Less than a year after being arrested in Colombia for drug smuggling-related activities, Michael B. Palmer signed a contract with the U.S. State Department in 1986 to distribute "humanitarian aid" to the Nicaraguan contras, a Senate Foreign Relations subcommittee was told in early April. 

Palmer, who said he had made "several million dollars" smuggling marijuana, said he participated in no illegal smuggling while he worked for the State Department, and that at the time he was an informant for the Drug Enforcement Administration (DEA). 

"I was a narcotics trafficker that was involved in legitimate entities with the U.S. [government] after my narcotics trafficking days were over," said Palmer. 

Palmer told the Subcommittee on Narcotics, Terrorism and International Operations he was also working for a "government-controlled" company, an apparent reference to a proprietary company of the CIA, which played a key role in the contra resupply operation run partly by former White House aide Oliver North (Guardian, April 20). 

Subcommittee chairman Sen. John Kerry (D-Mass.) said Palmer's testimony has raised new questions about the Nicaraguan Humanitarian Assistance Office (NHAO), which the State Department created in full 1985 to dispense $27 million in "nonlethal" aid to the contras. In late 1986 a congressional audit of NHAO revealed that $17 million of that money could not be located, and that NHAO "generally could not verify that the goods and services, wherever purchased, were not diverted." 

The State Department said political tensions in Central America did not permit usual auditing procedures there. But one congressional investigator recently said there was "no doubt" a law requiring the department to establish appropriate procedures to prevent diversion of funds "was clearly violated." 

In February a former chief money launderer for the largest Colombia cocaine ring, the Medellin cartel, said he created a company for the purpose of laundering drug profits, but the dummy corporation later received more than $200,000 from NHAO apparently to distribute humanitarian aid. 

Evades Indictment
Palmer's role in NHAO activities was first questioned last summer when Congress learned he signed a NHAO contract in February 1986, and four months later he was indicted in what has been called the largest marijuana importation case in Michigan history. Members of a House narcotics committee called upon the State Department to explain Palmer's employment with NHAO. 

Then, last October, the U.S. Attorney's office prosecuting Palmer released him from the indictment, which originally included 90 individuals. Palmer testified he was let off the indictment because he was working as an informant in a sting operation which resulted in a series of arrests in September 1987. He denied it was because of his work for NHAO and the "government-controlled" company. 

Axel Kleidboemer, Palmer's attorney, also said Palmer was arrested mistakenly by the FBI. Palmer testified he was working as an informant with the DEA before his arrest in June 1986, but there was a "communication failure" between the two agencies. 

Palmer said he had been cooperating with federal authorities since shortly after his arrest in May 1985 in Colombia, where after three months in jail he realized "I had trashed my entire life," and decided to work for the government. 

After he returned to the U.S., Palmer said, he became vice president of Vortex Inc., a small Miami aircraft-leasing company, which had previously bought from Palmer two DC-6s he had used in drug flights. In October or November, Palmer, said, NHAO requested estimates from Vortex for shipments of clothing and other supplies to Central America. 

State Department officials said they could not determine the final sum of money paid to Vortex, although documents released by Kerry's subcommittee show NHAO director Robert Duemling signed three letters of commitment with Palmer totaling $206,466.27. 

Kerry said Palmer's testimony "raised questions" about the judgment of NHAO officials, who closed a contract with Palmer at a time when allegations were being made about contra involvement in drug smuggling. Kerry described as "sloppy" the mixture of undercover drug enforcement operations with humanitarian aid and a former drug dealer. 

"Something that should have been clean as a whistle, without any ambiguities, without any potential for misunderstanding," Kerry said of the humanitarian aid program, "was exactly the opposite." 

A DC-6 sold by Palmer to Vortex was used in the marijuana bust in Michigan in July 1987. Men arrested in the "sting" have charged they were entrapped by Palmer, and that Palmer initiated and benefited from large drug operations. 

Alejandro Sanchez, who was convicted after DEA agents arrested him for drug smuggling in 1987, has said in an affidavit he paid Palmer and another man $1.4 million for flying 20,000 pounds of marijuana to Mexico. Sanchez said his payments to Palmer were possible because 17,000 pounds of the drug were smuggled successfully into the U.S. and sold. 

Sanchez also said in the sworn statement Palmer told him a boat they were using to smuggle marijuana to Mexico would not be in danger of interdiction by U.S. Coast Guard ships off the Colombian coast because Palmer had a "password which was changed every week." Sanchez said Palmer obtained the password for his work smuggling weapons in cargo ships from Argentina to the contras in Honduras. 

Kerry, the driving force behind a 2-year investigation of the contra war and its effect on the flow of drugs into this country, did not question Palmer about Sanchez's assertions. 

Under questioning by Kerry, Palmer said it is possible to deal drugs while working as a government informant. But he emphasized that he did not do so.