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 Drug agent thought
 she was onto something big

 Meneses' trail was getting warm when
 her superiors took her off the case

 Published: Aug. 19, 1996                                    [Other stories]

 BY GARY WEBB                                                'Crack' born
 Mercury News Staff Writer                                   in San
                                                             Francisco
 On a November afternoon in 1981, San Francisco DEA agent    Bay Area in
 Sandra Smith inadvertently uncovered the first direct       '74
 link between cocaine and the secret army the Central        It was a
 Intelligence Agency was assembling to overthrow the         failed
 government of Nicaragua.                                    attempt to
                                                             copy
 Smith, one of the first female Drug Enforcement             something
 Administration agents in the Bay Area, was investigating    else
 rumors that a cocaine ring run by Norwin Meneses was
 bringing drugs into California and, for some reason,        Shadowy
 sending weapons down to Central America.                    origins of
                                                             'crack'
 It was, she said, ''the only (case) that I ever worked,     epidemic
 in all the time I worked there, that I thought was really   Role of
 big.''                                                      CIA-linked
                                                             agents a
                                                             well-protected
                                                             secret until
                                                             now

 She had good reason to be excited. Federal agents had       [document link]
 amassed a thick file on Meneses, running across his              1981
 tracks in New Orleans and Los Angeles, a 1981 DEA             affidavit
 affidavit said. As far back as 1978, it said, agents knew     for search
 Meneses was bringing multi-kilo quantities of cocaine          warrant
 into the United States -- huge amounts by the standards
 of the day.

 Smith staked out San Francisco International Airport and
 tailed two of Meneses' Southern California dealers to a
 house at 8 Bellevue Ave. in Daly City.

 Investigation terminated

 Because Smith's investigation was terminated shortly
 afterward, she never learned who lived in that house. But
 two years later, its owner would become involved in one
 of the more curious incidents in the annals of the war on
 drugs.

 His name was Carlos Augusto Cabezas, and, like Norwin       [document link]
 Meneses, he'd been on the losing side of the Sandinista     Cross-examination
 revolution in Nicaragua. Then 37, Cabezas held degrees in     of Carlos
 law and accounting and ran the foreign division of the         Cabezas
 Bank of America in Managua. During the war, he was a
 pilot for the Guardia, the army of U.S.-backed dictator     [document link]
 Anastasio Somoza.                                             Statement
                                                               regarding
 Yet by February 1983, Cabezas was in jail in San              defendant
 Francisco, accused by the FBI of being part of a drug           Carlos
 ring that brought more than $100 million worth of cocaine      Cabezas
 into the country aboard Colombian freighters. Police
 cracked the case when they nabbed frogmen swimming ashore
 at Pier 96 near Hunters Point with 400 pounds of cocaine.
 At the time, it was the largest cocaine seizure in
 California history, and 35 people were ultimately
 arrested.

 Though Meneses was never charged, court records said
 there was ''a direct and ongoing connection between the
 Meneses organization and Carlos Cabezas.''

 Bay Area papers treated the case like any big drug bust     [document link]
 -- a front-page headline and a picture of the dope. But      Article from
 the Nicaraguan press saw something else entirely.                San
                                                               Francisco
 Managua press saw the story                                   Chronicle
                                                                 about
 ''Somoza supporters involved in drug trafficking,'' is         cocaine
 how the Feb. 20, 1983, edition of Barricada, a                 seizure
 pro-Sandinista daily in Managua, headlined its story.
 Citing unnamed Nicaraguan government sources, the story
 said that among the group arrested ''there were many who
 are linked to the ex-Guardia group of Somoza supporters
 in San Francisco, and through this link in the cocaine
 trafficking, they were giving economic support to the
 Contra revolution.''

 The first inkling here that the Frogman Case was
 something extraordinary came in June 1984, when the
 attorney for the cocaine ring's alleged leader, Julio
 Zavala, asked the government to return money seized from
 Zavala's apartment the morning of his arrest.

 Along with an assortment of arms, drugs, passports and
 catalogs for machine guns and silencers, agents found
 $36,800 in cash. Federal prosecutors declared it was drug
 money and said they would use it as evidence at Zavala's
 trial.

 But Zavala insisted the cash wasn't from drugs; he said     [document link]
 the money had been given to him by the Contra army to buy    Declaration
 supplies in the United States. To prove it, two exiled       of Zavala's
 Contra leaders wrote the court and swore that the money        defense
 seized from the cocaine dealer was ''for the                  attorney,
 reinstatement of democracy in Nicaragua.''                   Judd Iverson

 Those letters were hurriedly sealed after prosecutors
 invoked the Classified Information Procedures Act, a law
 designed to keep national security secrets from leaking
 out during trials.

 The money is returned                                       [document link]
                                                              Stipulation
 Soon, U.S. Attorney Joseph P. Russoniello decided he          regarding
 really didn't need the money as evidence. Nor did he want    disposition
 it forfeited to the government, which is standard             of funds
 procedure in drug cases. Instead, on Oct. 2, 1984, the
 Justice Department gave Zavala the money back.

 But that wasn't the end of the issue.

 A few weeks later, at Zavala's trial, Carlos Cabezas took
 the stand as a government witness against his old boss
 and exposed additional details of the Frogman ring's ties
 to the CIA's army.

 Cabezas said Zavala, who was convicted of the drug          [document link]
 charges, had sent him to Costa Rica in late 1981 to pick      Transcript
 up two kilos of cocaine from a man named Horacio Pereira,      of court
 an exiled Nicaraguan businessman, and bring the cocaine      proceedings
 back to San Francisco. But when he got there, Pereira had    for U.S. vs
 changed his mind and wouldn't hand over the dope because     Julio Zavala
 he'd heard Zavala was drinking heavily.

 Cabezas said Pereira didn't want someone unreliable
 handling the money because he ''was helping the Contra
 revolution in Nicaragua.''

 Cabezas said he agreed to be responsible for the Contras'
 cocaine profits and said Pereira eventually sold him a
 total of 12 kilos, worth at that time about $600,000
 wholesale.

 Pereira, a business associate of Norwin Meneses, was        [document link]
 later convicted on drug charges in Costa Rica. Secret         FBI report
 tapes made during that investigation revealed he was in       regarding
 frequent contact with Contra commanders. In addition, a        cocaine
 1982 FBI report -- which wasn't made public until 1988 --    distribution
 identified him and two other Contra leaders as the             by Julio
 cocaine suppliers for the Frogman ring. Pereira was            Zavala
 ''chopped into tiny bits'' a few years ago as a result of
 a drug debt, according to Meneses.

 Why DEA agent Smith's investigation of Meneses -- which
 predated the FBI's Frogman bust by two years -- was
 halted is not clear. Smith said her superiors didn't
 share her enthusiasm for the case and she was sent off to
 investigate motorcycle gangs in Oakland.

 ''I'm not so sure the DEA management took (my
 investigation) seriously enough to allow me the time and
 the assistance I would have needed,'' she said.

 When she quit in 1984, Smith asked her fellow DEA agents
 if they wanted the intelligence files she'd collected on
 Meneses in case ''anyone might be interested in picking
 up where I left off,'' she recalled.

 ''No one was. So I had a lot of notes that I had made
 that, just for lack of doing anything else (with them), I
 just shredded. No one was interested.''

 TUESDAY: The impact of the crack epidemic on the black
 community, and why justice hasn't been for all.

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