[Senate Hearing 108-173]
[From the U.S. Government Printing Office]

                                                        S. Hrg. 108-173

                             DANGEROUS MIX



                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION


                              MAY 20, 2003


                          Serial No. J-108-12


         Printed for the use of the Committee on the Judiciary

                            WASHINGTON : 2003
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                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman
CHARLES E. GRASSLEY, Iowa            PATRICK J. LEAHY, Vermont
ARLEN SPECTER, Pennsylvania          EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona                     JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio                    HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama               DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina    RUSSELL D. FEINGOLD, Wisconsin
LARRY E. CRAIG, Idaho                CHARLES E. SCHUMER, New York
SAXBY CHAMBLISS, Georgia             RICHARD J. DURBIN, Illinois
JOHN CORNYN, Texas                   JOHN EDWARDS, North Carolina
             Bruce Artim, Chief Counsel and Staff Director
      Bruce A. Cohen, Democratic Chief Counsel and Staff Director

                            C O N T E N T S




Biden, Hon. Joseph R., Jr., a U.S. Senator from the State of 
  Delaware.......................................................     3
Hatch, Hon. Orrin G. a U.S. Senator from the State of Utah.......     1
    prepared statement...........................................    72
Kyl, Hon. Jon, a U.S. Senator from the State of Arizona..........     6
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, 
  prepared statement.............................................    85


Casteel, Steven W., Assistant Administrator for Intelligence, 
  Drug Enforcement Administration, Washington, D.C...............     7
Clark, John P., Interim Director, Office of Investigations, 
  Bureau of Immigration and Customs Enforcement, Department of 
  Homeland Security, Washington, D.C.............................    14
Johnson, Larry C., Managing Director, Berg Associates, 
  Washington, D.C................................................    32
Lee, Rensselaer W., President, Global Advisory Services, McLean, 
  Virginia.......................................................    30
McCarthy, Deborah, Deputy Assistant Secretary, International 
  Narcotics and Law Enforcement Affairs, Department of State, 
  Washington, D.C................................................    12
McCraw, Steven C., Assistant Director, Office of Intelligence, 
  Federal Bureau of Investigation, Washington, D.C...............    10
Perl, Raphael, Specialist in International Affairs, Congressional 
  Research Service, Library of Congress, Washington, D.C.........    28

                          QUESTION AND ANSWER

Response of Steven C. McCraw to a question submitted by Senators 
  Biden and Hatch................................................    45

                       SUBMISSIONS FOR THE RECORD

Casteel, Steven W., Assistant Administrator for Intelligence, 
  Drug Enforcement Administration, Washington, D.C., prepared 
  statement......................................................    47
Clark, John P., Interim Director, Office of Investigations, 
  Bureau of Immigration and Customs Enforcement, Department of 
  Homeland Security, Washington, D.C., prepared statement........    64
Johnson, Larry C., Managing Director, Berg Associates, 
  Washington, D.C., prepared statement...........................    75
Lee, Rensselaer W., President, Global Advisory Services, McLean, 
  Virginia, prepared statement...................................    87
McCarthy, Deborah, Deputy Assistant Secretary, International 
  Narcotics and Law Enforcement Affairs, Department of State, 
  Washington, D.C., prepared statement...........................    92
McCraw, Steven C., Assistant Director, Office of Intelligence, 
  Federal Bureau of Investigation, Washington, D.C., prepared 
  statement......................................................   103
Perl, Raphael, Specialist in International Affairs, Congressional 
  Research Service, Library of Congress, Washington, D.C., 
  prepared statement.............................................   107

                             DANGEROUS MIX


                         TUESDAY, MAY 20, 2003

                              United States Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:02 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Orrin G. 
Hatch, Chairman of the Committee, presiding.
    Present: Senators Hatch, Kyl, Sessions, Cornyn, Biden, and 

                       THE STATE OF UTAH

    Chairman Hatch. Good morning. I want to welcome everyone to 
this important hearing to examine the issue of narco-terrorism.
    The problems of terrorism, drugs and international 
organized crime pose new and significant challenges to our 
country. As everyone knows, these problems occur across our 
borders and are less and less subject to control by nation 
states. Terrorists around the world and in every region appear 
to be increasing their involvement in the trafficking of 
illegal drugs, primarily as a source of financing for their 
terrorist operations.
    Narco-terrorists participate directly or indirectly in the 
cultivation, manufacture, transportation and/or distribution of 
controlled substances. Several terrorist groups provide 
security for drug traffickers transporting their products 
through territories under the control of terrorist 
organizations or their supporters. No matter what form it takes 
or the level of involvement in drug trafficking, several 
significant terrorist groups are reported to be relying on drug 
money as one of several significant funding sources.
    In the mid-1990's, I became concerned about the nexus 
forming between international organized crime, political 
movements and terrorism arising out of certain ungovernable 
areas of the world. Senator Biden and others, of course, have 
equally participated in this concern.
    Terrorist organizations developed relationships with 
illicit narcotics traffickers. In areas such as Afghanistan, a 
fundamentalist regime became wholly dependant on opium 
production at the time it became the host of Osama bin Laden 
and Al-Qaeda. In other parts of the world, such as Colombia, 
the connection was made through international organized crime, 
activities which are inconsistent with the ideological basis 
for terrorist activities.
    Today, United States and coalition forces have successfully 
removed the Taliban from power, but we have not succeeded in 
stabilizing Afghanistan. Our policy is to support President 
Karzai, but his Tajik-dominated government has alienated the 
majority of the Pashtun population, who live in most of the 
opium-producing areas of Afghanistan. This alienation of the 
Pashtuns has led to instability in Afghanistan that has 
resulted in fundamentalist and Al-Qaeda resistance to U.S. 
forces and an increase in opium production.
    The Bush administration recognizes that the situation in 
Afghanistan remains unresolved, and I urge the administration 
to maintain its commitment to the future of Afghanistan, if we 
are to root out Al-Qaeda and begin to reduce the opium 
production there.
    The reach of narco-terrorism extends across the globe to 
other areas in Asia, the Middle East and Latin America. In 
South America, the narco-terrorist threat is well-documented, 
including terrorist organizations such as the Revolutionary 
Armed Forces of Colombia, or FARC; the National Liberation 
Army, or ELN; and the United Self-Defense Groups of Colombia, 
or AUC.
    Terrorist groups in Colombia rely on cocaine trafficking, 
transportation and storage of cocaine and marijuana, as well as 
taxing traffickers and cocaine laboratories in order to support 
their civil war, terrorist attacks and, of course, the hostage-
taking of Americans, among others.
    The connection between Middle Eastern terrorist groups such 
as Hizballah and Hamas, and Latin American drug trafficking has 
been reported in the Tri-Border area of Argentina, Brazil and 
Paraguay, which has long been characterized as a regional hub 
for radical Islamic groups which engage in arms and drug 
trafficking, contraband smuggling, money laundering and 
movement of pirated goods.
    I would note that in a recent arrest reported just last 
week, the cousin of extremist Assad Ahmad Barakat, head of 
Hizballah in the Tri-Border area, was arrested in Paraguay with 
2.3 kilograms of cocaine powder which he intended to sell in 
Syria to benefit the Hizballah terrorist organization. The 
cousin was reportedly a mule hired by Barakat as part of the 
narco-terrorist financing operations needed to support Barakat 
and Hizballah.
    I want to commend the administration for its continuing 
efforts to fight narco-terrorism worldwide. Using tools 
provided in the PATRIOT Act, particularly those involving money 
laundering and intelligence-gathering, the Bush administration 
has demonstrated its commitment to fighting not only 
terrorists, but individuals and organizations which provide 
critical financing to terrorist groups.
    We should make no mistake about it: the impact of global 
narco-terrorism on our own communities is significant. In the 
District of Columbia, in November 2002, 3 separate indictments 
were announced charging 11 members of the FARC with the murder 
of 3 individuals, hostage-taking and drug trafficking involving 
the distribution of cocaine bound for the United States.
    In Houston, Texas, in November 2002, four members of the 
United Self-Defense Groups of Colombia, the AUC, were caught 
trying to exchange $25 million of cash and cocaine for weapons, 
such as shoulder-fired anti-aircraft missiles, 53 million 
rounds of ammunition, 9,000 rifles, rocket-propelled grenade 
launchers, along with almost 300,000 grenades to be used by AUC 
    In San Diego, California, in November 2002, two Pakistani 
nationals and one United States citizen were charged with 
attempting to exchange 600 kilograms of heroin and 5 metric 
tons of hashish for cash and four anti-aircraft missiles to 
supply to the Taliban and Al-Qaeda associates.
    Recently, in April 2003, the FBI and DEA disrupted a major 
Afghanistan-Pakistani heroin smuggling operation with the 
arrest of 16 individuals, in which heroin was being shipped to 
the United States, profits from the sale of heroin were 
laundered through Afghan and Pakistani-owned businesses in the 
United States, and then sent back to finance terrorists.
    If we really want to win the war against terrorism, we need 
to continue and expand our commitment to cutting off all 
sources of terrorism financing, including drug trafficking. By 
doing so, we will not only cut off an important source of 
funding for terrorists, but we will reduce the amount of 
illegal drugs that poison our communities.
    So I look forward to hearing from the experts we have 
called before the Committee today, today's witnesses.
    Now, I want to turn it over to Senator Biden, who is 
serving as the ranking minority member, for his opening 
remarks. In particular, he and Senator Kyl are great assets to 
this Committee, especially in the area of terrorism, and narco-
terrorism at that.
    So, Senator Biden, we will turn to you.

                       STATE OF DELAWARE

    Senator Biden. Thank you, Mr. Chairman, and thank you for 
the nice compliment. The truth is when Steve Casteel and I 
started in this business, there used to be an ad, ``This ain't 
your father's Oldsmobile.'' This is not your father's 
Oldsmobile anymore. I have been doing this for 30 years. I have 
been doing it as long as anyone in here, including the panel, 
and I have spent a considerable portion of my life trying to 
figure out how to deal with the drug problem and international 
drug trafficking.
    This has morphed into a very different arena now and we 
have not yet adjusted, in my view. That is not a criticism; it 
is an observation. We have not fully adjusted to the changes 
that have taken place, nor in a sense is it reasonable to 
expect we would have fully adjusted by now.
    Without going through, which I was going to do--I will ask 
unanimous consent that my entire statement be placed in the 
record, Mr. Chairman, and I will just speak to parts of it.
    Chairman Hatch. Without objection.
    Senator Biden. Without cataloguing, as you did very well, 
the recent arrests, including 16 Afghans and Pakistani 
nationals arrested in New York on drug charges, their drug ring 
was linked to Al-Qaeda and the Taliban. We know what is going 
    Since September 11, we have been focused on counter-
terrorism, and rightly so, but we have got to see and respond 
to the big picture here and it is going to take a while to get 
this right. I want to be realistic about homeland security and 
if we take our eye off the ball, we are going to find ourselves 
with a problem.
    We have to make sure our security priorities don't 
undermine our existing law enforcement efforts, which they are 
doing right now unintentionally. They must go hand in hand. I 
have been worried for some time that the increased focus that 
we have on homeland security has lost sight of what is really 
happening on our streets, and in drug trafficking in 
    If you look at the anti-drug initiatives that are part of 
the war on terrorism and understand that, I think we come up 
with a slightly different matrix than we now have. The 
administration's record here is somewhat mixed, in my view. It 
is doing a pretty good job on Colombia and it is doing a 
horrible job--and I want to make it clear, a horrible job--in 
    At home here, it has repeatedly proposed slashing or 
eliminating law enforcement programs with track records that 
reduce crime. The FBI has been forced to shift hundreds of 
agents away from counter-narcotics work which they were 
involved in, forcing the DEA to do more without sufficient 
funding, in my view, to do their job.
    Moreover, the administration has left the top anti-
narcotics position at the State Department vacant since 
September. It has yet to even nominate a replacement. We have 
to be able to walk and chew gum at the same time here, and we 
can't separate fighting terrorism from fighting drug 
trafficking, given the considerable and increasing linkage 
between the two.
    Let me just mention two areas that I have already 
mentioned, but expand slightly.
    Afghanistan: the connection between the warlords, drugs and 
terror is as clear as a bell. A lot of us here have talked 
about it. I have written reports about it. We have gone to the 
area and visited it. We even passed a $1 billion aid package 
here for Karzai last year for security, not one penny of which 
has been spent. There has been no extension of the security 
force beyond Kabul.
    The National Security Adviser has said to me personally and 
indicated to me generally that we have stability in Afghanistan 
and, quote, ``the warlords are in charge.'' When I indicated 
that, in Harat, you had a guy named Ismael Kahn, a warlord, 
running the show, she said, yes, there is some stability. There 
is stability all right. Everybody is back in business.
    When I was there a year ago January and spent time with 
Karzai, the opium production was way down. We all said, sitting 
here, we are not going to let this erupt again, we are not 
going to let this happen again, this is not going to become the 
single largest opium producer in the world. In a short 2 years, 
it is once again the single largest opium producer in the 
world. The fact of the matter is you can't stop opium 
production when the warlords control the region and when, in 
fact, we don't expand security beyond Kabul.
    Last year, Afghanistan produced 3,400 tons of opium. That 
is more than 18 times the amount produced during the last year 
the Taliban was in charge. The value of the harvest to growers 
and traffickers was $2.5 billion, more than double the entire 
amount of foreign aid given to Afghanistan by all nations in 
the world in the year 2002.
    It was the power vacuum created by warlords and drug 
traffickers that enabled the Taliban and Al-Qaeda to turn 
Afghanistan into an international swamp, as the President 
called it, the first time, and now we are back in the same 
situation again.
    In December, President Bush signed the Afghan Freedom 
Support Act, which authorizes $1 billion to expand 
international peace-keeping outside of Kabul to the rest of the 
country. To date, the President has not asked for one dime of 
that money to be spent. I sincerely urge the President and 
plead with him to seek to expand that force and to spend some 
of that money.
    In Colombia, the record is a little bit better. The effort 
has been consistent. The problem is, in a sense, even more 
intractable than it is in Afghanistan. All of us here have been 
to Colombia a number of times. We have witnessed the 
operations, we have met with the Colombians. We understand the 
FARC, ELN and AUC, and how they have gone from being 
facilitators to wholly-owned subsidiaries now. They are doing 
the job, and doing it very well.
    According to recent estimates, 90 percent of the cocaine 
consumed in the United States and 75 percent of the heroin used 
on the East Coast comes from Colombia. And, boy, it is pure, as 
we all know.
    I remember when you and I got here, Mr. Casteel, we were 
worried about brown heroin from Mexico. God give me back brown 
heroin, 6-percent purity. I can go on Aramingo Avenue in 
Philadelphia and pick it up at 90-percent purity. You can now 
smoke it. You can now get young girls who are 13 years old, who 
would no more put a needle in their arm than fly--you can get 
them to smoke cocaine, just like the crack epidemic started.
    The United States has remained engaged in Colombia and it 
is a very difficult problem, and I credit the administration 
for its efforts there. But the point I want to make is this: 
you all are in an almost--how can I say it--almost impossible 
    As we put together these pieces for homeland security and 
dealing with international terrorism, we have had to move a lot 
of pieces and there is bound to be some dislocation in the 
movement. But what concerns me is, with a 40-percent reduction 
in funding for law enforcement locally in next year's proposed 
budget, with moving 567 strike force and narcotics-related FBI 
agents out of that area, without significantly increasing for 
DEA a commensurate number of people, without putting security 
in Afghanistan, which is a very different way and place and 
ability to eradicate crops there than it is in the Amazon, we 
are missing real opportunities and creating problems that were 
pointed out by the Chairman.
    I will end by suggesting that you will be able to have all 
the terror, as the sophisticated terror operations, from Al-
Qaeda on, fully funded with money left over for vacations by 
the profit from narcotics and international narcotics trade now 
being controlled by terrorist organizations.
    So to suggest that we can deal with terror and not deal 
equally with as much emphasis and effort and resources with 
international drug trafficking, I think is a glaring, glaring 
mistake. Afghanistan is, to me, the most significant case in 
    And I might add I am fully aware of what you all tell me 
that 80 percent of the opium produced--by the way, they are 
moving the labs back from Pakistan now into Afghanistan because 
it is a secure area. There is nobody to crack down, nobody to 
crack down in most of these areas. At least in Pakistan, they 
are worried a little bit about the government, a little bit 
about the government. So you know things are really doing well 
when they are moving the labs back from Pakistan across the 
border into Afghanistan.
    Eighty percent of it goes to Europe, I understand. Drugs 
are like oil; they are fungible, and that means it increases 
our problem commensurately with the fact that all the heroin 
supply for Europe is coming out of Afghanistan now.
    I hope you all are willing to accept more money. I hope you 
all are going to be honest enough to tell us what your 
shortfall is. I hope you are going to be willing to tell us and 
not give us the malarkey that you can do more with less, 
because you know you can't and you haven't. And so I hope we 
have some candor here because this is a big, big deal.
    I yield the floor.
    Chairman Hatch. Well, thank you, Senator.
    We will turn to Senator Kyl.


    Senator Kyl. Thank you, Mr. Chairman. This hearing builds 
on one that Senator Feinstein held in the Terrorism 
Subcommittee last year. That hearing focused on illegal drugs 
and their link to terrorism in two parts of the world, 
Afghanistan and Colombia. As that hearing showed and as this 
hearing will confirm, there is a growing and significant link 
between international drug traffickers and terrorism.
    Several terrorist groups benefit directly or indirectly 
from drug trafficking activities. The form of such 
relationships varies among the groups and areas in the world. 
Some terrorist groups are directly involved in the trafficking 
of illegal drugs, some are indirectly involved as a financing 
mechanism by providing security for or taxing of traffickers 
who transport drugs through areas controlled by the terrorist 
groups. And some terrorist groups support cultivation of 
illegal drugs, such as coca or opium, as a financing mechanism.
    There are many examples. Indeed, as Chairman Hatch has 
mentioned, the narco-terrorism connection was underscored by a 
November 2002 arrest in San Diego of two Pakistanis and one 
U.S. citizen for attempting to exchange 600 kilograms of heroin 
and 5 metric tons of hashish for cash and 4 Stinger anti-
aircraft missiles to supply Al-Qaeda associates.
    We have a very distinguished panel of witnesses here today, 
Mr. Chairman, and I look forward to their testimony about the 
connection between terrorists and international drug 
    Chairman Hatch. Well, thank you, Senator.
    Senator Cornyn, do you care to make any remarks?
    Senator Cornyn. Thank you, Mr. Chairman. I will pass.
    Chairman Hatch. Thank you.
    Senator Sessions, do you care to make any comments?
    Senator Sessions. No, thank you, Mr. Chairman.
    Chairman Hatch. Well, we will begin with our panel. We are 
delighted to have these tremendous leaders here with us today.
    Mr. Steve W. Casteel is the Assistant Administrator for 
Intelligence at the Drug Enforcement Administration here in 
    Mr. Steve McCraw, we welcome you here again, Assistant 
Director of the Office of Intelligence at the Federal Bureau of 
    Ms. Deborah McCarthy is Deputy Assistant Secretary of State 
in the Bureau of International Narcotics and Law Enforcement 
Affairs at the Department of State. Mr. John P. Clark is the 
Interim Director of the Office of Investigations in the Bureau 
of Immigration and Customs Enforcement in the Department of 
Homeland Security.
    So we are happy to have all of you here and we will begin 
with you, Mr. Casteel.


    Mr. Casteel. Thank you, Mr. Chairman. Chairman Hatch, 
Senator Biden, Senator Kyl, Senator Sessions, good to see you 
again, and obviously last but not least, Senator Cornyn. It is 
a pleasure to be with you today to discuss a very important 
issue and to represent the Drug Enforcement Administration as 
the Assistant Administrator of Intelligence.
    Prior to September 11, 2001, the law enforcement community 
typically addressed drug trafficking and terrorist activities 
as separate issues. In the wake of the terrorist attacks in New 
York City, Washington, D.C., and Pennsylvania, these two 
criminal activities are virtually intertwined. For DEA, 
investigating the link between drugs and terrorism has taken on 
a renewed importance.
    Throughout history, a broad spectrum of the criminal 
element, from drug traffickers to arms dealers to terrorists, 
have used their respective power and profits in order to 
instill the fear and corruption required to shield them from 
the law.
    Whether a group is committing terrorist acts, drug 
trafficking or laundering money, the one constant to remember 
is that they are all forms of organized crime. The links 
between various aspects of the criminal world are evident 
because those who use illicit activities to further or fund 
their lifestyle, cause or fortune often interact with others 
involved in related illicit activities.
    For example, organizations that launder money for drug 
traffickers often utilize their existing infrastructure to 
launder money for arms traffickers, terrorists and other types 
of criminals. The link between drugs and terrorism is not a new 
    Globalization has dramatically changed the face of both 
legitimate and illegitimate enterprise. Criminals, by 
exploiting advances in technology, finance, communications and 
transportation in pursuit of their illegal endeavors, have 
become what we now call criminal entrepreneurs. Perhaps the 
most alarming aspect of this entrepreneurial style of crime is 
the intricate manner in which drugs and terrorism may be 
    The DEA does not specifically target terrorists or 
terrorist organizations. DEA's mission is and remains to 
investigate and prosecute drug traffickers and drug trafficking 
organizations. However, some of the individuals and/or 
organizations targeted by DEA may become involved in terrorist 
activities. In fact, 39 percent of the State Department's 
current list of designated foreign terrorist organizations have 
some degree of connection to drug activity.
    If the Committee would look to the right there, you will 
see two charts outlining that fact. The first chart lists the 
36 foreign terrorist organizations currently listed by our 
State Department. Those highlighted in red, those 14 
organizations, we believe have some link and ties. Often, when 
we talk about narco-terrorism, we think of Latin America, too. 
And if you look at the second chart, you will see that the 
global spectrum covered by these organizations is worldwide.
    One does not have to go to the Middle East, however, to 
find active terrorist groups. They exist right in our 
hemisphere a mere three hours' flight from Miami. The U.S. 
State Department has officially designated the ELN, the FARC 
and the AUC as foreign terrorist organizations. Based in 
Colombia, these groups were responsible for some 3,500 murders 
in 2002 alone.
    As in years past, Colombia endured more kidnappings last 
year than any other country in the world, roughly around 3,000. 
Overall, the ELN, FARC and AUC all benefit and derive some 
organizational proceeds from the drug trade, as well as illegal 
activities such as kidnapping, extortion and robbery.
    DEA reporting indicates that persons affiliated with the 
AUC, and to a lesser extent the FARC, are now working with 
Mexican and Central American trafficking organizations to 
facilitate cocaine transshipment throughout the region. 
Consistent with these reports, a Government of Mexico official 
recently stated that members of the AUC and FARC are carrying 
out drug trafficking activities in Mexico.
    There have been numerous instances of drugs-for-weapons 
exchanges occurring in the region, particularly in Central 
America. Drugs are almost becoming the universal currency of 
organized crime.
    As you see in a chart that has been placed up there now, 
this is all too often an occurrence in Central America. A plane 
will land, offload a large amount of cocaine. They will throw 
on a load of guns and back south it heads. Fortunately, this 
plane didn't make it off the ground.
    The ELN, FARC and AUC are not the only terrorist groups in 
our hemisphere. As you heard before, the Tri-Border area of 
Paraguay, Argentina and Brazil is a Hizballah and the Islamic 
Resistance Movement, known as Hamas, action area. DEA 
intelligence indicates that they generate a significant income 
by controlling the sale of various types of contraband in these 
areas, including drugs, liquor, cigarettes, weapons and forged 
documents. Our intelligence suggests that large sums of these 
earnings from these illegal activities go in support of the 
operatives' respective organizations in Lebanon.
    Although not in our hemisphere, but of great concern to our 
National interest, Afghanistan continues to be a major source-
producing country, producing approximately 59 percent of the 
world's supply of opium in 2002. In January 2003, DEA 
officially reopened its Kabul office, which is staffed by two 
full-time special agents.
    With a presence north and south of the Afghan border, 
through offices in Uzbekistan and Pakistan, the DEA continues 
to work closely with its counterparts to collect intelligence 
pertaining to clandestine laboratories, drug stockpiles, 
trafficking routes and major regional drug targets.
    Afghanistan's neighbors in the Central Asian states may 
also be candidates for exploitation by these traffickers. Drug 
trafficking groups could potentially utilize their existing 
networks within the region to move to market precursor 
chemicals and other things to be used in the drug trade. 
Presently, the situation is fluid and constantly changing. 
Until the situation in Afghanistan stabilizes, the future of 
drug cultivation and production within that country or within 
that region itself remains uncertain.
    Southeast Asia also faces similar obstacles in confronting 
the myriad and terrorist organizations who continue to 
challenge established governments. The United Wa Army, the 
largest heroin and methamphetamine trafficking group in the 
area, operates with virtual autonomy, a government within a 
government, primarily funded by drug activities. The 
overwhelming majority of both heroin and methamphetamine 
refineries currently are located in Burma and areas controlled 
by the Wa or indirectly in areas controlled by traffickers 
paying fees to the Wa.
    The terrorist attacks carried out on our Nation on 
September 11, 2001, graphically illustrate the need to starve 
the financial base of every terrorist organization and deprive 
them of the drug revenue that is used to fund acts of 
terrorism. Tracking and intercepting the unlawful flow of drug 
money is an important tool in identifying and dismantling 
international drug trafficking organizations and their ties to 
    Domestically, one major DEA effort that highlights the 
importance of targeting financial networks to the Middle East 
is Operation Mountain Express III. This investigation, which 
targeted pseudoephedrine suppliers from Mexican methamphetamine 
super labs, revealed that proceeds from the sale of Canadian 
pseudoephedrine are being funneled through the traditional 
hawala underground banking network to individuals in the Middle 
    The last chart you will see there somewhat illustrates that 
fact. What we have is major labs operating on our West Coast 
controlled by Mexican organized crime groups. The source or 
precursor chemical for that is pseudoephedrine which is 
produced in Canada, moves across our borders mainly to Chicago 
and Detroit, on then to Las Vegas and Phoenix, and then 
ultimately to the big labs.
    From a law enforcement perspective, what I find interesting 
here is the way we were seizing these pseudoephedrine tablets. 
As you see the pictures moving across, when we first started 
having this problem, we were seizing all these little bottles 
of pseudoephedrine, very small bottles, case after case. Then 
we started seizing bigger bottles and bigger bottles, and now 
as you can see at the end, we are seizing kegs of this product, 
which shows the need for it and the profitability to be 
addressed by it.
    In recent years, U.S. law enforcement has moved toward a 
community policing model. You hear that all the time in the 
United States, community policing, community policing. 
Internationally, law enforcement has adopted what we call the 
transnational policing approach. The DEA is positioned to 
support this model because it maintains 79 offices in 58 
countries. These offices support DEA domestic investigations 
through foreign liaison, training of host country officials, 
bilateral investigations and intelligence-sharing. Foreign 
operations enable DEA to share intelligence and coordinate and 
develop a worldwide drug strategy, in cooperation with our host 
    In conclusion, Mr. Chairman, the events of September 11 
have brought a new focus on an old problem, narco-terrorism. 
These events have forever changed the world and have 
demonstrated that even the most powerful Nation is vulnerable 
to acts of terrorism. In attempting to combat this threat, the 
link between drugs and terrorism has come to the fore. Whether 
it is a state, such as the formerly Taliban-controlled 
Afghanistan, or a narco-terrorist organization such as the 
FARC, the nexus between drugs and terrorism is perilously 
evident. DEA, though a single-mission agency, is committed to 
our National security through a myriad of cooperative 
international and domestic enforcement initiatives and 
    Once again, I thank the Committee for the opportunity to 
share my insights relative to DEA's role in this critically 
important and I will also be happy to respond to any questions 
the Committee may have.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Casteel appears as a 
submission for the record.]
    Senator Kyl. [Presiding]. Thank you very much, Mr. Casteel.
    Let me just note that Senator Leahy's and Senator 
Grassley's statements will be put in the record, without 
objection, and we will leave the record open for one week.
    Mr. McCraw.


    Mr. McCraw. Thank you, Senator Kyl. With your permission, I 
would like to respectfully request that my written testimony be 
submitted to the record.
    Senator Kyl. Without objection, so ordered.
    Mr. McCraw. Also, with your permission, I would like to 
depart a little bit from my written testimony and talk to you a 
little bit about this serious problem.
    Before I began, I want to take this opportunity on behalf 
of every FBI man and woman to publicly thank the members of 
this Committee, even though Chairman Hatch is not here at this 
time, for your tremendous support, and Senator Biden, Senator 
Sessions and Senator Cornyn, to the FBI. We are now able to 
modernize our information technology system. We are having 
agents increased in terms of combatting terrorism analysts, and 
also some support professionals, and we very much appreciate 
    Secondly, I would like to divert just a little bit of time 
to talk about what is the most significant threat as we see it 
right now. Clearly, it is Al-Qaeda. Also, there are other 
Islamic extremist groups. The FBI, along with our State, local 
and Federal partners, have identified hundreds of Islamic 
extremists and Sunni extremists tied to Al-Qaeda, tied to 
    The concentrations continue to be Eastern Seaboard, Western 
Seaboard and Southwest, in your part of the country, Senator 
Cornyn. And it is these threats that certainly keep all of us 
up late at night and up early in the morning. Clearly, the 
sleeper cells constitute our greatest threat. Those are the 
ones that sneak into this country. They capitalize on our 
porous borders, our free and open democracy that we cherish so 
much as Americans. Once in, they avoid police scrutiny. That is 
the trade craft; that is what they do, for good reason. 
Clearly, the 19 hijackers exhibited this and we have seen this 
like type of action throughout the world recently.
    We cannot afford to just focus on Al-Qaeda. We can't afford 
to focus on certainly the Islamic extremists. There is 
Hizballah, there is Hamas. There are even domestic terrorist 
organizations that still constitute a threat to this Nation.
    I think Senator Biden's point was right on target that, to 
paraphrase, independently each of these terrorism and narcotics 
trafficking groups constitutes significant threats to our 
country. Together, it grows the threat. Clearly, as we put 
additional pressure, which the U.S. Government has, on nations 
for supporting and harboring terrorism, they are going to seek 
other ways of funding. And I can't think of a more lucrative 
way right now than drug trafficking, and it is there. There is 
no question about it.
    There is no way that we can extract crime from terrorism. 
They are inextricably linked, which is one of the things I 
noted in my testimony. You recognized this back in the year 
2000 when we talked about the convergence of international 
crime and terrorism. They depend upon it, and there is a myriad 
of violations. I mean, it is like reading a RICO indictment, 
from white collar crime, to burglary, to robbery, to homicide, 
to smuggling, counterfeiting and drug trafficking, which is the 
focus of this testimony today; credit card fraud, white collar 
crime fraud.
    Mr. Casteel made a great point with the pseudoephedrine, 
and a lot of this diversion is happening with some of the 
groups that are associated with Hamas and Al-Qaeda and other 
Islamic extremists in the U.S. They are diverting this 
pseudoephedrine specifically to the drug trafficking market, it 
being a precursor to methamphetamine. That clearly is a 
    Again, additional funds, and these funds that they generate 
are used for two reasons, either direct support in terms of 
funding of operations, and certainly there is that facilitation 
model. When we see a lot of convergence and overlap between the 
criminal world and the terrorist world, unfortunately often--or 
I will say fortunately, we will take down investigations, some 
would argue prematurely.
    But there is a new paradigm and we can't afford--you know, 
unlike baseball where batting .700 will put you in the Hall of 
Fame, what we are faced with today, the intelligence community, 
the law enforcement community and the FBI together--it only 
takes one act of terrorism and there is a failure, and we can't 
afford that.
    So you will notice in a lot of our investigations that we 
will take down things that normally we might let continue on 
for a period of time to identify and be able to conclusively 
tell you that those links exist. The San Diego case is a 
perfect example that the Chairman spoke of earlier.
    Thank you. I look forward to answering any questions that 
you might have and I appreciate the opportunity to be here 
    [The prepared statement of Mr. McCraw appears as a 
submission for the record.]
    Senator Kyl. Thank you very much, Mr. McCraw. I also want 
to make sure that we will have some time later to get into a 
little bit more detail, to the extent you can, on that last 
case. I think that will be very important for people to 
    Mr. McCraw. Yes, sir.
    Senator Kyl. Ms. McCarthy.

                   OF STATE, WASHINGTON, D.C.

    Ms. McCarthy. Thank you, Mr. Chairman, members of the 
Committee. Thank you for the opportunity to speak today on 
behalf of the State Department. I am accompanied today by Mr. 
William Pope, the Principal Deputy Coordinator of the State 
Department's Office of Counter-Terrorism. I am going to request 
that my written statement be included in the record and I am 
going to do some extracts from it today.
    As you know, well before September 11 the INL office of the 
State Department has been working to combat narcotics 
production, trafficking, international money laundering, cyber 
crimes and theft of intellectual property rights. For fiscal 
year 2003, Congress appropriated INL more than $900 million to 
advance these objectives. S/CT has the lead in the Department 
for coordinating our activities in the war on terrorism. INL 
supports these efforts through counter-narcotics activities, 
anti-money laundering and crime control activities.
    To counter the increasing linkage and overlap among 
terrorist, drug and other criminal groups, INL has begun 
integrating counter-narcotics and anti-crime programs. We do 
this through initiatives to build up law enforcement and 
justice systems in key foreign countries. In other words, we 
also help other countries develop their border control 
    The terrorist interdiction program developed by S/CT 
installed powerful computer databases at airports and other 
ports of entry in friendly countries to enable immigration 
officials to cross-check passports and visas of arriving 
persons. We also work to develop stronger international law 
enforcement and financial regulation standards. We also have 
programs to fight corruption which are also part of our anti-
crime efforts.
    The sources of funds may vary between terrorists and other 
criminals and drug traffickers, but the methods used by 
terrorists and drug traffickers to transfer funds are similar. 
Illicit finances are of special concern and we have focused a 
number of activities against the programs that they use.
    In the past, state sponsors provided funding for 
terrorists. In recent years, however, as state sponsorship of 
terrorism has come under increased scrutiny, terrorist groups 
have looked increasingly at drug trafficking and other criminal 
activities as sources of revenue.
    Fighting money laundering and terrorist financing, which we 
engage in, provides a particularly clear example of the need 
for interagency and international cooperation across crime-
fighting and counter-terrorism disciplines. This is not to say 
that fighting crime and fighting terrorism are synonymous. 
There are important areas in law, policy, diplomacy and program 
management where the two must be treated separately. Law 
enforcement is one key tool among several in counter-terrorism.
    In Colombia, however, the links between drugs and terrorism 
are of particular concern. Since the date of our previous 
testimony, a good deal has changed. A new president has come 
in, setting Colombia firmly on the course of strengthening its 
military and police forces to defeat the narco-terrorist 
    In Colombia, we have mentioned the three main groups that 
receive revenue from narcotics cultivation, taxation and 
distribution. They provide at least half the funding that the 
FARC and the AUC rely on. We estimate that the ELN derives less 
of its support from drug trafficking.
    Drug money facilitates terrorist operations. As the FARC 
has expanded urban operations, they may also be reaching out to 
international terrorists and additional technical expertise. 
The ongoing trial of the alleged IRA operatives arrested in 
Colombia in 2001 is but one example.
    I will not go into the details of the various groups, as I 
think most people are familiar with them. I want to mention 
also that this Andean-produced cocaine and heroin passes 
through Central America, the Caribbean and Mexico, and we have 
noted the connection between the groups that pass the drugs.
    The situation in Afghanistan, of course, is of note. We 
have ample evidence that the Taliban condoned and profited from 
the drug trade when it was in power. Since the Taliban was 
forced from power, we have seen reports that they and other 
groups seeking to undermine the regime of President Karzai used 
drug trafficking to arm their militia and mount operations 
against the government. Two other groups are worth mentioning, 
the Peruvian terrorist group Shining Path and, in addition, the 
Islamic Movement of Uzbekistan.
    In addition to trying to curtail the flow of funds to 
terrorists from drug trafficking, we also have a number of 
other programs; as I mentioned, comprehensive anti-money 
laundering and counter-terrorist financing programs, but we 
also try to empower our allies to detect, prevent, disrupt, 
prosecute and seize the financial assets.
    We now recognize the close relationship between money 
laundering and terrorist financing, as noted in our recent 
INCSR. We note also that we train people in a number of law 
enforcement areas to increase our capability to prosecute and 
apprehend and investigate the cases.
    INL works closely with a number of multilateral agencies, 
and in particular we have some new initiatives within the group 
of G-8 countries, which I refer to a little bit more in my 
    Thank you.
    [The prepared statement of Ms. McCarthy appears as a 
submission for the record.]
    Senator Kyl. Thank you, Ms. McCarthy.
    Finally, Mr. Clark.


    Mr. Clark. Good morning, Mr. Chairman, distinguished 
members of the Committee. It is a pleasure and privilege to be 
here today to discuss the efforts undertaken by the Bureau of 
Immigration and Customs Enforcement, BICE, in its role in 
investigating international drug smuggling and money laundering 
as it relates to narco-terrorism.
    Prior to beginning my specific testimony, I would like to 
take some time to provide background on our new bureau.
    With the creation of the new Department of Homeland 
Security, the investigative and intelligence functions of the 
former U.S. Customs and Immigration and Naturalization Service 
have been merged to form the Bureau of Immigration and Customs 
Enforcement under the Department of Homeland Security. In 
addition, the bureau includes the Air and Marine Interdiction 
Division, the detention and removal program, and the Federal 
Protective Service.
    BICE utilizes the broad legal authorities of its legacy 
components to investigate and enforce violations of the law as 
they did previously, and under BICE will continue to protect 
the United States and its citizens from the dangers posed by 
criminal organizations, including those linked to narcotics 
trafficking and terrorism.
    BICE has the authority to investigate numerous violations, 
including violations of immigration law, export laws, money 
laundering, smuggling, fraud and cyber crimes, including child 
pornography. BICE investigations have led to the 
identification, penetration and prosecution of individuals and 
groups who are identified as being members of or linked to 
designated terrorist organizations such as the FARC and the 
    Furthermore, BICE, with its formidable money laundering and 
counter-narcotics programs and initiatives, has disrupted and 
dismantled narcotics smuggling organizations and the financial 
mechanisms utilized to launder their criminal proceeds.
    It is one of our top priorities to identify, investigate 
and dismantle the criminal organizations that specialize in the 
transportation and smuggling of contraband and illegal aliens. 
The title of this hearing today, ``Narco-Terrorism: 
International Drug Trafficking and Terrorism--A Dangerous 
Mix,'' is, in essence, the challenge faced by BICE agents on a 
daily basis.
    The transportation organization that is paid to smuggle 
cocaine today may very well be contracted to smuggle 
instruments of terror or terrorists tomorrow. It is clearly 
evident that the illicit narcotics trade generates enormous 
profits for criminal organizations. These organizations thrive 
on their ability to amass huge sums of money.
    BICE utilizes a multi-pronged approach to investigate these 
organizations. In an effort to disrupt and dismantle these 
organizations, BICE focuses not only on the inbound smuggling 
of contraband, but also the outbound flow of criminal proceeds.
    BICE's authority to conduct financial investigations has 
been derived from a variety of laws. BICE began conducting 
financial investigations after the enactment of the Bank 
Secrecy Act, the BSA, in 1970, and expanded their 
investigations with the enactment of the 1986 Money Laundering 
Control Act, the Anti-Drug Abuse Act of 1988, and the 2001 
    In addition, various memoranda of understanding between the 
Secretary of the Treasury, the Attorney General and the 
Postmaster General have been executed regarding the conduct of 
money laundering investigations. These MOUs delineate the 
specific unlawful activity and investigative authorities in 
which BICE has jurisdiction.
    Since its inception, BICE has had the authority to enforce 
anti-smuggling statutes, to include 18 USC 545. This authority 
allows BICE the ability to investigate the unlawful importation 
of any contraband. With Title 21 cross-designation, BICE has 
been authorized by the Department of Justice, and more 
specifically the Drug Enforcement Administration, to 
investigate narcotics smuggling organizations.
    Enforcement of Title 8 of the U.S. Code allows BICE to 
target individuals or groups of individuals who are attempting 
to or have entered the United States for illicit purposes. 
These authorities, combined with our broad border search 
authority, place BICE in an ideal position to fully investigate 
smuggling of contraband and humans by sophisticated smuggling 
organizations, while also targeting the financial mechanisms 
utilized by these elements to launder their illegal proceeds.
    One such laundering mechanism is the Black Market Peso 
Exchange, BMPE, a trade-based money laundering system. The 
Exchange allows drug traffickers to transfer their U.S. profits 
from dollars to pesos without moving cash across borders.
    BICE has an ongoing, aggressive investigative approach 
concerning the BMPE which includes utilizing investigative 
techniques such as undercover investigations, Title 3 wire 
intercepts, intelligence-gathering, international coordination 
and training of our international law enforcement counterparts.
    BICE undercover operations directed at the peso brokering 
system have resulted in the seizure of more than $800 million 
in cash and monetary instruments over the last 8 years. 
Undercover investigations conducted by BICE have targeted 
hundreds of Colombian brokers, accounts and domestic money 
laundering and drug trafficking cells operating in U.S. cities, 
Central and South America, as well as Europe and Asia.
    A few case examples: Operation Wire Cutter was a major 
joint money laundering investigation conducted by BICE, the 
Drug Enforcement Administration, personnel assigned to the U.S. 
Embassy in Bogota, Colombia, and Colombian law enforcement 
authorities that targeted high-level Colombian drug trafficking 
organizations and their cells.
    The primary defendants in Operation Wire Cutter were eight 
senior money brokers located in Bogota, Colombia. Each of these 
money brokers had distinct organizations that provided money 
laundering services to several drug cartels on a contract 
basis. Subsequently, undercover BICE agents picked up drug 
money from operatives of the money brokers in New York, Miami, 
Chicago, Los Angeles and San Juan, Puerto Rico.
    At the same time, the Colombian authorities conducted a 
parallel investigation on the BMPE money brokers and their 
associates in Colombia. Operation Wire Cutter marked the first 
time that U.S. authorities were able to combine undercover 
pickups of drug proceeds in this country with the investigative 
efforts by Colombian authorities to target BMPE money brokers.
    Operation Wire Cutter resulted in the arrest of 37 
individuals, 29 in the U.S., 8 in Colombia. U.S. authorities 
also seized more than $8 million, as well as 400 kilograms of 
cocaine, 100 kilograms of marijuana, and 6.5 kilograms of 
heroin. To date, five money brokers in Colombia have been 
extradited to the United States. This represents the first time 
that a money broker has been extradited from Colombia to the 
United States.
    As I mentioned previously, the transportation organization 
that is paid to smuggle cocaine today may very well be 
contracted to smuggle instruments of terror tomorrow. By using 
internal conspiracies, criminals utilize corrupt personnel 
within the seaport and airport environments to introduce 
contraband or implements of terrorism into otherwise legitimate 
cargo or conveyances, and to remove it prior to examination by 
the Bureau of Customs and Border Protection.
    In an ongoing investigation targeting internal conspiracies 
at one major U.S. seaport alone, BICE special agents have 
uncovered the endemic practice of contraband being removed from 
international cargo prior to the entry process. Utilizing a 
variety of investigative techniques, including undercover 
operations and controlled deliveries to successfully infiltrate 
the internal conspirators, hundreds of individuals have been 
arrested and convicted, thousands of pounds of cocaine have 
been seized, and hundreds of pounds of heroin as well.
    Another significant internal conspiracy investigation 
conducted by BICE agents in conjunction with the Drug 
Enforcement Administration was Operation Ramp Rats. Ramp Rats 
targeted corrupt employees working at Miami International 
Airport and resulted in more than 70 indictments and arrests. 
Thirty of those arrested were employees of a major domestic 
airline. Those arrested in this investigation were charged with 
various violations of Federal narcotics laws, such as 
conspiracy to import cocaine into the United States and 
conspiracy to possess cocaine.
    Both of these investigations have targeted corrupt 
employees in the transportation industry, resulting in the 
facilitation of smuggling schemes used by criminal 
organizations. BICE is aggressively implementing programs to 
address these weaknesses that include the assignment of 
additional investigative personnel, the utilization of 
improving technology, and the combination of various law 
enforcement and security components to counter these threats.
    Recently, BICE drug trafficking and money laundering 
investigations have highlighted the link between drug 
trafficking and terrorist organizations. An adjunct of these 
investigations is the link between the drug trafficking 
organizations and Colombia's illegal armies.
    In October 2002, BICE arrested Libardo Ernesto Florez Gomez 
after he arrived at Miami International Airport. Upon arrival, 
he declared over $180,000 in U.S. currency. A subsequent 
secondary examination revealed multiple financial records, 
blank pre-signed checks, a DEA seizure letter, and a document 
that alleges his links to the FARC. Florez Gomez admitted that 
the funds declared were not his. On April 4 of this year, 2003, 
Florez Gomez pled guilty to one count of 18 USC 1960 for his 
involvement in operating an unlicensed money transmitting 
business and is currently awaiting sentencing.
    Currently, BICE is participating in a highly successful 
joint organized crime drug enforcement task force with the Drug 
Enforcement Administration and the Federal Bureau of 
Investigation that is targeting the maritime transportation of 
multi-ton shipments of cocaine belonging to the Colombian drug 
    This investigation has led to indictments against several 
ostensibly high-ranking members of the AUC. These individuals 
were indicted for involvement in the maritime transportation of 
over 12 tons of cocaine. As a result of the investigation, a 
direct link between drug trafficking and known terrorist 
organizations has been established. Narco-terrorism will 
continue to be a top priority of BICE.
    In conclusion, I would like to thank the distinguished 
members of this Committee for the opportunity to speak before 
you today and will be glad to address any questions you may 
    [The prepared statement of Mr. Clark appears as a 
submission for the record.]
    Senator Kyl. Thank you very much, Mr. Clark.
    One of the common threads throughout your testimony suggest 
to me a question about sharing of information not only among 
the Federal agencies, but also with local authorities.
    Mr. McCraw, I wanted to ask you this question. Would it be 
your view that there are at least possibly some legislative 
changes needed to provide more information to State and local 
officials, particularly information gathered through grand jury 
investigations? Do you have any comment on that?
    Mr. McCraw. Well, Senator, I have to get back in terms of 
specifics before I wax on about what we need or don't need. 
However, it is a topic near and dear to my heart, and the 
Director's as well, as to how much information we can push out 
because the army out there is the State and locals. I mean, it 
is their job. They have got the public safety mission right up 
on the front lines.
    To the extent that we can use whatever we can in terms of 
statutory authorities--and, frankly, the PATRIOT Act has helped 
much--and also to get key individuals within the local law 
enforcement community their security clearances because some of 
this information, as you well know, is classified for good 
reason--yet, no longer can they work in a vacuum.
    I mean, there is information that happens overseas that 
affects the chief of police in Tucson, the chief of police in 
San Antonio, and they need that information. We are involved in 
a number of information-sharing initiatives right now where we 
can use technology to push information to them, as well as to 
our intelligence community partners.
    Senator Kyl. Would you do me a favor? If you could 
communicate with others in the Bureau or with the Department of 
Justice to get an answer to that question, I would appreciate 
getting that for the record.
    Mr. McCraw. Yes.
    Senator Kyl. But just to the rest of you now, are there any 
other issues with respect to information-sharing that you think 
is important to bring to the attention of the Committee?
    Yes, sir, Mr. Casteel.
    Mr. Casteel. It is interesting. Information-sharing has 
become my life for the last 3 years, so I would like to comment 
on a couple of things, if I could.
    Number one, when we talk about intelligence and when I 
speak before the intelligence subcommittees, I often point out 
in the back of the room our seal doesn't appear there. We are 
not part of the IC world and so we look at intelligence a 
little bit differently. We think there are two models for 
intelligence. One is the IC model, but one is a law enforcement 
model, and they are two different things. When you talk to the 
local chiefs of police, they may not understand the IC world, 
but they recognize what they want and what they need.
    To sum up the two models in two words perhaps, the IC model 
is based on getting to know something. The law enforcement 
model is based on being able to do something with that 
information. So I do see at times from a law enforcement 
perspective a concern that we are going down this IC road model 
for the development of intelligence-sharing and that may not be 
the correct road to go down. We need to recognize who the 
customer is and what they want.
    The second thing within intelligence is within our model 
you have the first responder. And you have heard that term used 
a lot, ``first responder.'' Well, they have an important role 
also in intelligence. Unlike the IC world, in law enforcement 
we have no collectors. Our collectors are those first 
responders out there every day of the week collecting 
information, and information is of value.
    We just recently closed one of our offices in Pakistan, not 
because of something we received from the IC community, but two 
local police officers there catching the people stepping off 
the distance to our front door to plant the bomb. The first 
responder has a role here.
    As we are looking at this, we are also putting a tremendous 
amount of money into technology, data-mining, terms like that. 
We have to remember there are two other parts to this. 
Technology is one answer, but the first responders need to be 
trained. They need to recognize what they do for a living is 
important for intelligence. You need more analysts on the other 
end to look at that intelligence.
    And last but not least, I have been a policeman for over 30 
years. I only do what benefits me. If I don't get information 
back, then as a police officer I am not going to want to be 
part of this system. So I do think we do need to look at that.
    Last but not least, Lord knows we have made enough mistakes 
in the drug arena when it comes to information-sharing. But 
over 30 years, we have tried to overcome many of these mistakes 
and I think we have learned a lot. I think we have learned a 
lot that would make a good template. Rather than reinvent a lot 
of things, move that template over into the terrorist arena.
    I go to meetings and I hear people say, you know, we need 
to be able to give more tactical information to the State and 
locals. Well, we have done that. We have got EPIC that has been 
there for 28 years, getting tactical information to that police 
officer on the side of the road halfway between Omaha and 
Lincoln at three o'clock in the morning.
    I hear them say the military and law enforcement have to be 
commingled in their information-sharing better so they both can 
take action. We do that already in JATF East, now called JATF 
South, where information from law enforcement overseas is given 
to the military, who takes action that leads to evidence that 
we put back in our court system. So that model is very 
important, sir.
    Thank you.
    Senator Kyl. Any other comments on that?
    Go ahead, Ms. McCarthy.
    Ms. McCarthy. I just want to make one comment that without 
the cooperation that we get among other law enforcement 
agencies, INL could not do its work, and I will point to the 
eradication effort in Colombia. To send the planes out to get 
the crops, we have to work with agencies to find out where the 
crops are. But also more importantly, we have to work with 
other agencies to get the information to find out where the 
guerrillas are so our planes don't go out and get shot down and 
it results in more hostages.
    Senator Kyl. Thank you.
    Mr. Clark.
    Mr. Clark. This is the fifth week of five very long weeks 
in my life, having just reported up here from Miami. On a good 
note, I would say, though, that there are positive improvements 
in terms of information-sharing, first, on the Federal level.
    In the five weeks I have been here, I have had the 
opportunity to sit down with representatives from both the Drug 
Enforcement Administration as well as the FBI, and we are 
working on improving our coordination and intelligence-sharing 
in many aspects.
    On a State and local level, first responder level, in my 
previous life I was the special agent in charge for customs 
investigations in Miami. I know we are taking very positive 
steps in terms of working with the first responders. We have a 
blue lightening operations center down in Miami which has 
always incorporated State and locals. It works under the HIDTA, 
High Intensity Drug Trafficking Area intelligence center.
    We have incorporated that operation now to work on 
operations at our borders that address terrorist threats, as 
well as drug trafficking. Through that operation, we are able 
to share a lot of information that is not classified with the 
State and locals to give them a sense of ownership of what we 
are doing and enlist their assistance in helping us at the 
borders. So there are some positive improvements along those 
    Senator Kyl. Well, you can see that is an emphasis of ours 
and we just need to have you identify any institutional or 
legal impediments to that sharing if they exist.
    Senator Biden.
    Senator Biden. Thank you very much, Mr. Chairman.
    I want to focus on three areas to just sort of give you a 
heads-up here. One is what our targeting priorities are. Two is 
what knowledge and detail we have about the impact of actual 
funds in the hands of terrorist organizations. And, three, the 
allocation of our resources domestically, the Federal budget, 
how we allocate those resources and whether we could do it 
    Now, I, like all of you and the Chairman, have spent a 
great deal of time dealing with the Andes, and Colombia in 
particular. But I want to make a point here. The very existence 
of that democracy is at stake and whether or not it becomes a 
narco state or whether or not it is able to gain control. That 
is consequential to us short-term and long-term, but it is not 
nearly as consequential to us as whether or not Al-Qaeda has an 
extra $200 million to spend.
    None of you has talked about priorities here. We talk about 
terror like all terrorists are created equal. All terrorists 
are not an equal threat to us. Nobody from the AUC is attacking 
directly the United States of America. We spend hundreds of 
millions of dollars aiding and assisting the Colombian 
government to deal with the AUC. We have trained their 
military. We have trained them explicitly to try to deal with 
the internal problems of the Colombian military.
    If we took all the money we were spending in Colombia and 
if we spent it all we could cut off all narcotics funding to 
Al-Qaeda, the American people in a heartbeat would say stop it 
all for everything else and take care of Al-Qaeda. My dad, who 
just died, used to say if everything is equally important to 
you, nothing is important to you. The reason I wrote the drug 
czar law in the first place was we didn't prioritize.
    My question to you is this: from each of your different 
perspectives, how are you charged? What is your number one 
priority? What terror organization, not generically--and if it 
is generic, then I think we have a serious problem. What is the 
bulk of your focus?
    Some of us are beating the living devil out of, with good 
reason, the Saudis for not having cut off quickly enough, 
directly enough and profoundly enough, not having changed their 
banking system, not having used their authority to get their 
billionaire cousins to stop funding indirectly and directly Al-
Qaeda and their madrases.
    What good does that do? We are risking, with good reason, a 
relationship that has profound consequences for us, including 
whether these lights go on or not and how much it costs to turn 
them on. In fact, the amount of money that Al-Qaeda may be 
getting through Afghanistan alone may make up for all the lost 
revenue. I don't know. It may.
    So my question to you is, starting with the State 
Department--and my first question for you, Ms. McCarthy, is why 
don't you have a boss? I am not being facetious. What is the 
reason, what is the inside skinny? Why have we not had this as 
a priority? Why don't you have somebody running the show there? 
That is my first question.
    Ms. McCarthy. I believe we should have some information on 
that very soon, Senator.
    Senator Biden. That is kind of an unfair question to ask 
you, actually.
    Ms. McCarthy. We would be happy to have a boss.
    Senator Biden. I should withdraw the question. There is no 
way you would know. It is above your pay grade, and mine maybe 
as well. But it is a reflection, in my view, of the lack of it 
being a priority.
    Number two, do you have a priority list internally as to 
where the focus should be in this nexus between terrorist 
organizations and drug trafficking? The State Department first.
    Ms. McCarthy. For the INL bureau, our top priority 
continues to be the Andean region and counter-narcotics 
activities there. Approximately 80.9 percent of our 2003 funds 
go to that area, Panama, and a couple of other countries.
    Our crime programs, which include money laundering and 
others, on which we work with a priority list of countries who 
have been designated as of special significance, accounts for a 
very small portion of our budget. So in terms of what INL does, 
again, to build up law enforcement, build up capacities, as 
opposed to going after groups specifically--it continues to be 
the Western Hemisphere, and particularly the Andean Ridge.
    Senator Biden. Now, I want to make it clear we urge you to 
do that, so I am not being critical. We, the Congress, and past 
administrations and this one have had that as a focus. But I 
just want to make the point that 81 percent of all your effort, 
money and funding has nothing to do with the organizations that 
create the greatest immediate threat to the citizens of the 
United States of America here and abroad--nothing, zero, 
nothing to do with it.
    Now, let me ask the question of each of you. DEA?
    Mr. Casteel. We have both, I would say, Senator, long-term 
and short-term goals here. Let's talk about short term because 
I think it addresses your question better than others.
    Obviously, as you said in your opening remarks, we have 
focused on Latin America for a long time because that is where 
the majority of actual drug availability on the street comes 
    Senator Biden. It still does.
    Mr. Casteel. But I want to assure you that we are not just 
focusing simply on that in the short term, and let me give you 
two examples. One month after 9/11 occurred, we held a meeting 
in Turkey and we brought together almost 30 countries of the 
world to address what we called Operation Containment.
    We recognized that Afghanistan is a bit like holding sand 
in the palm of your hand; the tighter you squeeze, the more it 
kind of gets out through your fingers.
    Senator Biden. I disagree with that metaphor, if I 
understand it.
    Mr. Casteel. What I mean by that is if you just focus on 
that one country and say, okay, we are going to fix everything 
in Afghanistan, and think you can build a perimeter around it 
and fix the drug problem there, I think you are wrong.
    I go back again to your opening remarks. You and I were 
around when Nixon coined the phrase ``war on drugs,'' and the 
first approach was build big borders around the United States 
and that was how we were going to solve it. With Afghanistan, 
yes, you have to create a capability within that country to 
address that problem, but then you build rings around it, 
fences around it. That was the goal of Operation Containment. 
We brought groups together, countries with equal concerns, and 
we have had some degree of success building these rings, these 
fences, around Afghanistan.
    Senator Biden. Give me an example of success because I see 
    Mr. Casteel. We seized 1.2 tons of heroin crossing the 
border in Turkey at three o'clock in the morning at a small 
border checkpoint.
    Senator Biden. Well, you have done that before. You have 
scores of examples of that.
    Mr. Casteel. We identified a group there that we didn't 
know about before, a group that had connections to other 
interests in the region.
    Senator Biden. This is not a general little deal here. What 
other interest in the region?
    Mr. Casteel. It was a group that we had found that were now 
moving their heroin laboratories into that region of Turkey to 
produce large amounts. We seized that. That led to the--
    Senator Biden. Was that group connected in any way--this is 
about terror, this hearing in particular, not just drugs 
generically, but terror. Was that group connected in any way 
with Al-Qaeda, the Taliban or any other terrorist organization, 
as we define here?
    You could argue that every international drug cartel is a 
terrorist organization. What my folks back home mean by 
terrorists is people who load planes up and crash them into 
buildings. What they mean is people are getting money to go out 
and buy highly-enriched uranium to try to build a bomb. They 
mean people who are going to go out and build a dirty bomb. 
They mean people who are going to go purchase botulism. They 
mean people who are going to go out and do those bad things 
that Governor Ridge talks about all the time and we worry a 
great deal about. So let's get it real straight what I am 
asking about here and what the focus of this hearing is, at 
least for this Senator.
    What is the connection between these trafficking 
organizations you are interdicting--and you are doing a good 
job at interdicting them--and the organizations that are the 
ones that are going to use weapons of mass destruction and/or 
catastrophic actions to cause significant numbers of deaths in 
the United States and Americans abroad? That is what this is 
    Now, please tell me whether or not the interdiction you had 
on the Turkish border or the movement of laboratories into 
Turkey which I mentioned in my opening statement--whether or 
not that has any direct relationship with the funding of 
terrorist organizations who are seeking to create significant 
numbers of American deaths as a consequence of their actions. 
If you don't know, that is okay.
    Mr. Casteel. I don't know other than to say that opium 
originated in Afghanistan. The people who are controlling it 
Afghanistan are one of two groups, the tribal organized crime 
groups that have existed there that have a relationship with 
the Taliban or the Taliban. So, indirectly, it all goes back 
    Let me give you another example, though, that might be a 
little closer to the point about prioritizing the targeting 
efforts toward terrorism. Last week, I was in Australia. I was 
sitting in Australia with five other nations of the world, to 
include the UK, Canada and the Australian Federal Police.
    What we did there was to begin a targeting process to 
identify drug trafficking organizations that affect each and 
every one of our countries. Now, DEA was the only agency 
sitting there at the time that doesn't have terrorist 
responsibilities. If you are in Australia, the Australian 
Federal Police has a priority on that. If you are in Canada, 
the RCMP has a priority on that. If you are in the UK, the same 
    As we sat down and started to approach these priorities, 
obviously those other countries represented there put terrorism 
as their number one reason for wanting to target these. So 
there are processes going on. This transnational policing 
approach requires this type of collaboration and partnership.
    Senator Biden. I agree with you.
    Mr. Casteel. So there are targeting approaches going on 
within DEA that tie to terrorism.
    Senator Biden. Let me give you a specific example, and I 
don't want to get any of your agents in trouble. For 30 years, 
as I traveled to countries, as you probably know, I find your 
agents and I sit with them. This has been a passion of mine for 
my entire career.
    Sitting at Bagram Air Force Base and dealing with your 
agents, there are no stovepipes there anymore and so you have a 
DEA agent sitting next to an FBI agent, sitting next to a CIA 
agent, sitting next to Defense Intelligence Agency personnel, 
sitting next to the commander of special operations all around 
a big table.
    Your guys were telling me exactly what was going to happen. 
They laid it out. Unless we established security in the 
provinces, the mayor of Kabul can't do a damn thing. There is 
nothing Karzai can do to follow up his edicts--zero. We have 
8,000 forces there no longer pursuing with the same--well, 
officially no longer pursuing the Taliban and Al-Qaeda in the 
same way we did before, but not out in the countryside. We have 
200 forces out in the countryside in these--what we were going 
to call them? What were these things called, instead of 
    Come on, somebody on the staff. There is a name for it. 
There is a great little acronym for these forces that were 
going to go out for reconstruction in the countryside. So you 
go out to build a dam and we were going to provide ``x'' number 
of military to go with the agency building the new sewer system 
or whatever. It has a name and I am amazed my staff doesn't 
know it. I am amazed I don't know it.
    But having said that, we have got 200 folks out in the 
field in uniform. Now, your guys told me, hey, Joe, do you 
think we are going to be able to stop poppy production on a 
grand scale if we cannot secure the region?
    Karzai sends out an edict and what happens? Ismael Kahn 
says, yes, okay, the mayor had something to say; I don't know 
what it was. The Pashtun, which he is part of, say, oh. He has 
no authority, no authority.
    What bothers me about your collective testimony, not any of 
you individually, is everybody knows that is for sure one of 
the revenue streams for the Taliban, particularly in the 
Pashtun area, and in turn Al-Qaeda, although we don't know for 
certain. None of you know enough to tell me. The intelligence 
community doesn't know enough to tell me. We don't know even 
what we don't know. So my frustration, as you can tell, is not 
with any one of you; it is our allocation of resources and the 
    Mr. Clark, you have been here for five weeks. You have done 
a great job and you are going to do a wonderful job because you 
did a hell of a job in Miami. You have got your hands full with 
this new outfit. It has sprawling jurisdiction.
    But you never once mentioned, not once, the only thing that 
concerns Americans right now, any terrorist organization that 
is likely to send in the phone call taking credit for a bus 
stop in Buffalo, a building in Wilmington, Delaware, a tower in 
Chicago, a discotheque in San Francisco or anywhere else.
    I am not picking on you; I really am not. But I am trying 
to point out that we don't have our act together yet. We do not 
have our act together yet and it is worrisome. So at some point 
maybe we should have a classified hearing with the intelligence 
agencies, and you included, to tell us what you actually know 
about following the dollar from the time the farmer plants the 
poppy in Afghanistan or anywhere else to the moment that a bank 
account is opening in a cell that is an Al-Qaeda cell in Riyadh 
or in Islamabad or in New York City, and the extent that we can 
follow the dollar, if we can. That is the part we don't know.
    The Chairman is back and I will come with a second round. 
Well, I guess I won't come back. I will just state that I 
really think we are misallocating our resources here. I do not 
think that we have sufficient information, and it is 
understandable, about the direct link between the actual 
production and the actual processing of, in this case heroin, 
but it could be other drugs as well, and the bank account of 
    Ms. McCarthy. Senator, I know you are focused on the money 
lead and that is an excellent question. I just wanted to add a 
piece of information. I think you were referring to what are 
called the provisional regional teams.
    Senator Biden. Thank you. Provisional regional teams. I 
love that.
    Ms. McCarthy. Well, we have some monies. INL has a small 
effort in Afghanistan that is $60 million for 2003 basically to 
boost capacity of the police and law enforcement. But, in 
general, all those operating over there--there is the 
acceptance that security in the countryside and, as I said, as 
a corollary stopping the flow of drug money to the warlords, is 
the top priority.
    Senator Biden. Yes, and unfortunately you don't have any 
ability to do it yet. Maybe we are going to have a little 
epiphany here--not you all--and we are going to see the light 
and figure out that there is no way. It is a little bit like 
saying that we are going to stop--well, anyway, I am taking too 
long, but it is something we want to work with you on. But we 
really have to get to the directors of each of your departments 
to be able to--yes, Mr. McCraw.
    Mr. McCraw. Senator, if you don't mind, just quickly to 
underscore, I think, the importance of what you said in terms 
of prioritization, as I testified earlier, there is no question 
that Al-Qaeda is the greatest threat; there is no question, and 
Islamic extremists which have really morphed into that Al-Qaeda 
threat. We talked a little bit about Hizballah, Hamas, and we 
can work our way down the chain. All of them have the potential 
to raise to a threat, but right now, without question, the 
Director has named the priorities. The priority is 
international terrorism, and in that Al-Qaeda is number one.
    With your permission, with Congress' support, we have 
diverted substantial criminal resources to divert because there 
is one guiding principle here. No lead, no matter how 
obnoxious--not obnoxious, excuse me; we are getting close 
here--seemingly absurd, will go uncovered. We have to address 
    And the way we address it is rather than following the seed 
and the poppy back, we look at the enterprise itself. So when 
we find trafficking in it, we exploit that like we did in San 
Diego or with DEA in New York. If we find that it is 
immigration violations, we work with our colleagues in BICE. It 
doesn't matter what the violation is. We know what their 
ultimate goal is and we will use any violation and any tool 
that we can take out of the toolbox that the Congress and the 
Constitution have provided us to disrupt that activity, because 
the name of the game is prevention and that is clearly the 
priority of the FBI, and I would submit the intelligence 
community as well.
    I would like to say something publicly. DEA has been a 
tremendous support to the FBI not just in joint investigations, 
but actually Steve himself called me on 9/11 and gave us 
analysts and agents to help out in this particular fight.
    Senator Biden. I am absolutely confident of that. That is 
why I am so happy we didn't let you merge, which you all wanted 
to do and I was able to help stop.
    Senator Biden. Let me ask one last question, Mr. Chairman, 
and I won't ask any more.
    Steve, eradication. Doesn't the circumstance in Afghanistan 
lend itself geographically, the topography, to the ability to 
eradicate more easily than it did even in Mexico in the 1970's, 
and clearly in Colombia?
    As an adjunct to that, the Taliban did a pretty good job. 
They shut the sucker down, they shut it down. So it is kind of 
interesting that they could shut it down. We are not looking 
for a pure democracy in Afghanistan. We are not following 
Karzai with the American Civil Liberties Union behind him.
    It seems to me we should be able to be mildly more 
effective in Afghanistan than we have been, or am I missing 
something here?
    Mr. Casteel. Well, obviously, the Taliban had a little more 
freedom, as did the Communist Party in China when they took 
over. If you remember, they had a tremendous opium problem and 
in 3 years it was gone. When you execute people and chop 
people's arms off and things like that, they play a little 
different game that we have.
    Senator Biden. By the way, this is still an Islamic state. 
Karzai still has the ability under the law to do similar 
things. He just doesn't have any means of enforcing it.
    Mr. Casteel. The issue of eradication has been discussed 
often, especially with our British colleagues. I think you 
spoke earlier about the importance to Europe of this, 90 
percent of their heroin coming from that point. I think it is 
just one tool in your tool belt that you use.
    You and I have been around long enough that everybody walks 
in with that one McDonald's answer for everything. I just think 
as long as you consider eradication as one of your tools--and 
by the way, it works in places. Peru and Bolivia are perfect 
examples of how eradication can work when it is tooled together 
with several other issues at the same time.
    Senator Biden. Thank you, Mr. Chairman. I appreciate your 
    Senator Kyl. Thank you, Senator Biden.
    Mr. McCraw, I wanted time and I will make this the last 
question, but I would like to take a little time to the extent 
that you might be able to expand on your testimony, 
notwithstanding the fact that both of these matters are, I 
believe, are still understand investigation, to tell us all 
that you can about the arrest of the 16 Afghan and Pakistani 
subjects possibly linked to the Al-Qaeda and the Taliban that 
you referred to in your testimony, and also the arrest and 
prosecution in San Diego of the individuals who were, as I 
referred to in my opening statement, caught trading heroin and 
hashish for cash and Stinger anti-aircraft missiles.
    Mr. McCraw. Yes, sir, and thank you for phrasing it that 
way so I can still within the four corners of the indictment. 
The major case 190, the Crown Prince investigation, actually 
started as a result of criminal violations being worked, and 
then it branched out to where we were able to see a number of 
different FBI cases converging in New York, and then soon later 
DEA cases converging in New York.
    They indicted the 16 Afghan and Pakistani subjects in this 
particular case. We can make that clear distinction. We know 
that the money and the crimes they had been involved had been 
funneled back and they were funneling money back through 
Pakistan into Afghanistan.
    The degree in terms of the links--clearly, there were some 
associations, and I am reluctant to go into detail. There were 
associations there. Sometimes, when you take investigations 
down at certain points, you aren't able to establish, without 
question, certain links over the course of the forthcoming 
trials we may bring to bear. But clearly there was a concern.
    I guess it can be used certainly as a model to illustrate 
your concern, Senator, Senator Biden's and the Chairman's 
concerns about the problems with drugs and the funding that 
they can provide to support and also facilitate drug 
trafficking or terrorist activities.
    The San Diego case was purely a drug case when it started. 
An undercover agent in San Diego working on the drug squad 
developed a source who developed a subject and was negotiating 
in terms of the purchase of heroin and later hashish.
    During the course of this, some links were established that 
looked like there was some association. Again, many of these 
groups use different criminal organizations. Terrorist groups 
share those, so there were some links and it morphed into a 
counter-terrorism investigation before it was all over with, 
using drug, criminal and counter-terrorism resources.
    The most disturbing part of that is when the undercover 
agent was overseas in Hong Kong negotiating for these 5 metric 
tons of hashish and 600 kilograms of heroin--during the course 
of it, unsolicited, they said, hey, you know, we would like to 
have--paraphrasing here, we would like to have four Stinger 
missiles that we intend to provide to others that we suspect 
will be used for shooting down U.S. airplanes. That was in the 
    I really can't go further in terms of discussions, but 
certainly if that doesn't send a chill down everybody's back in 
this room, I don't know what will. Obviously, we took the case 
down. I mean, you could argue that we should have kept it 
going, but the fact that they were going to get the four 
Stingers from us doesn't mean they weren't looking for four 
Stinger missiles. And we couldn't risk that opportunity or that 
threat and we did take it down. As you know, it is pending 
trial at this point in time and we have been able to work with 
the People's Republic of China or Hong Kong to have them 
extradited to the U.S.
    Senator Kyl. Where will that trial be held?
    Mr. McCraw. San Diego, sir.
    Senator Kyl. Okay, and the timing on that is?
    Mr. McCraw. I couldn't give you an exact time. I can get 
back to you, Senator.
    Senator Kyl. Okay. Well, this is the kind of thing 
obviously we will want to follow, and it causes me to make a 
final point. If any of you would like to comment on this, fine. 
Otherwise, we can move on to the next panel.
    One of the things that we have had a little trouble 
grappling with here in the Congress in trying to write laws or 
amend laws is an understanding that the kind of people that we 
are dealing with now are unlike past organizations or state 
sponsors of terror. And the point you just made, Mr. McCraw, I 
think, ties into this very well.
    You don't have necessarily representatives of other nations 
engaged in this activity, though that does happen. You don't 
necessarily have members of an explicit terrorist organization, 
like a Hizballah, for example, which is relatively close-knit, 
although that happens.
    Frequently, you have people who are Islamic jihadists, 
simply people associated with a cause that don't necessarily 
belong to any organization, as we in the West tend to think of 
belonging to an organization. They simply belong to a movement 
and they may be associated with or have dealings with people 
that we call Al-Qaeda. They may themselves be Al-Qaeda at one 
time or another, but they may simply be acting out this hatred 
toward the United States and not really affiliate with any 
particular organization, per se.
    They may also be dealing with criminal enterprises, as you 
note, to accomplish their goals, trafficking in drugs, money 
laundering and the sort, or they may be doing this again as 
individuals. So when we write laws that tend to try to 
categorize things, we get into trouble, and we need to always 
be cognizant in writing these laws to understand the new nature 
of the threat which is amorphous, undefinable frequently, 
people moving in and out of organizations, in and out of 
criminal enterprises, lots of different cut-outs, and therefore 
needing a different kind of description frequently in order for 
us to be able to satisfy the requirements of the law in many 
    That is something we have become aware of and we haven't 
really mastered the notion in all of what we are doing. We 
recently passed out of the Senate an amendment to the FISA law 
that recognizes that fact and attempts to deal with the lone 
wolf terrorist or the terrorist that may or may not be 
associated with an organization, but at least at the time we 
are trying to get the warrant we don't know for sure. So that 
was at least one recognition of that problem, but there are 
clearly others, too.
    Any comments on that particular point before we move on? 
Any disagreement with it?
    Mr. McCraw. Absolutely not. I fully agree with you, 
    Senator Kyl. Okay, great. Well, we appreciate your comments 
here. We are going to leave the record open one week for 
members to submit questions to you or for you to provide any 
other information to us. But don't stand on that formality. If 
there are other things that you think would be beneficial to 
the Committee, I would like to ask you to get them to us.
    The Subcommittee on Technology and Terrorism, which I 
Chair, will be having a couple of hearings soon, one of which 
will be on money laundering, and we will try to get your ideas 
on those subjects as well.
    We thank you very much for being with us this morning. With 
that, I will excuse this panel and we will move to the next 
    The next panel will consist of Mr. Raphael Perl, specialist 
in international affairs at the Congressional Research Service 
here at the Library of Congress; Mr. Rensselaer W. Lee, 
President of Global Advisory Services, in McLean, Virginia; and 
Mr. Larry Johnson, Managing Director of Berg Associates, in 
Washington, D.C. We welcome all of you to this hearing, as 
    I think the order we will do it in is Mr. Perl, then Mr. 
Lee, and then Mr. Johnson, if that is all right with the three 
of you. So as soon as we get settled down here, I will call 
upon you.
    We were anticipating the possibility of a vote, but now it 
appears that we won't be interrupted. We may need to conclude 
by noon, but I think we should be able to do that, especially 
if I am not joined by others here at the dais.
    Mr. Perl, why don't you begin? Thank you.

                        WASHINGTON, D.C.

    Mr. Perl. Thank you, Mr. Chairman. I would like to ask that 
my written remarks be submitted for the record.
    Although their objectives differ with drug traffickers 
seeking profits and terrorists seeking political aims, both 
thrive on instability. Instability provides fertile ground for 
their ongoing operations and expansion. The combined threat and 
activities of drug-trafficking and terrorist organizations pose 
an escalating danger to societies worldwide.
    Even in instances where groups do not actively cooperate 
together, the synergy of their separate operations and shared 
efforts at destabilization pose an increasing threat. Whether 
by design or happenstance, each group serves as a force 
multiplier for the other, and many experts view as imperative 
that these threats be addressed together, not separately.
    There are many similarities between drug-trafficking and 
terrorist groups. As we have heard today, both operate 
transnationally, benefitting from trends associated with 
globalization and an open, deregulated environment. Both thrive 
in regions and areas without effective government control, 
where the line between the criminal world, the drug-trafficking 
world and the terrorist world is becoming increasingly 
difficult to draw.
    Both exploit porous U.S. borders and seek loopholes in 
immigration controls. Both rely on the services of the criminal 
underworld. Both target civilian populations, one with 
indiscriminate killings, the other with drugs. And both target 
youth, either for recruitment into drug use or into terrorist 
cells. Approximately one-third of the groups on the State 
Department's Foreign Terrorist Organization list have reported 
drug-trafficking links.
    It is also worthy to note that at least four of the seven 
nations on the State Department's Sponsors of Terrorism list 
have some history of condoning or supporting drug trafficking--
Syria, Iran, Cuba and North Korea. However, as overt State 
support of terrorism has decreased, it seems that, 
increasingly, terrorist organizations must fend for themselves. 
The drug trade provides an attractive source of income.
    The involvement of terrorist groups in the drug trade, and 
vice versa, presents both challenges and opportunities for 
policymakers. One challenge is the tradeoff where counter-
terrorism priorities overshadow counter-drug agendas. Could 
situations arise where giving priority to anti-terrorism goals 
detracts from the effectiveness of anti-drug efforts deemed 
important to the national interest?
    A second challenge relates to the fact that not all drugs 
produced or trafficked by terrorist groups are destined for the 
United States. If our drug enforcement community increasingly 
focuses on interdicting drugs not designed for the United 
States, does this reduce the resources available to keep 
foreign drugs off the streets of our cities?
    A third challenge is how the priorities of counter-drugs 
and counter-terrorism can be reconciled, as is the case in 
Afghanistan today. And many observers also cite a fourth 
challenge, a need to reverse a longstanding erosion of 
America's ability to conduct diplomacy abroad largely as a 
result of budgetary limitations. Arguably, investing in 
diplomacy may help to deal with these problems and may prove 
far less expensive in the long run.
    The challenges posed to the United States and the world by 
the combined threat of drug traffickers and terrorist groups 
are formidable. But with challenges come opportunities. When 
terrorists engage in the drug trade, they become increasingly 
vulnerable to law enforcement activity. Drug-trafficking 
organizations and terrorist organizations share many 
characteristics and many of the same criminal structures for 
support. If we effectively combat one, it helps battle the 
    To conclude, Mr. Chairman, an effective campaign against 
these combined threats may indeed make the world safer and more 
secure. By according recognition and policy focus to the 
combined threat of drug trafficking and terrorist, we may be 
better able to devise cohesive strategies to deal with these 
threats in an effective and holistic manner.
    Mr. Chairman, this concludes my formal remarks. I welcome 
your questions and comments, and there are also a number of 
concerns that I would be happy to share with you during the 
question and answer period.
    [The prepared statement of Mr. Perl appears as a submission 
for the record.]
    Senator Kyl. Thank you very much. I just mentioned to 
Senator Biden that you raise a very interesting perspective on 
this. The more we are able to separate the terrorists from 
states, from nations, the more difficult it is for them to 
finance their operations. They then have to turn to things like 
drug trafficking, at which point we now have two different ways 
of going after them from a law enforcement perspective. They 
become more vulnerable to our enforcement, which I think is an 
excellent point. I hadn't quite thought about it that way in 
the past.
    Dr. Lee.

                   SERVICES, MCLEAN, VIRGINIA

    Mr. Lee. Thank you, Senator Kyl, Senator Biden.
    In recent years, we have seen a recognizable convergence 
between the lawless swamps of drug trafficking and 
international terrorism. These areas of overlap or intersection 
between these worlds are summed up in the concept of narco-
    This concept has the positive policy connotation that 
fighting drugs will significantly cut into the revenues of 
terrorist groups, cripple their operations, and help stabilize 
conflict-torn states and regions. Yet, we must also recognize 
the limitations of counter-narcotics as a tool for combatting 
    Experience and logic suggests that drug-dealing and 
terrorism are really different phenomena requiring different 
solutions. I have made a number of points to this effect in my 
prepared testimony which I would like to have submitted for the 
record and I will try to summarize these points here.
    Motives, for example, are a distinguishing characteristic. 
Professional drug criminals are typically concerned with 
amassing vast wealth, concealing the fruits of their crimes, 
and avoiding prosecution. Terrorists' aims are preeminently 
non-financial, gaining political influence or legitimacy, 
overthrowing a government, or fulfilling a radical religious 
    Sometimes, the interests of terrorists and criminals 
coincide, but sometimes they are very much at odds. On 
occasion, governments have sought, wisely or unwisely, to 
leverage these points of conflict to advance the fight against 
domestic or international terrorist threats. We have seen some 
overtones of this, unfortunately, in Colombia and Afghanistan.
    Drugs figure more prominently--this is the second point--
drugs figure more prominently in the fundraising strategies of 
some terrorist groups than others. I think if we could 
construct a typology of such groups, we might see that certain 
actors, like the Revolutionary Armed Forces of Colombia, the 
FARC, and Peru's resurgent Shining Path guerrillas, earn fairly 
significant revenues from taxing or selling illicit drugs.
    But the dangerous Middle Eastern terrorists like Al-Qaeda, 
Hizballah and Hamas traditionally have relied largely on 
donations from wealthy Arab contributors, sometimes funneled 
through Islamic charities, and in the case of Hamas and 
Hizballah on infusions of money and weapons from sympathetic 
states. And this means that whatever we can accomplish on the 
international drug front, however valuable, may not do much to 
constrain the activities of certain lethal terrorist entities.
    Even if we could cut substantially the narcotics revenues 
of a group such as the FARC, its response might be simply to 
expand into new criminal lines or to extract more revenues from 
tried-and-true ones such as extortion, kidnapping and 
hijacking, inflicting even more terrorism and misery on the 
Colombian population.
    A broader lesson here, I think, is that efforts to disrupt 
terror financing, while useful, are not an adequate substitute 
for targeting the terrorist organizations, per se, their core 
leadership, their ideology, their recruitment stratagems.
    The imperatives of fighting drugs are not the same as the 
imperatives of fighting terror--and this is my last major 
point--and might even conflict with them at some points. For 
example, in Afghanistan, the world's largest opium-producing 
nation, drug control has tended to take a back seat to the 
counter-agenda, which has included overthrowing the Taliban, 
rooting out pockets of Al-Qaeda and Taliban resistance, and 
creating, or you might say cobbling together some kind of a 
viable anti-Taliban governing coalition.
    Emphasis has been on consensus-building, and alliances have 
been struck and compromises formed with some possibly unsavory 
political forces that have a reputed history of involvement 
with the drug trade. And certainly the U.S. military--at least 
this is my impression--has not seen as its principal mission 
destroying drug crops, opium storehouses, or heroin labs, or 
going after heroin kingpins and their political sponsors.
    In Colombia, where counter-narcotics ranks as a higher 
priority, some of the drug control measures that we are funding 
such as the aerial spraying of illicit crops are controversial. 
Some people believe that they are intrinsically anti-popular 
and that these measures complicate, in fact, the task of 
winning rural adherence in the struggle against insurgency. 
Possibly, our drug control strategies could be fine-tuned to be 
a little bit more people-friendly, to focus more on hearts and 
minds approaches toward inhabitants of contested rural areas in 
    A final point. It is frequently argued, and I think I heard 
it argued today, that narcotics trafficking itself is a form of 
terrorism directly against the United States of America. 
Indeed, drugs impose a huge cost upon our society. I think the 
figure used by the drug czar is something upwards of $160 
billion a year.
    But let's not forget that the intent of the perpetrators is 
usually to make a profit and not to inflict necessarily harm on 
U.S. nationals or institutions. Also, unlike the victims of the 
9/11 attacks and other terror atrocities around the world, the 
victimized drug consumers have a choice, which is not to buy 
and use illicit substances.
    Thank you very much.
    [The prepared statement of Mr. Lee appears as a submission 
for the record.]
    Senator Kyl. Thank you, Dr. Lee.
    Now, Larry C. Johnson.

                  ASSOCIATES, WASHINGTON, D.C.

    Mr. Johnson. I appreciate the chance to appear before this 
Committee, and ask that my written statement be included in the 
    By way of background, I come at this really from three 
different angles. I started off in the Central Intelligence 
Agency. In part, I guess you can blame Senator Hatch for that; 
he wrote one of the letters of recommendation. I then moved to 
the State Department and worked in the Office of Counter-
Terrorism, and then since leaving that office I have been 
involved with scripting exercises for the special operations 
community in the field of counter-terrorism. At my current 
company, though, we are involved with money laundering 
investigations and do work for several Department of Justice 
entities. We handle a lot of the financial analysis.
    The bottom line with the link between terrorism and 
narcotics is it is all about the money and there is no other 
aspect to it. It is about the money. And as in terrorism, I 
believe if you follow the money you can break its back. I want 
to show you a couple of charts and graphs to illustrate this.
    Prior to 1991, we did not see significant amounts of 
terrorist funding coming from narcotics activity. It was the 
conventional State sponsorship. But if you look at 1991, and 
particularly the red, that shows Marxist-Leninist groups.
    When the Soviet Union collapsed--and I am not one that 
subscribes to the fact that the Soviets funded all terrorism, 
but the Soviets were a significant source of funding for other 
regimes that were sponsors, particularly Libya, Iraq and Cuba, 
in particular.
    When the Soviet Union collapsed, look at what happens to 
the Marxist-Leninist groups; within 3 to 4 years, it is in 
half. That speaks to the point that, without money, these 
terrorist groups cannot operate and they are confronted with a 
choice of either coming up with an alternative source or going 
out of business.
    What happened in the case of particularly the FARC and the 
ELN and the Kurdish Workers Party in Turkey--the PKK in the 
early 1990's was the most active terrorist group in the world, 
more active actually than the FARC and the ELN. What happened 
is those three groups then moved into narcotics trafficking.
    Now, one of the points that Senator Biden made earlier--and 
I have a personal anecdote to illustrate it. I sat in on a 
meeting out at the counter-narcotics center after Ambassador 
Busby had left Colombia. I had worked for him when he was the 
coordinator for counter-terrorism. We met with one of the 
senior analysts who had actually been a former branch-mate of 
mine when I was at the CIA, and there was a heated debate over 
were the FARC and the ELN involved with narcotics trafficking.
    The intelligence community's position was it was not 
occurring, it was nonsense. Ambassador Busby was about ready to 
pull out his hair, saying what are you talking about; of 
course, it is true. At that time, I didn't understand the 
disconnect. It was only when my two partners--one was the 
former chief of the International Office for DEA, Bobby Nievas, 
and John Moynihan--that we joined up that I came to understand 
what had happened.
    The DEA-6s, those law enforcement intelligence reports that 
are used internally for DEA and are never generated as 
intelligence reports, detailed names, events, dates, places, 
and it was clear the connection. The problem was the 
intelligence community wasn't seeing it then and still isn't 
seeing it today, so they live in the dark. Unfortunately, the 
rule in the intelligence community is if it is not in black and 
white and on paper, it doesn't exist.
    Let me take you, then, to--
    Senator Biden. Mr. Johnson, let me ask a question.
    Mr. Johnson. Yes, sir.
    Senator Biden. You are saying today, if, in fact, the DEA 
in Afghanistan had clear, direct evidence of a connection 
between the poppy being grown in the Pashtun area, the profits 
going directly to Al-Qaeda, that would not be on the CIA's 
radar screen, other than if they got it themselves?
    Mr. Johnson. Yes, sir, that is correct. That is my 
understanding. I have learned this: DEA is our best 
intelligence organization in the U.S. Government because they 
have better human sources. The problem is they are their own 
worst enemy; they don't realize what they have. I think the 
Committee may be aware of some other technical things that were 
developed at DEA--it took the FBI 4 years to come around to use 
them--that have been integral in the battle against terrorism.
    The next chart illustrates the activities of international 
terrorism, and I think it is important that we put the facts on 
the table of what is going on. Last year, in 2002, India and 
Colombia accounted for over 60 percent of the international 
terrorist attacks. In fact, India alone accounted for one out 
of every three international terrorist attacks. Yet, when we 
talk about terrorism, India doesn't even appear; we ignore it.
    Senator Biden. When you say attacks, you mean they were 
    Mr. Johnson. Yes, they were attacked.
    Senator Biden. In their country?
    Mr. Johnson. Yes, attacks that took place in their country, 
in the Kashmir region, and the groups carrying out these 
attacks were training in Afghanistan in the Al-Qaeda camps. 
These groups have received direct funding and support from 
renegade elements of the Pakistani ISI, the intelligence 
service. And at least some elements in Pakistan have allowed 
those groups to continue, pass through Pakistan and operate in 
the Kashmir region.
    And not only the attacks, but if you look at the deaths 
last year and if you ask the average American where did most of 
the casualties occur in terrorism, they would say, well, it was 
Israel. Wrong. More people died from terrorist attacks in India 
than in Israel, and almost as many were wounded in India and in 
    Now, you say, well, what is the relevance of this? The 
relevance of this is highlighted and you see the two reds, 
India and Pakistan. Now, let's look at the INCSR. Where are the 
areas of greatest either heroin production or opium production 
or cocaine production?
    India doesn't appear, but bordering it on either side we 
see Burma and Afghanistan, and then Colombia shows up as the 
primary producer of cocaine. This is not coincidence. The fact 
that you have the drug trafficking activities both from 
production and distribution in the same areas of the world 
where these groups that either Marxist-Leninist or Islamic is 
no coincidence. And that goes to the heart of your point that 
we need to get after this.
    Let me wrap up with just one thing on the money laundering 
front and bring it down in terms of a case that we are working 
on in support of the Department of Justice. There is a movement 
of money, checks written on U.S. banks that are coming out of 
the United States, and this goes directly to a group that has 
links to Al-Qaeda and it is an active case right now.
    Those checks come out of the United States, they go into a 
country over in the Middle East area, to leave it vague enough 
for now. Those checks are then deposited in a foreign bank. 
Those checks then--
    Senator Biden. Start again, please.
    Mr. Johnson. Okay. Checks in the United States written on a 
U.S. bank, individual checks, and the way we came across this 
is we found a bulk transaction of $18,000, roughly, and when we 
broke it out, the average check amount was something like $21. 
And you are thinking who is writing a $21 check and sending it 
over to the Middle East and Europe?
    What was happening was they write the checks here. Those 
checks would be taken overseas and they would be deposited in a 
foreign bank. The foreign bank then would credit an account, 
but would literally bundle the checks together and send them 
back, what is called a cash letter agreement.
    When those checks arrive in the United States at the 
correspondent bank, the bank takes them, stamps them, gets them 
deposited, and it is back in the system. They avoid the 
reporting requirements that you would normally see with wire 
    Senator Biden. Because they are coming back?
    Mr. Johnson. Yes, yes. You know, these folks are very 
creative and entrepreneurial. I will just close with that and 
then we will entertain any questions.
    [The prepared statement of Mr. Johnson appears as a 
submission for the record.]
    Senator Kyl. Thank you very much.
    We have been joined by Senator Feinstein. Senator Biden, 
would it be all right if I turned to Senator Feinstein first?
    Senator Biden. Yes.
    Senator Kyl. Let me just say that in about two minutes I am 
going to have to leave, but I am happy to turn the gavel over 
to Senator Biden and for he and Senator Feinstein to close the 
hearing. I am sorry that I will have to leave at that time.
    Senator Feinstein.
    Senator Feinstein. Thanks very much, Senator Kyl.
    If I understand this correctly--and I am sorry I missed the 
first panel--59 percent of the world's heroin is produced in 
Afghanistan. None up to this point has been eradicated, and I 
guess what I want my colleagues to know is, in briefings, we 
have been shown actual places where this poppy has been 
stockpiled. And I have asked questions and I have been assured 
that the military was going to destroy those stockpiles.
    Now, if what has been heard today is correct, it indicates 
that I wasn't told the truth and I am very concerned about 
that. It seems to me if we can't destroy stockpiles and fields 
in countries we occupy, how is there ever a chance to approach 
this problem on the supply side at all?
    I would be curious if any of the panelists have any 
comments on this because I find it beyond surprising, really 
shocking. So much has been made by Government spots on how 
narcotics is connected to terrorism. We are in a global war on 
terror. We occupy a country which is a principal producer of 
hard narcotics and yet we have done nothing to stop that 
    Mr. Perl. Senator, I would defer to Dr. Lee on that. He has 
written what I would consider to be the authoritative study on 
the drug trade in Afghanistan.
    Mr. Lee. Thank you very much. That is very kind of you, 
    I think that there has been a tendency on the part of our 
Government and the administration to try to distinguish short-
term and long-term objectives. Today, Afghanistan is 
demonstrably the world's largest opium producer, producing last 
year--about 75 percent of the world supply of opium comes from 
Afghanistan. I think there is going to be another record 
harvest this year.
    The problem is that we are still fighting a war against 
terrorism in Afghanistan, and in order to fight this war 
against terrorism--and I think the thinking goes both to some 
extent in Washington and in Kabul--we have to build alliances. 
To build these alliances, unfortunately we have had to make 
some arrangements and compromises with people that frankly may 
have some history of involvement with the drug trade and may be 
even possibly currently protecting the drug trade.
    This is a tragic situation, and it is a tragic situation 
because even given these consensus-building imperatives in the 
fight against terrorism, it is inconceivable that Afghanistan 
can ever develop as a nation state without getting a handle on 
this opium problem.
    On the other hand, you can see that you are talking about 
75 percent of the world's opium, you know, and much of the 
rural population and much of the Afghan economy tied up in this 
business. This has to be done in a very careful manner.
    Senator Feinstein. Well, if I might just have a little bit 
of a discourse with you on this, if we don't do it now, it is 
never going to be done. We know the Taliban are going to try to 
come back. We know that this is a prime source of funding for 
them. If we don't make some other arrangements with these 
warlords, even if it is to pay them a stipend not to produce 
while you cement a more permanent form of government and 
security system, I think it is all lost.
    You know, I think it is real hypocrisy. I don't know how we 
can go in there and talk about quelling the supply and be in 
control and do nothing to deter what you said this year will be 
a bumper crop. I think it is shameful.
    Mr. Lee. Well, I think it is shameful, but I think that it 
is an extremely difficult situation. We need, for example, to 
find ways of supporting these farmers whose opium we must 
necessarily eradicate. We don't have really much of any kind of 
a program in Afghanistan; small programs, yes, but it is going 
to have to be a very large-scale, very expensive effort. And 
above all, we have to make a commitment to that country; we 
have to make a commitment to the political and economic 
reconstruction. Our attention has been diverted elsewhere, in 
Iraq and other places.
    Senator Feinstein. There are tens of millions of dollars 
being spent in Afghanistan in all kinds of different ways. It 
seems to me that if you have to give somebody, if you will 
pardon the expression, a stipend not to produce to be able to 
support their families for a given period of time and have that 
arrangement, that is money well spent, as opposed to allowing 
them to produce it so that you have a kilo, which is $300, 
which becomes $100,000 by the time it comes on the market. This 
money goes back to fund others in the community that would do 
us harm.
    So I am happy to have heard this because I am going to do 
something about it in the Intelligence Committee, because we 
have been given, I think, information that is contrary to what 
I have heard here this morning.
    Thanks, Senator Biden.
    Mr. Perl. Senator, you raise a very interesting point and 
it relates to the whole issue of when you have a merger between 
drug-trafficking groups and terrorist groups where one has 
political ideology and one has financial profit as the 
motivation--when you have the overlap, it becomes increasingly 
difficult to find political solutions as the two groups merge 
because the drug trade becomes more and more entrenched.
    So with many groups, even if we could come to a political 
solution with many groups that are today terrorist groups, 
because of their involvement in the drug trade and because 
there is very little incentive for them to end their terrorist 
activities because it facilitates the drug trade to which they 
become addicted to, it no longer becomes a political issue.
    Mr. Lee. Senator, just one more point. We have to remember 
also that the Taliban in its last years eradicated opium, and 
in so doing it created many enemies within Afghanistan among 
people who were very much involved in opium and heroin 
    So we had to make an initial choice. Getting rid of the 
Taliban was the major objective and to the extent that that in 
a way is still going on, we find ourselves saddled, 
unfortunately, with--
    Senator Feinstein. You are saying we chose drugs.
    Mr. Lee. Well, I didn't choose drugs.
    Senator Feinstein. No, you didn't say that, but that is 
clearly the implication.
    Mr. Lee. Yes. Well, I think that not enough has been done 
on the drug front and I think not enough attention has been 
devoted to the entire Afghanistan political and economic 
reconstruction issue.
    Senator Feinstein. Thank you.
    Senator Biden [presiding]. Thank you, Senator. I share your 
frustration. You fortunately didn't have to hear what I had to 
say about this earlier. I want to reiterate two points.
    One is all that is happening in Afghanistan is operating 
under the umbrella of an absolute failed policy politically, 
economically, strategically, in every way. We are about to 
fundamentally lose Afghanistan in a way that will not be able 
to be retrieved because as my visits there have indicated, next 
time when the swamp fills up in 2, 3, 4, 5 years, we will not 
have the Northern Alliance to march with us next time. We will 
not have the Alliance that did most of the fighting next time.
    Let's get something straight here, because I agree with Mr. 
Perl's comments. Dr. Lee, you have done the definitive work 
here. We made a judgment. The President announced in a detail a 
policy toward Afghanistan within 3 months after, quote, ``our 
victory.'' He called for a Marshall Plan. We had a group of 
donor nations. No Senator or Congressman used that term. The 
President of the United States of America said he was 
initiating a Marshall Plan.
    He sent his Secretary of State to Tokyo to meet with the 
donor nations. There were pledges made far less than we 
anticipated, but the cost in a report that I wrote then was a 
minimum of $19 billion was going to be the cost, a minimum 
number. Everybody signed on to that number as a minimum cost 
for political, economic and other reconstruction to take place 
in that country.
    There was a great debate that took place between Cheney and 
Rumsfeld on one side and the Secretary of State on the other, 
and the issue was again a report we wrote in the Foreign 
Relations Committee calling for the expansion of ISAF. Messrs. 
Rumsfeld and Cheney won that fight. The State Department 
vehemently opposed the position taken by the Defense Department 
that we should not expand ISAF. I personally met with the 
British one-star running the operation for ISAF. In fact, 
everyone told us that if we did not expand, Europe was not 
going to do that; it would not be involved, they could not.
    There was a fundamental shift in policy that took place 
about 2 months later, when it was clear that we decided that 
stability would be gained through the warlords. That is how it 
would occur. There would no expansion of ISAF. And guess what? 
With that, you had the donor nations drop off, including us, in 
terms of the funding. There is no Marshall Plan. There is not 
even a mini-plan going on in Afghanistan right now.
    And now we are given this bizarre reasoning coming from the 
President that the reason why we can't spend money more rapidly 
is we can't get out in the field because there is no security. 
That is the rationale now; there is no security. so we come up 
with this stupid acronym, whatever the heck it is called, these 
forces that are going to go out, provincial reconstruction 
terms. Mr. Karzai was chastened before our Committee by the 
administration to say that is all he needed, when he know he 
needed a lot more.
    So the bottom line is why is anybody surprised? There is no 
significant money internationally for reconstruction. There is 
no security beyond Kabul. We now have American forces guarding 
Mr. Karzai. We are his bodyguards now. We can't even put 
together and train for them, which was the plan of this Afghan 
army of 70,000, his own bodyguards. This is a disaster.
    Anyone who thinks that one of the logical outcomes of this 
is not going to be a significant increase in drug production, 
why wouldn't there be? Why would there not be? In fairness, I 
think, Dr. Lee, you are correct. Once you decide you are not 
going to expand through NATO and the United States another 
100,000 forces or 50,000 forces, taking care to secure the rest 
of the country, then you have to make a judgment.
    You make a trade, and the trade is trade in drugs. We want 
to focus on Al-Qaeda and it may not be as bad a deal as it 
appears if one question were able to be answered, and this is 
my question, and that is if there is no real nexus between the 
profits from the drug trade and the financing of Al-Qaeda and 
their operations worldwide, then, okay, not as big a downside 
as it could be.
    But if there is that nexus that it is an alternative 
funding source of consequence for Al-Qaeda, then the Faustian 
bargain we made with the warlords has produced the exact 
opposite of what we intended. What was the deal? What did the 
administration say? Why did they make the bargain with the 
warlords? To secure the region, because guess what? I keep 
picking Ismael Kahn, but he is one of the most powerful.
    Ismael Kahn doesn't like Al-Qaeda. Therefore, that is okay. 
If he doesn't like Al-Qaeda, we don't care about western 
Afghanistan. That is the truth; the administration doesn't give 
a damn about it. We don't care about it. So as long as Al-Qaeda 
is not able to play in that part of Afghanistan, what 
difference does it make?
    But the irony will be if the drug flows which come out of 
western Afghanistan and southern Afghanistan with the Pashtun 
are ending up in the pockets of Al-Qaeda, funding their ability 
to purchase a little ball of enriched plutonium from Korea as 
they begin their plutonium factory, then that Faustian bargain 
is going to take us all to hell.
    I think it is a travesty, an absolute travesty, and to fly-
speck it as to whether or not we can now provide incentives or 
not provide incentives and, with all due respect, even take out 
the warehouses--I sat there in Afghanistan and there was talk 
about the plan that we were going to provide alternatives for 
these farmers and there was an urgency. Everybody knew if we 
did not get them money right away so they could eat and live, 
they would be growing that pretty little poppy. There is no 
other choice; there is nothing else.
    So I apologize for my frustration, but, Doctor, your 
reports are important. The one thing I have got to know for me 
personally, and you may be able to answer it, is how direct is 
the nexus. Where is the poppy being grown, the bulk of it? My 
understanding is it is nationwide, but the bulk of it is in the 
control of the Pashtun. I may be wrong. I don't know.
    Who controls most of it--that is my first question--the 
actual growing of the poppy, what parts of the country, and on 
whose watch is it happening?
    Mr. Lee. Well, let me try to answer that question and it is 
very difficult because I never got a sense of who actually was 
in control in what areas. But my sense is that most of the 
poppy production in Afghanistan is grown in areas under the 
control of political groups and forces, warlords who are more 
or less affiliated with what passes for a central government in 
    There is not a situation that I could see that you describe 
in which the remnants of Al-Qaeda are systematically extracting 
revenues from parts of the opium trade somewhere in the 
country. In fact, my impression has always been that even under 
the Taliban, the Taliban was successful in taxing the opium 
crop, but they were far less successful in actually being able 
to extract money from these clannish tribal trafficking groups 
that have quite a lot of power and weapons to back up this 
    Senator Biden. I agree that is factually correct. The 
question is has that changed now, because that was not narco-
terror trafficking then. Because it was not the case, you had a 
lot of money coming out of Saudi Arabia and other places 
funding the camps, funding the rest of it, and there was a 
counterintuitive instinct.
    Mr. Lee. That is absolutely correct that traditionally Al-
Qaeda has gotten its money from donations, primarily. Has it 
changed? Maybe, because some of our efforts to cut the flow of 
terrorist financing, centralized financing arrangements of Al-
Qaeda, might have pushed the organization more into a state of 
dependence on the drug trade. But I can't tell you for sure 
whether that is true or not.
    Senator Biden. Neither can I.
    I will yield to you, Mr. Johnson, in just a second.
    The whole purpose of this hearing, as I understood it, is 
not merely to delineate what we know in the International Drug 
Caucus and in the Crime Subcommittee of the Judiciary 
Committee, where we spend all our time talking about the drug 
    This was about drug-trafficking organizations which, as one 
of you said, are all about finances, money, big houses, fast 
boats, and lifestyles, merging with ideological organizations 
that use terror as the method to impose their ideology. That is 
the $64 question here. Ironically, we haven't gotten anything 
that has spoken to that specifically yet.
    We know it is occurring with the FARC, we know it is 
occurring with the AUC, the paramilitaries. We know it is 
occurring with the ELN. They have become self-financing 
mechanisms. None of those three organizations have chosen 
Americans, other than through kidnapping, as targets. Their 
ideology does not call for the destruction of the Western 
Culture and/or the United States of America.
    So our focus is supposed to be, I hope, on that one 
organization and its ancillary organizations that have as their 
objective killing Americans wherever they find them, with as 
big a payoff as they can get. And the question is are those 
organizations now finding their revenue stream in having 
partnered with, or to use the phrase you used, Mr. Perl, merged 
with traditional drug-trafficking organizations, whether they 
be tribal in nature or ideological in nature.
    I have not seen a shred of evidence yet, although I don't 
doubt it--I mean, intuitively it would seem that it is 
happening--whether or not the funding, these billions of 
dollars that are made, or the hundreds of millions that are 
made, is going into the pockets of terrorist organizations now 
who have as their number one enemy the United States of 
America. That is the question I am looking for an answer to. 
That is the question I think has to be answered because it 
radically changes the degree to which I focus my attention on 
the issue.
    Does anybody want to comment on that?
    Mr. Johnson. Well, I would encourage you not to divert your 
attention because I think we were sitting in the second row as 
sort of the ``amen'' corner when you were speaking earlier.
    There are elements in which money that will originate out 
of drug trafficking, not necessarily drug production but drug 
sales, is working its way back through the system. In terms of 
Al-Qaeda's overall reliance on the financing, I think you make 
the correct distinction that unlike the Marxist groups in 
Colombia where they don't have an institutional sakat, an 
institutional charitable giving system that backs them up, they 
also have not gotten into the same kinds of front businesses.
    We have seen with Al-Qaeda that they will send operatives 
into areas and actually set them up in furniture manufacturing 
and fishing. We have also seen the Al-Qaeda organization move 
into areas such as commodities. They deal with contraband and 
counterfeit merchandise that passes through Dubai and then on 
up into areas of Iraq and Iran and Afghanistan.
    So they are not relying on one source, but I think you put 
your finger on it that by recreating the infrastructure in 
Afghanistan where opium production can proceed almost 
unchecked, where the links still exist between those opium-
producing organizations and Russian organized crime, which is 
another vehicle for moving it, it creates the potential that if 
we have continued success in shutting down these other avenues, 
then they have something to turn to that can create significant 
    That is why the one message I have that I heard last week 
in Kansas City--I was an organized crime drug enforcement task 
force and an FBI guy came up to me and he said this insane 
focus on terrorism is ridiculous, he said, because we are 
getting people telling us that, oh, you know, drugs is old news 
and terrorism is the hot item.
    But when you sit down and look at the actual loss of life 
in the United States, we lose far more people to drug use than 
we do to terrorism. So we shouldn't make it an either/or 
because the tools to combat one are as effective in combatting 
the other and it is not that you have to do necessarily 
anything different.
    Senator Biden. Yes, Mr. Perl.
    Mr. Perl. My analysis reveals that I do not see a trend of 
the organizations merging. I see a trend of the activities 
merging and this concerns me because I know of terrorist 
    Senator Biden. Tell us what you mean by the activities 
    Mr. Perl. Terrorist groups engage in drug-trafficking 
activity, and the concern here is that I do know of terrorist 
groups that have negotiated and decided that they will cease to 
commit terrorist acts and be involved in terrorism. But I know 
of no narcotics organization that has agreed to stop 
trafficking in drugs voluntarily.
    This raises the possibility that we see a phenomenon here 
where terrorism will continue to perpetuate itself at a greater 
rate in the future than in the past because of the involvement 
of terrorist organizations in drug-trafficking activity.
    Senator Biden. I couldn't agree with you more, and I hope 
several of you know me well enough or at least know my 
predisposition about this drug issue that I don't have to spend 
a lot of time prefacing my remarks here and explaining the 
    There is no doubt in my mind--and I will not keep you 
beyond this--that you are, as a matter of principle, correct 
that there are some terrorist organizations or ideologically 
constructed organizations who have used terror as an instrument 
for their political ends that have, in fact, gone out of 
business. They have been politically negotiated out of 
business. I know of no drug organization that has gone out of 
business other than being crushed.
    Your generic point that the merger of the two--even once 
they abandon their ideological objective, they are still in the 
business of liking the fast boats and the big cars. They are 
not going to go out business. I understand that.
    I have a myopic focus at the moment on Al-Qaeda, not at the 
expense, Larry, of focusing on domestic--I am the guy calling 
for significantly more domestic investment on traditional law 
enforcement efforts relating to drugs, organized crime and the 
    By the way, the guy who is going to run up against the 
terrorist on the streets of Washington, D.C., is going to be a 
D.C. cop. It is not going to be a special forces guy with night 
vision goggles on.
    Mr. Johnson. Right.
    Senator Biden. And so I have no illusions about it and so I 
want to make it clear that I think we have misallocated the 
money we are spending, but I also think we have failed to 
    You said something, Dr. Lee, and you have been fastidious, 
and I respect it, in not getting into the politics of any of 
this. But you said something, and I don't know whether it 
slipped or it was intended, that our attention has been 
diverted to Iraq. Our attention has also been diverted, in 
part, away from Al-Qaeda. No one has forgotten it; it has not 
exclusively moved.
    But the point is the idea of the terrorist groups that are 
likely to cause the most economic as well as physical damage to 
the United States of America and its citizens do not have any 
possibility, in my view, any more than a drug-trafficking 
organization, to negotiate themselves out of existence. The 
political end of Al-Qaeda is totally incompatible with our 
ability to continue as the nation state we are with our Western 
democracy. So my concern here is if that marriage took place, 
that merger were to take place--and I don't know that it has--
then it seems to me that our focus on the drug effort should 
prioritize that aspect of the drug trade.
    When I wrote the drug czar law, the purpose was do we focus 
on methamphetamine this year more than we focus on cocaine, do 
we focus more on cocaine than we do on heroin. We can't do it 
all at once. We can't spend equal amounts of resources on it 
all, and it varies. These are entrepreneurial folks; they 
    When I wrote a report 5 years ago saying the biggest 
producer of heroin was soon going to be Colombia, everybody 
said what are you talking about? All you have got to do is 
think. They are looking for product, product. It is no 
different than selling soap. They are looking for product. And 
what is the product they diversified to? Heroin. There was no 
heroin, Larry, coming out of the Andean region.
    I think we need some harder data in order to make priority 
judgments about the extent to which there is a fundamentalist 
Islamic/terrorist nexus with drug trafficking. That is the key 
because if that is to be established and if we are unwilling in 
this or future administrations to spend the resources necessary 
to cover all the bases, then guys like me are left in a 
position of deciding how to best spend the limited resources. I 
know you understand it.
    You know, I used to have a friend named Bob Gold. God love 
him, he passed away. Bob was a street-smart guy. Sometimes, 
though, because he didn't know a specific thing, I would say, 
Bob, do you understand? And he would look at me and he would 
say, Joe, I not only understand, I overstand. I am sure you 
overstand the point I am making here. I hope you think, whether 
I am right or wrong, it is a legitimate point that we able to 
prioritize our funding.
    I will conclude, and I will give each of you an opportunity 
to make a closing statement, by saying this. I really think, 
Larry, we are making a serious mistake to think that we can 
take 567 FBI agents in violent crime task forces, FBI agents 
who work coordinated with DEA, move them out of that business 
as if it separable into counter-terrorism, not increase their 
total numbers at the FBI, have a 1-percent increase in DEA's 
budget, reduce local law enforcement total Federal funding by 
over 40 percent, and say that because we are going to spend $43 
billion on homeland defense we are actually increasing our 
security. I don't get that, I do not get that.
    Is that to say the $43 billion is not being wisely spent? 
No. It is to say that spending that $43 billion, if we ever get 
that far over this period of time, and eliminating or shifting 
these other priorities is counterproductive.
    I think there is much too narrow a definition of national 
security being engaged in here, and I think we are leaving a 
lot of our friends, the guys you have worked with before, 
whether it is at the CIA, whether it is at the DEA, whether it 
is at the FBI, in a very tenuous position.
    And I want to tell you you are the only one who said it, 
and you are a former CIA guy and you know my record with the 
    Mr. Johnson. Sure.
    Senator Biden. The DEA on this issue is by far and away the 
best resource asset we have.
    Mr. Johnson. Right.
    Senator Biden. It is almost like we are compartmentalizing 
this again.
    Mr. Johnson. And we still don't use it.
    Senator Biden. And we still don't use it.
    I would invite each of you--you have been so kind to spend 
this long--to make any comment you would make, if you have any, 
on any aspect of what you have testified to or what I have said 
or anyone else has said because your insights at this point are 
    Mr. Perl, do you have anything you would like to say?
    Mr. Perl. I have two thoughts. One thought relates to the 
issue of prioritization that you have talked about here in the 
hearing today and emphasized. One thing that struck me sitting 
in the audience when I looked at the first panel was that we 
had four people from four different organizations talking about 
the same issue, but they had different priorities.
    That, in my mind, raises the issue that we do have a 
national strategy for combatting terrorism that came out in 
February of this year and we have a national drug control 
strategy. But if indeed these two problems are becoming 
increasingly intertwined, perhaps we need an integrated 
strategy or sub-strategy as to how to approach them more 
effectively, to get all these different organizations better 
reading from the same sheet of music.
    Very frequently when strategies are devised, they are 
devised by people within the administration, but from different 
agencies, with different interests and institutional goals to 
pursue. So I would offer as a suggestion to consider the option 
of having an independent organization, something like the 
National Research Council, look at how to deal with this issue 
in an effective manner, how to prioritize the resources, and 
what a strategy might look at. That is one issue.
    Senator Biden. Good suggestion. Thank you.
    Dr. Lee.
    Mr. Lee. Well, I certainly share your concern about the 
lack of adequate information on the connections between Islamic 
terrorism and drug-dealing. I think there should be an 
intelligence priority. I think that we need to have more 
intelligence operatives, DEA people out in the field collecting 
this information. We need to have more information-sharing 
between DEA and the CIA to build this picture and I hope that 
this will be done.
    Senator Biden. Thank you.
    Mr. Johnson. I am in violent agreement with you and I will 
just leave it at that.
    Senator Biden. Well, one of the things that is coming out 
of this for me--and because we didn't have the answer to the 
question of the nexus, please do not think that I don't 
understand the value of the testimony across the board we have 
gotten today. It has been very valuable.
    What it has focused for me, though, is, more than I had 
focused on it before coming into this hearing is I am going to 
ask my staff, and hopefully with the concurrence of the 
Chairman--maybe he will join me or I will join him--for us to 
be able to draft very concise, precise questions about the 
status of the analysis within the administration, wherever it 
may lay, as to this nexus between fundamental Islam and narco-
trafficking, because that is the question we have to get 
answered first before we can make any judgments, at least in my 
view, before we can adequately prioritize.
    A woman who has been deeply involved in this has been 
Senator Feinstein. She rightly points out that she is dismayed 
by the failure of the military to destroy stockpiled opium 
where they know it exists. That in and of itself is worthwhile 
because that opium goes out to the world and pollutes the world 
and kills, as you said, Larry, more people than an airplane 
crashing into the Trade Towers, which was horrible. But that 
does not answer the question. That all by itself is a 
worthwhile thing to do.
    My criticism of Afghanistan and our policy has been 
consistent, and maybe I have been consistently wrong, but I 
don't think so because I have been trying to work inside the 
administration and do it quietly. Now, I am trying to scream 
and make a mess of it so hopefully something happens.
    But the truth of the matter is none of that will give me 
the answer, were I making those decisions, on how to prioritize 
my assets to deal with what is the number one, overriding, 
overarching short-term concern for the American people, and 
that is fundamental Islamic organizations who have us as a 
    As bad as the FARC is, as bad as even Hamas is, by the way, 
and Hizballah--they are the first team--so far they have not 
been taking flight lessons to figure out how to get to the 
Sears building. I have no illusions about how, quote, ``evil'' 
their intent is, but I want to concentrate on the guy coming at 
me now. I want to concentrate on the guy that has me in his 
cross-hairs now. We know of at least one outfit that has us in 
its cross-hairs.
    So I hope our staffs can work together. It is presumptuous 
of me to do this. I am getting back into a bad habit of acting 
like I am the Chairman or Ranking Member, but thank God I am 
not. But maybe we can work together to come up with that.
    I have a couple of questions--I will not trespass any more 
on your time right now, but a couple of questions in writing, 
and you can take your time. I mean, there is no urgency. In a 
week or ten days, get it back to us, but I would like to have 
it for the record on things we have not gone into.
    I can't tell you how much I appreciate your work here and 
your willingness to take the time, and as corny as it sounds, 
your patriotism in feeling obliged as a responsibility to be 
engaged in this effort. I thank you all. I look forward to 
talking to you some more, Larry, about some of this domestic 
    Thank you all very much. We are adjourned.
    [Whereupon, at 12:35 p.m., the Committee was adjourned.]
    [Question and answer and submissions for the record