The Strength of the Wolf (14 page)

Anslinger was formidable in 1947. His wartime service, his law and order stance, and his efforts on behalf of the increasingly profitable pharmaceutical and drug manufacturing industries had earned him numerous supporters in Congress, while on the international scene he had brought global drug policy firmly under American control. With State Department official George A. Morlock and drug industry lobbyist Herbert May, Anslinger organized the UN's Commission on Narcotic Drugs and located its lab in New York. He exercised greater influence than ever before, by monitoring drug production and trade around the world, and by linking favored nation status and International Monetary Fund loans to nations that abided by the tenets of American drug policy.

The Far East was of special concern to Anslinger, and in November 1945 he sent Ralph Oyler on a “confidential mission” of “an exceptional nature” to survey stockpiles of opium and narcotics that had been confiscated from the Japanese.
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After meeting in Tokyo with General Douglas MacArthur, Oyler inspected an opium factory three miles outside Seoul. He reported that the factory was guarded by US Army military policemen, and was strewn everywhere with morphine and opium. Upon opening the factory's vault, Oyler found fifty tons of opium – enough, in his opinion, to supply the underworld for two and half years.
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Next he traveled to Tientsin, China, where the Communists had closed all of the opium dens the Japanese had operated during the occupation. A few days later in Peking, Oyler witnessed the burning of thirty tons of opium the Communists had confiscated from the Japanese.

As Oyler's reports clearly indicate, the Communists, not the Nationalists, were the ones conducting anti-narcotic activities in China. In fact the Nationalists were still deeply involved in the drug trade. But Anslinger was
unwilling to acknowledge that reality, so he buried Oyler's reports, and thereafter drug law enforcement in the Far East proceeded in sync with national security concerns. Anslinger sent Customs Agent Melvin Hanks to Manila to prove that the Communist Chinese were smuggling narcotics to the Philippines, and he sent FBN Agents William F. Tollenger and Wayland L. Speer to Japan for basically the same political purpose.
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After authoring Japan's anti-narcotics laws and organizing its narcotics squads, Tollenger and Speer traveled throughout the Far East with Army CID agents, seeking evidence that would link the Communist Chinese to drug rings in Japan, Korea, and China.
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These developments marked an important turning-point in FBN history, for by suppressing Oyler's reports about Communist Chinese anti-narcotics activities, while publicizing all allegations of communist wrongdoing, Anslinger made the FBN an integral part of America's propaganda machine. And by swearing his undying loyalty to China Lobby Senators Patrick A. McCarran (Chairman of the Judiciary Committee), James O. Eastland (Chairman of the Internal Security Subcommittee), and Richard B. Russell (Chairman of the Appropriations Committee), Anslinger assured the FBN's bureaucratic survival at a time when the Truman administration was thinking about transferring the Bureau to the Justice Department.

Anslinger's devotion to the China Lobby had something to do with self-preservation too. Having witnessed the Lobby's destruction of John S. Service, a Foreign Service officer who had reported on the Kuomintang's narcotics dealings, the Commissioner was keenly aware of its power over the fate of government employees. For this reason the Service case is worth reviewing.

While serving as General Joseph Stilwel's liaison to the Communist Chinese in 1944, Service reported that the whole lifestyle of Kunming, the city where the Flying Tigers and OSS were headquartered, “was tied to opium smoking.”
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He said the Nationalists were decadent, totally dependent on opium, and “incapable of solving China's problems.”
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Service was a senior officer with years of experience in China, and his reports contributed to the Truman administration's decision not to come to Chiang Kai-shek's rescue. In retaliation, General Tai Li's agents in America accused Service of leaking the Kuomintang's battle plans to a leftist newsletter.
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He was arrested in June 1945 and, though cleared of any wrongdoing, the China Lobby persisted in attacking his character for the next six years. He was subjected to eight loyalty hearings and dismissed from the State Department in 1951.

Service's persecution was a clear signal that anyone linking the Nationalist Chinese to drug smuggling would, at a minimum, be branded a communist sympathizer and have his reputation ruined. It was a warning Anslinger heeded.

Mid-1947 marked a turning point in the FBN's collaboration with the espionage Establishment. With only token support from the Truman administration, the Nationalists' war with the Communists was faltering, and in Thailand a war had erupted between the police and army over the opium trade. Then a registered foreign agent for the Thai government, former OSS chief William Donovan traveled to Bangkok to unite the squabbling factions in a strategic alliance against the Communists. The Nationalist Chinese who served as middlemen in the production and transportation of narcotics from Thailand to Hong Kong, Macao, and other Asian markets, benefited greatly from Donovan's intervention.

Concurrently, a delicate, drug-related national security situation had developed in Vietnam. During the war, Iran, with the knowledge of its American financial advisors, had shipped tons of opium to the Vichy French in Saigon. Pressed by Anslinger, France in June 1946 pledged to disengage – but after the Viet Minh launched their insurgency a few months later, France, with America's tacit approval, continued to trade opium to help finance its counterinsurgency.

Helping to manage public perceptions in this regard was former ambassador to France and Russia William C. Bullitt. One of several diplomats linked to smuggling in the post-war era, Bullitt journeyed to the Far East as a reporter for China Lobby activist Henry Luce.
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A feature article Bullitt subsequently wrote for
Life Magazine
slammed Truman for not supporting the Nationalists and provided the Republicans with the enduring “Truman lost China” theme which they used to bash the Democrats. Bullitt, meanwhile, was dining regularly in Paris with Vietnam's playboy Emperor Bao Dai, an opium smoker who relied on opium profits to finance his decadent regime.

In secret the government rationalized its protection of the drug-smuggling Nationalists by insisting that any consequent health problems were confined to the Far East. But by mid-1947, Kuomintang narcotics were reaching America through Mexico. The Mafia was involved, as was Bugsy Siegel through his ill-fated love affair with curvaceous mob courier
and courtesan Virginia Hill. Described by Anslinger as a “prominent narcotics figure,” Siegel in 1947 was the subject of an FBN conspiracy case that included all the usual suspects: Lucky Luciano, Joe Adonis, Frank Costello, Meyer Lansky, and Chicago's Charlie Fischetti.
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The Siegel drug conspiracy had its inception in 1939 when, at Meyer Lansky's request, Virginia Hill moved to Mexico and seduced a number of Mexico's “top politicians, army officers, diplomats, and police officials.”
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Hill soon came to own a nightclub in Nuevo Laredo, and started making frequent trips to Mexico City with Dr. Margaret Chung, an honorary member of the Hip Sing T'ong and the attending physician to the Flying Tigers – the private airline formed under China Lobby luminary General Claire Chennault to fly supplies to the Nationalists in Kunming, the city John Service described as infused with OSS agents and opium. More to the point, as investigative journalist Ed Reid reported in
The Mistress and the Mafia
, the FBN knew that Dr. Chung was “in the narcotic traffic in San Francisco.”
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Chung took large cash payments from Siegel and Hill and delivered packages to Hill in New Orleans, Las Vegas, New York, and Chicago. These deals involved Kuomintang narcotics, and yet, despite the fact that the FBN agents “kept her under constant surveillance for years,” they “were never able to make a case against her.”
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Why not? Because she was protected, of course. Admiral Chester A. Nimitz was just one of her many influential friends in Washington. And unlike Bugsy Siegel, she wasn't making waves; although where, exactly, Siegel went wrong is open to debate. By most accounts he was murdered by the Mafia for squandering mob money on the Flamingo Hotel. But FBN Agent Joe Bell – George White's replacement as district supervisor in Chicago – advanced a more plausible theory: that Siegel's murder “paved the way to complete control of illegal narcotics distribution in California by the Mafia.”
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Bell was alluding to a drug smuggling operation Lansky had initiated in Mexico in 1944 under Harold “Happy” Meltzer. Described as “the man who most feared Bugsy's grab at Mexico,” Meltzer based his operation in Laredo, directly across the border from Hill's nightclub, and moved drugs to the Dragna organization in California. Meltzer was an associate of John Ormento, the Lucchese family's link to Mafia boss Joe Civello in Dallas, and he worked with the Mexican consul in Washington, who located suppliers and bribed border guards. Bankrolled by Lansky and Harry Stromberg in Philadelphia, Meltzer traveled regularly between Mexico City, Cuba, Hong Kong, and Japan. He was also a professional hit man, and in December 1960
the CIA would ask him to join an assassination team – a sinister overture that suggests that his connection to the espionage Establishment dated back to the Luciano Project, along with Lansky's and Siegel's.
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Meltzer's proximity to Virginia Hill in Laredo also strongly suggests that he was a recipient of Dr. Chung's Kuomintang narcotics. And if that was the case, Siegel may not have been murdered by the Mafia, but by agents of the US government, because his grab for control of the Mexican connection threatened to expose Dr. Chung's protected Kuomintang operation. Even the way Siegel was murdered – by two rifle shots to the head – has been characterized as very “ungangsterlike.”
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Protecting the Mexican connection was business as usual for the espionage Establishment, and when Siegel was killed in her house on 15 June 1947, Virginia Hill was already in France setting up an import agency that would exploit this most important gateway for moving narcotics to the Mafia in America. Again, there is convincing evidence that the secret government was aiding and protecting Hill in this endeavor: her passport was stolen while she was in France, and yet despite her ties to organized crime, the State Department quickly provided her with a new one.

In August, Hill traveled to Miami to deposit a large sum of cash in the National Bank of Mexico and then retreated with Dr. Chung to Mexico City, where in early 1949 she re-established her contacts. Hill then traveled to Europe to confer with Lucky Luciano – Lansky's partner in a new operation that relied on French Corsicans (many with intelligence connections) and clandestine labs producing high quality heroin in France and Sicily.

Why would the government protect notorious drug traffickers in this manner? Peter Dale Scott theorizes that it preferred “organized crime to disorganized crime or radicalism.”
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And by mid-1947 there was more at stake than the fate of the Nationalist Chinese; there was the fate of Israel too, and several gangsters from the Luciano Project, including Lansky, were actively involved in arms and drug smuggling in the Middle East. As the
New York Times
reported on 28 November 1948, the new state of Israel was combating “widespread narcotic smuggling” by “a small number of hardened criminals” who had slipped in and still practiced the black-market arts that had kept them alive during the war.

As John Service had reported three years earlier, and as Anslinger knew was still the case, the Nationalist regime was totally dependent on illicit narcotics. According to a 14 July 1947 State Department report, Nationalist forces were, at that moment, “selling opium in a desperate attempt to pay troops still fighting the Communists.”
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He also knew that Kuomintang
opium and narcotics were reaching Mexico. In a 15 November 1946 report to Anslinger, New Orleans District Supervisor Terry A. Talent reported that, “Many Chinese of authority and substance gain their means from this illicit trade,” and that, “In a recent Kuomintang Convention in Mexico City a wide solicitation of funds for the future operation of the opium trade was noted.” Talent listed the major Chinese traffickers by name.
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However, reports emanating from Mexico avoided any mention of the Mafia–Kuomintang connection. For example, in February 1947, Treasury Attaché Dolor DeLagrave, a former OSS officer, reported from Mexico City that three major drug rings existed, but he made no mention of Virginia Hill's connections, Albert Spitzer and Alfred C. Blumenthal.
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Though these connections were revealed to Senator Estes Kefauver, and even though Anslinger knew that Spitzer and Blumenthal were Lansky's associates, and that large opium shipments were coming out of Mexico “under police escort,” there was no follow-up by the FBN.
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In 1948 the FBN would declare that Mexico was the source of half the illicit drugs in America – but nothing was done about it.

Nothing was done, because the drug trade enabled the Central Intelligence Agency (CIA), which was created in 1947, to destabilize the Mexican government by pitting officials of the central government in Mexico City against warlords in the northern border region. Just as the CIA was pleased to see drug-addicted officials compromise the Cuban government, it was also glad when Captain Rafael Chavarri, founder of Mexico's version of the CIA, the Federal Security Directorate (DFS), formed relations with Mexican drug smuggler Jorge Moreno Chauvet. According to Professor Scott, at this point the CIA “became enmeshed in the drug intrigues and protection of the DFS.”
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By 1950, Chauvet was receiving narcotics from the new Lansky–Luciano French connection;
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and the mob-connected, former mayor of New York, William O'Dwyer, was the US ambassador to Mexico.