Notes

1. BANKING AND THE WORLD'S BIGGEST BUSINESS

1. 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 quickly.

2. 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).

3. The New York Times, January 20,1971, p. 1.

4. According to Drug Enforcement Administration estimates.

5. 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.

6. Euromoney (London), April, 1978.

2. FROM OPIUM TO DIRTY MONEY

1. 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.

2. Calculated on the basis of price markups as reported by law enforcement sources in interviews with the authors.

3. 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.

4. Richard Deacon, The Chinese Secret Service (New York: Ballantine Books, 1976), p. 447.
    

3. HOW THE DRUG TRADE IS FINANCED

1. London Financial Times, April 24,1978.

2. Ibid.

3. 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.

4. 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 Metropolitan Bank.

5. 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.

6. W. J. Cator, The Economic Position of the Chinese in the Netherlands Indies, p. 97-98.

7. Victor Purcell, The Chinese in Malaya, p. 189.

8. William Skinner, Chinese Society in Thailand: An Analytical History, p.140.

9. International Currency Review, Vol. 10, No. 4, p. 145.

10. M. A. Andreyev, Overseas Chinese Bourgeoisie — A Peking Tool inSoutheast Asia (Moscow: Progress Publishers, 1974), p. 30.

11. V. Thompson, R. Adloff, Minority Problems in Southeast Asia (Stanford: Stanford University Press, 1955), p. 13.
     

4. BRITAIN'S GOLD AND DIRTY DIAMOND OPERATIONS

1. 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.

2. 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.

3. Paul Ferris, The City (London, 1951).

4. H. R. Reinhart, The Reporter, July 22,1952.

5. Andreyev, The Chinese Bourgeoisie, p. 120.

6. Reinhart, The Reporter.

7. 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 officials.

8. 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 different routes.

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":

1. It serves as a major target for the production area

2. The criminal syndicates behind the Southeast Asian drug-traffic are based in Hong Kong

3. It serves as the refining center for "Golden Triangle" opium and morphine base

4. It is a major transshipment point for heroin coming into the U.S. and for transshipment to our 7th Army in Germany via The Netherlands.

. . . 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:

1) 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 adequate; and

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 other points.

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.

1. Andreyev, The Chinese Bourgeoisie, pp. 146-147.

2. Ibid.

3. Financial Times, July 4,1977, p. 24.

4. Ibid.

5. Ibid., p. 19.

6. Ibid.

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 Cathleen 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 transshipment center.

Typical of public sources is a Congressional investigation of 1973 which reported:

"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., Hon. Peter 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 in the wholesale drug traffic. Moreover, the citation of 1965 as the end-point of 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 colony.

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!

 

He argues,

"If opium 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 espionage operations.''

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."

Walt continued,

"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.''

1. Heikal, Mohammed Hassanein, The Cairo Documents (Garden City, N.Y.: Doubleday and Company, 1973), pp. 306-307.

2. 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.

3. London Financial Times, July 4,1977, p. 20.

4. Interviews with law enforcement officers. Law enforcement authorities suspect, but have never proven, that the Shaw Brothers' international film distribution network also conduits narcotics.

5. Deacon, Chinese Secret Service, pp. 437-438.

6. 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.

7. 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.

8. The Economist, September 2,1978.

9. 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.

10. 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 some explanation.

11. International Currency Review, Vol. 10, No. 4, p. 146.

12. Harry J. Anslinger, The Murderers (New York: Farrar, Straus, and Cudahy,1961).

13. "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.

14. Haikal, Cairo Documents.

15. Anslinger, Murderers.

16. Harold Chang, "U.S. Sanction Threat to HK Over Drugs," SouthChina Morning Post, August 18,1977.

17. Isvestia, February 17, 1978 (article by Bandura based on an article inthe Japanese weekly, Shukan Bunshun, by N. Otiai).

18. 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.

19. 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 above states. This was the observation of a correspondent of the weekly CHAS who recently visited Singapore, North Sumatra, Riau, and West Kalimantan. 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 concluded.

20. 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.

21. Daniel Insor, Thailand: A Political, Social, and Economic Analysis, (London: 1965), p. 135.

22. A. Doak Barnett, Communist China and Asia (New York: 1960), p. 186.

23. The Chinese Bourgeoisie, p. 67.

24. Ibid., p. 154.

25. Ibid., p. 120.

26. Ibid.

27. 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 that 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.

28. 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 apparatus.

29. Andreyev, The Chinese Bourgeoisie, p. 111.

30. 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

1. John Flint, Cecil Rhodes (Boston: Little, Brown, and Co., 1974).

2. U.S. State Department, Foreign Relations of the United States, 1949, Vol. VII: "The Far East: China."

3. 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 views concerning its own history. The 1977 release of RIIA papers was, unfortunately, selective.

    

   Thorne notes,

    

   • "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.

4. State Department, Foreign Relations, pp. 1289-92.

5. Chou En-lai represented the CP in its "United Front" in Chungking with the Kuomintang during these years.

6. Thome, "Chatham House," p. 20

7. Peter Vladimirov, Vladimirov Diaries, (Doubleday & Co.: 1976).

8. Thome, "Chatham House," pp. 4-5.

9. Ibid.

10. 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.)

11. Thome, "Chatham House," p. 27.

12. State Department, Foreign Relations, pp. 1289-92.

13. Ibid.

14. Christopher Wren, New York Herald Tribune, January 16,1948.

15. State Department, Foreign Relations, pp. 1289-92.

16. U.S. Senate, Committee on the Judiciary, 82nd Congress, First Session, Subcommittee on Internal Security, Hearings on the Institute for Pacific Relations, Part I.

17. State Department, Foreign Relations, pp. 331-332.

18. U.S. Senate, Hearings on the Institute for Pacific Relations, Part I.

19. Ibid.

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.

1. 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 identified himself:

   • "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.
    

2. 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.

    

3. A. J. Colin, Pro-Consul in Politics (New York: Macmillan, 1964).

9. ALL IN THE FAMILY: THE REAL SYNDICATE

1. 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 populations.

    

   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).
    

2. Carroll Quigley, Tragedy and Hope (New York: Macmillan Co., 1974), p. 131. The "Circle of Initiates" formation was explicitly modeled after the ancient Isis Priesthood.

3. R. S. Clymer, The Book of Rosicruciae (1947), Vol. II, p. 106.

4. See Lyndon H. LaRouche, Jr., "Is Jimmy Carter Truly a Christian?," New Solidarity, Vol. IX, No. 64, October 13,1978.

5. Cited in Nesta H. Webster, Secret Societies and Subversive Movements (London: Boswell Printing and Publishing Co., 1924), p. 115.

6. Their father, the 7th Earl of Elgin, was famous for his theft of the "Elgin Marbles" from Greece, smuggling them to the British Museum.

7. Dictionary of National Biography (London: Oxford University Press, 1968), Vol. III.p. 104ff.

8. 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.

9. 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.

10. 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."

11. 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.

12. 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 "counterculture" and "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 writes:

    • 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.

13. See Robert Cohen and L. Wolfe, "Karl Haushofer's Mein Kampf," New Solidarity, Vol. IX, No. 45, August 7,1978.

14. Cited in John Flint, Cecil Rhodes, p. 27.

15. Martin Fido, Rudyard Kipling (New York: Viking Press, 1974).

16. Ibid., p. 35.

17. See Harbans Rai Bachchan, W. B. Yeats and Occultism (Delhi: Motilal Banarsidass, 1965).

18. See Lyndon H. LaRouche, Jr., "Hitler: Runaway British Agent," New Solidarity, Vol. VIII, No. 87, January 10,1978.

19. 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.

20. Verse 8 of the Choric Song of the poem.

21. 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 British Embassy.

22. 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.

23. 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 "to give."

    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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