U.S. Reported Probing Noriega Link to Drugs : Inquiry Pursued Despite Administration Split Over Impact on American Bases in Panama

Panamanian strongman Manuel A. Noriega is the focus of a major federal drug conspiracy investigation into whether he has been providing protection to cocaine trafficking and money laundering operations in return for hefty payoffs, federal law enforcement sources said Monday.

The probe by a federal grand jury in Miami is being pursued despite a split within the Reagan Administration over whether to press for Gen. Noriega’s ouster, with CIA and Pentagon officials reportedly maintaining that the fall of the Panamanian defense chief could endanger U.S. military bases in Panama.

Investigators charge that Noriega, commander of the Panama Defense Forces, the nation’s sole military and police organization, has been skimming as much as 1.5% of the value of drug shipments and drug-related money transfers passing through Panama for several years. They say that attempts by Noriega to increase his percentage prompted some who know about the scheme to come to U.S. authorities and contribute to the case being built by Drug Enforcement Administration agents.

One law enforcement source familiar with the matter rated as “very strong” the evidence gathered so far, but acknowledged that there are problems in corroborating some details provided by single sources. Another official, also close to the investigation, replied, “Don’t hold your breath,” when asked if an indictment is imminent.

Officials who refused to be identified by name or agency said that the investigation almost certainly will cause further strain in the United States’ increasingly tense relations with Noriega’s regime. After widespread demonstrations against the military chief, the State Department has called for new elections and a return to unfettered civilian rule in Panama. The Panamanian government has denounced Washington for interfering in Panama’s internal affairs.

While the officials conceded that there is little possibility that Panama would agree to extradite Noriega to face federal charges in Florida, where much of the cocaine allegedly entered this country, they said that allegations formally returned by a grand jury could intensify pressures inside and outside Panama to reduce corruption and the flourishing drug trade there.

Two sources familiar with a congressional investigation of narcotics in Latin America said that several witnesses have directly implicated Noriega in money laundering and drug protection schemes.

Private Testimony

The chief witness, Ramon Milian-Rodriguez, told a Senate subcommittee in private testimony last month that Noriega negotiated a commission of up to 1.5% on all money transfers by a major Colombia cocaine cartel through banks in Panama, the sources said.

Milian-Rodriguez, a Cuban-American who allegedly helped manage the Colombian cartel’s finances and who is now serving a 35-year sentence on a federal racketeering conviction, testified under oath that he personally had negotiated the commission arrangement with Noriega in 1979, they said.

Milian-Rodriguez said that the Colombian traffickers have moved as much as $200 million per month through Panamanian banks--all subject to Noriega’s commission, the sources said.

Under Milian-Rodriguez’s account of the deal, Noriega offered government protection for the trafficker’s money laundering and for cocaine-processing plants in Panama in exchange for commissions on both operations, the sources said.

‘Dirty War’ Alleged

In 1983, Milian-Rodriguez reportedly testified, Noriega began pressing the Colombians to increase his commission on money laundering transactions to 3%, the sources said. It was not clear whether the payments to Noriega were increased that steeply, they said.

Last year, Noriega contended that U.S. press reports linking him to drug trafficking were part of a “dirty war” to prevent his country from taking over full operational control of the Panama Canal in the year 2000 as scheduled. U.S. officials have said that such allegations would have no effect on the timetable under which the canal, now operated by a binational commission, is to become solely a Panamanian operation.

The congressional investigation is being conducted by the Senate Foreign Relations subcommittee on terrorism and narcotics, chaired by Sen. John F. Kerry (D-Mass.).

In an unusual political alliance, the liberal Kerry has teamed up with archconservative Sen. Jesse Helms (R-N.C.) to press the congressional investigation of Noriega and other Latin American officials suspected of involvement in drug trafficking.

Praise From Meese

Disclosure that Noriega is the target of a federal drug conspiracy investigation comes only two months after Atty. Gen. Edwin Meese III and other Justice Department officials praised Panamanian law enforcement officials for seizing millions of dollars of drug profits deposited in Panama banks by major Colombian drug traffickers.

“When Meese talks about the cooperation he’s gotten from Panama, it’s basically busting the Colombian cartel’s competitors,” a source familiar with the Senate investigation said.

The Colombian cartel allegedly linked to Noriega is run by reputed drug kingpins Jorge Ochoa and Pablo Escobar. It is suspected of supplying as much as 75% of the cocaine sold in the United States.

Milian-Rodriguez told the Senate panel that the cartel owns majority interests in seven banks in Panama, the sources said.

Senate sources said that Noriega has no State Department backing and little Justice Department support, but is still backed by the Pentagon and CIA.

Security Concerns

“The State Department has abandoned Noriega, and so has the National Security Council,” a Senate source said. “But the Pentagon and the CIA believe we have more important interests in Panama than fostering democracy and cutting off the drug traffic,” referring to concerns that a new regime might evict U.S. military forces stationed in the country.

The Senate passed a resolution of disapproval earlier this year against the Administration’s certification that Panama was making good faith efforts to halt drug traffic. Such certification is a step in the release of U.S. foreign aid funds to countries with a history of drug trafficking.

In his testimony before the subcommittee, Milian-Rodriguez said that Noriega received “tens of millions of dollars” from his drug protection deal, one source said.

Milian-Rodriguez was arrested in Fort Lauderdale, Fla., in 1983 and charged with racketeering. He was convicted and sentenced to 35 years in prison in 1985.

Noriega has been Panama’s de facto ruler since becoming commander of the Defense Forces in 1983. He has become widely and increasingly unpopular--unlike his best-known modern predecessor, Gen. Omar Torrijos, who died in an airplane crash in 1981. Torrijos was a populist who negotiated the treaty under which Panama regained sovereignty over the Panama Canal from the United States.

Last month, when a former deputy chief of staff accused Noriega of corruption, election fraud and complicity in a political assassination, demonstrations broke out across Panama demanding the general’s ouster.

Noriega reacted by imposing a state of emergency, censoring the press and arresting the former deputy, Col. Roberto Diaz Herrera. On Monday, the government released a deposition in which Diaz, while under detention, retracted his accusations.

The State Department has publicly criticized Noriega and called on Panama to return to full civilian rule. At present, an elected civilian holds office as president, but Noriega effectively rules from behind the scenes.