1. BANKING AND THE WORLD'S BIGGEST BUSINESS
Based on interviews with Drug Enforcement Administration sources.
The typical deviation from the price trend resulted from the
importation of several kilograms of high-grade number four (85 to 95
percent pure) heroin from Vietnam by individual returning soldiers,
who would attempt to start their own distribution chain. Such
incidents stood out because the novice distributor tended to dilute
the heroin too little often distributing heroin at 30 percent
purity and above, rather than 5 percent purity, the normal dilution.
The free-lance pusher would therefore occasion an extraordinarily
large number of drug overdoses, enabling the authorities to spot him
The 700 ton figure is also used by the most widely circulated
sources on the subject, e.g., Alfred McCoy et al., The Politics of
Heroin in Southeast Asia, (New York: Harper and Row, 1974).
The New York Times, January 20,1971, p. 1.
According to Drug Enforcement Administration estimates.
The $40 billion figure is almost certainly an exaggeration; it does
not count attrition of the marijuana crop because of Colombian or
U.S. government counteraction. Since Colombia is the primary
supplier of the American market, the likely figure is half that.
Euromoney (London), April, 1978.
2. FROM OPIUM TO DIRTY MONEY
The $100 per pound initial price is slightly higher than most
estimates cited in studies which date back to 1971 or earlier. Since
the opium price is principally measured in terms of gold, it is fair
to assume a substantial increase since 1971 when gold went for $42
an ounce. The $100 figure is
conservative, assuming that the raw opium price has doubled in
reflection of local inflation. But if the opium price has risen in
tandem with the gold price, the figure is much higher.
Calculated on the basis of price markups as reported by law
enforcement sources in interviews with the authors.
The estimate was derived from the following calculations: At the
197172 peak of heroin production in the Golden Triangle, much of
which was intended for American soldiers in Vietnam, 21 refineries
were in operation; since then the number has declined. Assuming
that ten are still in operation, and that the annual output of each
is equivalent to the 3,000
kilograms of heroin seized in one major bust on record, then they
produce roughly 30,000 kilograms a year of heroin, derived from
about 300 tons of raw opium.
Richard Deacon, The Chinese Secret Service (New York: Ballantine
Books, 1976), p. 447.
3. HOW THE DRUG TRADE IS FINANCED
London Financial Times, April 24,1978.
A close examination of the price markup structure of the Golden
Triangle's primary wholesalers demonstrates that the increased
prices at various stages merely account for substantial additional
expenses, including the livelihoods of an inestimable number of Thai
and Burmese policemen and customs officials. The real profitability
the enormous profits associated with the traffic depends on the
process of cutting the pure heroin into "decks" of street quality
for sale in the West. The profits of the Hong Kong syndicates who
wholesale heroin are not accrued through the difference between
primary and secondary wholesale prices, but as a percentage of the
profits obtained through distribution of the drugs in the West. In
other words, the Hong Kong networks are directly represented in the
Western "organized crime" segment of Dope, Inc. and take their cut
in the form of a reflow of the retailing profits. Scattered bits of
evidence the most prominent of which is the activities of the
expatriate Chinese community in Vancouver indicate that this is,
in fact, how these syndicates operate.
The authors obtained briefings concerning but were not able to see
classified dossiers on Tejapaibul and Sophonpanich in the
possession of the American, Malaysian, and Thai governments. As
noted below in the text, they are "cut-outs" for the Hong Kong and
Shanghai Banking Corporation. Tejapaibul, whose -bank handles most
of Thailand's chemical imports, developed the Golden Triangle's
major source of acetic anhydride, the chemical required to refine
opium into heroin, through a Hong Kong subsidiary of the Bangkok
Certain aspects of the expatriate Chinese activity antedate the
British. The relationship between Ch'ao Chou Chinese merchants and
the Thai royal family, for example, dates back several centuries.
The predominance of Chinese compradors in the region, however, dates
to the turn of this century.
W. J. Cator, The Economic Position of the Chinese in the Netherlands
Indies, p. 97-98.
Victor Purcell, The Chinese in Malaya, p. 189.
William Skinner, Chinese Society in Thailand: An Analytical History,
International Currency Review, Vol. 10, No. 4, p. 145.
M. A. Andreyev, Overseas Chinese Bourgeoisie A Peking Tool
inSoutheast Asia (Moscow: Progress Publishers, 1974), p. 30.
V. Thompson, R. Adloff, Minority Problems in Southeast Asia
(Stanford: Stanford University Press, 1955), p. 13.
4. BRITAIN'S GOLD AND DIRTY DIAMOND OPERATIONS
Andreyev, Overseas Chinese Bourgeoisie, p. 120. In contrast to many
Soviet publications on the subject, the Andreyev book is a scholarly
monograph through nine-tenths of its extent, using quotations from
Western sources for most of its material. The propaganda factor is
comparatively small. Apart from the fact that it is a good survey of
Western literature on the subject, there is a special feature of
this short work that indicates its value to the investigator. The
work is a classical example of careful Soviet "surfacing" of their
on-the-ground intelligence reports, in such form as to make the
conclusions politically useful, without compromising their
operations. The clear intent of publication of the work is to put
some heat on Chinese intelligence operations in the Far Eastern
theater. The occasional "zingers" Andreyev includes, such as the
report of Chinese import of gold through the Golden Triangle, are
intended for a small professional audience in other intelligence
services. To the extent the authors were able to cross-check
Andreyev's facts with Western sources, they have checked out.
Therefore the authors believe that the Andreyev work is an
acceptable reference source.
Timothy Green, "Other World Markets," speech at the Gold Confer
ence of the London Financial Times and Investors Chronicle, The
London Hilton, October 24,1972.
Paul Ferris, The City (London, 1951).
H. R. Reinhart, The Reporter, July 22,1952.
Andreyev, The Chinese Bourgeoisie, p. 120.
Reinhart, The Reporter.
This information is a byproduct of a U.S. Labor Party
counterintelligence investigation of the operations of the Israeli
intelligence agency, Mossad, for which Jarecki appears to be a
"bagman." The details were cross-checked with law enforcement
According to interviews with leading diamond traders in New York.
5. HONG KONG: THE WORLD'S DRUG CAPITAL
Virtually all published sources identify Hong Kong as the world's
center for transshipment of opiates from the Far East, and even as
the center for heroin refining. For the most part, these admissions
encouraged by the local British authorities are in error. In fact,
heroin is refined in the triborder area of the Golden Triangle
itself. Once in the compact form of heroin, the drug may be shipped
by air, through individual couriers using a multiplicity of
It need not pass through Hong Kong at all,
although Hong Kong is possibly the most important of these various
routes, and may conduct significant refining operations. The British
admissions concerning refining and transshipment of opium and
heroin tend to distract the investigator from the more important
issue: that Hong Kong is the financial center for the Far East drug
trade, and hence the point of control for the Golden Triangle.
The most recent American congressional investigation into Hong Kong,
in 1973, wrote:
The British Crown Colony plays a major role in the trafficking
and refining of narcotics which originate in the "Golden Triangle":
It serves as a major target for the production area
criminal syndicates behind the Southeast Asian drug-traffic are based in Hong Kong
It serves as the refining center
for "Golden Triangle" opium and morphine base
It is a major
transshipment point for heroin coming into the
U.S. and for transshipment to our 7th Army in Germany via The
. . . It is estimated that 48 tons of opium are smoked in Hong Kong
annually and 4 tons of heroin are consumed. Local officials also
estimate that 4 to 10 tons of heroin is transshipped from Hong Kong
(primarily by body pack) to the United States annually, but accurate
information is lacking. Ten thousand dollars worth of heroin in Hong
Kong would retail for $50 to $60 million in the United States.
From reports we received in The Netherlands, it is also apparent
that heroin is being transported by air and ship to The Netherlands
from Hong Kong to supply the 7th Army in Germany. The potential for
growth of these shipments is unlimited. . . .
Despite the recent steps to upgrade the enforcement effort, Hong
Kong will continue to act as a funnel for heroin destined for the
United States unless some fundamental changes take place.
Smuggling into Hong Kong is almost impossible to control because:
it is a free port and the economy of the Crown Colony is dependent
upon its being easily accessible;
2) many drops are made outside of
the jurisdictional waters of the Crown Colony;
3) personnel are not
4) intelligence is lacking.
Since Hong Kong is a free port, there are no regularized customs
inspections. Also, most goods coming into Hong Kong are in sealed
containers. The Preventive Force, as a result, must rely primarily
on tips to conduct searches. The searches, however, are only of
vessels entering the harbor; not those leaving which could be
transmitting narcotics to the United States, The Netherlands, or
A major obstacle, also, is the lack of cooperation from the People's
Republic of China. Many of the drops are made in Chinese waters
because the Chinese do not police their coasts for narcotics. We
were told that a Chinese vessel will ignore a trawler smuggling
narcotics. Moreover, since the British in Hong Kong are naturally
sensitive to their relations with the People's Republic, they
care-fully observe territorial waters and are careful to avoid
appearances that a crackdown on traffickers is a vendetta against
the Chinese. ...
The British in Hong Kong are also reluctant to recognize the
severity of the problem evidenced by the increasing availability of
narcotics, and to, correspondingly, take action. For instance, most
officials we spoke with were "uptight" about the recent report of
the House Foreign Affairs Committee which concluded that the Hong
Kong Government has been lax.
They also resented the fact that no
one had talked to them before filing the report. (Report by Hon. Lou
Frey, Jr., Hon. Peter N. Kyros, and Hon. James F. Hastings, Members
of the Committee on Interstate and Foreign Commerce, Concerning
Narcotic Enforcement Efforts in Hong Kong, Thailand, Burma, India,
Lebanon, Greece, Turkey, France, and The Netherlands; April 1973,
pp. 2-11 passim).
Like most such documents, this report is loaded with
inconsistencies, although it contains occasional useful pieces of
information. One such item concerns the Hong Kong police force's
most successful means of discovering illicit heroin, noting that
police "found drugs concealed in the rectums of 40 defendants
referred to them by the courts in one week."
Also useful is the report that Hong Kong consumes 4 tons of heroin
and 48 tons of opium (medically equivalent to 4.8 tons of heroin
annually), from Hong Kong authorities. Taking this at the equivalent
of 8.8 tons of heroin consumption, the figure corroborates the
charge in this section that Hong Kong harbors one million drug
addicts in a 5 million population. At standard 5 percent purity for
street use, 1 kilogram of heroin will yield 150,000 "decks," or
single doses; 8.8 U.S. tons will yield roughly 1.2 million doses. A
serious addict requires more than one dose per day, so it Is hard to
estimate the precise number of addicts; but it is clear that the
British figures, probably conservative, are in the required range.
The report that the PRC does not interfere with opiates
transshipment in its territorial waters speaks for itself, as does
the statement that Hong Kong serves as a base for the criminal
syndicates behind the Southeast Asian drug trade. However, the
failure of the Congressional investigators to cite police corruption
at any point as an obstacle to narcotics enforcement in Hong Kong
demonstrates how inadequate the effort was.
There is nothing in the published literature concerning the
financial relationships between the Hong Kong and Shanghai Bank and
the Chinese syndicates; information had to be obtained from
interviews with knowledgeable area sources, and compared to studies
of financial market mechanisms.
Andreyev, The Chinese Bourgeoisie, pp. 146-147.
Financial Times, July 4,1977, p. 24.
Ibid., p. 19.
6. THE PEKING CONNECTION
Following Kissinger's 1972 trip to Peking, American public and
private literature both have played down the "Peking Connection," to
the point of ridiculing existing and current evidence of People's
Republic of China involvement in the trade. However, an examination
of these sources does not reveal a single piece of evidence that the
PRC role has stopped.
The current "standard reference work" on the Far East traffic is The
Politics of Heroin in Southeast Asia, by Alfred W. McCoy, with
B. Read and Leonard P. Adams II (New York: Harper and Row, 1972). In
dismissing the claims of former Bureau of Narcotics and Dangerous
Drugs chief Harry Anslinger, McCoy quotes an unnamed BNDD agent who
dismisses Anslinger's accusations against Peking, saying that the
People's Republic of China has no role whatsoever in the opium
trade, and that Anslinger's accusations are substantiated by nothing
more than Taiwanese propaganda. McCoy cites no other evidence, and
merely brushes the issue aside.
In fact, McCoy and his co-authors went so far out on a limb that
even sympathetic experts were forced to correct them. In a review
published in the Bulletin of Concerned Asian Scholars in September
1973; Peter Dale Scott wrote:
"McCoy quotes U.S. narcotics officials today to ridicule the 1950s
claims by then-U.S. Narcotics Commissioner Anslinger (and his government) about Communist China's 'twenty-year plan to finance
political activities and spread addiction' in the United States. But
McCoy subscribes to the equally dubious 'Turkey hypothesis' which
replaced Anslinger's in the 1960s; namely, that all of the U.S.
plague of heroin produced in the laboratories of Marseilles could be
attributed to opium grown in the Middle East. McCoy even claims that,
Throughout the 1960s ... the U.S. Bureau of Narcotics paid almost no
attention to Asia, there were few seizures of Asian heroin and
little awareness of the colony's growing role in the international
traffic. It was not until American GIs serving in Vietnam began
using . . . heroin refined in the Golden Triangle region that any
attention was focused on the Asian heroin trade, (pp. 223-24)
"That is an important claim," reviewer Scott continued, "and it is
quite false. In 1960, as he knows, the United States officially
listed Hong Kong as the first of the 'principal sources' of the
diacetylmorphine (heroin) seized in the United States; and the
Federal Bureau of Narcotics showed its concern by opening a branch
office in Hong Kong in 1963. Anslinger himself, while transmitting
KMT (Kuomintang, or Taiwanese ed.) propaganda about a Red Chinese
opium conspiracy, proved himself to be well-informed about the
world-wide significance of the Northern Thailand traffic, even to
such details as the roles played by a Macao financial syndicate, and
a Bangkok official of the Soong Bank of Canton."
Peter Dale Scott's
references are to Harry J. Anslinger, "The Opium of the People's
Government," in U.S. Congress, House, Soviet Total War, 85th
Congress, House Document No. 227, pp. 759-61.The accuracy or
inaccuracy of Harry Anslinger's presentation is not what is in
question at the moment. Rather, it is a simple point of fact that
McCoy and his co-authors have no facts whatever to indicate that the
PRC is not involved in the drugs traffic; and furthermore, that
their treatment of U.S. authorities who presented facts implicating
the PRC is wildly inaccurate.
As the Scott review demonstrated, that
is a matter of the published record. Experts on the Southeast Asian
theater at the time McCoy wrote simply doubt the author's integrity.
McCoy had available to him a mass of documentary evidence showing
that roughly half of the Golden Triangle growing area lay within the
confines of Communist China's Yunnan province. He also had available
a substantial portion of corroborating facts contained in this
report. McCoy simply chose to ignore this evidence, or, more
accurately, to attempt to refute it with unsubstantiated assertions.
According to individuals who knew McCoy when he was a regular in the
anti-Vietnam War movement, McCoy was in close friendly contact with
North Vietnamese legations in Western Europe at the time of writing
of The Politics of Heroin in Southeast Asia, and intended his
efforts to undermine the American war effort. In that context he
deliberately excised references to PRC opium trafficking. Since the
PRC and North Vietnam have come to blows over the status of the
expatriate Chinese comprador community in the latter country, it may
be that McCoy's political judgment, rather than North Vietnamese
views, were faulty on this subject. McCoy's book cannot be taken
seriously as far as the PR C issue is concerned. McCoy,
incidentally, does mention that expatriate Chinese syndicates are
the main traffickers in the Far East, and that Hong Kong is the main
Typical of public sources is a Congressional investigation of 1973
"There is no indication that the People's Republic of China is a
source of illegal narcotics coming to or through Hong Kong. A former
American missionary in China, now with SARDA (Society for Aid and
Rehabilitation of Drug Addicts ed.), said that since 1965 not
one addict from China has appeared in Hong Kong. Prior to 1965 they
arrived in droves. Arrests and seizures also evidence no Red Chinese
involvement whatsoever in narcotics traffic in Hong Kong.
"It was interesting to note the reaction of the Government officials
regarding the 'Chinese connection.' They thought that such
statements were 'rubbish and either made out of ignorance or by
individuals seeking political gain.' To say they were emphatic would
be an understatement.
"When the Communists came into power in 1949 in China, they imposed
the death penalty on anyone producing or consuming opiates. Users
were sentenced to long terms, which included building a road toward
Siberia. This was, in effect, a death penalty. Their success and
continuing interest in purging addiction from their society has
removed China as a major source of narcotics."
The report says further, "All officials acknowledged the fact that
most of the opium or morphine base coming into Hong Kong comes from
eitherBangkok or the Gulf of Siam." (Report by Hon. Lou Frey, Jr.,
N. Kyros, and Hon. James F. Hastings, members of the Committee of
Interstate and Foreign Commerce, Concerning Narcotic Enforcement
Efforts in Hong Kong, Thailand, Burma, India, Lebanon, Greece,
Turkey, France, and The Netherlands; April 1973, p. 4).
These claims are worth examining one by one.
First, the Report does not seek to determine whether opium coming
into Hong Kong from Bangkok is, in fact, of Red Chinese origin.
According to our expert sources, the main PRC transshipment route
southwards, through the Golden Triangle, to Bangkok.
Second,, whether or not the "former missionary" source cited is
accurate, the appearance or nonappearance of drug addicts from the
PRC mainland is utterly irrelevant to the issue of PRC involvement
wholesale drug traffic. Moreover, the citation of 1965 as the
PRC traffic is suspicious, since the hardest evidence of all Chou
Enlai's recorded boasts on the subject dates from that year.
Third, the authority cited by the Congressional delegation is the
Hong Kong Government itself. The integrity of the Hong Kong
authorities maybe judged from material presented in Section 5 of
this report. The utter ingenuousness of the Congressional document
cited, however, may be gauged from its enthusiasm for the Hong Kong
police: "We were impressed by the desire of the Service to do a job.
Their frustration was also apparent. They'll give it 100 percent,
but no matter how much they try or how good a job they do it's
just too big for them" (p. 10).
Two years after the publication of this document, the Independent
Commission Against Corruption in Hong Kong made its official
estimate of a $1 billion annual rate of police bribery in the
The most complete British work on the subject, Richard Deacon's The
Chinese Secret Service (New York: Ballantine Books, 1976) merely
ignores the issue, and defends PRC motivations!
could be introduced into a country that did not wish it in peacetime
by a so-called civilized Western Power, with the connivance of its
Government, how can the British adopt an outraged critical tone
towards China for copying her own tactics, not by having opium
forcibly imported this time, but by exporting the stuff to try to
check such a war as that in Vietnam, which threatened to go on
indefinitely. . . . Can one blame China, however intrinsically
disgusting the tactic may be, for manipu-lating an 'opium war in
reverse'?" (p. 441).
Deacon does admit, "Many nations and many
individuals are in the drug game solely for sordid commercial gain.
It is essentially an international problem, but that should not
blind one to the fact that only in the hands of the Chinese
Communists has it been used almost solely as a subversive weapon
and for financing, by an opium war in reverse, a great many of their
After 1972, American officials accepted the official line that China
had ceased to be an exporter of opiates, although they never liked
it. A case in point was Gen. Lewis W. Walt, a retired Marine Corps
officer who became the chief investigator for a set of hearings on
"World Drug Traffic and Its Impact on U.S. Security" (see note 27
below). On September 14, 1972, Walt states, "The official U.S.
position today is thatwe have no evidence that opium or opiates are
coming out of Communist China."
However, a specialist familiar with
the intelligence reports that made up the raw material of Gen.
Walt's briefing to the Subcommittee, said,
"It is highly significant
that he used the word evidence, rather than information. That is an
intentional dodge. He is playing a word game: evidence is a legal
term, and may exclude information. Had he used the word information,
he would have had to explain away a couple of hundred reports coming
in at the time."
"There can be no question that
large quantities of opium were coming out of China in the 1950s and
early 1960s. . . . The Director of British customs at Hong Kong also
told us that they had no evidence that opiates were coming out of
China. On the other hand, he informed us frankly that they were not
looking for evidence that, for political reasons, they do not
search ships or cargo coming out of mainland China. An identical
situation prevails in Portuguese Macao.''
Heikal, Mohammed Hassanein, The Cairo Documents (Garden City, N.Y.:
Doubleday and Company, 1973), pp. 306-307.
The significance of the investment, which occasioned widespread commentary in the Western press, is not so much the novelty of the
joint-venture format, but the surfacing of longstanding business
relationships between Jardine's and the PRC.
London Financial Times, July 4,1977, p. 20.
Interviews with law enforcement officers. Law enforcement
authorities suspect, but have never proven, that the Shaw Brothers'
international film distribution network also conduits narcotics.
Deacon, Chinese Secret Service, pp. 437-438.
In 1949, according to recently released American diplomatic cables,
the newly formed PRC was happy to permit Britain to retain control
over Hong Kong for the same reason.
Management Magazine (South Africa), December 1975. The Rennie and
Matheson families' relations go back much further than the recent
merger of business operations. They are intermarried through the
Ogilvie family, which is itself intermarried with the current
British royal family. The Rennies are core members of the British
establishment in South Africa. For example, relative Julian Ogilvie
Thompson is a member of Anglo-American Corporation's three-man
operating committee (see Section 4 for details on Anglo-American's
role in dirty money operations). The Rennies show up prominently in
British diplomatic and military posts throughout Africa and Asia,
e.g., Sir John Shaw Rennie was Governor and Commander in Chief of
Mauritius (1962-68), and Sir Gilbert McCall Rennie was Governor and
Commander in Chief of Northern Rhodesia in 1952.
The Economist, September 2,1978.
The authors benefited from an unpublished letter, "Jardine's
Octopusin Southern Africa; Rennie's Consolidated Holdings," by David
Cherry of the Africa staff of Executive Intelligence Review.
Peking's influence on the international gold market has been the
subject of considerable commentary in the financial press; during
1977 the Bank of China suddenly released about 80 tons of gold onto
the international markets, a move which commentators believed
depressed the gold price. What commentators were then at a loss to
explain is how the PRC, which runs a chronic balance-of-trade
deficit, was able to obtain the gold in advance of selling it off.
Peking's role in the gold-related aspect of opium financing provide
International Currency Review, Vol. 10, No. 4, p. 146.
Harry J. Anslinger, The Murderers (New York: Farrar, Straus, and
"World Drug Traffic and Its Impact on U.S. Security," Hearings
before the Subcommittee to Investigate the Administration of the
Internal Security Act and Other Internal Security Laws of the
Committe on the Judiciary, United States Senate; 92nd Congress,
Second Session; Part 3, The International Connection; September
13,15,1972, p. 101.
Haikal, Cairo Documents.
Harold Chang, "U.S. Sanction Threat to HK Over Drugs," SouthChina
Morning Post, August 18,1977.
Isvestia, February 17, 1978 (article by Bandura based on an article
inthe Japanese weekly, Shukan Bunshun, by N. Otiai).
According to interviews with Far Eastern and Soviet specialists,
the figure Liternatura cited was "laundered" through a series of
different Soviet conduits and publications during the 1960s, in a
form typical of Soviet "surfacing" of hard intelligence for more
general consumption. This particular report is taken much more
seriously by Western specialists, than, for example, Soviet claims
that the PRC at one point had 35,000 tons per year annual opium
production enough dope to keep the entire U.S. population addicted.
Reported in the Indonesian journal Buana Minggu, December 12, 1972.
Many similar reports came through during the same period, including
the following item from Indonesia as reported in the December29,
1970 issue of Foreign Broadcast Information Service Daily Report:
Djakarta The weekly CHAS has signaled the possibility that
Adjitorop, former Brigadier General Suharjo, and other elements of
remnants of the G-30-S/PKI who lived in communist China, the Soviet
Union, or other communist countries, continue to operate in
Indonesia. According to CHAS, they often come to Singapore using
foreign passports and fake names and disguised, because of
Singapore's proximity to Indonesia.
In view of the great risk of capture by Indonesia state agencies,
these elements use Singapore for their subversion against Indonesia.
The attempts to crush the Indonesian republic by remnants of the
G-30-S/PKI also depend on assistance from and subversion by the
This was the observation of a correspondent of the weekly CHAS who
recently visited Singapore, North Sumatra, Riau, and West
According to CHAS, Indonesia is one of the targets for subversion by
communist China in fighting the Soviet Union and its allies, and in
the struggle between the communists and the West.
To attain their purpose, all sides employ all kinds of methods to
mobilize local forces, which in the current new order oppose and
undermine the Indonesian republican government overtly and covertly.
Among these forces are remnants of the G-30-S PKI and groups which
are defending the political principles of the old order.
In launching its subversion, communist China conspicuously combines
trade activities with the dissemination of communist ideology and
instigation to rebel against the Indonesian government, CHAS
U.S. intelligence agencies had the same problem with the Ch'ao
Chou element in the Chinese Communist Intelligence Service that
Japanese interpreters had with American radio dispatches during
World War II; American military forces employed Sioux and other
Indians for certain classified radio transmissions, for which the
Japanese had no interpreters. The entire American government had,
during the early 1970s, only two employees capable of translating
the Ch'ao Chou dialect. How extensive this network is, therefore,
remains a matter of mystery. One disturbing feature of the New York
City incident is that the Ch'ao Chou contact had with him the
business card of the local Ch'ao Chou fraternal association in New
York's Chinatown (See Note 3, Section 3).
Virtually the only published source indicating the Ch'ao Chou
operation is John Le Carre's The Honourable Schoolboy (New York:
Alfred A. Knopf, 1977). Its leading character is Drake Ko,
supposedly a Hong Kong kingpin of narcotics traffic with an Order of
the British Empire and a brother in the Chinese Politburo. "They'd
come up from Swatow, the two of them," a Le Carre character remarks
of Ko and his brother. "They were boat people, Chiu Chow." Le
Carre's novel, according to highly informed sources, is a straight
roman a clef from the files of British intelligence; most of the
individual characters are scarcely disguised real figures in the Far
East drug traffic and mercenary scene. The book's apparent intent,
to portray fictionally the replacement of British intelligence-power
in the Far East by the CIA's, is patent nonsense. The interesting
question is how Le Carre became so well-informed; his
acknowledgements are to British intelligence and police sources.
Daniel Insor, Thailand: A Political, Social, and Economic Analysis,
(London: 1965), p. 135.
A. Doak Barnett, Communist China and Asia (New York: 1960), p. 186.
The Chinese Bourgeoisie, p. 67.
Ibid., p. 154.
Ibid., p. 120.
Statement of Gen. Lewis W. Walt, before the Subcommittee to
Investigate Administration of the Internal Security Act and Other
Internal Security Laws of the Committee of the Judiciary, Hearings
on "World Drug Traffic and its Impact on U.S. Security," Part 4,
September 14, 1978, p. 160. "Communist guerrillas in Thailand are in
control of an important stretch of opium-growing land on the Laos
frontier," Walt testified. "The most serious insurgency is the White
Flag Communist Party. . . it is Peking which has armed the
insurgents and trained their leader, and supports them with a
China-based radio operation. Over the past year, the White Flag
Communist insurgency has grown to the point where it absorbs up to
80 percent of the counterinsurgency efforts of the Rangoon
government. All the armed groups in Burma, pro-communist or
anti-communist, have been involved in the drug trade. . . .The area
the Communists control is estimated at 25 percent of Burma's total
(opium) production. Burma produces 400 tons of opium a year."
The authors cross-checked Walt's testimony with U.S. Foreign Service
officers and found the above statement to be accurate.
Apparently, the relatively small city of Swatow was the center of an
extraordinary pre-revolution network of mainland financial links with
expatriates that was maintained intact after the PRC was
established. The remittance agencies, based in Swatow, Amoy, and
Canton, had 1,000 branches throughout Southeast Asia as of 1950.
After the revolution, the PRC government transformed them into an
intelligence operation, employing the agents of the remittance
companies abroad for intelligence-gathering purposes. Once the
external financial operations of Peking's state banks got off the
ground, however, the remittance companies were merged into the new
Andreyev, The Chinese Bourgeoisie, p. 111.
Ibid., p. 117. Much of this is of a directly political nature.
"Mention must also be made," the Soviet author says, "of the large
contribution made by overseas Chinese businessmen towards financing
the operation of PRC representatives in Southeast Asian countries
(Burma and until recently Cambodia and Indonesia). Although in
the given case these large contributions are spent in the countries
concerned, they are neither more nor less than a clandestine form of
sending foreign exchange to the PRC. In some cases local Chinese
businessmen helped to finance the propaganda campaigns of the PRC
embassies, the current expenses of embassies and missions and even
the implementation of the economic aid agreements signed by the PRC.
For example, the building of four factories in Cambodia under an
economic aid agreement signed with the PRC was financed by local
pro-Peking businessmen." However, Andreyev's data, the most current
available, drop off at the critical period; no figures are available
for the joint venture investments. The more recent picture was
filled out through interviews with American and Southeast Asian
specialists on PRC external finances.
7. T HE ROYAL INSTITUTE OF INTERNATIONAL AFFAIRS
John Flint, Cecil Rhodes (Boston: Little, Brown, and Co., 1974).
U.S. State Department, Foreign Relations of the United States, 1949,
Vol. VII: "The Far East: China."
Christopher Thorne, "Chatham House, Whitehall, and Far Eastern
Issues: 1941-45," International Affairs, January, 1978. The authors
were compelled to rely on this summary rather than the original
documents of the Royal Institute itself. However, the Thorne article
is by a member of the RIIA, and published in the RIIA's own journal,
and may be considered an authoritative representation of the RIIA's
concerning its own history. The 1977 release of RIIA papers was,
"The preparation of this
article was greatly facilitated by a grant given to the Royal
Institute of International Affairs by the Leverhulme Trust, which
enabled the Institute to put its archives in an order more readily
accessible to researchers. With the exception of papers dealing with
the internal affairs of the Institute, those archives more than
thirty years old are now open to bona fide research workers."
The RIIA, of course, decides who is or is not bona fide.
State Department, Foreign Relations, pp. 1289-92.
Chou En-lai represented the CP in its "United Front" in Chungking
with the Kuomintang during these years.
Thome, "Chatham House," p. 20
Peter Vladimirov, Vladimirov Diaries, (Doubleday & Co.: 1976).
Thome, "Chatham House," pp. 4-5.
The ties of Ronning and Endicott to China go back very far and have
served as a crucial contact between British policy and the PRC.
Endicott was born of missionary parents in China in 1899, and worked
there as a Methodist minister for many years. By the time of the
1927 Shanghai massacre of communists by the KMT, Endicott admitted
in a discussion that he was already working as an advisor to Chiang
Kai-shek. In the early 1940s Endicott underwent a "Damascus Road"
transformation to Marxism and became a supporter of the CCP. He
became close to Chou En-lai during this time. Following his return
to Canada, Endicott formed a newsletter which reported on the PRC
and was a founding member of the Norman Bethune College at York
University, working closely with Chester Ronning.
Ronning, also born in China of missionary parents, was in the Royal
Canadian Air Force Intelligence during World War II. With the end of
the War, Ronning became a Canadian foreign officer in China, during
which time he developed close relations with CCP leaders, especially
Chou Enlai, and current PRC Foreign Minister Huang Hua. Ronning
argued strongly for Western recognition of the PRC after 1949, as did
the leaders of the Far East Group of the RIIA, and was recognized as
a friend by PRC leaders. Ronning served as translator for Huang Hua,
who was the official spokesman for the PRC in the aftermath of the
Communist victory. When China began diplomatic openings to the West
in the early 1970s, Canada was one of the first countries chosen for
normalization. Ronning's friend Huang Hua was the PRC's first
ambassador to Canada.
Investigations have shown that both Paul Lin and Endicott maintain
extensive ties to Canadian Maoist organizations, and through them,
to international terrorist organizations. Ronning is known by
professional intelligence officers to play a higher "coordinating"
role at the government level of terrorist deployment; Endicott and
Lin handle the
"field work" with the Maoists. (The information here is derived from
team interviews with Endicott himself and associates of Paul Lin.)
Thome, "Chatham House," p. 27.
State Department, Foreign Relations, pp. 1289-92.
Christopher Wren, New York Herald Tribune, January 16,1948.
State Department, Foreign Relations, pp. 1289-92.
U.S. Senate, Committee on the Judiciary, 82nd Congress, First
Session, Subcommittee on Internal Security, Hearings on the
Institute for Pacific Relations, Part I.
State Department, Foreign Relations, pp. 331-332.
U.S. Senate, Hearings on the Institute for Pacific Relations, Part
8. CANADA: NORTH AMERICA'S HONG KONG
Most of the source material from this section came from analysis of
bank and corporate annual reports and Who's Who entries; a simple
cross-correlation of such information produced an unbroken trail of
dope and dirty money from the Far East, through Canada, into the
United States. The business, legal, and accounting relations noted
here are all a matter of public record.
In addition, the authors
interviewed several former and serving Canadian and American law
enforcement officers, who have had Walter Lockhart Gordon and his
Canadian "China Lobby" under scrutiny for years.
An egregious example of British intelligence activity in Canada
is the formation of the British Newfoundland Corporation (Brinco) in
the early1950s. This project was planned by Winston Churchill, the
Rothschilds, and Newfoundland's Premier Joseph "Joey" Smallwood, a
Master Scottish Mason.
According to Virginia Cowles's book on the Rothschilds (1973):
In 1951 shortly after Winston Churchill had become Prime Minister
for the second time, he received Mr. Smallwood, the Premier of
Newfoundland. Smallwood unfolded plans for a vast development scheme
in Labrador and Newfoundland. To carry it out British capital was
needed on a truly mammoth scale. . . . When the consortium of firms
was formed (Churchill) was delighted that N. M. Rothschild & Sons
should head it.
Participation in the founding of Brinco included the leading firms
involved in Dope, Inc., including Morgan, Grenfell, Kleinwort and
Sons, Rio Tinto Zinc, Anglo-American Corp., and Prudential. Cowles
adds, "Brinco's terms of reference were breathtaking: the
exploratory right to
sixty thousand square miles in Newfoundland and Labrador, an area
larger than England and Wales. . . ."
In Smallwood's autobiography (New American Library, 1973), he
"In 1967 (I) enjoyed immensely the distinction
of being installed in office (as Master Mason) by the Grand Master
Mason (Scottish Constitution) Lord Bruce, who came from Scotland
especially for the purpose. So I met the direct descendant of King
Robert the Bruce. Proud? Oh, yes."
Brinco's board of directors today includes Mark Turner, the chairman
of Rio Tinto Zinc, former member of the RIIA Council; Edmund de
Rothschild, the president of N. M. Rothschild and Sons; and Sam
Harris, the New York lawyer who is a director of Rio Tinto Zinc and
whose law firm represents RTZ as well as the Kaplan Foundation, a
funder of environmentalist groups. In court papers filed by the
Westinghouse Corporation, Harris was named a conspirator in a plan to
raise artificially the price of the world's uranium 800 percent
during the 1970s.
This piece of information was an incidental product of a Labor Party
counter surveillance operation against a number of individuals
associated with the top management of Drexel Burnham Lambert.
A. J. Colin, Pro-Consul in Politics (New York: Macmillan, 1964).
9. ALL IN THE FAMILY: THE REAL SYNDICATE
The cult of Isis was developed in ancient Egypt no later than the
Third Dynasty of the Old Kingdom, approximately 2780 B.C., and
represents one of the earliest formal articulations of the entropic
and backward ideology of mother-worship. As known to the Priesthood
of the Temple of Isis true believers themselves the Isis cult
formalizes the elements of a capability for social control,
exploitation, and destruction of creative free will in subject
The elements include:
Use of various schizophrenia-inducing drugs;
Use of repetitive, heteronomic sounds to supplement the effect of
psychotropic drugs, and to create a societal aesthetic that endorses
and encourages use of the drugs;
Creation of synthetic cults based on the original reactionary Isis
myth, but specific to the psychological profile of the population
which the priesthood has targeted for subversion;
Enforcement of a political-economic model antagonistic to general
human progress, and containing targeted populations within non
creative, manual slave-labor projects (e.g., pyramid-building).
This combination of Pharaonic cult capabilities was taken as a model
for further refinement in this century by the British Secret
Intelligence Service's Tavistock Institute in London an
institution which launched the "counterculture" in the United States
and Europe, based on the very
drugs, mescaline and hashish, the Ancient Priesthood had employed
(see Part IV).
Carroll Quigley, Tragedy and Hope (New York: Macmillan Co.,
p. 131. The "Circle of Initiates" formation was explicitly modeled
after the ancient Isis Priesthood.
R. S. Clymer, The Book of Rosicruciae (1947), Vol. II, p. 106.
See Lyndon H. LaRouche, Jr., "Is Jimmy Carter Truly a Christian?,"
New Solidarity, Vol. IX, No. 64, October 13,1978.
Cited in Nesta H. Webster, Secret
Societies and Subversive Movements (London: Boswell Printing and Publishing Co., 1924), p.
Their father, the 7th Earl of Elgin, was famous for his theft of the
"Elgin Marbles" from Greece, smuggling them to the British Museum.
Dictionary of National Biography (London: Oxford University Press,
1968), Vol. III.p. 104ff.
Jean de Villiershad was the Master of the Knights of St. John of
Jerusalem from 1285-93, when the preparations for the slaughter of
the Knights Templar were undertaken. Philippe Villiers de l'Isle
Adam was the Grand Master of the Knights of St. John in France from
1521-22, and was the first Grand Master in Malta from 1530-34. Today
Sir Charles Villiers, who was the managing director of J. Henry
Schroder Wagg from 1960-68, is the chairman of the British Steel
Corp. Sir John Michael Villiers, a Knight of St. John, was the
Queen's Harbour Master Malta from 1952-54, and Lieutenant-Governor
of Jersey, an offshore banking center, from 1964-69.
By his own testimony in various writings, Lord Russell was in
periodic contact with the Communist Chinese regime and Premier Chou
in particular after 1949.
For example, Rudolf Hess and Professor-General Karl Haushofer,
ghost-writer of Mein Kampf; Alfred Rosenberg, Nazi Minister of
Foreign Services; Max Amann, Editor in Chief of Nazi Publications;
Hans Frank, Nazi Governor-General of Occupied Poland during World
War II; and
several members of the Wittelsbach family (the Bavarian royal
family) who sponsored much of Adolf Hitler's career. Hitler himself
was an associate of the society, known as a "Visiting Brother."
The connection is visible in the 1866 founding of the "Masonic
Rosicrucian Society" whose leaders, Mathers, Wescott, and Woodman,
also formed the Isis-Urania Temple of the Hermetic Students of the
Golden Dawn in 1886. The Golden Dawn group, by 1890, included the
mystic poet, William Butier Yeats, former Secretary of the
Theosophist Society. Aleister Crowley was the order's historian
during the period of Yeats's association with it.
The LSD cult was a creation of the Royal Institute of International
Affairs and its psychological warfare arm, the Tavistock Institute
(see Part IV). During the late 1960s at the height of the
"hippy movement" in the United States the Director of the RIIA,
Andrew Schonfield, was a member of the Tavistock Institute's
Governing Council. In 1967, during Schonfield's tenure at RIIA and
Tavistock, Tavistock's leading Staff Psychologist, R. D. Laing,
published his book, The Politics of Experience, which advocated
schizophrenia ("madness isthe only sanity") and drug use. Laing
I want you to taste and smell me, want to be palpable, to get under
your skin, to be an itch in your brain and in your guts that you
can't scratch out and that you can't allay, that will corrupt and
destroy you and drive you mad.
During the 1960s, the Tavistock Institute received large grants from
the Ford Foundation, the British Center for Environmental Studies,
the British Defense Ministry, Harvard University, and at least
£22,797 from the Social Science Research Council, of which
Schonfield was chairman at the time.
See Robert Cohen and L. Wolfe, "Karl Haushofer's Mein Kampf," New
Solidarity, Vol. IX, No. 45, August 7,1978.
Cited in John Flint, Cecil Rhodes, p. 27.
Martin Fido, Rudyard Kipling (New York: Viking Press, 1974).
Ibid., p. 35.
See Harbans Rai Bachchan, W. B. Yeats and Occultism (Delhi: Motilal
See Lyndon H. LaRouche, Jr., "Hitler: Runaway British Agent," New
Solidarity, Vol. VIII, No. 87, January 10,1978.
Tennyson in 1820 had been a member of the "Cambridge Apostles" which
initiated the Metaphysical Society in 1868-69. Other members of the
Metaphysical Society included H. W. Ackland, the Duke of Argyle,
Alexander Campbell Fraser, William Gladstone, Shadworth Hodgson, and
Walter Bagehot. This group included prominent members of the Society
for Psychical Research, Mind magazine, and the Fabian Society.
Verse 8 of the Choric Song of the poem.
History of the Times, Vol. IV: 1912-1920 (New York: Macmillan Co.,
1952), p. 244. The relevant section reads:
On Jan. 19, 1917, Milner left London at the head of an Allied
mission which, during three weeks in Petrograd, laid down a suitable
scheme for keeping the Russian forces supplied with Western
munitions. . . . It was widely believed at the time that the
February Revolution (installing Kerensky ed.) was hatched at the
After the destruction of the Knights Templar in the 14th century,
the Knights of St. John appropriated the Templars' Red Cross symbol
into their own iconography.
According to Ferdinand Lundberg, America's 60 Families (New York:
Vanguard Press, 1937), p. 146ff:
The Russian Mission of the Red Cross was headed by Col. William
Boyce Thompson and Col. Raymond Robbins . . . (who) used the Red
Cross to forward the war aims of Wall Street in a way unsuspected
by the American people. The purely political function of the Red
Cross is not generally appreciated even today.
. . . Thompson and Robbins, according to their own statements,
functioned in Russia as a political arm of the War Department. Their
crowning achievement was the purchase of enough delegates to the
All-Russian Democratic Congress (to support Kerensky ed.). The
cost of seducing this congress was $1,000,000.
Winston Churchill's wife, Clementine, a Commander of the Order of
St. John, served as the Chairman of the Red Cross Aid to Russia Fund
from 1939-46. The same uses of the "Red Cross" cover for
intelligence operations is implicit in the fact that a direct
descendant of King Robert Bruce of Scotland, David Bruce, was the
Chief Representative of the American Red Cross in Britain in 1940,
and one year later, in 1941, became head of Office of Strategic
Services (OSS) Operations in the European Theatre; the same David
Bruce, during the Nixon Administration years, was selected by
Secretary of State Henry Kissinger to be Chief of the U.S. Mission
to the People's Republic of China from 1973-74, and then became U.S.
Ambassador to NATO from 1974-76.
For example, in his April 1938 Annual Report to the Shareholders
of Rio Tinto, chairman Geddes noted that:
Our company has received recently a great deal of attention in the
press of many countries. Propagandists possessed of
lively imaginations but devoid of respect for accuracy have told the
world of our doings. In result a lot of nonsense has been published,
evidently designed to suggest that your Board is composed of violent
fascists actively participating on the side of General Franco. I
read the other day an article in which it was stated as a fact that
we had sent in a year 300,000 tons of copper to Germany and 65,000
tons to Italy to pay for supplies from those two countries to
General Franco. . . . This is just rubbish. ... I have seen it
stated in the press that we . . . your Board . . . "gave" . . . help
to General Franco's cause. It depends on your meaning of the verb
Significantly, in 1923's Annual Report by then-Chairman Lord Alfred
Milner, it was stated that "The constantly increasing burden of
taxation, especially in Spain, where the (republican ed.)
government is evidently convinced that it can never kill the goose
that lays golden
eggs. ..." (See David Avery, Not On Queen Victoria's Birthday: The
Story of the Rio Tinto Mines, London, 1973, pp. 371ff.)
Auckland Geddes' grandfather had been the Hudson's Bay Company's
official agent in Scotland. His second nephew, Anthony, was a member
of the Governing Council of the Royal Institute of International
Affairs in 1949, alongside Sir Mark Turner, Rio Tinto's current
chairman. The same Anthony is a director of the Midland Bank.
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