The New Opium Monopoly

Premier Ky's air force career began when he returned from instrument flying school in France with his certification as a transport pilot and a French wife. As the Americans began to push the French out of air force advisory positions in 1955, the French attempted to bolster their wavering influence by promoting officers with strong proFrench loyalties to key positions. Since Lieut. Tran Van Ho was a French citizen, he was promoted to colonel "almost overnight" and became the first ethnic Vietnamese to command the Vietnamese air force. Lieutenant Ky's French wife was adequate proof of his loyalty, and despite his relative youth and inexperience, he was appointed commander of the First Transport Squadron. In 1956 Ky was also appointed commander of Saigon's Tan Son Nhut Air Base, and his squadron, which was based there, was doubled to a total of thirty-two C-47s and renamed the First Transport Group. (44) While shuttling back and forth across the countryside in the lumbering C-47s may have lacked the dash and romance of fighter flying, it did have its advantages. Ky's responsibility for transporting government officials and generals provided him with useful political contacts, and with thirty-two planes at his command, Ky had the largest commercial air fleet in South Vietnam. Ky lost command of the Tan Son Nhut Air Base, allegedly, because of the criticism about the management (or mismanagement) of the base mess hall by his sister, Madame Nguyen Thi Ly. But he remained in control of the First Transport Group until the anti-Diem coup of November 1963. Then Ky engaged in some dextrous political intrigue and, despite his lack of credentials as a coup plotter, emerged as commander of the entire Vietnamese air force only six weeks after Diem's overthrow. (45)

As air force commander, Air Vice-Marshal Ky became one of the most active of the "young Turks" who made Saigon political life so chaotic under General Khanh's brief and erratic leadership. While the air force did not have the power to initiate a coup singlehandedly, as an armored or infantry division did, its ability to strafe the roads leading into Saigon and block the movement of everybody else's coup divisions gave Ky a virtual veto power. After the air force crushed the abortive September 13, 1964, coup against General Khanh, Ky's political star began to rise. On June 19, 1965, the ten-man National Leadership Committee headed by Gen. Nguyen Van Thieu appointed Ky to the office of premier, the highest political office in South Vietnam. (46)

Although he was enormously popular with the air force, Ky had neither an independent political base nor any claim to leadership of a genuine mass movement when he took office. A relative newcomer to politics, Ky was hardly known outside elite circles. Also, Ky seemed to lack the money, the connections, and the capacity for intrigue necessary to build up an effective ruling faction and restore Saigon's security. But he solved these problems in the traditional Vietnamese manner by choosing a power broker, a "heavy" as Machiavellian and corrupt as Bay Vien or Ngo Dinh Nhu-Gen. Nguyen Ngoc Loan.

Loan was easily the brightest of the young air force officers. His career was marked by rapid advancement and assignment to such technically demanding jobs as commander of the Light Observation Group and assistant commander of the Tactical Operations Center. (47) Loan also had served as deputy commander to Ky, an old classmate and friend, in the aftermath of the anti-Diem coup. Shortly after Ky took office he appointed Loan director of the Military Security Service (MSS). Since MSS was responsible for anticorruption investigations inside the military, Loan was in an excellent position to protect members of Ky's faction. Several months later Loan's power increased significantly when he was also appointed director of the Central Intelligence Organization (CIO), South Vietnam's CIA, without being asked to resign from the MSS. Finally, in April 1966, Premier Ky announced that General Loan had been appointed to an additional post--directorgeneral of the National Police. (48) Only after Loan had consolidated his position and handpicked his successors did he "step down" as director of the MSS and CIO. Not even under Diem had one man controlled so many police and intelligence agencies.

In the appointment of Loan to all three posts, the interests of Ky and the Americans coincided. While Premier Ky was using Loan to build up a political machine, the U.S. mission was happy to see a strong man take command of "Saigon's police and intelligence communities" to drive the NLF out of the capital. Lt. Col. Lucien Conein says that Loan was given whole-hearted U.S. support because

We wanted effective security in Saigon above all else, and Loan could provide that security. Loan's activities were placed beyond reproach and the whole three-tiered US advisory structure at the district, province and national level was placed at his disposal. (49) The liberal naivete that had marked the Kennedy diplomats in the last few months of Diem's regime was decidedly absent. Gone were the qualms about "police state" tactics and daydreams that Saigon could be secure and politics "stabilized" without using funds available from the control of Saigon's lucrative rackets.

With the encouragement of Ky and the tacit support of the U.S. mission, Loan (whom the Americans called "Laughing Larry" because he frequently burst into a high-pitched giggle) revived the Binh Xuyen formula for using systematic corruption to combat urban guerrilla warfare. Rather than purging the police and intelligence bureaus, Loan forged an alliance with the specialists who had been running these agencies for the last ten to fifteen years. According to Lieutenant Colonel Conein, "the same professionals who organized corruption for Diem and Nhu were still in charge of police and intelligence. Loan simply passed the word among these guys and put the old system back together again. (50)

Under Loan's direction, Saigon's security improved markedly. With the "door-todoor" surveillance network perfected by Dr. Tuyen back in action, police were soon swamped with information. (51) A U.S. Embassy official, Charles Sweet, who was then engaged in urban pacification work, recalls that in 1965 the NLF was actually holding daytime rallies in the sixth, seventh, and eighth districts of Cholon and terrorist incidents were running over forty a month in district 8 alone. (See Map 4, page 111.) Loan's methods were so effective, however, that from October 1966 until January 1968 there was not a single terrorist incident in district 8. (52) In January 1968, correspondent Robert Shaplen reported that Loan "has done what is generally regarded as a good job of tracking down Communist terrorists in Saigon .... (53)

Putting "the old system back together again," of course, meant reviving largescale corruption to finance the cash rewards paid to these part-time agents whenever they delivered information. Loan and the police intelligence professionals systematized the corruption, regulating how much each particular agency would collect, how much each officer would skim off for his personal use, and what percentage would be turned over to Ky's political machine. Excessive individual corruption was rooted out, and Saigon-Cholon's vice rackets, protection rackets, and payoffs were strictly controlled. After several years of watching Loan's system in action, Charles Sweet feels that there were four major sources of graft in South Vietnam: (1) sale of government jobs by generals or their wives, (2) administrative corruption (graft, kickbacks, bribes, etc.), (3) military corruption (theft of goods and payroll frauds), and (4) the opium traffic. And out of the four, Sweet has concluded that the opium traffic was undeniably the most important source of illicit revenue. (54)

As Premier Ky's power broker, Loan merely supervised all of the various forms of corruption at a general administrative level; he usually left the mundane problems of organization and management of individual rackets to the trusted assistants.

In early 1966 General Loan appointed a rather mysterious Saigon politician named Nguyen Thanh Tung (known as "Mai Den" or "Black Mai") director of the Foreign Intelligence Bureau of the Central Intelligence Organization. Mai Den is one of those perennial Vietnamese plotters who have changed sides so many times in the last twenty-five years that nobody really knows too much about them. It is generally believed that Mai Den began his checkered career as a Viet Minh intelligence agent in the late 1940s, became a French agent in Hanoi in the 1950s, and joined Dr. Tuyen's secret police after the French withdrawal. When the Diem government collapsed, he became a close political adviser to the powerful I Corps commander, Gen. Nguyen Chanh Thi. However, when General Thi clashed with Premier Ky during the Buddhist crisis of 1966, Mai Den began supplying General Loan with information on Thi's movements and plans. After General Thi's downfall in April 1966, Loan rewarded Mai Den by appointing him to the Foreign Intelligence Bureau. Although nominally responsible for foreign espionage operations, allegedly Mai Den's real job was to reorganize opium and gold smuggling between Saigon and Laos. (55)

Through his control over foreign intelligence and consular appointments, Mai Den would have had no difficulty in placing a sufficient number of contact men in Laos. However, the Vietnamese military attache in Vientiane, Lt. Col. Khu Duc Nung, (56) and Premier Ky's sister in Pakse, Mrs. Nguyen Thi Ly (who managed the Sedone Palace Hotel), were Mai Den's probable contacts.

Once opium had been purchased, repacked for shipment, and delivered to a pickup point in Laos (usually Savannakhet or Pakse), a number of methods were used to smuggle it into South Vietnam. Although no longer as important as in the past, airdrops in the Central Highlands continued. In August 1966, for example, U.S. Green Berets on operations in the hills north of Pleiku were startled when their hill tribe allies presented them with a bundle of raw opium dropped by a passing aircraft whose pilot evidently mistook the tribal guerrillas for his contact men. (57) Ky's man in the Central Highlands was 11 Corps commander Gen. Vinh Loc.58 He was posted there in 1965 and inherited all the benefits of such a post. His predecessor, a notoriously corrupt general, bragged to colleagues of making five thousand dollars for every ton of opium dropped into the Central Highlands.

While Central Highland airdrops declined in importance and overland narcotics smuggling from Cambodia had not yet developed, large quantities of raw opium were smuggled into Saigon on regular commercial air flights from Laos. The customs service at Tan Son Nhut was rampantly corrupt, and Customs Director Nguyen Van Loc was an important cog in the Loan fund-raising machinery. In a November 1967 report, George Roberts, then chief of the U.S. customs advisory team in Saigon, described the extent of corruption and smuggling in South Vietnam:

"Despite four years of observation of a typically corruption ridden agency of the GVN [Government of Vietnam], the Customs Service, I still could take very few persons into a regular court of law with the solid evidence I possess and stand much of a chance of convicting them on that evidence. The institution of corruption is so much a built in part of the government processes that it is shielded by its very pervasiveness. It is so much a part of things that one can't separate "honest" actions from "dishonest" ones. Just what is corruption in Vietnam? From my personal observations, it is the following:

The customs official who sells to the highest bidder the privilege of holding down for a specific time the position where the graft and loot possibilities are the greatest." (58)

It appeared that Customs Director Loc devoted much of his energies to organizing the gold and opium traffic between Vientiane, Laos, and Saigon. When 114 kilos of gold were intercepted at Tan Son Nhut Airport coming from Vientiane, George Roberts reported to U.S. customs in Washington that "There are unfortunate political overtones and implications of culpability on the part of highly placed personages. (59), (60) Director Loc also used his political connections to have his attractive niece hired as a stewardess on Royal Air Lao, which flew several times a week between Vientiane and Saigon, and used her as a courier for gold and opium shipments. When U.S. customs advisers at Tan Son Nhut ordered a search of her luggage in December 1967 as she stepped off a Royal Air Lao flight from Vientiane they discovered two hundred kilos of raw opium. (61) In his monthly report to Washington, George Roberts concluded that Director Loc was "promoting the day-to-day system of payoffs in certain areas of Customs' activities." (62)

After Roberts filed a number of hard-hitting reports with the U.S. mission, Ambassador Ellsworth Bunker called him and members of the customs advisory team to the Embassy to discuss Vietnamese "involvement in gold and narcotics smuggling." (63) The Public Administration Ad Hoc Committee on Corruption in Vietnam was formed to deal with the problem. Although Roberts admonished the committee, saying "we must stop burying our heads in the sand like ostriches" when faced with corruption and smuggling, and begged, "Above all, don't make this a classified subject and thereby bury it," the U.S. Embassy decided to do just that. Embassy officials whom Roberts described as advocates of "the noble kid glove concept of hearts and minds" had decided not to interfere with smuggling or large-scale corruption because of "pressures which are too well known to require enumeration." (64)

Frustrated at the Embassy's failure to take action, an unknown member of U.S. customs leaked some of Roberts' reports on corruption to a Senate subcommittee chaired by Sen. Albert Gruening of Alaska. When Senator Gruening declared in February 1968 that the Saigon government was "so corrupt and graft-ridden that it cannot begin to command the loyalty and respect of its citizens," (65) U.S. officials in Saigon defended the Thieu-Ky regime by saying that "it had not been proved that South Vietnam's leaders are guilty of receiving 'rake-offs." (66) A month later Senator Gruening released evidence of Ky's 1961-1962 opium trafficking, but the U.S. Embassy protected Ky from further investigations by issuing a flat denial of the senator's charges. (67)

While these sensational exposes of smuggling at Tan Son Nhut's civilian terminal grabbed the headlines, only a few hundred yards down the runway VNAF C-47 military transports loaded with Laotian opium were landing unnoticed. Ky did not relinquish command of the air force until November 1967, and even then he continued to make all of the important promotions and assignments through a network of loyal officers who still regarded him as the real commander. Both as premier and vice-president, Air Vice-Marshal Ky refused the various official residences offered him and instead used $200,000 of government money to build a modern, air-conditioned mansion right in the middle of Tan Son Nhut Air Base. The "vice-presidential palace," a pastelcolored monstrosity resembling a Los Angeles condominium, is only a few steps away from Tan Son Nhut's runway, where helicopters sit on twentyfourhour alert, and a minute down the road from the headquarters of his old unit, the First Transport Group. As might be expected, Ky's staunchest supporters were the men of the First Transport Group. Its commander, Col. Luu Kim Cuong, was considered by many informed observers to be the unofficial "acting commander" of the entire air force and a principal in the opium traffic. Since command of the First Transport Group and Tan Son Nhut Air Base were consolidated in 1964, Colonel Cuong not only had aircraft to fly from southern Laos and the Central Highlands (the major opium routes), but also controlled the air base security guards and thus could prevent any search of the C-47s. (68)

Once it reaches Saigon safely, opium is sold to Chinese syndicates who take care of such details as refining and distribution. Loan's police used their efficient organization to "license" and shake down the thousands of illicit opium dens concentrated in the fifth, sixth, and seventh wards of Cholon and scattered evenly throughout the rest of the capital district.

Although morphine base exports to Europe had been relatively small during the Diem administration, they increased during Ky's administration as Turkey began to phase out production in 1967-1968. And according to Lt. Col. Lucien Conein, Loan profited from this change:

"Loan organized the opium exports once more as a part of the system of corruption. He contacted the Corsicans and Chinese, telling them they could begin to export Laos's opium from Saigon if they paid a fixed price to Ky's political organization." (69)

Most of the narcotics exported from South Vietnam-whether morphine base to Europe or raw opium to other parts of Southeast Asia-were shipped from Saigon Port on oceangoing freighters. (Also, Saigon was probably a port of entry for drugs smuggled into South Vietnam from Thailand.) The director of the Saigon port authority during this period was Premier Ky's brother-in-law and close political adviser, Lt. Col. Pho Quoc Chu (Ky had divorced his French wife and married a Vietnamese). (70) Under Lieutenant Colonel Chu's supervision all of the trained port officers were systematically purged, and in October 1967 the chief U.S. customs adviser reported that the port authority "is now a solid coterie of GVN [Government of Vietnam military officers. (71) However, compared to the fortunes that could Se made from the theft of military equipment, commodities, and manufactured goods, opium was probably not that important.

Loan and Ky were no doubt concerned about the critical security situation in Saigon when they took office, but their real goal in building up the police state apparatus was political power. Often they seemed to forget who their "enemy" was supposed to be, and utilized much of their police-intelligence network to attack rival political and military factions. Aside from his summary execution of an NLF suspect in front of U.S. television cameras during the 1968 Tet offensive, General Loan is probably best known to the world for his unique method of breaking up legislative logjams during the 1967 election campaign. A member of the Constituent Assembly who proposed a law that would have excluded Ky from the upcoming elections was murdered. (72) widow publicly accused General Loan of having ordered the assassination. When the assembly balked at approving the ThieuKy slate unless they complied with the election law, General Loan marched into the balcony of the assembly chamber with two armed guards, and the opposition evaporated . (73) When the assembly hesitated at validating the fraudulent tactics the Thieu-Ky slate had used to gain their victory in the September elections, General Loan and his gunmen stormed into the balcony, and once again the representatives saw the error of their ways. (74)

Under General Loan's supervision, the Ky machine systematically reorganized the network of kickbacks on the opium traffic and built up an organization many observers feel was even more comprehensive than Nhu's candestine apparatus. Nhu had depended on the Corsican syndicates to manage most of the opium smuggling between Laos and Saigon, but their charter airlines were evicted from Laos in early 1965. This forced the Ky apparatus to become much more directly involved in actual smuggling than Nhu's secret police had ever been. Through personal contacts in Laos, bulk quantities of refined and raw opium were shipped to airports in southern Laos, where they were picked up and smuggled into South Vietnam by the air force transport wing. The Vietnamese Customs Service was also controlled by the Ky machine, and substantial quantities of opium were flown directly into Saigon on regular commercial air flights from Laos , , Once the opium reached the capital it was distributed to smoking dens throughout the city that were protected by General Loan's police force. Finally, through its control over the Saigon port authority, the Ky apparatus was able to derive considerable revenues by taxing Corsican morphine exports to Europe and Chinese opium and morphine shipments to Hong Kong. Despite the growing importance of morphine exports, Ky's machine was still largely concerned with its own domestic opium market. The GI heroin epidemic was still five years in the future.