didthe exact opposite when they took over theCAT airline they gave majority control of theCAT planes to the KMT-linked Kincheng Bankon Taiwan105 Thereafter for many yearsCAT planes would fly arms into Li Mirsquos campfor the CIA and then fly drugs out for the KMT

The opium traffic may well have seemedattractive to OPC for strategic as well asfinancial reasons As Alfred McCoy hasobserved Phaorsquos pro-KMT activities in Thailandldquowere a part of a larger CIA effort to combatthe growing popularity of the Peoplersquos Republica m o n g t h e w e a l t h y i n f l u e n t i a loverseas Chinese community throughoutSoutheast Asiardquo106 I have noted elsewhere that

the KMT reached these communities in partthrough triads and other secret societies(especially in Malaya) that had traditionallybeen involved in the opium traffic Thus therestoration of an opium supply in Burma toreplace that being lost in Yunnan had the resultof sustaining a social fabric and an economythat was capitalist and anticommunist107

I would add today that the opium traffic was aneven more impor tant e lement in ananticommunist strategy for Southeast Asia as asource of income We have already seen thatfor a century the Thai state had relied on itsrevenues from the state opium monopoly in1953 ldquothe Thai representative at the April CND[Commission on Narcotic Drugs] session hadadmitted that his country could not afford tog ive up the revenue f rom the op iumbusinessrdquo 1 0 8

Just as important was the role of opium profitsin promoting capitalism among the Chinesebusinessmen of Southeast Asia (the agenda ofSir William Stephenson and the WCC) Whetherthe Chinese who dominated business in theregion would turn their allegiance to Beijingdepended on the availability of funds foralternative business opportunities Here Phaorsquosbanker Chin Sophonpanich became a sourceo f f u n d s f o r t o p a n t i c o m m u n i s tbusinessmen not only in Thailand but also inMalaysia and Indonesia

Chin Sophonpanich created thelargest bank in south-east Asia andone that was extremely profitableA report by the InternationalMonetary Fund in 1973 claimedthat Bangkok Bankrsquos privilegedposition allowed it to make returnson its capital in excess of 100 percent a year (a claim denounced byChinrsquos lieutenants) What was notin dispute was that the bankrsquosbulging deposit base could not belent out at optimum rates in

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

16

Thailand alone This is where Chinrevolutionised the south-east Asianbanking scene He personallytravelled between Hong KongSingapore Kuala Lumpur andJakarta identifying and courtingthe new generation of putativepost colonial tycoons Chinbanked the key godfathers outsideHong KongmdashRobert Kuok inMalays ia L iem Sioe L iong[Sudono Salim] in Indonesia theChearavanonts in Thailandmdashaswell as other players in Singaporeand Hong Kong Chin wasclosely linked to the Thai herointrade through his role as personalfinancier to the narcotics kingpinPhao Sriyanon and to otherpoliticians involved in running thedrug business109

Chin thus followed the example of the Khawfamily opium farmers in nineteenth-centurySiam whose commercial influence alsoeventually ldquoextended across Siamrsquos southernborders into Malaya and the Netherlands EastIndiesrdquo into legitimate industries such as tinmines and a shipping company110

America had another reason to accept Li Mirsquossmuggling activities as a source of badlyneeded Burmese tungsten According toJonathan Marshall there is fragmentaryevidence that OPCCIA support for his remnantarmy was ldquoalso to facilitate Western control ofBurmarsquos tungsten resourcesrdquo111

Creation of an Off-the-Books Force withoutAccountability

The OPC aid to Thai police greatly augmentedthe influence of both Phao Sriyanon whoreceived it and Willis Bird the OSS veteranthrough which it passed and who was already asupplier for the Thai military and police Seeingthe gap between the generals who had

organized the military coup of 1947 and USAmbassador Stanton who still worked tosupport civilian politicians Bird worked withPhao and the generals of the 1947 CoupGroup to create in 1950 a secret ldquoNaresuanC o m m i t t e e rdquo B y p a s s i n g t h e U S embassy altogether the Naresuan Committeecreated a parallel parastatal channelfor USndashThai governmental relations betweenOPC and Phaorsquos BPP

Bird organized in 1950 a secretcommittee of leading military andpolitical figures to develop ananticommunist strategy and moreimportantly lobby the UnitedStates for increased militaryassistance The group dubbed theNaresuan Committee includedpolice strongman Phao SriyanonSarit Thanarat Phin ChoonhawanPhaorsquos father-in-law air force chiefFuen Ronnaphakat and Birdrsquos[Anglo-Thai] brother-in-law [airforce colonel] Sitthi [Savetsilalater Thailandrsquos foreign ministerfor a decade] Bird and thegenerals establ ished theirc o m m i t t e e t o b y p a s s t h eambassador and work through[Birdrsquos] old OSS buddies nowemployed by the CIA [sic ieOPC]112

Thomas Lobe ignoring Bird writes that it wasthe ldquoThai military cliquerdquo who organized thecommittee But from his own prose we learnthat the initiative may have been neither theirsnor Birdrsquos alone but in implementation of a newstrategy of support to the KMT in Burmadesigned by the OPC and JCS in Washington

A high-ranking US military officerand a CIA [OPC] official came toBangkok [in 1950] to review the

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

17

political situation113 Throughthe ldquo[Naresuan] Anti-CommunistCommitteerdquo secret negotiationsensued between Phao and theCIA [OPC] The US representativee x p l a i n e d t h e n e e d f o r aparamilitary force that could bothdefend Thai borders and cross overi n t o T h a i l a n d rsquo sneighborsmdash Vietnam Laos BurmaCambodia and Chinamdashfor secretmissions The CIArsquos new policewere to be special an elite forceo u t s i d e t h e n o r m a l c h a i nof command of both the Thaisecurity bureaucracy and theTNPD [Thai National Policedepartment] Phao and Phibunagreed to this arrangementbecause of the increase in armedpower that this new national policemeant v i s -agrave -v i s the armedforces 1 1 4

This was in keeping with the JCS call in April1950 for a new ldquoprogram of special covertoperations designed to interfere withCommunist activities in Southeast Asiardquo notingldquothe evidences of renewed vitality and apparentincreased effectiveness of the ChineseNationalist forcesrdquo115

Action was taken immediately

[Birdrsquos] CIA [ie OPC] contactssent an observer to meet thecommittee and impressed with theresolve the Thais manifested gotW a s h i n g t o n t o a g r e e t o alarge covert assistance programBecause they considered thematter urgent planners on boththe Thai and American sidesdec ided t o f o rgo a f o rma lagreement on the terms of the aidInstead Paul Helliwell an OSS

friend of Bird [from China] nowpracticing law in Florida [as wellas military reserve officer and OPCoperative] incorporated a dummyfirm in Miami named the Sea (ieS o u t h - E a s t A s i a ) S u p p l yCompany as a cover for theoperation The CIA [OPC] thea g e n c y o n t h e A m e r i c a nend responsible for the assistanceopened a Sea Supply office inBangkok By the beginning of1951 Sea Supply was receivingarms shipments for distribution The CIA [OPC] appointed Birdrsquosfirm general agent for Sea Supplyin Bangkok116

Sea Supplyrsquos arms from Bird soon reached notonly the Thai police and BPP but also startingin early 1951 the KMT 93rd Division in Burmawhich was still supporting itself as during thewar from the opium traffic117 General Li Mithe postwar commander of the 93rd Divisionwould consult with Bird and Phao in Bangkokabout the arms that he needed for the KMTbase at Mong Hsat in Burma and that hadalready begun to reach him months before thecreation of the Bangkok Sea Supply office inJanuary 1951118 The airline supplying the KMTbase at Mong Hsat in Burma from Bangkok wasHelliwellrsquos other OPC proprietary CAT Incwhich in 1959 changed its name to becomethe well-known Air America The deliberatelyinformal arrangement for Sea Supply served tomask the sensitive arms shipments to a KMTopium base119

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

18

Air America U-10D Helio Courier aircraftin Laos on a covert mountaintop landing

strip (LS) Lima site

In the complex legal takeover of Chennaultrsquosairline his assets developed into three separatecomponents planes (the Taiwanese civilianairline In the complex legal takeover ofChennaultrsquos airline his assets developed intothree separate components planes (theTaiwanese civilian airline Civil Air Transport orCATCL) pilots (later Air America) and ground-support operations (Air Asia) Of these theplanes only 40 percent were owned by the CIAthe remaining 60 percent continued to beowned by KMT financiers (with alleged links toTV Soong and Mme Chiang K ai-shek) whohad relocated to Taiwan and were associatedwith the Kincheng Bank120 The Kincheng Bankwas under the control of the so-called PoliticalScience Clique of the KMT whose memberChen Yi was the first postwar KMT governor ofTaiwan121

The OPCrsquos organizational arrangements for itsproprietary CAT which left 60 percent of thecompany owning the CAT planes in KMT handsguaranteed that CATrsquos activities were immuneto being reined in by Washington122

In fact Helliwell Bird and Birdrsquos Thai brother-in-law Sitthi Savetsila all avoided the USembassy and instead plotted strategy for theKMT armies at the Taiwanese embassy There

the real headquarters for Operation Paperwas the private office of Taiwanese DefenseAttacheacute Chen Zengshi a graduate of ChinarsquosWhampoa Military Academy123

Birdrsquos energetic promotion of Phao precisely ata time when the US embassy was trying toreduce Phaorsquos corrupt influence led to a 1951embassy memorandum of protest toWashington about Birdrsquos activities ldquoWhy isthis man Bird allowed to deal with the PoliceChief [Phao]rdquo the memo asked1 2 4 Thequestion for which there is no publiclyrecorded reply was an urgent one Birdrsquosbacking of the so-called Coup Group (PhinChoonhavan Phao Sriyanon and SaritThanarat) reinforced by the obvious USsupport for Bird through Operation Paper andSea Supply encouraged these military men intheir November 1951 ldquoSilent Couprdquo to defyStanton dissolve the Thai parliament andreplace the postwar Thai constitution with onebased on the much more react ionaryconstitution of 1932 1 2 5

The KMT Drug Legacy for Southeast Asia

When the OPC airline CAT began its covertflights to Burma in the 1950s the areaproduced about eighty tons of opium a year Inten yearsrsquo time production had at leastquadrupled and at one point during theVietnam War the output from the GoldenTriangle reached 1200 tons a year By 1971there were also at least seven heroin labs in theregion one of which close to the CIA base ofBan Houei Sai in Laos produced an estimated36 tons of heroin a year126

The end of the Vietnam War did not interruptthe flow of CIA-protected heroin to Americafrom the KMT remnants of the former 93rdDivision now relocated in northern Thailandunder Generals Li Wenhuan and DuanXiwen (Tuan Hsi-wen) The two generals bythen officially integrated into the defenseforces of Thailand still enjoyed a special

APJ | JF 8 | 44 | 2

19

relationship to and protection from the CIAWith this protection Li Wenhuan from his basein Tam Ngob became according to JamesM i l l s ldquo o n e o f t h e m o s t p o w e r f u lnarcotics traffickers on earth controllingt h e o p i u m f r o m w h i c h i s r e f i n e d amajor percentage of heroin entering the UnitedStatesrdquo127

From the very outset of Operation Paper theconsequences were felt in America itself As Ihave shown elsewhere most of the KMT-Thaiopium and heroin was distributed in Americaby KMT-linked tongs with long-term ties to theAmerican mafia128 Thus Anslingerrsquos rhetoricserved to protect the primary organized crimenetworks distributing Asian narcotics inAmerica Far more than the CIA drug alliancesin Europe the CIArsquos drug project inAsia contributed to the drug crisis that afflictedAmerica during the Vietnam War and fromwhich America still suffers Furthermore USprotection of leading KMT drug traffickers ledto the neutralization of domestic drugenforcement at a high level It has also inflicteddecades of militarized oppression on the tribesof eastern Myanmar (Burma) perhaps theprincipal victims of this story

By the end of 1951 Truman convinced that theKMT forces in Burma were more of a threat tohis containment policy than an asset ldquohadcome to the conclusion that the irregulars hadto be removedrdquo129 Direct US support to Li Miended forcing the KMT troops to focus evenmore actively on proceeds from opium soonsupplemented by profits from morphine labs aswell But nevertheless in June 1952 as weshall see 100 Thai graduates from theBPP training camp were in Burma training LiMirsquos troops in jungle warfare130 After askirmish in 1953 the Burma army recoveredthe corpses of three white men with noidentification except for some documents withaddresses in Washington and New York131

Operation Paper was by now leading a life ofits own independent not just of Ambassador

Stanton but even of the president

A much-publicized evacuation of troops toTaiwan in 1953ndash1954 was a charade despitefive months of strenuous negotiations byWilliam Donovan by then Eisenhowerrsquosambassador in Thailand Old men boys andhill tribesmen were airlifted by CAT fromThailand and replaced by fresh troopsnew arms and a new commander132

The fiasco of Operation Paper led in 1952 tothe final absorption of the OPC into the CIAAccording to R Harris Smith

Bedell Smith summoned theOPCrsquos Far East director RichardStilwell and in the words of anagency eyewitness gave him sucha ldquoviolent tongue lashingrdquo that ldquothecolonel went down the hall intearsrdquo [T]he Burma debaclewas the worst in a string of OPCaffronts that confirmed hisdecision to abolish the office In1952 he merged the OPC with theCIArsquos Office of Special Operations[to create a new Directorate ofPlans]133

What precipitated this decision was an eventremembered inside the agency as the ldquoThailandflaprdquo Its precise nature remains unknown butcentral to it was a drugs-related in-housemurder Allen Dullesrsquos biographer recountsthat in 1952 Walter Bedell Smith ldquohad to sendtop officials of both clandestine branches [theCIArsquos OSO and OPC] out to untangle a mess ofopium trading under the cover of efforts totopple the Chinese communistsrdquo134 (I heardfrom a former CIA officer that an OSO officerinvestigating drug flows through Thailand wasmurdered by an OPC officer135) Years later ata secret Council on Foreign Affairs meeting in1968 to rev iew of f ic ia l inte l l igenceoperations former CIA officer Richard Bissell

APJ | JF 8 | 44 | 2

20

referred back to the CIAndashOPC flap as ldquoa totaldisaster organizationallyrdquo136

But what was an organizational disaster may beseen as having benefited the political objectivesof the wealthy New York Republicans in OPC(including Wisner Fitzgerald Burnham andothers) who constituted an overworld enclavecommitted to rollback inside the Trumanestablishment committed to containment(Recall that Wisner had surrounded himself inthe OPC with men who in the words ofWisnerrsquos ex-wife ldquohad money enough of theiro w n t o b e a b l e t o c o m e d o w n rdquo t oWashington137) This enclave was alreadyexperimenting with attempts to launch therollback policy that Eisenhower and JohnFoster Dulles would call for in the 1952election campaign138

Truman understandably and rightlymistrusted this enclave of overworld WallStreet Republicans that the CIA and OPC hadinjected into his administration The fourdirectors Truman appointed to oversee centralintelligencemdashSidney Souers Hoyt VandenbergRoscoe Hillenkoetter and Walter BedellSmithmdashwere all from the military and all (likeTruman himself) from the central UnitedStates139 This was in striking contrast to the sixknown deputy directors below them whosebackground was that of New York City or (inone case) Boston law andor finance and (in allcases but one) the Social Register140

But Bedell Smith Trumanrsquos choice to controlthe CIA inadvertently set the stage foroverworld triumph in the agency when inJanuary 1951 he brought in Allen Dulles (WallStreet Republican Social Register and OSS)ldquoto control Frank Wisnerrdquo141 And with theRepublican elect ion victory of 1952Bedell Smithrsquos intentions in abolishing the OPCwere completely reversed Desmond Fitzgeraldof the OPC who had been responsible for thecontroversial Operation Paper became chief ofthe CIArsquos Far East Division142 American arms

and supplies continued to reach Li Mirsquos troopsno longer directly from OPC but now indirectlythrough either the BPP in Thailand or the KMTin Taiwan

The CIA support for Phao began to wane in1955ndash1956 especially after a staged BPPseizure of twenty tons of opium on the Thaiborder was exposed by a dramatic story in theSaturday Evening Post144 But the role of theBPP in the drug trade changed little as isindicated in a recent report from theAsian Human Rights Commission in HongKong Meanwhile for at least seven years theBPP would ldquocapturerdquo KMT opium in stagedraids and turn it over to the Thai OpiumMonopoly The ldquorewardrdquo for doing so one-eighth the retail value financed the BPP143

The police force that exists inThailand today is for all intents andpurposes the same one that wasbuilt by Pol Gen Phao Sriyanondi n t h e 1 9 5 0 s I t t o o kon paramilitary functions throughnew special units including theborder police It ran the drugtrade carried out abductions andki l l ings with impunity andwas used as a political base forP h a o a n d h i s a s s o c i a t e s Successive attempts to reform thepolice particularly from the 1970sonwards have all met with failured e s p i t e a l m o s t u n i v e r s a lacknowledgment that somethingmust be done145

The last sentence could equally be applied toAmerica with respect to the CIArsquos involvementin the global drug connection

Peter Dale Scott a former Canadian diplomatand English Professor at the University of

APJ | JF 8 | 44 | 2

21

California Berkeley is the author of Drugs Oiland War The Road to 9 11 The WarConspiracy JFK 911 and the Deep Politics ofWar His American War Machine Deep Politicsthe CIA Global Drug Connection and the Roadto Afghanistan from which the present article isexcerpted has just been published

Recommended citation Peter Dale ScottOperation Paper The United States and Drugsin Thailand and Burma The Asia-PacificJournal 44-2-10 November 1 2010

Notes

1 William O Walker III ldquoDrug Trafficking inAsiardquo Journal of Interamerican Studies andWorld Affairs 34 no 3 (1992) 204

2 William Peers [OSSCIA] and Dean BrellisBehind the Burma Road (Boston Little Brown1963) 64

3 Burton Hersh The Old Boys The AmericanElite and the Origins of the CIA (New YorkScribnerrsquos 1992) 300

4 Peter Dale Scott ldquoMae Salongrdquo in MosaicOrpheus (Montreal McGill-Queenrsquos UniversityPress 2009) 45

5 Peter Dale Scott ldquoWat Pa Nanachatrdquo inMosaic Orpheus 56

6 Note Omitted

7 I write about this practice in Drugs Oil andWar The United States in AfghanistanColombia and Indochina (Lanham MDRowman amp Littlefield 2003)

8 There are analogies also with the history ofUS involvement in Iraq though here theanalogies are not so easily drawn The mostrelevant point is that US success in thedefense of Kuwait during the 1990ndash1991 GulfWar once again produced internal pressuresdominated by the neoconservative clique and

the CheneyndashRumsfeldndashProject for the NewAmerican Century cabal which ultimatelypushed the United States into another rollbackcampaign the current invasion of Iraq itself

9 G William Skinner Chinese Society inThailand An Analytical History (Ithaca NYCornell University Press 1957) 166ndash67 AlfredW McCoy The Politics of Heroin CIAComplicity in the Global Drug Trade (ChicagoLawrence Hill BooksChicago Review Press2003) 101 Bertil Lintner Blood Brothers TheCriminal Underworld of Asia (New YorkPalgrave Macmillan 2002) 234

10 Carl A Trocki ldquoDrugs Taxes and ChineseCapitalism in Southeast Asiardquo in OpiumRegimes China Britain and Japan 1839ndash1952ed T imothy Brook and Bob Tadash iWakabayashi (Berkeley University of CaliforniaPress 2000) 99

11 McCoy The Politics of Heroin 102 James CIngram Economic Change in Thailand1850ndash1970 (Stanford CA Stanford UniversityPress 1971) 177

12 Skinner Chinese Society in Thailand 166ndash67236ndash44 264ndash65

13 Cf Robert Maule ldquoBritish Policy Discussionson the Opium Question in the Federated ShanStates 1937ndash1948rdquo Journal of Southeast AsianStudies 33 (June 2002) 203ndash24

14 One often reads that the Northern Armyinvasion of the Shan states was in support ofthe Japanese invasion of Burma In fact theJapanese army (which may have had its owndesigns on Shan opium) refused for somemonths to allow the Thai army to move untilthe refusal was overruled for political reasonsby officials in Tokyo See E Bruce ReynoldsThailand and Japanrsquos Southern Advance1940ndash1945 (New York St Martinrsquos 1994)115ndash17

15 McCoy The Politics of Heroin 105 Cf E

APJ | JF 8 | 44 | 2

20

referred back to the CIAndashOPC flap as ldquoa totaldisaster organizationallyrdquo136

But what was an organizational disaster may beseen as having benefited the political objectivesof the wealthy New York Republicans in OPC(including Wisner Fitzgerald Burnham andothers) who constituted an overworld enclavecommitted to rollback inside the Trumanestablishment committed to containment(Recall that Wisner had surrounded himself inthe OPC with men who in the words ofWisnerrsquos ex-wife ldquohad money enough of theiro w n t o b e a b l e t o c o m e d o w n rdquo t oWashington137) This enclave was alreadyexperimenting with attempts to launch therollback policy that Eisenhower and JohnFoster Dulles would call for in the 1952election campaign138

Truman understandably and rightlymistrusted this enclave of overworld WallStreet Republicans that the CIA and OPC hadinjected into his administration The fourdirectors Truman appointed to oversee centralintelligencemdashSidney Souers Hoyt VandenbergRoscoe Hillenkoetter and Walter BedellSmithmdashwere all from the military and all (likeTruman himself) from the central UnitedStates139 This was in striking contrast to the sixknown deputy directors below them whosebackground was that of New York City or (inone case) Boston law andor finance and (in allcases but one) the Social Register140

But Bedell Smith Trumanrsquos choice to controlthe CIA inadvertently set the stage foroverworld triumph in the agency when inJanuary 1951 he brought in Allen Dulles (WallStreet Republican Social Register and OSS)ldquoto control Frank Wisnerrdquo141 And with theRepublican elect ion victory of 1952Bedell Smithrsquos intentions in abolishing the OPCwere completely reversed Desmond Fitzgeraldof the OPC who had been responsible for thecontroversial Operation Paper became chief ofthe CIArsquos Far East Division142 American arms

and supplies continued to reach Li Mirsquos troopsno longer directly from OPC but now indirectlythrough either the BPP in Thailand or the KMTin Taiwan

The CIA support for Phao began to wane in1955ndash1956 especially after a staged BPPseizure of twenty tons of opium on the Thaiborder was exposed by a dramatic story in theSaturday Evening Post144 But the role of theBPP in the drug trade changed little as isindicated in a recent report from theAsian Human Rights Commission in HongKong Meanwhile for at least seven years theBPP would ldquocapturerdquo KMT opium in stagedraids and turn it over to the Thai OpiumMonopoly The ldquorewardrdquo for doing so one-eighth the retail value financed the BPP143

The police force that exists inThailand today is for all intents andpurposes the same one that wasbuilt by Pol Gen Phao Sriyanondi n t h e 1 9 5 0 s I t t o o kon paramilitary functions throughnew special units including theborder police It ran the drugtrade carried out abductions andki l l ings with impunity andwas used as a political base forP h a o a n d h i s a s s o c i a t e s Successive attempts to reform thepolice particularly from the 1970sonwards have all met with failured e s p i t e a l m o s t u n i v e r s a lacknowledgment that somethingmust be done145

The last sentence could equally be applied toAmerica with respect to the CIArsquos involvementin the global drug connection

Peter Dale Scott a former Canadian diplomatand English Professor at the University of

APJ | JF 8 | 44 | 2

21

California Berkeley is the author of Drugs Oiland War The Road to 9 11 The WarConspiracy JFK 911 and the Deep Politics ofWar His American War Machine Deep Politicsthe CIA Global Drug Connection and the Roadto Afghanistan from which the present article isexcerpted has just been published

Recommended citation Peter Dale ScottOperation Paper The United States and Drugsin Thailand and Burma The Asia-PacificJournal 44-2-10 November 1 2010

Notes

1 William O Walker III ldquoDrug Trafficking inAsiardquo Journal of Interamerican Studies andWorld Affairs 34 no 3 (1992) 204

2 William Peers [OSSCIA] and Dean BrellisBehind the Burma Road (Boston Little Brown1963) 64

3 Burton Hersh The Old Boys The AmericanElite and the Origins of the CIA (New YorkScribnerrsquos 1992) 300

4 Peter Dale Scott ldquoMae Salongrdquo in MosaicOrpheus (Montreal McGill-Queenrsquos UniversityPress 2009) 45

5 Peter Dale Scott ldquoWat Pa Nanachatrdquo inMosaic Orpheus 56

6 Note Omitted

7 I write about this practice in Drugs Oil andWar The United States in AfghanistanColombia and Indochina (Lanham MDRowman amp Littlefield 2003)

8 There are analogies also with the history ofUS involvement in Iraq though here theanalogies are not so easily drawn The mostrelevant point is that US success in thedefense of Kuwait during the 1990ndash1991 GulfWar once again produced internal pressuresdominated by the neoconservative clique and

the CheneyndashRumsfeldndashProject for the NewAmerican Century cabal which ultimatelypushed the United States into another rollbackcampaign the current invasion of Iraq itself

9 G William Skinner Chinese Society inThailand An Analytical History (Ithaca NYCornell University Press 1957) 166ndash67 AlfredW McCoy The Politics of Heroin CIAComplicity in the Global Drug Trade (ChicagoLawrence Hill BooksChicago Review Press2003) 101 Bertil Lintner Blood Brothers TheCriminal Underworld of Asia (New YorkPalgrave Macmillan 2002) 234

10 Carl A Trocki ldquoDrugs Taxes and ChineseCapitalism in Southeast Asiardquo in OpiumRegimes China Britain and Japan 1839ndash1952ed T imothy Brook and Bob Tadash iWakabayashi (Berkeley University of CaliforniaPress 2000) 99

11 McCoy The Politics of Heroin 102 James CIngram Economic Change in Thailand1850ndash1970 (Stanford CA Stanford UniversityPress 1971) 177

12 Skinner Chinese Society in Thailand 166ndash67236ndash44 264ndash65

13 Cf Robert Maule ldquoBritish Policy Discussionson the Opium Question in the Federated ShanStates 1937ndash1948rdquo Journal of Southeast AsianStudies 33 (June 2002) 203ndash24

14 One often reads that the Northern Armyinvasion of the Shan states was in support ofthe Japanese invasion of Burma In fact theJapanese army (which may have had its owndesigns on Shan opium) refused for somemonths to allow the Thai army to move untilthe refusal was overruled for political reasonsby officials in Tokyo See E Bruce ReynoldsThailand and Japanrsquos Southern Advance1940ndash1945 (New York St Martinrsquos 1994)115ndash17

15 McCoy The Politics of Heroin 105 Cf E

APJ | JF 8 | 44 | 2

21

California Berkeley is the author of Drugs Oiland War The Road to 9 11 The WarConspiracy JFK 911 and the Deep Politics ofWar His American War Machine Deep Politicsthe CIA Global Drug Connection and the Roadto Afghanistan from which the present article isexcerpted has just been published

Recommended citation Peter Dale ScottOperation Paper The United States and Drugsin Thailand and Burma The Asia-PacificJournal 44-2-10 November 1 2010

Notes

1 William O Walker III ldquoDrug Trafficking inAsiardquo Journal of Interamerican Studies andWorld Affairs 34 no 3 (1992) 204

2 William Peers [OSSCIA] and Dean BrellisBehind the Burma Road (Boston Little Brown1963) 64

3 Burton Hersh The Old Boys The AmericanElite and the Origins of the CIA (New YorkScribnerrsquos 1992) 300

4 Peter Dale Scott ldquoMae Salongrdquo in MosaicOrpheus (Montreal McGill-Queenrsquos UniversityPress 2009) 45

5 Peter Dale Scott ldquoWat Pa Nanachatrdquo inMosaic Orpheus 56

6 Note Omitted

7 I write about this practice in Drugs Oil andWar The United States in AfghanistanColombia and Indochina (Lanham MDRowman amp Littlefield 2003)

8 There are analogies also with the history ofUS involvement in Iraq though here theanalogies are not so easily drawn The mostrelevant point is that US success in thedefense of Kuwait during the 1990ndash1991 GulfWar once again produced internal pressuresdominated by the neoconservative clique and

the CheneyndashRumsfeldndashProject for the NewAmerican Century cabal which ultimatelypushed the United States into another rollbackcampaign the current invasion of Iraq itself

9 G William Skinner Chinese Society inThailand An Analytical History (Ithaca NYCornell University Press 1957) 166ndash67 AlfredW McCoy The Politics of Heroin CIAComplicity in the Global Drug Trade (ChicagoLawrence Hill BooksChicago Review Press2003) 101 Bertil Lintner Blood Brothers TheCriminal Underworld of Asia (New YorkPalgrave Macmillan 2002) 234

10 Carl A Trocki ldquoDrugs Taxes and ChineseCapitalism in Southeast Asiardquo in OpiumRegimes China Britain and Japan 1839ndash1952ed T imothy Brook and Bob Tadash iWakabayashi (Berkeley University of CaliforniaPress 2000) 99

11 McCoy The Politics of Heroin 102 James CIngram Economic Change in Thailand1850ndash1970 (Stanford CA Stanford UniversityPress 1971) 177

12 Skinner Chinese Society in Thailand 166ndash67236ndash44 264ndash65

13 Cf Robert Maule ldquoBritish Policy Discussionson the Opium Question in the Federated ShanStates 1937ndash1948rdquo Journal of Southeast AsianStudies 33 (June 2002) 203ndash24

14 One often reads that the Northern Armyinvasion of the Shan states was in support ofthe Japanese invasion of Burma In fact theJapanese army (which may have had its owndesigns on Shan opium) refused for somemonths to allow the Thai army to move untilthe refusal was overruled for political reasonsby officials in Tokyo See E Bruce ReynoldsThailand and Japanrsquos Southern Advance1940ndash1945 (New York St Martinrsquos 1994)115ndash17

15 McCoy The Politics of Heroin 105 Cf E

APJ | JF 8 | 44 | 2

22

Bruce Reynolds ldquolsquoInternational OrphansrsquomdashTheChinese in Thailand during World War IIrdquoJournal of Southeast Asian Studies 28(September 1997) 365ndash88 ldquoIn an effort todistance himself from the Japanese PremierPhibun initiated secret contacts withNationalist China through the Thai army in theShan States and developed a scheme totransfer the capital to the northern town ofPetchabun with the idea of ultimately turningagainst the Japanese and linking up militarilywith Nationalist Chinardquo Under orders fromThai Premier Phibun rapprochement of theNorthern Army in Kengtung with the KMTbegan in January 1943 with a symbolic releaseof prisoners fol lowed by a cease f ire(ldquoThailand and the Second World Warrdquo)

16 E Bruce Reynolds Thailandrsquos Secret WarThe Free Thai OSS and SOE during WorldWar II (Cambridge Cambridge UniversityPress 2005) 170ndash71

17 McCoy The Politics of Heroin 162ndash63 citingArchimedes L A Patti Why Vietnam (BerkeleyUniversity of California Press 1980) 216ndash17265 354ndash55 487 Lung Yunrsquos son Lung Shingdenied to James Mills that his father was asmuggler ldquoMy familyrsquos been painted as thebiggest drug runner This is nonsense Thegovernment in the old days put a tax on opiumwhich is true Itrsquos been doing that for the pasthundred years You canrsquot pin it on my family forthatrdquo (James Mil ls The UndergroundEmpire Where Crime and GovernmentsEmbrace [New York Dell 1986] 737)

18 The directions given by Washington to theOSS mission were to establish contact withPhibunrsquos political enemy Pridi PhanomyongHowever the missionrsquos leader Khap Kunchonwas secretly a Phibun loyalist with a history ofsensitive missions and this complication helpsto explain Khaprsquos motive and success inpromoting the ThaindashKMT talks (Nigel J BraileyThailand and the Fall of Singapore AFrustrated Asian Revolution [Boulder CO

Westview Press 1986] 100)

19 Judith A Stowe Siam Becomes Thailand AStory of Intrigue (Honolulu University ofHawailsquoi Press 1991) 282 The border itself aproduct of SinondashBritish negotiations in thenineteenth century was an artifact dividingthe historically connected principalities of theThai Luuml in Sipsongpanna (southern Yunnan)from those of the Thai Yai (Shans) in Burma(Stephen Sparkes and Signe Howell The Housein Southeast Asia A Changing Social Economica n d P o l i t i c a l D o m a i n [ L o n d o n RoutledgeCurzon 2003] 134 Janet CSturgeon Border Landscapes The Politics ofAkha Land Use in China and Thailand [SeattleUniversity of Washington Press 2005] 82)

20 Stowe Siam Becomes Thailand 282ndash83 Ihave discovered no indication as to whetherNicol Smith the American leader of the OSSmission was aware of the implications of thetalks for the future of the Shan opium trade

21 Reynolds Thailandrsquos Secret War 171175ndash76

22 Reynolds Thailandrsquos Secret War 171Brailey Thailand and the Fall of Singapore100 Maochun Yu OSS in China Prelude toCold War (New Haven CT Yale UniversityPress 1996) 117 John B Haseman The ThaiResistance Movement (Chiang Mai SilkwormBooks 2002) 62ndash63 Stowe Siam BecomesThailand 282 Nicol Smith and Blake ClarkI n t o S i a m U n d e r g r o u n d K i n g d o m(Indianapolis Bobbs-Merrill 1946) 146According to Smith General Lu himself tookresponsibility for delivering a message fromOSS promising amnesty to the Northern Armyaccording to Haseman the letter ldquowasdelivered to front-line Thai positions whopassed it in turn to Sawaeng [Thappasut aformer s tudent o f Khap rsquos ] MG Han[Songkhram] LTG Chira [Wichitsongkhram]and to Marshal Phibulrdquo

23 Miles Donovanrsquos first OSS chief for China

APJ | JF 8 | 44 | 2

23

became more and more closely allied with thecontroversial Tai Li in a semiautonomousnetwork SACO In December 1943 Donovanalerted to the situation replaced Miles as OSSChina chief with Colonel John Coughlin(Richard Harris Smith OSS The Secret Historyof Americarsquos First Central Intelligence Agency[Berkeley University of California Press 1972]246ndash58)

24 Reynolds Thailandrsquos Secret War 191ndash92citing documents of September 1944 cf 175Stowe Siam Becomes Thailand 270

25 Cf Jonathan Marshall ldquoOpium Tungstenand the Search for National Secu- rity1940ndash52rdquo in Drug Control Policy Essays inHistorical and Comparative Perspective edWilliam O Walker III (University ParkPennsylvania State University Press 1992) 96ldquoAmericans knew that [Tai Lirsquos] agentsprotected Tursquos huge opium convoysrdquo DouglasValentine The Strength of the Wolf The SecretHistory of Americarsquos War on Drugs (LondonVerso 2004) 47 ldquoIt was an open secret thatTai Lirsquos agents escorted opium caravans fromYunnan to Saigon and used Red Crossoperations as a front for selling opium to theJapaneserdquo

26 After the final KMT defeat of 1949 the 93rdDivision received other remnants from the KMT8th and 26th Armies and a new commanderGeneral Li Mi of the KMT Eighth Army (BertilLintner Burma in Revolt Opium andInsurgency since 1948 [Chiang Mai SilkwormBooks 1999] 111ndash15)

27 McCoy The Politics of Heroin 106 188ndash91415ndash20

28 Thomas Lobe United States NationalSecurity Policy and Aid to the Thailand Police(Denver Graduate School of InternationalStudies University of Denver 1977) 27

29 Lintner Burma in Revolt 192

30 Lintner Blood Brothers 241ndash44 After Saritdied in 1963 Chin was able to return toThailand

31 William Stevenson The Revolutionary KingThe True-Life Sequel to The King and I(London Constable and Robinson 2001) 4162 195 The king personally translatedStevensonrsquos biography of Sir Will iamStephenson into Thai

32 Anthony Cave Brown The Last Hero WildBill Donovan (New York Times Books 1982)797 Stevenson The Revolutionary King 162In 1970 Thompsonrsquos biographer WilliamWarren described the funding of Thompsonrsquoscompany in some detail but made no referenceto the WCC (William Warren Jim ThompsonThe Unsolved Mystery [Singapore ArchipelagoP r e s s 1 9 9 8 ] 6 6 ndash 6 7 ) F o r m e r C I Aofficer Richard Harris Smith wrote thatThompson was later ldquofrequently reported tohave CIA connectionsrdquo (Smith OSS 313n) JoeTrento without citing any sources places JimThompson at the center of this chapterrsquosnarrative ldquoJim Thompson (who in fact wasa CIA officer) had recruited General Phao headof the Thai police to accept the KMT armyrsquosdrugs for distributionrdquo (Joseph J Trento TheSecret History of the CIA [New York RandomHouseForum 2001] 346) Thompsondisappeared mysteriously in Malaysia in 1967his sister who investigated the disappearancewas brutally murdered in America a fewmonths later

33 Valentine The Strength of the Wolf 155Helliwell in Kunming used opium which was ineffect the local hard currency to purchaseintelligence (Wall Street Journal April 181980)

34 Sterling Seagrave The Marcos Dynasty (NewYork Harper and Row 1988) 361

35 John Loftus and Mark Aarons The SecretWar against the Jews (New York St Martinrsquos1994) 110ndash11

APJ | JF 8 | 44 | 2

24

36 The best evidence of this the M-fundreported on by Chalmers Johnson is discussedin the next chapter Cf Sterling and PeggySeagrave Gold Warriors Americarsquos SecretRecovery of Yamashitarsquos Gold (London Verso2003) 3 The Seagraves link Helliwell to themovement of Japanese gold out of thePhilippines and they suggest by hearsay butwithout evidence that both Sea Supply Inc andCivil Air Transport were thus funded (147ndash48152) Although many of their startlingallegations are beyond my competence toassess or even believe there are at least twothat I have verified from my own research I ampersuaded that in the first postwar monthswhen the United States was already supportingand using the SS war cr iminal KlausBarbie the operation was paid by SS fundsAnd I have seen secret documentary proof thata large sum of gold was indeed later depositedin a Swiss bank account in the name ofa famous Southeast Asian leader as claimed bythe Seagraves

37 Leonard Slater The Pledge (New YorkPocket Books 1971) 175 An attorney oncemade the statement that Burton Kanter(Helliwellrsquos partner in the money-launderingCastle Bank) ldquowas introduced to Helliwell byGeneral William J Donovan Kanter deniedthat lsquoI personally never met Donovan I believeI may have spoken to him once at PaulHelliwellrsquos requestrsquordquo (Pete Brewton The MafiaCIA and George Bush [New York SPI Books1992] 296)

38 In the course of Operation Safehaven theUS Third Army took an SS major ldquoon severaltrips to Italy and Austria and as a result ofthese preliminary trips over $500000 in goldas well as jewels were recoveredrdquo (AnthonyCave Brown The Secret War Report of the OSS[New York Berkeley 1976] 565ndash66)

39 Amy B Zegart Flawed by Design TheEvolution of the CIA JCS and NSC (StanfordCA Stanford University Press 1999) 189

citing Christopher Andrew For the PresidentrsquosEyes Only (New York HarperCollins 1995)172 see also US Congress Senate 94thCong 2nd sess Select Committee to StudyGovernmental Operations with Respect toIntelligence Activities Final Report April 261976 Senate Report No 94-755 28ndash29

40 Stevenson The Revolutionary King 50Douglas Valentine claims that in mid-1947Donovan intervened in Bangkok politics toresolve a conflict between the police and thearmy over the opium traffic In 1947 Donovanwas a registered foreign agent for the civilianThai government representing them innegotiations over the post-war border withFrench Indochina Valentine reports that inmid-1947 ldquoDonovan traveled to Bangkok tounite the squabbling factions in a strategicalliance against the Communistsrdquo and that theKMT businessmen in Bangkok who managedthe flow of narcotics from Thailand to HongKong and Macao ldquobenef i ted great lyfrom Donovanrsquos interventionrdquo (Valentine TheStrength of the Wolf 70) He notes alsothat ldquoby mid-1947 Kuomintang narcotics werereaching America through MexicordquoWhat actually happened in November 1947 inTha i land was the oust ing o f Pr id i rsquo scivilian government in a military coup Soonafterward the first of Thailandrsquos postwarmilitary dictators Phibun took office Not longaf ter Ph ibunrsquos access ion Tha i landquietly abandoned the antiopium campaignannounced in 1948 whereby all opiumsmoking would have ended by 1953 (Francis WBelanger Drugs the US and Khun Sa[Bangkok Editions Duang Kamol 1989]75ndash90)

41 Stevenson The Revolutionary King 50ndash51

42 William O Walker III Opium and ForeignPolicy The Anglo-American Search for Order inAsia 1912ndash1954 (Chapel Hill University ofNorth Carolina Press 1991) 184ndash85 citingletters from Bird April 5 1948 and Donovan

APJ | JF 8 | 44 | 2

25

April 14 1948 (Donovan Papers box 73aMilitary History Institute US Army CarlisleBarracks Pennsylvania)

43 Paul M Handley The King Never Smiles ABiography of Thailandrsquos Bhumipol Adulyadej(New Haven CT Yale University Press 2006)105

44 Walker Opium and Foreign Policy 185

45 Foreign Relations of the United States1949ndash1951 (hereinafter FRUS) (WashingtonDC Government Printing Office) vol 6 40ndash41memo of March 9 1950 from Dean Achesonsecretary of state

46 FRUS 1952ndash1954 vol 12 651 memo ofOctober 7 1952 from Edwin M Martin specialassistant to the secretary for mutual securityaffairs to John H Ohly assistant director forprogram Office of the Director of MutualSecurity (emphasis added)

47 Shortly before his dismissal on April 111951 MacArthur in Tokyo issued a statementcalling for a ldquodecision by the United Nations todepart from its tolerant effort to contain thewar to the area of Korea through an expansionof our military operations to its coastal areasand interior bases [to] doom Red China to riskthe imminent military collapserdquo (Lintner BloodBrothers 237)

48 Bruce Cumings The Origins of the KoreanWar vol 2 (Princeton NJ Princeton UniversityPress 1990) Donovan in this period becamevice chairman of the Committee to DefendAmerica by Aiding Anti-Communist China

49 Martha Byrd Chennault Giving Wings to theTiger (Tuscaloosa University of Alabama Press1987) 325ndash28 William M Leary PerilousMissions Civil Air Transport and CIA CovertOperations in Asia 1946ndash1955 (TuscaloosaUniversity of Alabama Press 1984) 67ndash68Scott Drugs Oil and War 2

50 Jack Samson Chennault 62

51 John Prados Safe for Democracy The SecretWars of the CIA (Chicago Ivan R Dee 2006)125 Cf Los Angeles Times September 222000 ldquoNewly declassified US intelligence filestell the remarkable story of the ultra-secretInsurance Intelligence Unit a component of theOffice of Strategic Services a forerunner of theCIA and its elite counterintelligence branchX-2 Though rarely numbering more than ahalf dozen agents the unit gatheredintelligence on the enemyrsquos insurance industryNazi insurance t i tans and suspectedcollaborators in the insurance business Themen behind the insurance unit were OSS headWilliam ldquoWild Billrdquo Donovan and California-born insurance magnate Cornelius V StarrStarr had started out selling insurance toChinese in Shanghai in 1919 Starr sentinsurance agents into Asia and Europe evenbefore the bombs stopped falling and built whateventually became AIG which today has itsworld headquarters in the same downtown NewYork building where the tiny OSS unit toiled inthe deepest secrecyrdquo

52 Peter Dale Scott The War Conspiracy JFK911 and the Deep Politics of War (IpswichMA Mary Ferrell Foundation Press 2008)46ndash47 263ndash64 William Youngman Corcoranrsquoslaw partner and a key member of Chennaultrsquossupport team in Washington during and afterthe war was by 1960 president of a C V Starrcompany in Saigon

53 Smith OSS 267

54 Smith OSS 267n

55 It is possible that other backers of theChennau l t P lan a l l i ed themse lves like Helliwell with organized crime In thoseearly postwar years one of the C VStarr companies US Life was the recipient ofdubious Teamster insurance contracts throughthe intervention of the mob-linked businessagents Paul and Allan Dorfman (Scott Drugs

APJ | JF 8 | 44 | 2

26

Oil and War 197 Scott The War Conspiracy279) One of the principal supporters ofChennaultrsquos airline on the US West Coast DrMargaret Chung was suspected of drugtrafficking after her frequent trips to MexicoCity with Virginia Hill a courier for MeyerLansky and Bugsy Siegel See Ed Reid TheMistress and the Mafia The Virginia Hill Story(New York Bantam 1972) 42 90 Peter DaleScott ldquoOpium and Empire McCoy on Heroin inSoutheast Asiardquo Bulletin of Concerned AsianScholars September 1973 49ndash56

56 Ronald Shelp with Al Ehrbar Fallen GiantThe Amazing Story of Hank Greenberg and theHistory of AIG (Hoboken NJ Wiley 2006) 60

57 Encyclopaedia Britannica The moneysplashed around in Washington by the ldquoChinaLobbyrdquo was attributed at the time chiefly to thewealthy linen and lace merchant JosephKohlberg the so-called China Lobby man But ithas often been suspected that he was frontingfor others

58 Lintner Burma in Revolt 111ndash14 As early as1950 Ting was also actively promoting theconcept of an Anti-Communist League tosupport KMT resistance (134 234) The KMTrsquosensuing Asian Peoplesrsquo Anti-Communist League(later known as the World Anti-CommunistLeague) became intimately involved withsupport for the KMT troops in Burma In 1971the chief Laotian delegate to the World Anti-Communist League Prince Sopsaisana wasdetained with sixty kilos of top-grade heroin inhis luggage (Scott Drugs Oil and War 163194ndash95)

59 MacArthur advised the State Department in1949 that the United States should place ldquo500fighter planes in the hands of some lsquowar horsersquosimilar to Chennaultrdquo and further support theKMT wi th US vo lunteers (memo ofconversation September 5 1949 FRUS 1949vol 9 544ndash46 Cumings The Origins of theKorean War 103 Byrd Chennault 344)

Chennault in turn told Senator Knowland thatCongress should ap- point MacArthur asupreme commander for the entire Far East

60 Donovan suggested that Chennault becomeminister of defense in a reconstituted KMTgovernment At some point Chennault andDonovan met privately with Willoughby inJapan (Cumings The Origins of the KoreanWar 513)

61 Valentine The Strength of the Wolf 260Cumings The Origins of the Korean War 133

62 Cumings The Origins of the Korean War119ndash21 796 James Burnham The ComingDefeat of Communism (New York John Day1951) 256ndash66

63 David McKean Peddling Influence ThomasldquoTommy the Corkrdquo Corcoran and the Birth ofModern Lobbying (Hanover NH Steerforth2004) 216

64 Hersh The Old Boys 299

6 5 McKean Peddl ing Inf luence 216Christopher Robbins Air America (New YorkPutnamrsquos 1979) 48ndash49 56ndash57 70 ByrdChennault 333 Alan A Block Masters ofParadise Organized Crime and the InternalRevenue Service in the Bahamas (NewBrunswick NJ Transaction 1991) 169

66 Curtis Peebles Twilight Warriors Covert AirOperations against the USSR (Annapolis MDNaval Institute Press 2005) 88ndash89

67 William R Corson The Armies of IgnoranceThe Rise of the American Intelligence Empire(New York Dial PressJames Wade 1977)320ndash21

68 Hersh The Old Boys 284 Cf SamuelHalpern (a former CIA officer) in Ralph SWeber Spymasters Ten CIA Officers in TheirOwn Words (Wilmington DE ScholarlyResources 1999) 117 ldquoBedell suddenly said

APJ | JF 8 | 44 | 2

27

lsquoTheyrsquore under my commandrsquo He did it andhe did it in the first seven days of his tenure asDCI [director of the CIA]rdquo

69 Corson The Armies of Ignorance 319 DanielFineman A Special Relationship The UnitedStates and Military Government in Thailand1947ndash1958 (Honolulu University of HawailsquoiPress 1997) 137 Henry G Gole GeneralWilliam E DePuy Preparing the Army forModern War (Lexington University Press ofKentucky 2008) 80 ldquoCIA Director WalterBedell Smith opposed the plan but PresidentTruman approved it overruled the Directorand ordered the strictest secrecy about itrdquo

70 Victor S Kaufman ldquoTrouble in the GoldenTriangle The United States Taiwan and the93rd Nationalist Divisionrdquo China Quarterly no166 (June 2001) 441 citing MemorandumBradley to Secretary of Defense April 10 1950and Annex to NSC 483 ldquoUnited StatesObjectives Policies and Courses of Action inAsiardquo May 2 1951 Presidentrsquos SecretaryrsquosFile National Security FilemdashMeetings box 212Harry S Truman Library IndependenceMissouri Cf Sam Halpern in WeberSpymasters 119 ldquoThe Pentagon came up withthis bright plan as I understand it at least Iwas told this by my [CIAOSO] boss LloydGeorge who was Chief of the Far East Divisionat the timerdquo

71 Kaufman ldquoTrouble in the Golden Trianglerdquo442ndash43 Fineman A Special Relationship141ndash42

72 Kaufman ldquoTrouble in the Golden Trianglerdquo443 ldquoWhether Secretary of State DeanAcheson knew of Operation Paper isuncertain Acheson was present at discussionsregarding the use of covert operations againstChina Yet since mid-1950 the secretary ofstate had been working to remove theirregulars Therefore either Acheson knew ofthe operat ion and did not inform hissubordinates or he too did not have the entire

picturerdquo In apparent contradiction WilliamWalker writes that ldquoAcheson had participatedfrom the start in the decision-making processrelating to NSC 485 so he was familiar withthe d i scuss ions about us ing cover toperations against Chinarsquos southern flankrdquo(Opium and Foreign Policy 203) But NSC485 primarily a policy paper on Korea datesfrom May 17 1951 half a year later

73 Leary Perilous Missions 116ndash17

7 4 Lintner Blood Brothers 237 citingMacArthur on March 21 1951 in Robert HTaylor Foreign and Domestic Consequences ofthe Kuomintang Intervention in Burma (IthacaNY Cornell University Southeast Asia ProgramData Paper no 93 1973) 42 Chennault onApril 23 1958 in US Congress HouseCommittee on Un-American ActivitiesInternational Communism (CommunistEncroachment in the Far East) ldquoConsultationswith Maj-Gen Claire Lee Chennault UnitedStates Armyrdquo 85th Cong 2nd sess 9ndash10

75 Leary Perilous Missions 129ndash30 Learystates that US personnel delivered the armsonly as far as northern Thailand with the lastleg of delivery handled by the Thai BorderPolice But there are numerous contemporaryreports of US personnel at Mong Hsat inBurma who helped unload the planes andreload them with opium (Scott Drugs Oil andWar 60 Corson The Armies of Ignorance320ndash22) Lintner reproduces a photograph ofthree American civilians who were killed inaction with the KMT in Burma in 1953 (LintnerBurma in Revolt 168) On April 1 1953the Rangoon Nation reported a captured letterf r o m M a j o r G e n e r a l L i rsquo sheadquarters discussing ldquoEuropean instructorsfor the training of studentsrdquo

76 McCoy The Politics of Heroin 169ndash71Lintner Blood Brothers 238 Despite thismilitary fiasco the KMT troops contributed tothe survival of noncommunist Chinese

APJ | JF 8 | 44 | 2

28

communities in Southeast Asia both by servingas a protective shield and by sustaining thetraditional social fabric of drug-financed KMTTriads in Southeast Asia See McCoy ThePolitics of Heroin 185ndash86 Scott Drugs Oiland War 60 192ndash93

77 Donald F Cooper Thailand Dictatorship ofDemocracy (Montreux Minerva Press 1995)120

78 Eg McCoy The Politics of Heroin 165ndash69Cf Tim Weiner Legacy of Ashes The History ofthe CIA (New York Doubleday 2007) 60 ldquoThefinal theater for the CIA in the Korean War layin Burma In early 1951 as the ChineseCommunists chased General MacArthurrsquostroops south the Pentagon thought the ChineseNationalists could take some pressure offMacArthur by opening a second front The CIA began [sic] flying Chinese Nationalistsoldiers into Thailand and dropping themalong with pallets of guns and ammunition intonorthern Burmardquo Cf Walker Opium andForeign Policy 200 ldquoSome aid was alreadyreaching KMT forces in Burma monthsbefore the January 1951 NSC meetingrdquo

79 Fineman A Special Relationship 289n25

80 Fineman A Special Relationship 137

81 US Treasury Department Bureau ofN a r c o t i c s T r a f f i c i n O p i u m a n dOther Dangerous Drugs (Washington DCGovernment Printing Office 1949) 13(1950) 3 (1954) 12 Through the samedecade the FBN by direction of the US StateDepartment acknowledged to UN NarcoticsConferences that Thailand was a source foropium and heroin reaching the United States(Scott Drugs Oil and War 191 203 citing UNDocuments ECN7213 ECN7283 22 andECN7303Rev1 34 cf Walker Opium andForeign Policy 201 [State Department]) Whenthe FBN Traffic in Opium reports began toacknowledge Thai drug seizures again in1962 the Kennedy administration had already

initiated serious efforts to remove the bulk ofthe KMT troops from the region (KaufmanldquoTrouble in the Golden Trianglerdquo 452)

82 Walker Opium and Foreign Policy 206 cf213ndash15 Cf also Valentine The Strength of theWolf 133 150ndash52 Anslinger was not alone inblaming heroin flows on mainland China Hewas joined in the attack by two others with CIAconnections Edward Hunter (a veteran of OSSCh ina and OPC who in tu rn was f edinformation regularly by Chennault) andRichard L G Deverall of the AmericanFederation of Laborrsquos Free Trade UnionCommittee (under the CIArsquos labor asset JayLovestone)

83 Scott Drugs Oil and War 7 60ndash61 198207 citing Penny Lernoux In Banks We Trust(Garden City NY AnchorDoubleday 1984)42ndash44 84

84 Fineman A Special Relationship 215

85 I explore this question in Scott Drugs Oiland War 60ndash64

86 Gole General William E DePuy 80

87 Chennault himself was investigated for suchsmuggling activities ldquobut no official action wastaken because he was politically untouchablerdquo(Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 92) cfBarbara Tuchman Stilwell and the AmericanExperience in China 1911ndash1945 7ndash78 PaulFrillmann and Graham Peck China TheRemembered Life (Boston Houghton Mifflin1968) 152

88 Corson The Armies of Ignorance 322

89 Valentine The Strength of the Wolf 71quoting Reid The Mistress and the Mafia 42

90 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 98 citing OSSCID 126155 April 19 1945

APJ | JF 8 | 44 | 2

29

91 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo

92 Andrew Forbes and David Henley The HawTraders of the Golden Triangle (Bangkok TeakHouse 1997)

93 Cooper Thailand 116

9 4 Wen-chin Chang ldquoIdentif ication ofLeadership among the KMT Yunnanese Chinesein Northern Thailand Journal of SoutheastAsian Studies 33 (2002) 125 Chang calls thisname ldquoa popular misnomerrdquo on the groundsthat the KMT villages have been expanding andldquoslowly casting off their former militarylegacyrdquo

95 Taylor Foreign and Domestic Consequencesof the Kuomintang Intervention in Burma 10

96 McCoy The Politics of Heroin 162ndash63

97 Sucheng Chan Hmong Means Free Life inLaos and America (Philadelphia TempleUniversity Press 1994) 1942 cf John TMcAlister Viet Nam The Origins of Revolution(Garden City NY Doubleday 1971) 228Scott The War Conspiracy 267

9 8 T i m o t h y B r o o k a n d B o b T a d a s h iWakabayashi eds Opium RegimesChina Britain and Japan 1839ndash1952(Berkeley University of California Press 2000)261ndash79 Jonathan Marshall ldquoOpium and thePolitics of Gangsterism in NationalistChina 1927ndash1945rdquo Bulletin of ConcernedAsian Scholars JulyndashSeptember 1976 19ndash48Laura Tyson Li Madame Chiang Kai-shekChinarsquos Eternal First Lady (New YorkAtlantic Monthly Press 2006) 107 citingNelson T Johnson to Stanley K Hornbeck May31 1934 box 23 Johnson Papers Library ofCongress

99 In global surveys of the opium traffic oneregularly reads of the importance of Teochew(Chiu chau) triads in the postwar Thai drug

milieu (eg Martin Booth Dragon SyndicatesThe Global Phenomenon of the Triads [NewYork Carroll and Graf 1999] 176ndash77 McCoyThe Politics of Heroin 389 396) Althoughtriads are central to trafficking in Hong Kongand today possibly inside China I questionwhether the Teochew in Thailand althoughthey certainly are prominent in the drug tradethere are still as dominated by triads as theywere before World War II Cf SkinnerChinese Society in Thailand 264ndash67

100 Valentine The Strength of the Wolf 14citing Melvin L Hanks NARC The Adventuresof a Federal Agent (New York Hastings House1973) 37 162ndash66 Brook and WakabayashiOpium Regimes 263 For an overview of USknowledge of KMT drug trafficking seeMarshal l ldquoOpium and the Pol i t ics ofGangsterism in Nationalist China 1927ndash1945rdquo

101 Valentine The Strength of the Wolf 72ndash73citing Terry A Talent report of November 151946 Douglas Clark Kinder and William OWalker III ldquoStable Force in a Storm Harry JAnslinger and United States Narcotics Policy1930ndash1962rdquo Journal of American HistoryMarch 1986 919

102 Valentine The Strength of the Wolf 77

103 Victor S Kaufman Confronting CommunismUS and British Policies toward China(Columbia University of Missouri Press 2001)20ndash21

104 Cumings The Origins of the Korean War508ndash25 Robert Accinel l i Cris is andCommitment United States Policy towardTaiwan 1950ndash1955 (Chapel Hill University ofNorth Carolina Press 1996) 271ndash72 Ross YKoen The China Lobby in American Politics(New York Harper and Row 1974) 46 48ndash51Elsewhere I have described CommerceInternational China as a subsidiary of the WCCSince then I have learned that it was a firmfounded in Shanghai in 1930 I now doubt thealleged WCC connection Later Fassoulis was

APJ | JF 8 | 44 | 2

30

ind ic ted in a huge organ ized cr imeconspiracy to defraud banks in a stock swindle(New York Times September 12 1969 PeterDale Scott Deep Politics and the Death of JFK[Berkeley University of California Press 1998]168ndash69 178) By 2005 Fassoulis was worth$150 million as chairman and CEO of CICInternational the successor to CommerceInternational China his company nowsupplying the US armed services waspredicted to do $870 million of business (ldquoThe50 Wealthiest Greeks in Americardquo NationalHerald March 29 2008) There have beenspeculations that the ldquoUS Central IntelligenceAgency may actual ly support CICInternational Ltd so it remains in business asone of its many brokers for arms technologycomponents logistics on transactionssignificant to intelligence operationsrdquo (PaulCollin ldquoGlobal Economic Brinkmanshiprdquo)

105 Scott Drugs Oil and War 188

106 McCoy The Politics of Heroin 185

1 0 7 Scott Drugs Oil and War 192ndash93Anslingerrsquos protection of the KMT traffichad the add i t i ona l consequence o fstrengthening and protecting pro-KMT tongs inAmerica In 1959 when a pro-KMT Hip Singtong network distributing drugs was broken upin San Francisco a leading FBN official withOSSndashCIA connections George Whiteblamed the drug shipment on communist Chinawhile allowing the ringleader to escape toTaiwan (Scott Drugs Oil and War 63Valentine The Strength of the Wolf 195)

108 Walker Opium and Foreign Policy 214

109 Joe Studwell Asian Godfathers Money andPower in Hong Kong and Southeast Asia (NewYork Atlantic Monthly Press 2007) 95ndash96

110 J W Cushman ldquoThe Khaw Group ChineseBusiness in Early Twentieth- Century PenangrdquoJournal of Southeast Asian Studies 17 (1986)58 cf Trocki ldquoDrugs Taxes and Chinese

Capitalism in Southeast Asiardquo 99ndash100

111 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 106 The KMTobtained the tungsten from Karen rebelscontrolling a major mine at Mawchj inexchange for modern arms provided by theCIA

112 Fineman A Special Relationship 133 153Bird at the time was a ldquoprivate aviationcontractorrdquo (McCoy The Politics of Heroin168) and aviation was the key to the BPPstrategy of defending the Thai frontier becausethe Thai road system was still primitive in theborder areas Because Bird included in thiscommittee his brother-in-law Air Force ColonelSitthi Savetsila Sitthi became one of Phaorsquosclosest aides-de-camp and his translator In the1980s he served for a decade as foreignminister in the last Thai military government

113 I have not been able to establish the identityof this OPC officer One possibility is DesmondFitzgerald who became the overseer andchampion of Sea Supply Operation Paper theBPP and (still to be discussed) PARU Anotherpossibility is Paul Helliwell

114 Lobe United States National Security Policyand Aid to the Thailand Police 19ndash20

115 Fineman A Special Relationship 137McCoy The Politics of Heroin 165

116 Fineman A Special Relationship 134emphasis added

117 McCoy The Politics of Heroin 168ndash69Sherman Joost the OPC officer who headedSea Supply in Bangkok ldquohad led Kachinguerrillas in Burma during the war as acommander of OSS Detachment 101rdquo

118 Walker Opium and Foreign Policy 200205

119 McCoy The Politics of Heroin 168

APJ | JF 8 | 44 | 2

24

36 The best evidence of this the M-fundreported on by Chalmers Johnson is discussedin the next chapter Cf Sterling and PeggySeagrave Gold Warriors Americarsquos SecretRecovery of Yamashitarsquos Gold (London Verso2003) 3 The Seagraves link Helliwell to themovement of Japanese gold out of thePhilippines and they suggest by hearsay butwithout evidence that both Sea Supply Inc andCivil Air Transport were thus funded (147ndash48152) Although many of their startlingallegations are beyond my competence toassess or even believe there are at least twothat I have verified from my own research I ampersuaded that in the first postwar monthswhen the United States was already supportingand using the SS war cr iminal KlausBarbie the operation was paid by SS fundsAnd I have seen secret documentary proof thata large sum of gold was indeed later depositedin a Swiss bank account in the name ofa famous Southeast Asian leader as claimed bythe Seagraves

37 Leonard Slater The Pledge (New YorkPocket Books 1971) 175 An attorney oncemade the statement that Burton Kanter(Helliwellrsquos partner in the money-launderingCastle Bank) ldquowas introduced to Helliwell byGeneral William J Donovan Kanter deniedthat lsquoI personally never met Donovan I believeI may have spoken to him once at PaulHelliwellrsquos requestrsquordquo (Pete Brewton The MafiaCIA and George Bush [New York SPI Books1992] 296)

38 In the course of Operation Safehaven theUS Third Army took an SS major ldquoon severaltrips to Italy and Austria and as a result ofthese preliminary trips over $500000 in goldas well as jewels were recoveredrdquo (AnthonyCave Brown The Secret War Report of the OSS[New York Berkeley 1976] 565ndash66)

39 Amy B Zegart Flawed by Design TheEvolution of the CIA JCS and NSC (StanfordCA Stanford University Press 1999) 189

citing Christopher Andrew For the PresidentrsquosEyes Only (New York HarperCollins 1995)172 see also US Congress Senate 94thCong 2nd sess Select Committee to StudyGovernmental Operations with Respect toIntelligence Activities Final Report April 261976 Senate Report No 94-755 28ndash29

40 Stevenson The Revolutionary King 50Douglas Valentine claims that in mid-1947Donovan intervened in Bangkok politics toresolve a conflict between the police and thearmy over the opium traffic In 1947 Donovanwas a registered foreign agent for the civilianThai government representing them innegotiations over the post-war border withFrench Indochina Valentine reports that inmid-1947 ldquoDonovan traveled to Bangkok tounite the squabbling factions in a strategicalliance against the Communistsrdquo and that theKMT businessmen in Bangkok who managedthe flow of narcotics from Thailand to HongKong and Macao ldquobenef i ted great lyfrom Donovanrsquos interventionrdquo (Valentine TheStrength of the Wolf 70) He notes alsothat ldquoby mid-1947 Kuomintang narcotics werereaching America through MexicordquoWhat actually happened in November 1947 inTha i land was the oust ing o f Pr id i rsquo scivilian government in a military coup Soonafterward the first of Thailandrsquos postwarmilitary dictators Phibun took office Not longaf ter Ph ibunrsquos access ion Tha i landquietly abandoned the antiopium campaignannounced in 1948 whereby all opiumsmoking would have ended by 1953 (Francis WBelanger Drugs the US and Khun Sa[Bangkok Editions Duang Kamol 1989]75ndash90)

41 Stevenson The Revolutionary King 50ndash51

42 William O Walker III Opium and ForeignPolicy The Anglo-American Search for Order inAsia 1912ndash1954 (Chapel Hill University ofNorth Carolina Press 1991) 184ndash85 citingletters from Bird April 5 1948 and Donovan

APJ | JF 8 | 44 | 2

25

April 14 1948 (Donovan Papers box 73aMilitary History Institute US Army CarlisleBarracks Pennsylvania)

43 Paul M Handley The King Never Smiles ABiography of Thailandrsquos Bhumipol Adulyadej(New Haven CT Yale University Press 2006)105

44 Walker Opium and Foreign Policy 185

45 Foreign Relations of the United States1949ndash1951 (hereinafter FRUS) (WashingtonDC Government Printing Office) vol 6 40ndash41memo of March 9 1950 from Dean Achesonsecretary of state

46 FRUS 1952ndash1954 vol 12 651 memo ofOctober 7 1952 from Edwin M Martin specialassistant to the secretary for mutual securityaffairs to John H Ohly assistant director forprogram Office of the Director of MutualSecurity (emphasis added)

47 Shortly before his dismissal on April 111951 MacArthur in Tokyo issued a statementcalling for a ldquodecision by the United Nations todepart from its tolerant effort to contain thewar to the area of Korea through an expansionof our military operations to its coastal areasand interior bases [to] doom Red China to riskthe imminent military collapserdquo (Lintner BloodBrothers 237)

48 Bruce Cumings The Origins of the KoreanWar vol 2 (Princeton NJ Princeton UniversityPress 1990) Donovan in this period becamevice chairman of the Committee to DefendAmerica by Aiding Anti-Communist China

49 Martha Byrd Chennault Giving Wings to theTiger (Tuscaloosa University of Alabama Press1987) 325ndash28 William M Leary PerilousMissions Civil Air Transport and CIA CovertOperations in Asia 1946ndash1955 (TuscaloosaUniversity of Alabama Press 1984) 67ndash68Scott Drugs Oil and War 2

50 Jack Samson Chennault 62

51 John Prados Safe for Democracy The SecretWars of the CIA (Chicago Ivan R Dee 2006)125 Cf Los Angeles Times September 222000 ldquoNewly declassified US intelligence filestell the remarkable story of the ultra-secretInsurance Intelligence Unit a component of theOffice of Strategic Services a forerunner of theCIA and its elite counterintelligence branchX-2 Though rarely numbering more than ahalf dozen agents the unit gatheredintelligence on the enemyrsquos insurance industryNazi insurance t i tans and suspectedcollaborators in the insurance business Themen behind the insurance unit were OSS headWilliam ldquoWild Billrdquo Donovan and California-born insurance magnate Cornelius V StarrStarr had started out selling insurance toChinese in Shanghai in 1919 Starr sentinsurance agents into Asia and Europe evenbefore the bombs stopped falling and built whateventually became AIG which today has itsworld headquarters in the same downtown NewYork building where the tiny OSS unit toiled inthe deepest secrecyrdquo

52 Peter Dale Scott The War Conspiracy JFK911 and the Deep Politics of War (IpswichMA Mary Ferrell Foundation Press 2008)46ndash47 263ndash64 William Youngman Corcoranrsquoslaw partner and a key member of Chennaultrsquossupport team in Washington during and afterthe war was by 1960 president of a C V Starrcompany in Saigon

53 Smith OSS 267

54 Smith OSS 267n

55 It is possible that other backers of theChennau l t P lan a l l i ed themse lves like Helliwell with organized crime In thoseearly postwar years one of the C VStarr companies US Life was the recipient ofdubious Teamster insurance contracts throughthe intervention of the mob-linked businessagents Paul and Allan Dorfman (Scott Drugs

APJ | JF 8 | 44 | 2

26

Oil and War 197 Scott The War Conspiracy279) One of the principal supporters ofChennaultrsquos airline on the US West Coast DrMargaret Chung was suspected of drugtrafficking after her frequent trips to MexicoCity with Virginia Hill a courier for MeyerLansky and Bugsy Siegel See Ed Reid TheMistress and the Mafia The Virginia Hill Story(New York Bantam 1972) 42 90 Peter DaleScott ldquoOpium and Empire McCoy on Heroin inSoutheast Asiardquo Bulletin of Concerned AsianScholars September 1973 49ndash56

56 Ronald Shelp with Al Ehrbar Fallen GiantThe Amazing Story of Hank Greenberg and theHistory of AIG (Hoboken NJ Wiley 2006) 60

57 Encyclopaedia Britannica The moneysplashed around in Washington by the ldquoChinaLobbyrdquo was attributed at the time chiefly to thewealthy linen and lace merchant JosephKohlberg the so-called China Lobby man But ithas often been suspected that he was frontingfor others

58 Lintner Burma in Revolt 111ndash14 As early as1950 Ting was also actively promoting theconcept of an Anti-Communist League tosupport KMT resistance (134 234) The KMTrsquosensuing Asian Peoplesrsquo Anti-Communist League(later known as the World Anti-CommunistLeague) became intimately involved withsupport for the KMT troops in Burma In 1971the chief Laotian delegate to the World Anti-Communist League Prince Sopsaisana wasdetained with sixty kilos of top-grade heroin inhis luggage (Scott Drugs Oil and War 163194ndash95)

59 MacArthur advised the State Department in1949 that the United States should place ldquo500fighter planes in the hands of some lsquowar horsersquosimilar to Chennaultrdquo and further support theKMT wi th US vo lunteers (memo ofconversation September 5 1949 FRUS 1949vol 9 544ndash46 Cumings The Origins of theKorean War 103 Byrd Chennault 344)

Chennault in turn told Senator Knowland thatCongress should ap- point MacArthur asupreme commander for the entire Far East

60 Donovan suggested that Chennault becomeminister of defense in a reconstituted KMTgovernment At some point Chennault andDonovan met privately with Willoughby inJapan (Cumings The Origins of the KoreanWar 513)

61 Valentine The Strength of the Wolf 260Cumings The Origins of the Korean War 133

62 Cumings The Origins of the Korean War119ndash21 796 James Burnham The ComingDefeat of Communism (New York John Day1951) 256ndash66

63 David McKean Peddling Influence ThomasldquoTommy the Corkrdquo Corcoran and the Birth ofModern Lobbying (Hanover NH Steerforth2004) 216

64 Hersh The Old Boys 299

6 5 McKean Peddl ing Inf luence 216Christopher Robbins Air America (New YorkPutnamrsquos 1979) 48ndash49 56ndash57 70 ByrdChennault 333 Alan A Block Masters ofParadise Organized Crime and the InternalRevenue Service in the Bahamas (NewBrunswick NJ Transaction 1991) 169

66 Curtis Peebles Twilight Warriors Covert AirOperations against the USSR (Annapolis MDNaval Institute Press 2005) 88ndash89

67 William R Corson The Armies of IgnoranceThe Rise of the American Intelligence Empire(New York Dial PressJames Wade 1977)320ndash21

68 Hersh The Old Boys 284 Cf SamuelHalpern (a former CIA officer) in Ralph SWeber Spymasters Ten CIA Officers in TheirOwn Words (Wilmington DE ScholarlyResources 1999) 117 ldquoBedell suddenly said

APJ | JF 8 | 44 | 2

27

lsquoTheyrsquore under my commandrsquo He did it andhe did it in the first seven days of his tenure asDCI [director of the CIA]rdquo

69 Corson The Armies of Ignorance 319 DanielFineman A Special Relationship The UnitedStates and Military Government in Thailand1947ndash1958 (Honolulu University of HawailsquoiPress 1997) 137 Henry G Gole GeneralWilliam E DePuy Preparing the Army forModern War (Lexington University Press ofKentucky 2008) 80 ldquoCIA Director WalterBedell Smith opposed the plan but PresidentTruman approved it overruled the Directorand ordered the strictest secrecy about itrdquo

70 Victor S Kaufman ldquoTrouble in the GoldenTriangle The United States Taiwan and the93rd Nationalist Divisionrdquo China Quarterly no166 (June 2001) 441 citing MemorandumBradley to Secretary of Defense April 10 1950and Annex to NSC 483 ldquoUnited StatesObjectives Policies and Courses of Action inAsiardquo May 2 1951 Presidentrsquos SecretaryrsquosFile National Security FilemdashMeetings box 212Harry S Truman Library IndependenceMissouri Cf Sam Halpern in WeberSpymasters 119 ldquoThe Pentagon came up withthis bright plan as I understand it at least Iwas told this by my [CIAOSO] boss LloydGeorge who was Chief of the Far East Divisionat the timerdquo

71 Kaufman ldquoTrouble in the Golden Trianglerdquo442ndash43 Fineman A Special Relationship141ndash42

72 Kaufman ldquoTrouble in the Golden Trianglerdquo443 ldquoWhether Secretary of State DeanAcheson knew of Operation Paper isuncertain Acheson was present at discussionsregarding the use of covert operations againstChina Yet since mid-1950 the secretary ofstate had been working to remove theirregulars Therefore either Acheson knew ofthe operat ion and did not inform hissubordinates or he too did not have the entire

picturerdquo In apparent contradiction WilliamWalker writes that ldquoAcheson had participatedfrom the start in the decision-making processrelating to NSC 485 so he was familiar withthe d i scuss ions about us ing cover toperations against Chinarsquos southern flankrdquo(Opium and Foreign Policy 203) But NSC485 primarily a policy paper on Korea datesfrom May 17 1951 half a year later

73 Leary Perilous Missions 116ndash17

7 4 Lintner Blood Brothers 237 citingMacArthur on March 21 1951 in Robert HTaylor Foreign and Domestic Consequences ofthe Kuomintang Intervention in Burma (IthacaNY Cornell University Southeast Asia ProgramData Paper no 93 1973) 42 Chennault onApril 23 1958 in US Congress HouseCommittee on Un-American ActivitiesInternational Communism (CommunistEncroachment in the Far East) ldquoConsultationswith Maj-Gen Claire Lee Chennault UnitedStates Armyrdquo 85th Cong 2nd sess 9ndash10

75 Leary Perilous Missions 129ndash30 Learystates that US personnel delivered the armsonly as far as northern Thailand with the lastleg of delivery handled by the Thai BorderPolice But there are numerous contemporaryreports of US personnel at Mong Hsat inBurma who helped unload the planes andreload them with opium (Scott Drugs Oil andWar 60 Corson The Armies of Ignorance320ndash22) Lintner reproduces a photograph ofthree American civilians who were killed inaction with the KMT in Burma in 1953 (LintnerBurma in Revolt 168) On April 1 1953the Rangoon Nation reported a captured letterf r o m M a j o r G e n e r a l L i rsquo sheadquarters discussing ldquoEuropean instructorsfor the training of studentsrdquo

76 McCoy The Politics of Heroin 169ndash71Lintner Blood Brothers 238 Despite thismilitary fiasco the KMT troops contributed tothe survival of noncommunist Chinese

APJ | JF 8 | 44 | 2

28

communities in Southeast Asia both by servingas a protective shield and by sustaining thetraditional social fabric of drug-financed KMTTriads in Southeast Asia See McCoy ThePolitics of Heroin 185ndash86 Scott Drugs Oiland War 60 192ndash93

77 Donald F Cooper Thailand Dictatorship ofDemocracy (Montreux Minerva Press 1995)120

78 Eg McCoy The Politics of Heroin 165ndash69Cf Tim Weiner Legacy of Ashes The History ofthe CIA (New York Doubleday 2007) 60 ldquoThefinal theater for the CIA in the Korean War layin Burma In early 1951 as the ChineseCommunists chased General MacArthurrsquostroops south the Pentagon thought the ChineseNationalists could take some pressure offMacArthur by opening a second front The CIA began [sic] flying Chinese Nationalistsoldiers into Thailand and dropping themalong with pallets of guns and ammunition intonorthern Burmardquo Cf Walker Opium andForeign Policy 200 ldquoSome aid was alreadyreaching KMT forces in Burma monthsbefore the January 1951 NSC meetingrdquo

79 Fineman A Special Relationship 289n25

80 Fineman A Special Relationship 137

81 US Treasury Department Bureau ofN a r c o t i c s T r a f f i c i n O p i u m a n dOther Dangerous Drugs (Washington DCGovernment Printing Office 1949) 13(1950) 3 (1954) 12 Through the samedecade the FBN by direction of the US StateDepartment acknowledged to UN NarcoticsConferences that Thailand was a source foropium and heroin reaching the United States(Scott Drugs Oil and War 191 203 citing UNDocuments ECN7213 ECN7283 22 andECN7303Rev1 34 cf Walker Opium andForeign Policy 201 [State Department]) Whenthe FBN Traffic in Opium reports began toacknowledge Thai drug seizures again in1962 the Kennedy administration had already

initiated serious efforts to remove the bulk ofthe KMT troops from the region (KaufmanldquoTrouble in the Golden Trianglerdquo 452)

82 Walker Opium and Foreign Policy 206 cf213ndash15 Cf also Valentine The Strength of theWolf 133 150ndash52 Anslinger was not alone inblaming heroin flows on mainland China Hewas joined in the attack by two others with CIAconnections Edward Hunter (a veteran of OSSCh ina and OPC who in tu rn was f edinformation regularly by Chennault) andRichard L G Deverall of the AmericanFederation of Laborrsquos Free Trade UnionCommittee (under the CIArsquos labor asset JayLovestone)

83 Scott Drugs Oil and War 7 60ndash61 198207 citing Penny Lernoux In Banks We Trust(Garden City NY AnchorDoubleday 1984)42ndash44 84

84 Fineman A Special Relationship 215

85 I explore this question in Scott Drugs Oiland War 60ndash64

86 Gole General William E DePuy 80

87 Chennault himself was investigated for suchsmuggling activities ldquobut no official action wastaken because he was politically untouchablerdquo(Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 92) cfBarbara Tuchman Stilwell and the AmericanExperience in China 1911ndash1945 7ndash78 PaulFrillmann and Graham Peck China TheRemembered Life (Boston Houghton Mifflin1968) 152

88 Corson The Armies of Ignorance 322

89 Valentine The Strength of the Wolf 71quoting Reid The Mistress and the Mafia 42

90 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 98 citing OSSCID 126155 April 19 1945

APJ | JF 8 | 44 | 2

29

91 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo

92 Andrew Forbes and David Henley The HawTraders of the Golden Triangle (Bangkok TeakHouse 1997)

93 Cooper Thailand 116

9 4 Wen-chin Chang ldquoIdentif ication ofLeadership among the KMT Yunnanese Chinesein Northern Thailand Journal of SoutheastAsian Studies 33 (2002) 125 Chang calls thisname ldquoa popular misnomerrdquo on the groundsthat the KMT villages have been expanding andldquoslowly casting off their former militarylegacyrdquo

95 Taylor Foreign and Domestic Consequencesof the Kuomintang Intervention in Burma 10

96 McCoy The Politics of Heroin 162ndash63

97 Sucheng Chan Hmong Means Free Life inLaos and America (Philadelphia TempleUniversity Press 1994) 1942 cf John TMcAlister Viet Nam The Origins of Revolution(Garden City NY Doubleday 1971) 228Scott The War Conspiracy 267

9 8 T i m o t h y B r o o k a n d B o b T a d a s h iWakabayashi eds Opium RegimesChina Britain and Japan 1839ndash1952(Berkeley University of California Press 2000)261ndash79 Jonathan Marshall ldquoOpium and thePolitics of Gangsterism in NationalistChina 1927ndash1945rdquo Bulletin of ConcernedAsian Scholars JulyndashSeptember 1976 19ndash48Laura Tyson Li Madame Chiang Kai-shekChinarsquos Eternal First Lady (New YorkAtlantic Monthly Press 2006) 107 citingNelson T Johnson to Stanley K Hornbeck May31 1934 box 23 Johnson Papers Library ofCongress

99 In global surveys of the opium traffic oneregularly reads of the importance of Teochew(Chiu chau) triads in the postwar Thai drug

milieu (eg Martin Booth Dragon SyndicatesThe Global Phenomenon of the Triads [NewYork Carroll and Graf 1999] 176ndash77 McCoyThe Politics of Heroin 389 396) Althoughtriads are central to trafficking in Hong Kongand today possibly inside China I questionwhether the Teochew in Thailand althoughthey certainly are prominent in the drug tradethere are still as dominated by triads as theywere before World War II Cf SkinnerChinese Society in Thailand 264ndash67

100 Valentine The Strength of the Wolf 14citing Melvin L Hanks NARC The Adventuresof a Federal Agent (New York Hastings House1973) 37 162ndash66 Brook and WakabayashiOpium Regimes 263 For an overview of USknowledge of KMT drug trafficking seeMarshal l ldquoOpium and the Pol i t ics ofGangsterism in Nationalist China 1927ndash1945rdquo

101 Valentine The Strength of the Wolf 72ndash73citing Terry A Talent report of November 151946 Douglas Clark Kinder and William OWalker III ldquoStable Force in a Storm Harry JAnslinger and United States Narcotics Policy1930ndash1962rdquo Journal of American HistoryMarch 1986 919

102 Valentine The Strength of the Wolf 77

103 Victor S Kaufman Confronting CommunismUS and British Policies toward China(Columbia University of Missouri Press 2001)20ndash21

104 Cumings The Origins of the Korean War508ndash25 Robert Accinel l i Cris is andCommitment United States Policy towardTaiwan 1950ndash1955 (Chapel Hill University ofNorth Carolina Press 1996) 271ndash72 Ross YKoen The China Lobby in American Politics(New York Harper and Row 1974) 46 48ndash51Elsewhere I have described CommerceInternational China as a subsidiary of the WCCSince then I have learned that it was a firmfounded in Shanghai in 1930 I now doubt thealleged WCC connection Later Fassoulis was

APJ | JF 8 | 44 | 2

30

ind ic ted in a huge organ ized cr imeconspiracy to defraud banks in a stock swindle(New York Times September 12 1969 PeterDale Scott Deep Politics and the Death of JFK[Berkeley University of California Press 1998]168ndash69 178) By 2005 Fassoulis was worth$150 million as chairman and CEO of CICInternational the successor to CommerceInternational China his company nowsupplying the US armed services waspredicted to do $870 million of business (ldquoThe50 Wealthiest Greeks in Americardquo NationalHerald March 29 2008) There have beenspeculations that the ldquoUS Central IntelligenceAgency may actual ly support CICInternational Ltd so it remains in business asone of its many brokers for arms technologycomponents logistics on transactionssignificant to intelligence operationsrdquo (PaulCollin ldquoGlobal Economic Brinkmanshiprdquo)

105 Scott Drugs Oil and War 188

106 McCoy The Politics of Heroin 185

1 0 7 Scott Drugs Oil and War 192ndash93Anslingerrsquos protection of the KMT traffichad the add i t i ona l consequence o fstrengthening and protecting pro-KMT tongs inAmerica In 1959 when a pro-KMT Hip Singtong network distributing drugs was broken upin San Francisco a leading FBN official withOSSndashCIA connections George Whiteblamed the drug shipment on communist Chinawhile allowing the ringleader to escape toTaiwan (Scott Drugs Oil and War 63Valentine The Strength of the Wolf 195)

108 Walker Opium and Foreign Policy 214

109 Joe Studwell Asian Godfathers Money andPower in Hong Kong and Southeast Asia (NewYork Atlantic Monthly Press 2007) 95ndash96

110 J W Cushman ldquoThe Khaw Group ChineseBusiness in Early Twentieth- Century PenangrdquoJournal of Southeast Asian Studies 17 (1986)58 cf Trocki ldquoDrugs Taxes and Chinese

Capitalism in Southeast Asiardquo 99ndash100

111 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 106 The KMTobtained the tungsten from Karen rebelscontrolling a major mine at Mawchj inexchange for modern arms provided by theCIA

112 Fineman A Special Relationship 133 153Bird at the time was a ldquoprivate aviationcontractorrdquo (McCoy The Politics of Heroin168) and aviation was the key to the BPPstrategy of defending the Thai frontier becausethe Thai road system was still primitive in theborder areas Because Bird included in thiscommittee his brother-in-law Air Force ColonelSitthi Savetsila Sitthi became one of Phaorsquosclosest aides-de-camp and his translator In the1980s he served for a decade as foreignminister in the last Thai military government

113 I have not been able to establish the identityof this OPC officer One possibility is DesmondFitzgerald who became the overseer andchampion of Sea Supply Operation Paper theBPP and (still to be discussed) PARU Anotherpossibility is Paul Helliwell

114 Lobe United States National Security Policyand Aid to the Thailand Police 19ndash20

115 Fineman A Special Relationship 137McCoy The Politics of Heroin 165

116 Fineman A Special Relationship 134emphasis added

117 McCoy The Politics of Heroin 168ndash69Sherman Joost the OPC officer who headedSea Supply in Bangkok ldquohad led Kachinguerrillas in Burma during the war as acommander of OSS Detachment 101rdquo

118 Walker Opium and Foreign Policy 200205

119 McCoy The Politics of Heroin 168

APJ | JF 8 | 44 | 2

25

April 14 1948 (Donovan Papers box 73aMilitary History Institute US Army CarlisleBarracks Pennsylvania)

43 Paul M Handley The King Never Smiles ABiography of Thailandrsquos Bhumipol Adulyadej(New Haven CT Yale University Press 2006)105

44 Walker Opium and Foreign Policy 185

45 Foreign Relations of the United States1949ndash1951 (hereinafter FRUS) (WashingtonDC Government Printing Office) vol 6 40ndash41memo of March 9 1950 from Dean Achesonsecretary of state

46 FRUS 1952ndash1954 vol 12 651 memo ofOctober 7 1952 from Edwin M Martin specialassistant to the secretary for mutual securityaffairs to John H Ohly assistant director forprogram Office of the Director of MutualSecurity (emphasis added)

47 Shortly before his dismissal on April 111951 MacArthur in Tokyo issued a statementcalling for a ldquodecision by the United Nations todepart from its tolerant effort to contain thewar to the area of Korea through an expansionof our military operations to its coastal areasand interior bases [to] doom Red China to riskthe imminent military collapserdquo (Lintner BloodBrothers 237)

48 Bruce Cumings The Origins of the KoreanWar vol 2 (Princeton NJ Princeton UniversityPress 1990) Donovan in this period becamevice chairman of the Committee to DefendAmerica by Aiding Anti-Communist China

49 Martha Byrd Chennault Giving Wings to theTiger (Tuscaloosa University of Alabama Press1987) 325ndash28 William M Leary PerilousMissions Civil Air Transport and CIA CovertOperations in Asia 1946ndash1955 (TuscaloosaUniversity of Alabama Press 1984) 67ndash68Scott Drugs Oil and War 2

50 Jack Samson Chennault 62

51 John Prados Safe for Democracy The SecretWars of the CIA (Chicago Ivan R Dee 2006)125 Cf Los Angeles Times September 222000 ldquoNewly declassified US intelligence filestell the remarkable story of the ultra-secretInsurance Intelligence Unit a component of theOffice of Strategic Services a forerunner of theCIA and its elite counterintelligence branchX-2 Though rarely numbering more than ahalf dozen agents the unit gatheredintelligence on the enemyrsquos insurance industryNazi insurance t i tans and suspectedcollaborators in the insurance business Themen behind the insurance unit were OSS headWilliam ldquoWild Billrdquo Donovan and California-born insurance magnate Cornelius V StarrStarr had started out selling insurance toChinese in Shanghai in 1919 Starr sentinsurance agents into Asia and Europe evenbefore the bombs stopped falling and built whateventually became AIG which today has itsworld headquarters in the same downtown NewYork building where the tiny OSS unit toiled inthe deepest secrecyrdquo

52 Peter Dale Scott The War Conspiracy JFK911 and the Deep Politics of War (IpswichMA Mary Ferrell Foundation Press 2008)46ndash47 263ndash64 William Youngman Corcoranrsquoslaw partner and a key member of Chennaultrsquossupport team in Washington during and afterthe war was by 1960 president of a C V Starrcompany in Saigon

53 Smith OSS 267

54 Smith OSS 267n

55 It is possible that other backers of theChennau l t P lan a l l i ed themse lves like Helliwell with organized crime In thoseearly postwar years one of the C VStarr companies US Life was the recipient ofdubious Teamster insurance contracts throughthe intervention of the mob-linked businessagents Paul and Allan Dorfman (Scott Drugs

APJ | JF 8 | 44 | 2

26

Oil and War 197 Scott The War Conspiracy279) One of the principal supporters ofChennaultrsquos airline on the US West Coast DrMargaret Chung was suspected of drugtrafficking after her frequent trips to MexicoCity with Virginia Hill a courier for MeyerLansky and Bugsy Siegel See Ed Reid TheMistress and the Mafia The Virginia Hill Story(New York Bantam 1972) 42 90 Peter DaleScott ldquoOpium and Empire McCoy on Heroin inSoutheast Asiardquo Bulletin of Concerned AsianScholars September 1973 49ndash56

56 Ronald Shelp with Al Ehrbar Fallen GiantThe Amazing Story of Hank Greenberg and theHistory of AIG (Hoboken NJ Wiley 2006) 60

57 Encyclopaedia Britannica The moneysplashed around in Washington by the ldquoChinaLobbyrdquo was attributed at the time chiefly to thewealthy linen and lace merchant JosephKohlberg the so-called China Lobby man But ithas often been suspected that he was frontingfor others

58 Lintner Burma in Revolt 111ndash14 As early as1950 Ting was also actively promoting theconcept of an Anti-Communist League tosupport KMT resistance (134 234) The KMTrsquosensuing Asian Peoplesrsquo Anti-Communist League(later known as the World Anti-CommunistLeague) became intimately involved withsupport for the KMT troops in Burma In 1971the chief Laotian delegate to the World Anti-Communist League Prince Sopsaisana wasdetained with sixty kilos of top-grade heroin inhis luggage (Scott Drugs Oil and War 163194ndash95)

59 MacArthur advised the State Department in1949 that the United States should place ldquo500fighter planes in the hands of some lsquowar horsersquosimilar to Chennaultrdquo and further support theKMT wi th US vo lunteers (memo ofconversation September 5 1949 FRUS 1949vol 9 544ndash46 Cumings The Origins of theKorean War 103 Byrd Chennault 344)

Chennault in turn told Senator Knowland thatCongress should ap- point MacArthur asupreme commander for the entire Far East

60 Donovan suggested that Chennault becomeminister of defense in a reconstituted KMTgovernment At some point Chennault andDonovan met privately with Willoughby inJapan (Cumings The Origins of the KoreanWar 513)

61 Valentine The Strength of the Wolf 260Cumings The Origins of the Korean War 133

62 Cumings The Origins of the Korean War119ndash21 796 James Burnham The ComingDefeat of Communism (New York John Day1951) 256ndash66

63 David McKean Peddling Influence ThomasldquoTommy the Corkrdquo Corcoran and the Birth ofModern Lobbying (Hanover NH Steerforth2004) 216

64 Hersh The Old Boys 299

6 5 McKean Peddl ing Inf luence 216Christopher Robbins Air America (New YorkPutnamrsquos 1979) 48ndash49 56ndash57 70 ByrdChennault 333 Alan A Block Masters ofParadise Organized Crime and the InternalRevenue Service in the Bahamas (NewBrunswick NJ Transaction 1991) 169

66 Curtis Peebles Twilight Warriors Covert AirOperations against the USSR (Annapolis MDNaval Institute Press 2005) 88ndash89

67 William R Corson The Armies of IgnoranceThe Rise of the American Intelligence Empire(New York Dial PressJames Wade 1977)320ndash21

68 Hersh The Old Boys 284 Cf SamuelHalpern (a former CIA officer) in Ralph SWeber Spymasters Ten CIA Officers in TheirOwn Words (Wilmington DE ScholarlyResources 1999) 117 ldquoBedell suddenly said

APJ | JF 8 | 44 | 2

27

lsquoTheyrsquore under my commandrsquo He did it andhe did it in the first seven days of his tenure asDCI [director of the CIA]rdquo

69 Corson The Armies of Ignorance 319 DanielFineman A Special Relationship The UnitedStates and Military Government in Thailand1947ndash1958 (Honolulu University of HawailsquoiPress 1997) 137 Henry G Gole GeneralWilliam E DePuy Preparing the Army forModern War (Lexington University Press ofKentucky 2008) 80 ldquoCIA Director WalterBedell Smith opposed the plan but PresidentTruman approved it overruled the Directorand ordered the strictest secrecy about itrdquo

70 Victor S Kaufman ldquoTrouble in the GoldenTriangle The United States Taiwan and the93rd Nationalist Divisionrdquo China Quarterly no166 (June 2001) 441 citing MemorandumBradley to Secretary of Defense April 10 1950and Annex to NSC 483 ldquoUnited StatesObjectives Policies and Courses of Action inAsiardquo May 2 1951 Presidentrsquos SecretaryrsquosFile National Security FilemdashMeetings box 212Harry S Truman Library IndependenceMissouri Cf Sam Halpern in WeberSpymasters 119 ldquoThe Pentagon came up withthis bright plan as I understand it at least Iwas told this by my [CIAOSO] boss LloydGeorge who was Chief of the Far East Divisionat the timerdquo

71 Kaufman ldquoTrouble in the Golden Trianglerdquo442ndash43 Fineman A Special Relationship141ndash42

72 Kaufman ldquoTrouble in the Golden Trianglerdquo443 ldquoWhether Secretary of State DeanAcheson knew of Operation Paper isuncertain Acheson was present at discussionsregarding the use of covert operations againstChina Yet since mid-1950 the secretary ofstate had been working to remove theirregulars Therefore either Acheson knew ofthe operat ion and did not inform hissubordinates or he too did not have the entire

picturerdquo In apparent contradiction WilliamWalker writes that ldquoAcheson had participatedfrom the start in the decision-making processrelating to NSC 485 so he was familiar withthe d i scuss ions about us ing cover toperations against Chinarsquos southern flankrdquo(Opium and Foreign Policy 203) But NSC485 primarily a policy paper on Korea datesfrom May 17 1951 half a year later

73 Leary Perilous Missions 116ndash17

7 4 Lintner Blood Brothers 237 citingMacArthur on March 21 1951 in Robert HTaylor Foreign and Domestic Consequences ofthe Kuomintang Intervention in Burma (IthacaNY Cornell University Southeast Asia ProgramData Paper no 93 1973) 42 Chennault onApril 23 1958 in US Congress HouseCommittee on Un-American ActivitiesInternational Communism (CommunistEncroachment in the Far East) ldquoConsultationswith Maj-Gen Claire Lee Chennault UnitedStates Armyrdquo 85th Cong 2nd sess 9ndash10

75 Leary Perilous Missions 129ndash30 Learystates that US personnel delivered the armsonly as far as northern Thailand with the lastleg of delivery handled by the Thai BorderPolice But there are numerous contemporaryreports of US personnel at Mong Hsat inBurma who helped unload the planes andreload them with opium (Scott Drugs Oil andWar 60 Corson The Armies of Ignorance320ndash22) Lintner reproduces a photograph ofthree American civilians who were killed inaction with the KMT in Burma in 1953 (LintnerBurma in Revolt 168) On April 1 1953the Rangoon Nation reported a captured letterf r o m M a j o r G e n e r a l L i rsquo sheadquarters discussing ldquoEuropean instructorsfor the training of studentsrdquo

76 McCoy The Politics of Heroin 169ndash71Lintner Blood Brothers 238 Despite thismilitary fiasco the KMT troops contributed tothe survival of noncommunist Chinese

APJ | JF 8 | 44 | 2

28

communities in Southeast Asia both by servingas a protective shield and by sustaining thetraditional social fabric of drug-financed KMTTriads in Southeast Asia See McCoy ThePolitics of Heroin 185ndash86 Scott Drugs Oiland War 60 192ndash93

77 Donald F Cooper Thailand Dictatorship ofDemocracy (Montreux Minerva Press 1995)120

78 Eg McCoy The Politics of Heroin 165ndash69Cf Tim Weiner Legacy of Ashes The History ofthe CIA (New York Doubleday 2007) 60 ldquoThefinal theater for the CIA in the Korean War layin Burma In early 1951 as the ChineseCommunists chased General MacArthurrsquostroops south the Pentagon thought the ChineseNationalists could take some pressure offMacArthur by opening a second front The CIA began [sic] flying Chinese Nationalistsoldiers into Thailand and dropping themalong with pallets of guns and ammunition intonorthern Burmardquo Cf Walker Opium andForeign Policy 200 ldquoSome aid was alreadyreaching KMT forces in Burma monthsbefore the January 1951 NSC meetingrdquo

79 Fineman A Special Relationship 289n25

80 Fineman A Special Relationship 137

81 US Treasury Department Bureau ofN a r c o t i c s T r a f f i c i n O p i u m a n dOther Dangerous Drugs (Washington DCGovernment Printing Office 1949) 13(1950) 3 (1954) 12 Through the samedecade the FBN by direction of the US StateDepartment acknowledged to UN NarcoticsConferences that Thailand was a source foropium and heroin reaching the United States(Scott Drugs Oil and War 191 203 citing UNDocuments ECN7213 ECN7283 22 andECN7303Rev1 34 cf Walker Opium andForeign Policy 201 [State Department]) Whenthe FBN Traffic in Opium reports began toacknowledge Thai drug seizures again in1962 the Kennedy administration had already

initiated serious efforts to remove the bulk ofthe KMT troops from the region (KaufmanldquoTrouble in the Golden Trianglerdquo 452)

82 Walker Opium and Foreign Policy 206 cf213ndash15 Cf also Valentine The Strength of theWolf 133 150ndash52 Anslinger was not alone inblaming heroin flows on mainland China Hewas joined in the attack by two others with CIAconnections Edward Hunter (a veteran of OSSCh ina and OPC who in tu rn was f edinformation regularly by Chennault) andRichard L G Deverall of the AmericanFederation of Laborrsquos Free Trade UnionCommittee (under the CIArsquos labor asset JayLovestone)

83 Scott Drugs Oil and War 7 60ndash61 198207 citing Penny Lernoux In Banks We Trust(Garden City NY AnchorDoubleday 1984)42ndash44 84

84 Fineman A Special Relationship 215

85 I explore this question in Scott Drugs Oiland War 60ndash64

86 Gole General William E DePuy 80

87 Chennault himself was investigated for suchsmuggling activities ldquobut no official action wastaken because he was politically untouchablerdquo(Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 92) cfBarbara Tuchman Stilwell and the AmericanExperience in China 1911ndash1945 7ndash78 PaulFrillmann and Graham Peck China TheRemembered Life (Boston Houghton Mifflin1968) 152

88 Corson The Armies of Ignorance 322

89 Valentine The Strength of the Wolf 71quoting Reid The Mistress and the Mafia 42

90 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 98 citing OSSCID 126155 April 19 1945

APJ | JF 8 | 44 | 2

29

91 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo

92 Andrew Forbes and David Henley The HawTraders of the Golden Triangle (Bangkok TeakHouse 1997)

93 Cooper Thailand 116

9 4 Wen-chin Chang ldquoIdentif ication ofLeadership among the KMT Yunnanese Chinesein Northern Thailand Journal of SoutheastAsian Studies 33 (2002) 125 Chang calls thisname ldquoa popular misnomerrdquo on the groundsthat the KMT villages have been expanding andldquoslowly casting off their former militarylegacyrdquo

95 Taylor Foreign and Domestic Consequencesof the Kuomintang Intervention in Burma 10

96 McCoy The Politics of Heroin 162ndash63

97 Sucheng Chan Hmong Means Free Life inLaos and America (Philadelphia TempleUniversity Press 1994) 1942 cf John TMcAlister Viet Nam The Origins of Revolution(Garden City NY Doubleday 1971) 228Scott The War Conspiracy 267

9 8 T i m o t h y B r o o k a n d B o b T a d a s h iWakabayashi eds Opium RegimesChina Britain and Japan 1839ndash1952(Berkeley University of California Press 2000)261ndash79 Jonathan Marshall ldquoOpium and thePolitics of Gangsterism in NationalistChina 1927ndash1945rdquo Bulletin of ConcernedAsian Scholars JulyndashSeptember 1976 19ndash48Laura Tyson Li Madame Chiang Kai-shekChinarsquos Eternal First Lady (New YorkAtlantic Monthly Press 2006) 107 citingNelson T Johnson to Stanley K Hornbeck May31 1934 box 23 Johnson Papers Library ofCongress

99 In global surveys of the opium traffic oneregularly reads of the importance of Teochew(Chiu chau) triads in the postwar Thai drug

milieu (eg Martin Booth Dragon SyndicatesThe Global Phenomenon of the Triads [NewYork Carroll and Graf 1999] 176ndash77 McCoyThe Politics of Heroin 389 396) Althoughtriads are central to trafficking in Hong Kongand today possibly inside China I questionwhether the Teochew in Thailand althoughthey certainly are prominent in the drug tradethere are still as dominated by triads as theywere before World War II Cf SkinnerChinese Society in Thailand 264ndash67

100 Valentine The Strength of the Wolf 14citing Melvin L Hanks NARC The Adventuresof a Federal Agent (New York Hastings House1973) 37 162ndash66 Brook and WakabayashiOpium Regimes 263 For an overview of USknowledge of KMT drug trafficking seeMarshal l ldquoOpium and the Pol i t ics ofGangsterism in Nationalist China 1927ndash1945rdquo

101 Valentine The Strength of the Wolf 72ndash73citing Terry A Talent report of November 151946 Douglas Clark Kinder and William OWalker III ldquoStable Force in a Storm Harry JAnslinger and United States Narcotics Policy1930ndash1962rdquo Journal of American HistoryMarch 1986 919

102 Valentine The Strength of the Wolf 77

103 Victor S Kaufman Confronting CommunismUS and British Policies toward China(Columbia University of Missouri Press 2001)20ndash21

104 Cumings The Origins of the Korean War508ndash25 Robert Accinel l i Cris is andCommitment United States Policy towardTaiwan 1950ndash1955 (Chapel Hill University ofNorth Carolina Press 1996) 271ndash72 Ross YKoen The China Lobby in American Politics(New York Harper and Row 1974) 46 48ndash51Elsewhere I have described CommerceInternational China as a subsidiary of the WCCSince then I have learned that it was a firmfounded in Shanghai in 1930 I now doubt thealleged WCC connection Later Fassoulis was

APJ | JF 8 | 44 | 2

30

ind ic ted in a huge organ ized cr imeconspiracy to defraud banks in a stock swindle(New York Times September 12 1969 PeterDale Scott Deep Politics and the Death of JFK[Berkeley University of California Press 1998]168ndash69 178) By 2005 Fassoulis was worth$150 million as chairman and CEO of CICInternational the successor to CommerceInternational China his company nowsupplying the US armed services waspredicted to do $870 million of business (ldquoThe50 Wealthiest Greeks in Americardquo NationalHerald March 29 2008) There have beenspeculations that the ldquoUS Central IntelligenceAgency may actual ly support CICInternational Ltd so it remains in business asone of its many brokers for arms technologycomponents logistics on transactionssignificant to intelligence operationsrdquo (PaulCollin ldquoGlobal Economic Brinkmanshiprdquo)

105 Scott Drugs Oil and War 188

106 McCoy The Politics of Heroin 185

1 0 7 Scott Drugs Oil and War 192ndash93Anslingerrsquos protection of the KMT traffichad the add i t i ona l consequence o fstrengthening and protecting pro-KMT tongs inAmerica In 1959 when a pro-KMT Hip Singtong network distributing drugs was broken upin San Francisco a leading FBN official withOSSndashCIA connections George Whiteblamed the drug shipment on communist Chinawhile allowing the ringleader to escape toTaiwan (Scott Drugs Oil and War 63Valentine The Strength of the Wolf 195)

108 Walker Opium and Foreign Policy 214

109 Joe Studwell Asian Godfathers Money andPower in Hong Kong and Southeast Asia (NewYork Atlantic Monthly Press 2007) 95ndash96

110 J W Cushman ldquoThe Khaw Group ChineseBusiness in Early Twentieth- Century PenangrdquoJournal of Southeast Asian Studies 17 (1986)58 cf Trocki ldquoDrugs Taxes and Chinese

Capitalism in Southeast Asiardquo 99ndash100

111 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 106 The KMTobtained the tungsten from Karen rebelscontrolling a major mine at Mawchj inexchange for modern arms provided by theCIA

112 Fineman A Special Relationship 133 153Bird at the time was a ldquoprivate aviationcontractorrdquo (McCoy The Politics of Heroin168) and aviation was the key to the BPPstrategy of defending the Thai frontier becausethe Thai road system was still primitive in theborder areas Because Bird included in thiscommittee his brother-in-law Air Force ColonelSitthi Savetsila Sitthi became one of Phaorsquosclosest aides-de-camp and his translator In the1980s he served for a decade as foreignminister in the last Thai military government

113 I have not been able to establish the identityof this OPC officer One possibility is DesmondFitzgerald who became the overseer andchampion of Sea Supply Operation Paper theBPP and (still to be discussed) PARU Anotherpossibility is Paul Helliwell

114 Lobe United States National Security Policyand Aid to the Thailand Police 19ndash20

115 Fineman A Special Relationship 137McCoy The Politics of Heroin 165

116 Fineman A Special Relationship 134emphasis added

117 McCoy The Politics of Heroin 168ndash69Sherman Joost the OPC officer who headedSea Supply in Bangkok ldquohad led Kachinguerrillas in Burma during the war as acommander of OSS Detachment 101rdquo

118 Walker Opium and Foreign Policy 200205

119 McCoy The Politics of Heroin 168

APJ | JF 8 | 44 | 2

26

Oil and War 197 Scott The War Conspiracy279) One of the principal supporters ofChennaultrsquos airline on the US West Coast DrMargaret Chung was suspected of drugtrafficking after her frequent trips to MexicoCity with Virginia Hill a courier for MeyerLansky and Bugsy Siegel See Ed Reid TheMistress and the Mafia The Virginia Hill Story(New York Bantam 1972) 42 90 Peter DaleScott ldquoOpium and Empire McCoy on Heroin inSoutheast Asiardquo Bulletin of Concerned AsianScholars September 1973 49ndash56

56 Ronald Shelp with Al Ehrbar Fallen GiantThe Amazing Story of Hank Greenberg and theHistory of AIG (Hoboken NJ Wiley 2006) 60

57 Encyclopaedia Britannica The moneysplashed around in Washington by the ldquoChinaLobbyrdquo was attributed at the time chiefly to thewealthy linen and lace merchant JosephKohlberg the so-called China Lobby man But ithas often been suspected that he was frontingfor others

58 Lintner Burma in Revolt 111ndash14 As early as1950 Ting was also actively promoting theconcept of an Anti-Communist League tosupport KMT resistance (134 234) The KMTrsquosensuing Asian Peoplesrsquo Anti-Communist League(later known as the World Anti-CommunistLeague) became intimately involved withsupport for the KMT troops in Burma In 1971the chief Laotian delegate to the World Anti-Communist League Prince Sopsaisana wasdetained with sixty kilos of top-grade heroin inhis luggage (Scott Drugs Oil and War 163194ndash95)

59 MacArthur advised the State Department in1949 that the United States should place ldquo500fighter planes in the hands of some lsquowar horsersquosimilar to Chennaultrdquo and further support theKMT wi th US vo lunteers (memo ofconversation September 5 1949 FRUS 1949vol 9 544ndash46 Cumings The Origins of theKorean War 103 Byrd Chennault 344)

Chennault in turn told Senator Knowland thatCongress should ap- point MacArthur asupreme commander for the entire Far East

60 Donovan suggested that Chennault becomeminister of defense in a reconstituted KMTgovernment At some point Chennault andDonovan met privately with Willoughby inJapan (Cumings The Origins of the KoreanWar 513)

61 Valentine The Strength of the Wolf 260Cumings The Origins of the Korean War 133

62 Cumings The Origins of the Korean War119ndash21 796 James Burnham The ComingDefeat of Communism (New York John Day1951) 256ndash66

63 David McKean Peddling Influence ThomasldquoTommy the Corkrdquo Corcoran and the Birth ofModern Lobbying (Hanover NH Steerforth2004) 216

64 Hersh The Old Boys 299

6 5 McKean Peddl ing Inf luence 216Christopher Robbins Air America (New YorkPutnamrsquos 1979) 48ndash49 56ndash57 70 ByrdChennault 333 Alan A Block Masters ofParadise Organized Crime and the InternalRevenue Service in the Bahamas (NewBrunswick NJ Transaction 1991) 169

66 Curtis Peebles Twilight Warriors Covert AirOperations against the USSR (Annapolis MDNaval Institute Press 2005) 88ndash89

67 William R Corson The Armies of IgnoranceThe Rise of the American Intelligence Empire(New York Dial PressJames Wade 1977)320ndash21

68 Hersh The Old Boys 284 Cf SamuelHalpern (a former CIA officer) in Ralph SWeber Spymasters Ten CIA Officers in TheirOwn Words (Wilmington DE ScholarlyResources 1999) 117 ldquoBedell suddenly said

APJ | JF 8 | 44 | 2

27

lsquoTheyrsquore under my commandrsquo He did it andhe did it in the first seven days of his tenure asDCI [director of the CIA]rdquo

69 Corson The Armies of Ignorance 319 DanielFineman A Special Relationship The UnitedStates and Military Government in Thailand1947ndash1958 (Honolulu University of HawailsquoiPress 1997) 137 Henry G Gole GeneralWilliam E DePuy Preparing the Army forModern War (Lexington University Press ofKentucky 2008) 80 ldquoCIA Director WalterBedell Smith opposed the plan but PresidentTruman approved it overruled the Directorand ordered the strictest secrecy about itrdquo

70 Victor S Kaufman ldquoTrouble in the GoldenTriangle The United States Taiwan and the93rd Nationalist Divisionrdquo China Quarterly no166 (June 2001) 441 citing MemorandumBradley to Secretary of Defense April 10 1950and Annex to NSC 483 ldquoUnited StatesObjectives Policies and Courses of Action inAsiardquo May 2 1951 Presidentrsquos SecretaryrsquosFile National Security FilemdashMeetings box 212Harry S Truman Library IndependenceMissouri Cf Sam Halpern in WeberSpymasters 119 ldquoThe Pentagon came up withthis bright plan as I understand it at least Iwas told this by my [CIAOSO] boss LloydGeorge who was Chief of the Far East Divisionat the timerdquo

71 Kaufman ldquoTrouble in the Golden Trianglerdquo442ndash43 Fineman A Special Relationship141ndash42

72 Kaufman ldquoTrouble in the Golden Trianglerdquo443 ldquoWhether Secretary of State DeanAcheson knew of Operation Paper isuncertain Acheson was present at discussionsregarding the use of covert operations againstChina Yet since mid-1950 the secretary ofstate had been working to remove theirregulars Therefore either Acheson knew ofthe operat ion and did not inform hissubordinates or he too did not have the entire

picturerdquo In apparent contradiction WilliamWalker writes that ldquoAcheson had participatedfrom the start in the decision-making processrelating to NSC 485 so he was familiar withthe d i scuss ions about us ing cover toperations against Chinarsquos southern flankrdquo(Opium and Foreign Policy 203) But NSC485 primarily a policy paper on Korea datesfrom May 17 1951 half a year later

73 Leary Perilous Missions 116ndash17

7 4 Lintner Blood Brothers 237 citingMacArthur on March 21 1951 in Robert HTaylor Foreign and Domestic Consequences ofthe Kuomintang Intervention in Burma (IthacaNY Cornell University Southeast Asia ProgramData Paper no 93 1973) 42 Chennault onApril 23 1958 in US Congress HouseCommittee on Un-American ActivitiesInternational Communism (CommunistEncroachment in the Far East) ldquoConsultationswith Maj-Gen Claire Lee Chennault UnitedStates Armyrdquo 85th Cong 2nd sess 9ndash10

75 Leary Perilous Missions 129ndash30 Learystates that US personnel delivered the armsonly as far as northern Thailand with the lastleg of delivery handled by the Thai BorderPolice But there are numerous contemporaryreports of US personnel at Mong Hsat inBurma who helped unload the planes andreload them with opium (Scott Drugs Oil andWar 60 Corson The Armies of Ignorance320ndash22) Lintner reproduces a photograph ofthree American civilians who were killed inaction with the KMT in Burma in 1953 (LintnerBurma in Revolt 168) On April 1 1953the Rangoon Nation reported a captured letterf r o m M a j o r G e n e r a l L i rsquo sheadquarters discussing ldquoEuropean instructorsfor the training of studentsrdquo

76 McCoy The Politics of Heroin 169ndash71Lintner Blood Brothers 238 Despite thismilitary fiasco the KMT troops contributed tothe survival of noncommunist Chinese

APJ | JF 8 | 44 | 2

28

communities in Southeast Asia both by servingas a protective shield and by sustaining thetraditional social fabric of drug-financed KMTTriads in Southeast Asia See McCoy ThePolitics of Heroin 185ndash86 Scott Drugs Oiland War 60 192ndash93

77 Donald F Cooper Thailand Dictatorship ofDemocracy (Montreux Minerva Press 1995)120

78 Eg McCoy The Politics of Heroin 165ndash69Cf Tim Weiner Legacy of Ashes The History ofthe CIA (New York Doubleday 2007) 60 ldquoThefinal theater for the CIA in the Korean War layin Burma In early 1951 as the ChineseCommunists chased General MacArthurrsquostroops south the Pentagon thought the ChineseNationalists could take some pressure offMacArthur by opening a second front The CIA began [sic] flying Chinese Nationalistsoldiers into Thailand and dropping themalong with pallets of guns and ammunition intonorthern Burmardquo Cf Walker Opium andForeign Policy 200 ldquoSome aid was alreadyreaching KMT forces in Burma monthsbefore the January 1951 NSC meetingrdquo

79 Fineman A Special Relationship 289n25

80 Fineman A Special Relationship 137

81 US Treasury Department Bureau ofN a r c o t i c s T r a f f i c i n O p i u m a n dOther Dangerous Drugs (Washington DCGovernment Printing Office 1949) 13(1950) 3 (1954) 12 Through the samedecade the FBN by direction of the US StateDepartment acknowledged to UN NarcoticsConferences that Thailand was a source foropium and heroin reaching the United States(Scott Drugs Oil and War 191 203 citing UNDocuments ECN7213 ECN7283 22 andECN7303Rev1 34 cf Walker Opium andForeign Policy 201 [State Department]) Whenthe FBN Traffic in Opium reports began toacknowledge Thai drug seizures again in1962 the Kennedy administration had already

initiated serious efforts to remove the bulk ofthe KMT troops from the region (KaufmanldquoTrouble in the Golden Trianglerdquo 452)

82 Walker Opium and Foreign Policy 206 cf213ndash15 Cf also Valentine The Strength of theWolf 133 150ndash52 Anslinger was not alone inblaming heroin flows on mainland China Hewas joined in the attack by two others with CIAconnections Edward Hunter (a veteran of OSSCh ina and OPC who in tu rn was f edinformation regularly by Chennault) andRichard L G Deverall of the AmericanFederation of Laborrsquos Free Trade UnionCommittee (under the CIArsquos labor asset JayLovestone)

83 Scott Drugs Oil and War 7 60ndash61 198207 citing Penny Lernoux In Banks We Trust(Garden City NY AnchorDoubleday 1984)42ndash44 84

84 Fineman A Special Relationship 215

85 I explore this question in Scott Drugs Oiland War 60ndash64

86 Gole General William E DePuy 80

87 Chennault himself was investigated for suchsmuggling activities ldquobut no official action wastaken because he was politically untouchablerdquo(Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 92) cfBarbara Tuchman Stilwell and the AmericanExperience in China 1911ndash1945 7ndash78 PaulFrillmann and Graham Peck China TheRemembered Life (Boston Houghton Mifflin1968) 152

88 Corson The Armies of Ignorance 322

89 Valentine The Strength of the Wolf 71quoting Reid The Mistress and the Mafia 42

90 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 98 citing OSSCID 126155 April 19 1945

APJ | JF 8 | 44 | 2

29

91 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo

92 Andrew Forbes and David Henley The HawTraders of the Golden Triangle (Bangkok TeakHouse 1997)

93 Cooper Thailand 116

9 4 Wen-chin Chang ldquoIdentif ication ofLeadership among the KMT Yunnanese Chinesein Northern Thailand Journal of SoutheastAsian Studies 33 (2002) 125 Chang calls thisname ldquoa popular misnomerrdquo on the groundsthat the KMT villages have been expanding andldquoslowly casting off their former militarylegacyrdquo

95 Taylor Foreign and Domestic Consequencesof the Kuomintang Intervention in Burma 10

96 McCoy The Politics of Heroin 162ndash63

97 Sucheng Chan Hmong Means Free Life inLaos and America (Philadelphia TempleUniversity Press 1994) 1942 cf John TMcAlister Viet Nam The Origins of Revolution(Garden City NY Doubleday 1971) 228Scott The War Conspiracy 267

9 8 T i m o t h y B r o o k a n d B o b T a d a s h iWakabayashi eds Opium RegimesChina Britain and Japan 1839ndash1952(Berkeley University of California Press 2000)261ndash79 Jonathan Marshall ldquoOpium and thePolitics of Gangsterism in NationalistChina 1927ndash1945rdquo Bulletin of ConcernedAsian Scholars JulyndashSeptember 1976 19ndash48Laura Tyson Li Madame Chiang Kai-shekChinarsquos Eternal First Lady (New YorkAtlantic Monthly Press 2006) 107 citingNelson T Johnson to Stanley K Hornbeck May31 1934 box 23 Johnson Papers Library ofCongress

99 In global surveys of the opium traffic oneregularly reads of the importance of Teochew(Chiu chau) triads in the postwar Thai drug

milieu (eg Martin Booth Dragon SyndicatesThe Global Phenomenon of the Triads [NewYork Carroll and Graf 1999] 176ndash77 McCoyThe Politics of Heroin 389 396) Althoughtriads are central to trafficking in Hong Kongand today possibly inside China I questionwhether the Teochew in Thailand althoughthey certainly are prominent in the drug tradethere are still as dominated by triads as theywere before World War II Cf SkinnerChinese Society in Thailand 264ndash67

100 Valentine The Strength of the Wolf 14citing Melvin L Hanks NARC The Adventuresof a Federal Agent (New York Hastings House1973) 37 162ndash66 Brook and WakabayashiOpium Regimes 263 For an overview of USknowledge of KMT drug trafficking seeMarshal l ldquoOpium and the Pol i t ics ofGangsterism in Nationalist China 1927ndash1945rdquo

101 Valentine The Strength of the Wolf 72ndash73citing Terry A Talent report of November 151946 Douglas Clark Kinder and William OWalker III ldquoStable Force in a Storm Harry JAnslinger and United States Narcotics Policy1930ndash1962rdquo Journal of American HistoryMarch 1986 919

102 Valentine The Strength of the Wolf 77

103 Victor S Kaufman Confronting CommunismUS and British Policies toward China(Columbia University of Missouri Press 2001)20ndash21

104 Cumings The Origins of the Korean War508ndash25 Robert Accinel l i Cris is andCommitment United States Policy towardTaiwan 1950ndash1955 (Chapel Hill University ofNorth Carolina Press 1996) 271ndash72 Ross YKoen The China Lobby in American Politics(New York Harper and Row 1974) 46 48ndash51Elsewhere I have described CommerceInternational China as a subsidiary of the WCCSince then I have learned that it was a firmfounded in Shanghai in 1930 I now doubt thealleged WCC connection Later Fassoulis was

APJ | JF 8 | 44 | 2

30

ind ic ted in a huge organ ized cr imeconspiracy to defraud banks in a stock swindle(New York Times September 12 1969 PeterDale Scott Deep Politics and the Death of JFK[Berkeley University of California Press 1998]168ndash69 178) By 2005 Fassoulis was worth$150 million as chairman and CEO of CICInternational the successor to CommerceInternational China his company nowsupplying the US armed services waspredicted to do $870 million of business (ldquoThe50 Wealthiest Greeks in Americardquo NationalHerald March 29 2008) There have beenspeculations that the ldquoUS Central IntelligenceAgency may actual ly support CICInternational Ltd so it remains in business asone of its many brokers for arms technologycomponents logistics on transactionssignificant to intelligence operationsrdquo (PaulCollin ldquoGlobal Economic Brinkmanshiprdquo)

105 Scott Drugs Oil and War 188

106 McCoy The Politics of Heroin 185

1 0 7 Scott Drugs Oil and War 192ndash93Anslingerrsquos protection of the KMT traffichad the add i t i ona l consequence o fstrengthening and protecting pro-KMT tongs inAmerica In 1959 when a pro-KMT Hip Singtong network distributing drugs was broken upin San Francisco a leading FBN official withOSSndashCIA connections George Whiteblamed the drug shipment on communist Chinawhile allowing the ringleader to escape toTaiwan (Scott Drugs Oil and War 63Valentine The Strength of the Wolf 195)

108 Walker Opium and Foreign Policy 214

109 Joe Studwell Asian Godfathers Money andPower in Hong Kong and Southeast Asia (NewYork Atlantic Monthly Press 2007) 95ndash96

110 J W Cushman ldquoThe Khaw Group ChineseBusiness in Early Twentieth- Century PenangrdquoJournal of Southeast Asian Studies 17 (1986)58 cf Trocki ldquoDrugs Taxes and Chinese

Capitalism in Southeast Asiardquo 99ndash100

111 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 106 The KMTobtained the tungsten from Karen rebelscontrolling a major mine at Mawchj inexchange for modern arms provided by theCIA

112 Fineman A Special Relationship 133 153Bird at the time was a ldquoprivate aviationcontractorrdquo (McCoy The Politics of Heroin168) and aviation was the key to the BPPstrategy of defending the Thai frontier becausethe Thai road system was still primitive in theborder areas Because Bird included in thiscommittee his brother-in-law Air Force ColonelSitthi Savetsila Sitthi became one of Phaorsquosclosest aides-de-camp and his translator In the1980s he served for a decade as foreignminister in the last Thai military government

113 I have not been able to establish the identityof this OPC officer One possibility is DesmondFitzgerald who became the overseer andchampion of Sea Supply Operation Paper theBPP and (still to be discussed) PARU Anotherpossibility is Paul Helliwell

114 Lobe United States National Security Policyand Aid to the Thailand Police 19ndash20

115 Fineman A Special Relationship 137McCoy The Politics of Heroin 165

116 Fineman A Special Relationship 134emphasis added

117 McCoy The Politics of Heroin 168ndash69Sherman Joost the OPC officer who headedSea Supply in Bangkok ldquohad led Kachinguerrillas in Burma during the war as acommander of OSS Detachment 101rdquo

118 Walker Opium and Foreign Policy 200205

119 McCoy The Politics of Heroin 168

APJ | JF 8 | 44 | 2

27

lsquoTheyrsquore under my commandrsquo He did it andhe did it in the first seven days of his tenure asDCI [director of the CIA]rdquo

69 Corson The Armies of Ignorance 319 DanielFineman A Special Relationship The UnitedStates and Military Government in Thailand1947ndash1958 (Honolulu University of HawailsquoiPress 1997) 137 Henry G Gole GeneralWilliam E DePuy Preparing the Army forModern War (Lexington University Press ofKentucky 2008) 80 ldquoCIA Director WalterBedell Smith opposed the plan but PresidentTruman approved it overruled the Directorand ordered the strictest secrecy about itrdquo

70 Victor S Kaufman ldquoTrouble in the GoldenTriangle The United States Taiwan and the93rd Nationalist Divisionrdquo China Quarterly no166 (June 2001) 441 citing MemorandumBradley to Secretary of Defense April 10 1950and Annex to NSC 483 ldquoUnited StatesObjectives Policies and Courses of Action inAsiardquo May 2 1951 Presidentrsquos SecretaryrsquosFile National Security FilemdashMeetings box 212Harry S Truman Library IndependenceMissouri Cf Sam Halpern in WeberSpymasters 119 ldquoThe Pentagon came up withthis bright plan as I understand it at least Iwas told this by my [CIAOSO] boss LloydGeorge who was Chief of the Far East Divisionat the timerdquo

71 Kaufman ldquoTrouble in the Golden Trianglerdquo442ndash43 Fineman A Special Relationship141ndash42

72 Kaufman ldquoTrouble in the Golden Trianglerdquo443 ldquoWhether Secretary of State DeanAcheson knew of Operation Paper isuncertain Acheson was present at discussionsregarding the use of covert operations againstChina Yet since mid-1950 the secretary ofstate had been working to remove theirregulars Therefore either Acheson knew ofthe operat ion and did not inform hissubordinates or he too did not have the entire

picturerdquo In apparent contradiction WilliamWalker writes that ldquoAcheson had participatedfrom the start in the decision-making processrelating to NSC 485 so he was familiar withthe d i scuss ions about us ing cover toperations against Chinarsquos southern flankrdquo(Opium and Foreign Policy 203) But NSC485 primarily a policy paper on Korea datesfrom May 17 1951 half a year later

73 Leary Perilous Missions 116ndash17

7 4 Lintner Blood Brothers 237 citingMacArthur on March 21 1951 in Robert HTaylor Foreign and Domestic Consequences ofthe Kuomintang Intervention in Burma (IthacaNY Cornell University Southeast Asia ProgramData Paper no 93 1973) 42 Chennault onApril 23 1958 in US Congress HouseCommittee on Un-American ActivitiesInternational Communism (CommunistEncroachment in the Far East) ldquoConsultationswith Maj-Gen Claire Lee Chennault UnitedStates Armyrdquo 85th Cong 2nd sess 9ndash10

75 Leary Perilous Missions 129ndash30 Learystates that US personnel delivered the armsonly as far as northern Thailand with the lastleg of delivery handled by the Thai BorderPolice But there are numerous contemporaryreports of US personnel at Mong Hsat inBurma who helped unload the planes andreload them with opium (Scott Drugs Oil andWar 60 Corson The Armies of Ignorance320ndash22) Lintner reproduces a photograph ofthree American civilians who were killed inaction with the KMT in Burma in 1953 (LintnerBurma in Revolt 168) On April 1 1953the Rangoon Nation reported a captured letterf r o m M a j o r G e n e r a l L i rsquo sheadquarters discussing ldquoEuropean instructorsfor the training of studentsrdquo

76 McCoy The Politics of Heroin 169ndash71Lintner Blood Brothers 238 Despite thismilitary fiasco the KMT troops contributed tothe survival of noncommunist Chinese

APJ | JF 8 | 44 | 2

28

communities in Southeast Asia both by servingas a protective shield and by sustaining thetraditional social fabric of drug-financed KMTTriads in Southeast Asia See McCoy ThePolitics of Heroin 185ndash86 Scott Drugs Oiland War 60 192ndash93

77 Donald F Cooper Thailand Dictatorship ofDemocracy (Montreux Minerva Press 1995)120

78 Eg McCoy The Politics of Heroin 165ndash69Cf Tim Weiner Legacy of Ashes The History ofthe CIA (New York Doubleday 2007) 60 ldquoThefinal theater for the CIA in the Korean War layin Burma In early 1951 as the ChineseCommunists chased General MacArthurrsquostroops south the Pentagon thought the ChineseNationalists could take some pressure offMacArthur by opening a second front The CIA began [sic] flying Chinese Nationalistsoldiers into Thailand and dropping themalong with pallets of guns and ammunition intonorthern Burmardquo Cf Walker Opium andForeign Policy 200 ldquoSome aid was alreadyreaching KMT forces in Burma monthsbefore the January 1951 NSC meetingrdquo

79 Fineman A Special Relationship 289n25

80 Fineman A Special Relationship 137

81 US Treasury Department Bureau ofN a r c o t i c s T r a f f i c i n O p i u m a n dOther Dangerous Drugs (Washington DCGovernment Printing Office 1949) 13(1950) 3 (1954) 12 Through the samedecade the FBN by direction of the US StateDepartment acknowledged to UN NarcoticsConferences that Thailand was a source foropium and heroin reaching the United States(Scott Drugs Oil and War 191 203 citing UNDocuments ECN7213 ECN7283 22 andECN7303Rev1 34 cf Walker Opium andForeign Policy 201 [State Department]) Whenthe FBN Traffic in Opium reports began toacknowledge Thai drug seizures again in1962 the Kennedy administration had already

initiated serious efforts to remove the bulk ofthe KMT troops from the region (KaufmanldquoTrouble in the Golden Trianglerdquo 452)

82 Walker Opium and Foreign Policy 206 cf213ndash15 Cf also Valentine The Strength of theWolf 133 150ndash52 Anslinger was not alone inblaming heroin flows on mainland China Hewas joined in the attack by two others with CIAconnections Edward Hunter (a veteran of OSSCh ina and OPC who in tu rn was f edinformation regularly by Chennault) andRichard L G Deverall of the AmericanFederation of Laborrsquos Free Trade UnionCommittee (under the CIArsquos labor asset JayLovestone)

83 Scott Drugs Oil and War 7 60ndash61 198207 citing Penny Lernoux In Banks We Trust(Garden City NY AnchorDoubleday 1984)42ndash44 84

84 Fineman A Special Relationship 215

85 I explore this question in Scott Drugs Oiland War 60ndash64

86 Gole General William E DePuy 80

87 Chennault himself was investigated for suchsmuggling activities ldquobut no official action wastaken because he was politically untouchablerdquo(Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 92) cfBarbara Tuchman Stilwell and the AmericanExperience in China 1911ndash1945 7ndash78 PaulFrillmann and Graham Peck China TheRemembered Life (Boston Houghton Mifflin1968) 152

88 Corson The Armies of Ignorance 322

89 Valentine The Strength of the Wolf 71quoting Reid The Mistress and the Mafia 42

90 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 98 citing OSSCID 126155 April 19 1945

APJ | JF 8 | 44 | 2

29

91 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo

92 Andrew Forbes and David Henley The HawTraders of the Golden Triangle (Bangkok TeakHouse 1997)

93 Cooper Thailand 116

9 4 Wen-chin Chang ldquoIdentif ication ofLeadership among the KMT Yunnanese Chinesein Northern Thailand Journal of SoutheastAsian Studies 33 (2002) 125 Chang calls thisname ldquoa popular misnomerrdquo on the groundsthat the KMT villages have been expanding andldquoslowly casting off their former militarylegacyrdquo

95 Taylor Foreign and Domestic Consequencesof the Kuomintang Intervention in Burma 10

96 McCoy The Politics of Heroin 162ndash63

97 Sucheng Chan Hmong Means Free Life inLaos and America (Philadelphia TempleUniversity Press 1994) 1942 cf John TMcAlister Viet Nam The Origins of Revolution(Garden City NY Doubleday 1971) 228Scott The War Conspiracy 267

9 8 T i m o t h y B r o o k a n d B o b T a d a s h iWakabayashi eds Opium RegimesChina Britain and Japan 1839ndash1952(Berkeley University of California Press 2000)261ndash79 Jonathan Marshall ldquoOpium and thePolitics of Gangsterism in NationalistChina 1927ndash1945rdquo Bulletin of ConcernedAsian Scholars JulyndashSeptember 1976 19ndash48Laura Tyson Li Madame Chiang Kai-shekChinarsquos Eternal First Lady (New YorkAtlantic Monthly Press 2006) 107 citingNelson T Johnson to Stanley K Hornbeck May31 1934 box 23 Johnson Papers Library ofCongress

99 In global surveys of the opium traffic oneregularly reads of the importance of Teochew(Chiu chau) triads in the postwar Thai drug

milieu (eg Martin Booth Dragon SyndicatesThe Global Phenomenon of the Triads [NewYork Carroll and Graf 1999] 176ndash77 McCoyThe Politics of Heroin 389 396) Althoughtriads are central to trafficking in Hong Kongand today possibly inside China I questionwhether the Teochew in Thailand althoughthey certainly are prominent in the drug tradethere are still as dominated by triads as theywere before World War II Cf SkinnerChinese Society in Thailand 264ndash67

100 Valentine The Strength of the Wolf 14citing Melvin L Hanks NARC The Adventuresof a Federal Agent (New York Hastings House1973) 37 162ndash66 Brook and WakabayashiOpium Regimes 263 For an overview of USknowledge of KMT drug trafficking seeMarshal l ldquoOpium and the Pol i t ics ofGangsterism in Nationalist China 1927ndash1945rdquo

101 Valentine The Strength of the Wolf 72ndash73citing Terry A Talent report of November 151946 Douglas Clark Kinder and William OWalker III ldquoStable Force in a Storm Harry JAnslinger and United States Narcotics Policy1930ndash1962rdquo Journal of American HistoryMarch 1986 919

102 Valentine The Strength of the Wolf 77

103 Victor S Kaufman Confronting CommunismUS and British Policies toward China(Columbia University of Missouri Press 2001)20ndash21

104 Cumings The Origins of the Korean War508ndash25 Robert Accinel l i Cris is andCommitment United States Policy towardTaiwan 1950ndash1955 (Chapel Hill University ofNorth Carolina Press 1996) 271ndash72 Ross YKoen The China Lobby in American Politics(New York Harper and Row 1974) 46 48ndash51Elsewhere I have described CommerceInternational China as a subsidiary of the WCCSince then I have learned that it was a firmfounded in Shanghai in 1930 I now doubt thealleged WCC connection Later Fassoulis was

APJ | JF 8 | 44 | 2

30

ind ic ted in a huge organ ized cr imeconspiracy to defraud banks in a stock swindle(New York Times September 12 1969 PeterDale Scott Deep Politics and the Death of JFK[Berkeley University of California Press 1998]168ndash69 178) By 2005 Fassoulis was worth$150 million as chairman and CEO of CICInternational the successor to CommerceInternational China his company nowsupplying the US armed services waspredicted to do $870 million of business (ldquoThe50 Wealthiest Greeks in Americardquo NationalHerald March 29 2008) There have beenspeculations that the ldquoUS Central IntelligenceAgency may actual ly support CICInternational Ltd so it remains in business asone of its many brokers for arms technologycomponents logistics on transactionssignificant to intelligence operationsrdquo (PaulCollin ldquoGlobal Economic Brinkmanshiprdquo)

105 Scott Drugs Oil and War 188

106 McCoy The Politics of Heroin 185

1 0 7 Scott Drugs Oil and War 192ndash93Anslingerrsquos protection of the KMT traffichad the add i t i ona l consequence o fstrengthening and protecting pro-KMT tongs inAmerica In 1959 when a pro-KMT Hip Singtong network distributing drugs was broken upin San Francisco a leading FBN official withOSSndashCIA connections George Whiteblamed the drug shipment on communist Chinawhile allowing the ringleader to escape toTaiwan (Scott Drugs Oil and War 63Valentine The Strength of the Wolf 195)

108 Walker Opium and Foreign Policy 214

109 Joe Studwell Asian Godfathers Money andPower in Hong Kong and Southeast Asia (NewYork Atlantic Monthly Press 2007) 95ndash96

110 J W Cushman ldquoThe Khaw Group ChineseBusiness in Early Twentieth- Century PenangrdquoJournal of Southeast Asian Studies 17 (1986)58 cf Trocki ldquoDrugs Taxes and Chinese

Capitalism in Southeast Asiardquo 99ndash100

111 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 106 The KMTobtained the tungsten from Karen rebelscontrolling a major mine at Mawchj inexchange for modern arms provided by theCIA

112 Fineman A Special Relationship 133 153Bird at the time was a ldquoprivate aviationcontractorrdquo (McCoy The Politics of Heroin168) and aviation was the key to the BPPstrategy of defending the Thai frontier becausethe Thai road system was still primitive in theborder areas Because Bird included in thiscommittee his brother-in-law Air Force ColonelSitthi Savetsila Sitthi became one of Phaorsquosclosest aides-de-camp and his translator In the1980s he served for a decade as foreignminister in the last Thai military government

113 I have not been able to establish the identityof this OPC officer One possibility is DesmondFitzgerald who became the overseer andchampion of Sea Supply Operation Paper theBPP and (still to be discussed) PARU Anotherpossibility is Paul Helliwell

114 Lobe United States National Security Policyand Aid to the Thailand Police 19ndash20

115 Fineman A Special Relationship 137McCoy The Politics of Heroin 165

116 Fineman A Special Relationship 134emphasis added

117 McCoy The Politics of Heroin 168ndash69Sherman Joost the OPC officer who headedSea Supply in Bangkok ldquohad led Kachinguerrillas in Burma during the war as acommander of OSS Detachment 101rdquo

118 Walker Opium and Foreign Policy 200205

119 McCoy The Politics of Heroin 168

APJ | JF 8 | 44 | 2

28

communities in Southeast Asia both by servingas a protective shield and by sustaining thetraditional social fabric of drug-financed KMTTriads in Southeast Asia See McCoy ThePolitics of Heroin 185ndash86 Scott Drugs Oiland War 60 192ndash93

77 Donald F Cooper Thailand Dictatorship ofDemocracy (Montreux Minerva Press 1995)120

78 Eg McCoy The Politics of Heroin 165ndash69Cf Tim Weiner Legacy of Ashes The History ofthe CIA (New York Doubleday 2007) 60 ldquoThefinal theater for the CIA in the Korean War layin Burma In early 1951 as the ChineseCommunists chased General MacArthurrsquostroops south the Pentagon thought the ChineseNationalists could take some pressure offMacArthur by opening a second front The CIA began [sic] flying Chinese Nationalistsoldiers into Thailand and dropping themalong with pallets of guns and ammunition intonorthern Burmardquo Cf Walker Opium andForeign Policy 200 ldquoSome aid was alreadyreaching KMT forces in Burma monthsbefore the January 1951 NSC meetingrdquo

79 Fineman A Special Relationship 289n25

80 Fineman A Special Relationship 137

81 US Treasury Department Bureau ofN a r c o t i c s T r a f f i c i n O p i u m a n dOther Dangerous Drugs (Washington DCGovernment Printing Office 1949) 13(1950) 3 (1954) 12 Through the samedecade the FBN by direction of the US StateDepartment acknowledged to UN NarcoticsConferences that Thailand was a source foropium and heroin reaching the United States(Scott Drugs Oil and War 191 203 citing UNDocuments ECN7213 ECN7283 22 andECN7303Rev1 34 cf Walker Opium andForeign Policy 201 [State Department]) Whenthe FBN Traffic in Opium reports began toacknowledge Thai drug seizures again in1962 the Kennedy administration had already

initiated serious efforts to remove the bulk ofthe KMT troops from the region (KaufmanldquoTrouble in the Golden Trianglerdquo 452)

82 Walker Opium and Foreign Policy 206 cf213ndash15 Cf also Valentine The Strength of theWolf 133 150ndash52 Anslinger was not alone inblaming heroin flows on mainland China Hewas joined in the attack by two others with CIAconnections Edward Hunter (a veteran of OSSCh ina and OPC who in tu rn was f edinformation regularly by Chennault) andRichard L G Deverall of the AmericanFederation of Laborrsquos Free Trade UnionCommittee (under the CIArsquos labor asset JayLovestone)

83 Scott Drugs Oil and War 7 60ndash61 198207 citing Penny Lernoux In Banks We Trust(Garden City NY AnchorDoubleday 1984)42ndash44 84

84 Fineman A Special Relationship 215

85 I explore this question in Scott Drugs Oiland War 60ndash64

86 Gole General William E DePuy 80

87 Chennault himself was investigated for suchsmuggling activities ldquobut no official action wastaken because he was politically untouchablerdquo(Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 92) cfBarbara Tuchman Stilwell and the AmericanExperience in China 1911ndash1945 7ndash78 PaulFrillmann and Graham Peck China TheRemembered Life (Boston Houghton Mifflin1968) 152

88 Corson The Armies of Ignorance 322

89 Valentine The Strength of the Wolf 71quoting Reid The Mistress and the Mafia 42

90 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 98 citing OSSCID 126155 April 19 1945

APJ | JF 8 | 44 | 2

29

91 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo

92 Andrew Forbes and David Henley The HawTraders of the Golden Triangle (Bangkok TeakHouse 1997)

93 Cooper Thailand 116

9 4 Wen-chin Chang ldquoIdentif ication ofLeadership among the KMT Yunnanese Chinesein Northern Thailand Journal of SoutheastAsian Studies 33 (2002) 125 Chang calls thisname ldquoa popular misnomerrdquo on the groundsthat the KMT villages have been expanding andldquoslowly casting off their former militarylegacyrdquo

95 Taylor Foreign and Domestic Consequencesof the Kuomintang Intervention in Burma 10

96 McCoy The Politics of Heroin 162ndash63

97 Sucheng Chan Hmong Means Free Life inLaos and America (Philadelphia TempleUniversity Press 1994) 1942 cf John TMcAlister Viet Nam The Origins of Revolution(Garden City NY Doubleday 1971) 228Scott The War Conspiracy 267

9 8 T i m o t h y B r o o k a n d B o b T a d a s h iWakabayashi eds Opium RegimesChina Britain and Japan 1839ndash1952(Berkeley University of California Press 2000)261ndash79 Jonathan Marshall ldquoOpium and thePolitics of Gangsterism in NationalistChina 1927ndash1945rdquo Bulletin of ConcernedAsian Scholars JulyndashSeptember 1976 19ndash48Laura Tyson Li Madame Chiang Kai-shekChinarsquos Eternal First Lady (New YorkAtlantic Monthly Press 2006) 107 citingNelson T Johnson to Stanley K Hornbeck May31 1934 box 23 Johnson Papers Library ofCongress

99 In global surveys of the opium traffic oneregularly reads of the importance of Teochew(Chiu chau) triads in the postwar Thai drug

milieu (eg Martin Booth Dragon SyndicatesThe Global Phenomenon of the Triads [NewYork Carroll and Graf 1999] 176ndash77 McCoyThe Politics of Heroin 389 396) Althoughtriads are central to trafficking in Hong Kongand today possibly inside China I questionwhether the Teochew in Thailand althoughthey certainly are prominent in the drug tradethere are still as dominated by triads as theywere before World War II Cf SkinnerChinese Society in Thailand 264ndash67

100 Valentine The Strength of the Wolf 14citing Melvin L Hanks NARC The Adventuresof a Federal Agent (New York Hastings House1973) 37 162ndash66 Brook and WakabayashiOpium Regimes 263 For an overview of USknowledge of KMT drug trafficking seeMarshal l ldquoOpium and the Pol i t ics ofGangsterism in Nationalist China 1927ndash1945rdquo

101 Valentine The Strength of the Wolf 72ndash73citing Terry A Talent report of November 151946 Douglas Clark Kinder and William OWalker III ldquoStable Force in a Storm Harry JAnslinger and United States Narcotics Policy1930ndash1962rdquo Journal of American HistoryMarch 1986 919

102 Valentine The Strength of the Wolf 77

103 Victor S Kaufman Confronting CommunismUS and British Policies toward China(Columbia University of Missouri Press 2001)20ndash21

104 Cumings The Origins of the Korean War508ndash25 Robert Accinel l i Cris is andCommitment United States Policy towardTaiwan 1950ndash1955 (Chapel Hill University ofNorth Carolina Press 1996) 271ndash72 Ross YKoen The China Lobby in American Politics(New York Harper and Row 1974) 46 48ndash51Elsewhere I have described CommerceInternational China as a subsidiary of the WCCSince then I have learned that it was a firmfounded in Shanghai in 1930 I now doubt thealleged WCC connection Later Fassoulis was

APJ | JF 8 | 44 | 2

30

ind ic ted in a huge organ ized cr imeconspiracy to defraud banks in a stock swindle(New York Times September 12 1969 PeterDale Scott Deep Politics and the Death of JFK[Berkeley University of California Press 1998]168ndash69 178) By 2005 Fassoulis was worth$150 million as chairman and CEO of CICInternational the successor to CommerceInternational China his company nowsupplying the US armed services waspredicted to do $870 million of business (ldquoThe50 Wealthiest Greeks in Americardquo NationalHerald March 29 2008) There have beenspeculations that the ldquoUS Central IntelligenceAgency may actual ly support CICInternational Ltd so it remains in business asone of its many brokers for arms technologycomponents logistics on transactionssignificant to intelligence operationsrdquo (PaulCollin ldquoGlobal Economic Brinkmanshiprdquo)

105 Scott Drugs Oil and War 188

106 McCoy The Politics of Heroin 185

1 0 7 Scott Drugs Oil and War 192ndash93Anslingerrsquos protection of the KMT traffichad the add i t i ona l consequence o fstrengthening and protecting pro-KMT tongs inAmerica In 1959 when a pro-KMT Hip Singtong network distributing drugs was broken upin San Francisco a leading FBN official withOSSndashCIA connections George Whiteblamed the drug shipment on communist Chinawhile allowing the ringleader to escape toTaiwan (Scott Drugs Oil and War 63Valentine The Strength of the Wolf 195)

108 Walker Opium and Foreign Policy 214

109 Joe Studwell Asian Godfathers Money andPower in Hong Kong and Southeast Asia (NewYork Atlantic Monthly Press 2007) 95ndash96

110 J W Cushman ldquoThe Khaw Group ChineseBusiness in Early Twentieth- Century PenangrdquoJournal of Southeast Asian Studies 17 (1986)58 cf Trocki ldquoDrugs Taxes and Chinese

Capitalism in Southeast Asiardquo 99ndash100

111 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 106 The KMTobtained the tungsten from Karen rebelscontrolling a major mine at Mawchj inexchange for modern arms provided by theCIA

112 Fineman A Special Relationship 133 153Bird at the time was a ldquoprivate aviationcontractorrdquo (McCoy The Politics of Heroin168) and aviation was the key to the BPPstrategy of defending the Thai frontier becausethe Thai road system was still primitive in theborder areas Because Bird included in thiscommittee his brother-in-law Air Force ColonelSitthi Savetsila Sitthi became one of Phaorsquosclosest aides-de-camp and his translator In the1980s he served for a decade as foreignminister in the last Thai military government

113 I have not been able to establish the identityof this OPC officer One possibility is DesmondFitzgerald who became the overseer andchampion of Sea Supply Operation Paper theBPP and (still to be discussed) PARU Anotherpossibility is Paul Helliwell

114 Lobe United States National Security Policyand Aid to the Thailand Police 19ndash20

115 Fineman A Special Relationship 137McCoy The Politics of Heroin 165

116 Fineman A Special Relationship 134emphasis added

117 McCoy The Politics of Heroin 168ndash69Sherman Joost the OPC officer who headedSea Supply in Bangkok ldquohad led Kachinguerrillas in Burma during the war as acommander of OSS Detachment 101rdquo

118 Walker Opium and Foreign Policy 200205

119 McCoy The Politics of Heroin 168

APJ | JF 8 | 44 | 2

29

91 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo

92 Andrew Forbes and David Henley The HawTraders of the Golden Triangle (Bangkok TeakHouse 1997)

93 Cooper Thailand 116

9 4 Wen-chin Chang ldquoIdentif ication ofLeadership among the KMT Yunnanese Chinesein Northern Thailand Journal of SoutheastAsian Studies 33 (2002) 125 Chang calls thisname ldquoa popular misnomerrdquo on the groundsthat the KMT villages have been expanding andldquoslowly casting off their former militarylegacyrdquo

95 Taylor Foreign and Domestic Consequencesof the Kuomintang Intervention in Burma 10

96 McCoy The Politics of Heroin 162ndash63

97 Sucheng Chan Hmong Means Free Life inLaos and America (Philadelphia TempleUniversity Press 1994) 1942 cf John TMcAlister Viet Nam The Origins of Revolution(Garden City NY Doubleday 1971) 228Scott The War Conspiracy 267

9 8 T i m o t h y B r o o k a n d B o b T a d a s h iWakabayashi eds Opium RegimesChina Britain and Japan 1839ndash1952(Berkeley University of California Press 2000)261ndash79 Jonathan Marshall ldquoOpium and thePolitics of Gangsterism in NationalistChina 1927ndash1945rdquo Bulletin of ConcernedAsian Scholars JulyndashSeptember 1976 19ndash48Laura Tyson Li Madame Chiang Kai-shekChinarsquos Eternal First Lady (New YorkAtlantic Monthly Press 2006) 107 citingNelson T Johnson to Stanley K Hornbeck May31 1934 box 23 Johnson Papers Library ofCongress

99 In global surveys of the opium traffic oneregularly reads of the importance of Teochew(Chiu chau) triads in the postwar Thai drug

milieu (eg Martin Booth Dragon SyndicatesThe Global Phenomenon of the Triads [NewYork Carroll and Graf 1999] 176ndash77 McCoyThe Politics of Heroin 389 396) Althoughtriads are central to trafficking in Hong Kongand today possibly inside China I questionwhether the Teochew in Thailand althoughthey certainly are prominent in the drug tradethere are still as dominated by triads as theywere before World War II Cf SkinnerChinese Society in Thailand 264ndash67

100 Valentine The Strength of the Wolf 14citing Melvin L Hanks NARC The Adventuresof a Federal Agent (New York Hastings House1973) 37 162ndash66 Brook and WakabayashiOpium Regimes 263 For an overview of USknowledge of KMT drug trafficking seeMarshal l ldquoOpium and the Pol i t ics ofGangsterism in Nationalist China 1927ndash1945rdquo

101 Valentine The Strength of the Wolf 72ndash73citing Terry A Talent report of November 151946 Douglas Clark Kinder and William OWalker III ldquoStable Force in a Storm Harry JAnslinger and United States Narcotics Policy1930ndash1962rdquo Journal of American HistoryMarch 1986 919

102 Valentine The Strength of the Wolf 77

103 Victor S Kaufman Confronting CommunismUS and British Policies toward China(Columbia University of Missouri Press 2001)20ndash21

104 Cumings The Origins of the Korean War508ndash25 Robert Accinel l i Cris is andCommitment United States Policy towardTaiwan 1950ndash1955 (Chapel Hill University ofNorth Carolina Press 1996) 271ndash72 Ross YKoen The China Lobby in American Politics(New York Harper and Row 1974) 46 48ndash51Elsewhere I have described CommerceInternational China as a subsidiary of the WCCSince then I have learned that it was a firmfounded in Shanghai in 1930 I now doubt thealleged WCC connection Later Fassoulis was

APJ | JF 8 | 44 | 2

30

ind ic ted in a huge organ ized cr imeconspiracy to defraud banks in a stock swindle(New York Times September 12 1969 PeterDale Scott Deep Politics and the Death of JFK[Berkeley University of California Press 1998]168ndash69 178) By 2005 Fassoulis was worth$150 million as chairman and CEO of CICInternational the successor to CommerceInternational China his company nowsupplying the US armed services waspredicted to do $870 million of business (ldquoThe50 Wealthiest Greeks in Americardquo NationalHerald March 29 2008) There have beenspeculations that the ldquoUS Central IntelligenceAgency may actual ly support CICInternational Ltd so it remains in business asone of its many brokers for arms technologycomponents logistics on transactionssignificant to intelligence operationsrdquo (PaulCollin ldquoGlobal Economic Brinkmanshiprdquo)

105 Scott Drugs Oil and War 188

106 McCoy The Politics of Heroin 185

1 0 7 Scott Drugs Oil and War 192ndash93Anslingerrsquos protection of the KMT traffichad the add i t i ona l consequence o fstrengthening and protecting pro-KMT tongs inAmerica In 1959 when a pro-KMT Hip Singtong network distributing drugs was broken upin San Francisco a leading FBN official withOSSndashCIA connections George Whiteblamed the drug shipment on communist Chinawhile allowing the ringleader to escape toTaiwan (Scott Drugs Oil and War 63Valentine The Strength of the Wolf 195)

108 Walker Opium and Foreign Policy 214

109 Joe Studwell Asian Godfathers Money andPower in Hong Kong and Southeast Asia (NewYork Atlantic Monthly Press 2007) 95ndash96

110 J W Cushman ldquoThe Khaw Group ChineseBusiness in Early Twentieth- Century PenangrdquoJournal of Southeast Asian Studies 17 (1986)58 cf Trocki ldquoDrugs Taxes and Chinese

Capitalism in Southeast Asiardquo 99ndash100

111 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 106 The KMTobtained the tungsten from Karen rebelscontrolling a major mine at Mawchj inexchange for modern arms provided by theCIA

112 Fineman A Special Relationship 133 153Bird at the time was a ldquoprivate aviationcontractorrdquo (McCoy The Politics of Heroin168) and aviation was the key to the BPPstrategy of defending the Thai frontier becausethe Thai road system was still primitive in theborder areas Because Bird included in thiscommittee his brother-in-law Air Force ColonelSitthi Savetsila Sitthi became one of Phaorsquosclosest aides-de-camp and his translator In the1980s he served for a decade as foreignminister in the last Thai military government

113 I have not been able to establish the identityof this OPC officer One possibility is DesmondFitzgerald who became the overseer andchampion of Sea Supply Operation Paper theBPP and (still to be discussed) PARU Anotherpossibility is Paul Helliwell

114 Lobe United States National Security Policyand Aid to the Thailand Police 19ndash20

115 Fineman A Special Relationship 137McCoy The Politics of Heroin 165

116 Fineman A Special Relationship 134emphasis added

117 McCoy The Politics of Heroin 168ndash69Sherman Joost the OPC officer who headedSea Supply in Bangkok ldquohad led Kachinguerrillas in Burma during the war as acommander of OSS Detachment 101rdquo

118 Walker Opium and Foreign Policy 200205

119 McCoy The Politics of Heroin 168

APJ | JF 8 | 44 | 2

30

ind ic ted in a huge organ ized cr imeconspiracy to defraud banks in a stock swindle(New York Times September 12 1969 PeterDale Scott Deep Politics and the Death of JFK[Berkeley University of California Press 1998]168ndash69 178) By 2005 Fassoulis was worth$150 million as chairman and CEO of CICInternational the successor to CommerceInternational China his company nowsupplying the US armed services waspredicted to do $870 million of business (ldquoThe50 Wealthiest Greeks in Americardquo NationalHerald March 29 2008) There have beenspeculations that the ldquoUS Central IntelligenceAgency may actual ly support CICInternational Ltd so it remains in business asone of its many brokers for arms technologycomponents logistics on transactionssignificant to intelligence operationsrdquo (PaulCollin ldquoGlobal Economic Brinkmanshiprdquo)

105 Scott Drugs Oil and War 188

106 McCoy The Politics of Heroin 185

1 0 7 Scott Drugs Oil and War 192ndash93Anslingerrsquos protection of the KMT traffichad the add i t i ona l consequence o fstrengthening and protecting pro-KMT tongs inAmerica In 1959 when a pro-KMT Hip Singtong network distributing drugs was broken upin San Francisco a leading FBN official withOSSndashCIA connections George Whiteblamed the drug shipment on communist Chinawhile allowing the ringleader to escape toTaiwan (Scott Drugs Oil and War 63Valentine The Strength of the Wolf 195)

108 Walker Opium and Foreign Policy 214

109 Joe Studwell Asian Godfathers Money andPower in Hong Kong and Southeast Asia (NewYork Atlantic Monthly Press 2007) 95ndash96

110 J W Cushman ldquoThe Khaw Group ChineseBusiness in Early Twentieth- Century PenangrdquoJournal of Southeast Asian Studies 17 (1986)58 cf Trocki ldquoDrugs Taxes and Chinese

Capitalism in Southeast Asiardquo 99ndash100

111 Marshall ldquoOpium Tungsten and the Searchfor National Security 1940ndash52rdquo 106 The KMTobtained the tungsten from Karen rebelscontrolling a major mine at Mawchj inexchange for modern arms provided by theCIA

112 Fineman A Special Relationship 133 153Bird at the time was a ldquoprivate aviationcontractorrdquo (McCoy The Politics of Heroin168) and aviation was the key to the BPPstrategy of defending the Thai frontier becausethe Thai road system was still primitive in theborder areas Because Bird included in thiscommittee his brother-in-law Air Force ColonelSitthi Savetsila Sitthi became one of Phaorsquosclosest aides-de-camp and his translator In the1980s he served for a decade as foreignminister in the last Thai military government

113 I have not been able to establish the identityof this OPC officer One possibility is DesmondFitzgerald who became the overseer andchampion of Sea Supply Operation Paper theBPP and (still to be discussed) PARU Anotherpossibility is Paul Helliwell

114 Lobe United States National Security Policyand Aid to the Thailand Police 19ndash20

115 Fineman A Special Relationship 137McCoy The Politics of Heroin 165

116 Fineman A Special Relationship 134emphasis added

117 McCoy The Politics of Heroin 168ndash69Sherman Joost the OPC officer who headedSea Supply in Bangkok ldquohad led Kachinguerrillas in Burma during the war as acommander of OSS Detachment 101rdquo

118 Walker Opium and Foreign Policy 200205

119 McCoy The Politics of Heroin 168

APJ | JF 8 | 44 | 2

31

120 Scott Drugs Oil and War 187ndash89 201ndash2Robbins Air America 48ndash49 56ndash57 70 LearyPerilous Missions 110ndash12

121 Chen Han-Seng ldquoMonopoly and Civil War inChinardquo Institute of Pacific Relations FarEastern Survey 15 no 20 (October 9 1946)308

122 Scott Drugs Oil and War 187ndash89 CAT wasnot the only airline supplying Li Mi There wasalso Trans-Asiatic Airlines described as ldquoa CIAoutfit operating along the Burma-China borderagainst the Peoplersquos Republic of Chinardquo andbased in Manila (Roland G Simbulan ldquoThe CIAi n M a n i l a rdquo N a t h a n H a l e I n s t i t u t efor Intelligence and Military Affairs August 182 0 0 0 ) O n A p r i l 1 0 1 9 4 8 a noperating agreement was signed in Thailandbetween the new Thai government of Phibunand Trans-Asiatic Airlines (Siam) Limited (FarEastern Economic Review 35 [1962]329) Note that this was two months beforeNSC 102 formally directed the CIA toconduct ldquocovertrdquo rather than merelyldquopsychologicalrdquo operations and five monthsbefore the creation of the OPC in September1948

123 Lintner Burma in Revolt 146

124 FRUS 1951 vol 6 pt 2 1634 Fineman ASpecial Relationship 150ndash51 The memodescribed Bird as ldquothe character who handedover a lot of military equipment to the Policewithout any authorization as far as I candetermine and whose status with CAS [localCIA] is ambiguous to say the leastrdquo

125 Fineman A Special Relationship 133 153Handleyrsquos otherwise well-informed accountwholly ignores Birdrsquos role in preparing for thecoup (The King Never Smiles 113ndash15)

126 Scott Drugs Oil and War 40 citing McCoyThe Politics of Heroin 162 286ndash87 McCoyrsquosestimate of the KMTrsquos impact on expandingproduction is ex- tremely conservative

According to Bertil Lintner the foremostauthority on the Shan states of Burma ldquoTheannual production increased from a mere 30tons at the time of independence [1945] to 600tons in the mid-1950srdquo (Bertil Lintner ldquoHeroinand Highland Insurgencyrdquo in War on DrugsStudies in the Failure of US NarcoticsPolicy ed Alfred W McCoy and Alan A Block[Boulder CO Westview Press 1992]288) Furthermore the KMT exploitation of theShan states led thousands of hill tribesmen toflee to northern Thailand where opiumproduction also increased

127 Mills Underground Empire 789 Mills alsoquotes General Tuan as saying that the ThaiBorder Police ldquowere totally corrupt andresponsible for transportation of narcoticsrdquoMills comments ldquoThis was of some interestsince the BPP a CIA creation was known to becontrolled by SRF the Bangkok CIA stationrdquo(Mills Underground Empire 780) For detailson the CIAndashBPP relationship in the 1980s seeValentinersquos account (from Drug EnforcementAdministration sources) The Strength of thePack 254ndash55

128 Scott Drugs Oil and War 62ndash63 193

129 Kaufman ldquoTrouble in the Golden Trianglerdquo443

130 Fineman A Special Relationship 141

131 Rangoon Nation March 30 1953 CooperThailand 123 McCoy The Politics of Heroin174 Lintner Burma in Revolt 139

132 McCoy The Politics of Heroin 174ndash76Leary Perilous Missions 195ndash96 LintnerBlood Brothers 238 Life December 7 195361

133 McCoy The Politics of Heroin 177ndash78

134 Peter Grose Gentleman Spy The Life ofAllen Dulles (Boston Richard Todd HoughtonMifflin 1994) 324

APJ | JF 8 | 44 | 2

32

135 According to McCoy (The Politics of Heroin178) a CAT pilot named Jack Killam ldquowasmurdered in 1951 after an opium deal wentwrong and was buried in an unmarked grave byCIA [ie OPC] agent Sherman Joostrdquomdashthe headof Sea Supply Joseph Trento citing CIA officerRobert Crowley gives the almost certainlybowd-lerized version that two ldquodrunk andv i o l e n t rdquo C A T p i l o t s ldquo s h o t i t o u t i nBangkokrdquo (Trento The Secret History of theCIA 347) According to William CorsonldquoSeveral theories have been advanced by thosefamiliar with the Killam case to suggest thatthe trafficking in drugs in Southeast Asia wasused by the CIA as a self-financing device topay for services and persons whose hire wouldnot have been approved in Washington orthat it amounted to the actions of lsquoroguersquointelligence agentsrdquo (Corson The Armies ofIgnorance 323) One consequence of theseintrigues was that as we have seen OPC wasabolished At this time OPC Far East DirectorRichard Stilwell was rebuked severely by CIADirector Bedell Smith and transferred to themilitary In the Pentagon ldquoby the end of 1981Stilwell was running one of the most secretoperations of the governmentrdquo in conjunctionwith ex-CIA officer Theodore Shackley aproteacutegeacute of Stilwellrsquos former OPC deputyDesmond Fitzgerald (Joseph J Trento Preludeto Terror The Rogue CIA and the Legacy ofAmericarsquos Private Intelligence Network[New York Carroll and Graf 2005] 213)Stilwell was advising on the creation of theUS Joint Special Operations Command

136 Marchetti and Marks CIA and the Cult 383

137 Hersh The Old Boys 301 quoting Polly(Mrs Clayton) Fritchey Other men prominentin the cabal responsible for Operation Paperwere also Republican activists One was PaulHelliwell who became very prominent inFlorida Republican Party politics thanks inpart to funds he received from Thailand as theThai consul general in Miami Harry Anslingerwas a staunch Republican and owed his

appointment as the first director of the FBN tohis marriage to a niece of the Republican Partymagnate (and Treasury Secretary) AndrewMellon (Valentine The Strength of theWolf 16) Donovan married to a New Yorkheiress and an OPC consultant in the lateTruman years had a lifelong history of activismin New York Republican Party politics

138 A perhaps unanswerable deep historicalquestion is whether some of these men andespecially Helliwell were aware that KMTprofits from the revived drug traffic out ofBurma were funding the China Lobbyrsquos heavyattack on the Truman administration in generaland on Dean Acheson and George C Marshallin particular (We shall see that in the later1950s Donovan and Helliwell received fundsfrom Phao Sriyanon for the lobbying ofCongress supplanting those of the moribundChina Lobby Cf Fineman A SpecialRelationship 214ndash15) Citing John Loftus andothers Anthony Summers has written thatAllen Dulles before joining the CIA hadcontributed to the young Richard Nixonrsquos firste lect ion campaign and poss ib ly hadalso suppl ied him with the explosiveinformation that made Nixon famous thatformer State Department officer Alger Hiss hadk n o w n t h e c o m m u n i s t W h i t t a k e rChambers (Anthony Summers with RobbynSwann The Arrogance of Power The SecretWorld of Richard Nixon [New York Viking2000] 62ndash63)

139 Sydney Souers (the first director CentralIntelligence Group 1946) was born in DaytonOhio Hoyt Vandenberg (director CentralIntelligence Group 1946ndash1947) was born inMilwaukee Wisconsin Roscoe Hillenkoetter(the third and first director of the CIA1947ndash1949) was born in St Louis WalterBedell Smith (the fourth director of the CIA1949ndash1953) was born in Indianapolis

1 4 0 For the details see Scott The WarConspiracy 261 The one from Boston Robert

APJ | JF 8 | 44 | 2

33

Amory was no less Social Register and hisbrother Cleveland Amory wrote a best-sellerWho Killed Society 1960)

141 Weiner Legacy of Ashes 52ndash53 It may berelevant that Bedell Smith himself was a right-wing Republican who reportedly once toldEisenhower that Nelson Rockefeller ldquowas aCommunistrdquo (Smith OSS 367)

142 McCoy The Politics of Heroin 165ndash78 cf

Trento The Secret History of the CIA 71

143 McCoy The Politics of Heroin 184

144 Darrell Berrigan ldquoThey Smuggle Drugs bythe Tonrdquo Saturday Evening Post May 5 195642

145 ldquoThailand Not Rogue Cops but a RogueSystemrdquo a statement by the Asian HumanRights Commission AHRC-STM-031-2008January 31 2008

Click on the cover to order

Click on the cover to order

APJ | JF 8 | 44 | 2

33

Amory was no less Social Register and hisbrother Cleveland Amory wrote a best-sellerWho Killed Society 1960)

141 Weiner Legacy of Ashes 52ndash53 It may berelevant that Bedell Smith himself was a right-wing Republican who reportedly once toldEisenhower that Nelson Rockefeller ldquowas aCommunistrdquo (Smith OSS 367)

142 McCoy The Politics of Heroin 165ndash78 cf

Trento The Secret History of the CIA 71

143 McCoy The Politics of Heroin 184

144 Darrell Berrigan ldquoThey Smuggle Drugs bythe Tonrdquo Saturday Evening Post May 5 195642

145 ldquoThailand Not Rogue Cops but a RogueSystemrdquo a statement by the Asian HumanRights Commission AHRC-STM-031-2008January 31 2008

Click on the cover to order

Click on the cover to order

APJ | JF 8 | 44 | 2

34

Click on the cover to order

Click on the cover to order