The Looting of Asia, by Chalmers Johnson, book review

  • Gold Warriors: America’s Secret Recovery of Yamashita’s Gold by Sterling Seagrave and Peggy Seagrave
    Verso, 332 pp, £17.00, September 2003, ISBN 1 85984 542 8

“It may be pointless to try to establish which World War Two Axis aggressor, Germany or Japan, was the more brutal to the peoples it victimised. The Germans killed six million Jews and 20 million Russians; the Japanese slaughtered as many as 30 million Filipinos, Malays, Vietnamese, Cambodians, Indonesians and Burmese, at least 23 million of them ethnic Chinese. Both nations looted the countries they conquered on a monumental scale, though Japan plundered more, over a longer period, than the Nazis. Both conquerors enslaved millions and exploited them as forced labourers – and, in the case of the Japanese, as prostitutes for front-line troops. If you were a Nazi prisoner of war from Britain, America, Australia, New Zealand or Canada (but not Russia) you faced a 4 per cent chance of not surviving the war; the death rate for Allied POWs held by the Japanese was nearly 30 per cent.

The real differences between the two nations, however, developed in the years and decades after 1945. Survivors and relatives of victims of the Holocaust have worked for almost six decades to win compensation from German corporations for slave labour and to regain possession of works of art stolen from their homes and offices. Litigation continues against Swiss banks that hid much of the Nazi loot. As recently as July 2001, the Austrian Government began to disburse some $300 million out of an endowment of almost $500 million to more than 100,000 former slave labourers. The German Government has long recognised that, in order to re-establish relations of mutual respect with the countries it pillaged, serious gestures towards restitution are necessary. It has so far paid more than $45 billion in compensation and reparations. Japan, on the other hand, has given its victims a mere $3 billion, while giving its own nationals around $400 billion in compensation for war losses.

One reason for these differences is that victims of the Nazis have been politically influential in the US and Britain, forcing their Governments to put pressure on Germany, whereas Japan’s victims live in countries that for most of the postwar period were torn by revolution, anticolonial movements and civil wars. This has begun to change with the rise of Sino-American activists. The success of Iris Chang’s The Rape of Nanking (1997), a book the Japanese establishment did everything in its power to impugn, heralded the emergence of this group.

More significant, however, are differences in US Government policies towards the two countries. From the moment of Germany’s defeat, the United States was active in apprehending war criminals, denazifying German society, and collecting and protecting archives of the Nazi regime, all of which have by now been declassified. By contrast, from the moment of Japan’s defeat, the US Government sought to exonerate the Emperor and his relatives from any responsibility for the war. By 1948, it was seeking to restore the wartime ruling class to positions of power (Japan’s wartime minister of munitions, Nobusuke Kishi, for example, was prime minister from 1957 to 1960). The US keeps many of its archives concerned with postwar Japan highly classified, in violation of its own laws.

Most important, John Foster Dulles, President Truman’s special envoy to Japan charged with ending the occupation, wrote the peace treaty of 1951 in such a way that most former POWs and civilian victims of Japan are prevented from obtaining any form of compensation from either the Japanese Government or private Japanese corporations who profited from their slave labour. He did so in perfect secrecy and forced the other Allies to accept his draft (except for China and Russia, which did not sign).

Article 14(b) of the treaty, signed at San Francisco on 8 September 1951, specifies: ‘Except as otherwise provided in the present Treaty, the Allied Powers waive all reparations claims of the Allied Powers, other claims of the Allied Powers and their nationals arising out of any actions taken by Japan and its nationals in the course of the prosecution of the war, and claims of the Allied Powers for direct military costs of occupation.’ As recently as 25 September 2001, three former American Ambassadors to Japan – Thomas Foley, a former Speaker of the House of Representatives, Michael Armacost, the president of the Brookings Institution, and Walter Mondale, Carter’s Vice-President – wrote a joint letter to the Washington Post denouncing Congress for its willingness even to think about helping former American slave labourers get around the treaty.

Why do these attitudes protecting and excusing Japan persist? Why has the US pursued such divergent policies towards postwar Germany and Japan? Why was the peace treaty written in the way it was? Many reasons have been offered over the years, including that Japan was too poor to pay, that these policies were necessary to keep postwar Japan from ‘going Communist’, and that the Emperor and Japanese people had been misled into war by a cabal of insane militarists, all of whom the occupation had eliminated from positions of responsibility. The explanation offered in the Seagraves’ book is considerably more sinister. It concerns what the United States did with Japan’s loot once it discovered how much of it there was, the form it took, and how little influence its original owners had.

Almost as soon as the war was over, American forces began to discover stupendous caches of Japanese war treasure. General MacArthur, in charge of the occupation, reported finding ‘great hoards of gold, silver, precious stones, foreign postage stamps, engraving plates and . . . currency not legal in Japan’. His officials arrested the underworld boss Yoshio Kodama, who had worked in China during the war, selling opium and supervising the collection and shipment to Japan of industrial metals such as tungsten, titanium and platinum. Japan was by far the largest opium producer in Asia throughout the first half of the 20th century, initially in its colony of Korea and then in Manchuria, which it seized in 1931. Kodama supplied heroin and liquor to occupied China in return for gold coins, jewellery and objets d’art, which the Japanese melted down into ingots.

Kodama returned to Japan after the surrender immensely rich. Before going to prison he transferred part of his booty to the conservative politicians Ichiro Hatoyama and Ichiro Kono, who used the proceeds to finance the newly created Liberal Party, precursor of the party that has ruled Japan almost uninterruptedly since 1949. When Kodama was released from prison, also in 1949, he went to work for the CIA and later became the chief agent in Japan for the Lockheed Aircraft Company, bribing and blackmailing politicians to buy the Lockheed F-104 fighter and the L-1011 airbus. With his stolen wealth, underworld ties and history as a supporter of militarism, Kodama became one of the godfathers of pro-American single-party rule in Japan.

He was not alone in his war-profiteering. One of the Seagraves’ more controversial contentions is that the looting of Asia took place under the supervision of the Imperial household. This contradicts the American fiction that the Emperor was a pacifist and a mere figurehead observer of the war. The Seagraves convincingly argue that after Japan’s full-scale invasion of China on 7 July 1937, Emperor Hirohito appointed one of his brothers, Prince Chichibu, to head a secret organisation called kin no yuri (‘Golden Lily’) whose function was to ensure that contraband was properly accounted for and not diverted by military officers or other insiders, such as Kodama, for their own enrichment. Putting an Imperial prince in charge was a guarantee that everyone, even the most senior commanders, would follow orders and that the Emperor personally would become immensely rich.

The Emperor also posted Prince Tsuneyoshi Takeda, a first cousin, to the staff of the Kwantung Army in Manchuria and later as his personal liaison officer to the Saigon headquarters of General Count Hisaichi Terauchi, to supervise looting and ensure that the proceeds were shipped to Japan in areas under Terauchi’s control. Although assigned to Saigon, Takeda worked almost exclusively in the Philippines as second in command to Chichibu. Hirohito named Prince Yasuhiko Asaka, his uncle, to be deputy commander of the Central China Area Army, in which capacity he commanded the final assault on Nanking, the Chinese capital, between 2 December and 6 December 1937, and allegedly gave the order to ‘kill all captives’. The Japanese removed some 6000 tonnes of gold from Chiang Kai-shek’s treasury and the homes and offices of the leaders of Nationalist China. All three princes were graduates of the military academy and all three survived the war; Chichibu died in 1953 of tuberculosis but the other two lived to a very ripe old age.

With the Japanese capture in the winter and spring of 1941-42 of all of South-East Asia, including the Philippines and Indonesia, the work of Golden Lily increased many times over. In addition to the monetary assets of the Dutch, British, French and Americans in their respective colonies, Golden Lily operatives absconded with as much of the wealth of the overseas Chinese populations as they could find, tore gilt from Buddhist temples, stole solid gold Buddhas from Burma, sold opium to the local populations and collected gemstones from anyone who had any. The gold was melted down into ingots at a big Japanese-run smelter in Ipoh, Malaya and marked with its degree of purity and weight. Chichibu and his staff inventoried all this plunder and put it aboard boats, usually disguised as hospital ships, bound for Japan. There was no overland route to Korea, the closest point on the mainland to Japan, until very briefly in late 1944.

A lot of gold and gems were lost as a result of American submarine warfare; and by early 1943, it was no longer possible for the Japanese to break through the Allied blockade of the main islands except by submarine. Chichibu therefore shifted his headquarters from Singapore to Manila and ordered all the shipments to head for Philippine ports. He and his staff reasoned that the war would end with a negotiated settlement, and they believed (or imagined) that the Americans could be persuaded to transfer the Philippines to Japan in return for an end to the war. From 1942, Chichibu supervised the building of 175 ‘Imperial’ storage sites to hide the treasure until after the war was over.


Slave labourers and POWs dug tunnels and caves and then were invariably buried alive, often along with Japanese officers and soldiers, when the sites were sealed to keep their locations secret. Each cache was booby-trapped, and the few extant Golden Lily maps are elaborately encoded to hide exact location, depth, air vents (if any) and types of booby trap (e.g. large aerial bombs, sand traps, poison gases). In Manila itself, Golden Lily constructed treasure caverns in the dungeon of the old Spanish Fort Santiago, within the former American military headquarters (Fort McKinley, now Fort Bonifacio), and under the cathedral, all places the Japanese rightly assumed the Americans would not bomb. As the war came to an end, Chichibu and Takeda escaped back to Japan by submarine.

Soon after the liberation of the Philippines, American special agents began to discover a few of the hidden gold repositories. The key figure was a Filipino American born in Luzon in either 1901 or 1907 named Severino Garcia Diaz Santa Romana (and several other aliases), who in the mid-1940s worked for MacArthur’s chief intelligence officer, General Willoughby. As a commando behind the lines in the Philippines he had once witnessed the unloading of heavy boxes from a Japanese ship, their being placed in a tunnel, and the entrance being dynamited shut.

He had already suspected what was going on. After the war, Santa Romana was joined in Manila by Captain Edward Lansdale of the OSS, the CIA’s predecessor. Lansdale later became one of America’s most notorious Cold Warriors, manipulating governments and armies in the Philippines and French Indo-China. He retired as a major-general in the Air Force. Together, Santa Romana and Lansdale tortured the driver of General Tomoyuki Yamashita, Japan’s last commander in the Philippines, forcing him to divulge the places where he had driven Yamashita in the last months of the war. Using hand-picked troops from the US Army’s Corps of Engineers, these two opened about a dozen Golden Lily sites in the high valleys north of Manila. They were astonished to find stacks of gold ingots higher than their heads and reported this to their superiors.

Lansdale was sent to Tokyo to brief MacArthur and Willoughby, and they, in turn, ordered Lansdale to Washington to report to Truman’s national security aide, Clark Clifford. As a result, Robert Anderson, on the staff of the Secretary of War, Henry Stimson, returned to Tokyo with Lansdale and, according to the Seagraves, then flew secretly with MacArthur to the Philippines, where they personally inspected several caverns. They concluded that what had been found in Luzon, combined with the caches the Occupation had uncovered in Japan, amounted to several billion dollars’ worth of war booty.


Back in Washington, it was decided at the highest levels, presumably by Truman, to keep these discoveries secret and to funnel the money into various off-the-books slush funds to finance the clandestine activities of the CIA. One reason, it has been alleged, was to maintain the price of gold and the system of fixed currency exchange rates based on gold, which had been decided at Bretton Woods in 1944. Just like the South African diamond cartel, Washington’s plotters feared what would happen if this much ‘new’ gold was suddenly injected into world markets.

They also realised that exposure of the Imperial household’s role in the looting of Asia would destroy their by now carefully constructed cover story of the Emperor as a peaceful marine biologist. Washington concluded that even though Japan, or at least the Emperor, had ample funds to pay compensation to Allied POWs, because of the other deceptions, the peace treaty would have to be written in such a way that Japan’s wealth would remain secret. The treaty therefore gave up all claims for compensation on behalf of American POWs. To keep the Santa Romana-Lansdale recoveries secret, MacArthur also decided to get rid of Yamashita, who had accompanied Chichibu on many site closings. After a hastily put-together court martial for war crimes, Yamashita was hanged on 23 February 1946.

On orders from Washington, Lansdale supervised the recovery of several Golden Lily vaults, inventoried the bullion, and had it trucked to warehouses at the US Naval base at Subic Bay or the Air Force base at Clark Field. According to the Seagraves, two members of Stimson’s staff, together with financial experts from the newly formed CIA, instructed Santa Romana in how to deposit the gold in 176 reliable banks in 42 different countries. These deposits were made in his own name or in one of his numerous aliases in order to keep the identity of the true owners secret. Once the gold was in their vaults, the banks would issue certificates that are even more negotiable than money, being backed by gold itself.

With this seemingly inexhaustible source of cash, the CIA set up slush funds to influence politics in Japan, Greece, Italy, Britain and many other places around the world. For example, money from what was called the ‘M-Fund’ (named after Major-General William Marquat of MacArthur’s staff) was secretly employed to pay for Japan’s initial rearmament after the outbreak of the Korean War, since the Japanese Diet itself refused to appropriate money for the purpose. The various uses to which these funds were put over the years, among them helping to finance the Nicaraguan counter-revolutionaries in their attacks on the elected government in Managua (the Iran-Contra scandal of the Reagan Presidency), would require another volume. Suffice it to say that virtually everyone known to have been involved with the secret CIA slush funds derived from Yamashita’s gold has had their career ruined.

Santa Romana died in 1974, leaving several wills, including a final holographic testament, naming Tarciana Rodriguez, a Filipina who was the official treasurer of his various companies, and Luz Rambano, his common-law wife, as his main heirs. They set out to recover the gold since, after all, it was in his name in various banks and they had custody of all the account books, secret code names, amounts, records of interest paid, and other official documents proving its existence.

Using the famous San Francisco attorney Melvin Belli as her representative, Rambano actually filed a suit against John Reed, then CEO of Citibank in New York and today president of the New York Stock Exchange, charging him with ‘wrongful conversion’: that is, selling $20 billion of Santa Romana’s gold and converting the proceeds to his own use. The Seagraves vividly describe the extraordinary meetings that took place between Rambano and Reed, with phalanxes of lawyers on both sides, in Citibank’s boardroom in New York. Reed apparently ordered the gold moved to Cititrust in the Bahamas.

Santa Romana and Lansdale by no means discovered all the Golden Lily sites. Over the years, a cottage industry developed of treasure hunters digging holes in obscure places in Luzon, often claiming they were looking for the remains of family or lovers. A regular feature of life in the village of Bambang, in the Cagayan Valley, Nueva Viscaya province – one of the places where Takeda was most active – is the appearance of elderly Japanese ‘tourists’ bearing not the usual bag of golf clubs but sophisticated metal detectors. This area of the Philippines is one where guerrillas of the New People’s Army are active, and it has no major tourist attractions. Many local Filipinos have gone into business as professional ‘pointers’, telling gullible visitors, for a fee, where to search, before skipping town.

Twenty years after Santa Romana stopped searching in 1947, a secondary – and quite violent – hunt for gold began, carried out by Ferdinand Marcos. Marcos recovered at least $14 billion in gold – $6 billion from the sunken Japanese cruiser Nachi in Manila Bay, and $8 billion from the tunnel known as ‘Teresa 2’, 38 miles south of Manila in Rizal province. During 2001, Philippine politics were rocked when the former solicitor-general Francisco Chavez alleged that Irene Marcos-Araneta, Marcos’s youngest daughter, maintained an account worth $13.2 billion in Switzerland.

Its existence apparently came to light when she tried to move it from the Union Bank of Switzerland to Deutsche Bank in Düsseldorf. Marcos, who personally supervised the opening of at least six sites and routinely used his thugs to steal any treasure that local peasants happened to find, died in exile in Honolulu in 1989. In 1998, the Supreme Court of Hawaii affirmed a judgment against his estate for the astonishing sum of $1.4 billion in favour of a Filipino who retrieved a solid gold Buddha and then had it stolen from him by Marcos, who also had him tortured for protesting.

The key to Marcos’s discoveries was the services of one Robert Curtis, a Nevada chemist, metallurgist and mining engineer, whom Marcos hired to resmelt his gold, to bring it up to current international requirements for purity so that it could be marketed internationally. Curtis proved to be the only person who could decipher the few Golden Lily maps that survived, in the possession of Takeda’s former valet, a Filipino youth from Bambang. The Seagraves describe very thoroughly Curtis’s activities, including his narrow escape from death on the orders of Marcos’s henchman General Ver, after he struck gold at Teresa 2.

The Seagraves’ narrative is comprehensive, but they are not fully reliable as historians. They have a tendency to overreach, exaggerating the roles of Japanese gangsters and ex-military American bit-players when the bankers, politicians and CIA operatives are scary enough. They know the Philippines well, but are unreliable on Japan and do not read Japanese. The book is full of errors that could easily be corrected by a second-year student of the language – the ship they repeatedly call the Huzi is accurately romanised Fuji; the important Japan Sea port is Maizuru, not Maisaru; tairiki is not a Japanese word: they mean tairiku ronin (a ‘Continental adventurer’ or a ‘China carpetbagger’); and their mysterious Lord Ichivara is an absurdity – no one was ever called ‘Lord’ in postwar Japan and Ichivara is an impossible name (it is surely Ishihara).

The authors seem to sense that they might have a credibility problem, and have therefore taken the unusual step of making available two CDs containing more than 900 megabytes of documents, maps and photographs assembled in the course of their research. The CDs can be ordered from their website (www.bowstring.net). These are invaluable, particularly in what they reveal of the US Government’s vicious sting operation against a former American deputy Attorney General, Norbert Schlei.

Schlei represented about sixty Japanese people on whom the Japanese Government had unloaded huge promissory notes in an attempt to hide the M-Fund after the former Prime Minister Kakuei Tanaka was convicted of bribery. The Government persisted in calling these notes forgeries (thus engaging in another form of illegal conversion) and Schlei’s career was ruined. Gold Warriors is easily the best guide available to the scandal of ‘Yamashita’s gold’, and the authors play fair with their readers by supplying them with massive amounts of their raw research materials.

The Seagraves end their ‘authors’ note’ with these words: ‘As a precaution, should anything odd happen, we have arranged for this book and all its documentation to be put up on the Internet at a number of sites. If we are murdered, readers will have no difficulty figuring out who “they” are.’ Unfortunately, the list of potential killers from this book alone would include at least several thousand generals, spies, bankers, politicians, lawyers, treasure hunters and thieves from half a dozen countries. So I wish the Seagraves a long life. Meanwhile, a substantial portion of the treasure stolen by the Japanese from East Asian countries remains buried in the Philippines.

New Epilogue ~ GOLD WARRIORS by Sterling & Peggy Seagrave

Men in Black
We cannot blame private banks and government agencies for these crimes of grand larceny without identifying some of the spiders that wove the web of influence. That General Haig successfully redeemed a “57” in Tokyo, thanks to a personal letter from President George H.W. Bush, reveals the vital role of influence peddling at the highest levels of state. It is no longer the climax of a career to become an American president or a British prime minister.

More important is whether the president or prime minister can look forward, on retirement from office, to becoming a board member of the foremost influence peddlers in Washington, such as The Carlyle Group.1 As US Supreme Court Justice Felix Frankfurter wrote: “The real rulers in Washington are invisible, and exercise power from behind the scenes.”2 As far back as 1922, New York Mayor John Hylan said: “The invisible government is like a giant octopus that sprawls its slimy length over … the nation. At the head of this octopus are the Rockefeller … interests and a small group of powerful banking houses … who virtually run the US Government for their own selfish purposes.”3 He got it right.

The corruption obvious in the Federal Reserve system, the gold cartel and big banks, has turned America into a nation most of the world no longer respects – a nation driven by greed, greased by influence-peddling, controlled by fear, and misled by lies. Since 1945, its all-consuming greed has been hidden by the veil of National Security. Despite the collapse of the “communist menace” that justified excessive secrecy during the Cold War, the corrupt Bush administration has shown how new enemies can always be found to scare Americans into submission and compliance.

The Carlyle Group is only one of many organizations whose boards are composed of former presidents, former prime ministers, and other top government officials able to arrange mergers and acquisitions, which benefit from their advance knowledge of future government defense contract requirements. Unless you are part of this network, your prospects in life range from being cannon- fodder in Iraq, to being a serf in the pseudo-Puritan feudal society of the Neo-Cons.

In the Puritan-ethic, wealth is evidence of God’s approval of you as a person. The richer you are, the more God approves of you. Once private bankers gained monopoly control of gold and the supply of money in 1913, America’s Robber Barons moulted into Puritan nobility, a new aristocracy based on money in a country that had totally rejected aristocracy of any type.

Not content to be merely super-rich, the monopolists saw themselves as “The Illuminati”, symbolized by the all-seeing eye at the top of the pyramid on U.S. currency. Many of the richest families in America learned to avoid drawing attention to themselves – among the Rockefellers for example, only Nelson courted publicity and involved himself personally in covert operations, becoming an intimate friend of General Lansdale and other spooks. As a consequence of this low profile, the label “The Octopus” has since been relegated to their cadre of servants, who do the dirty work in hope of someday joining the overlords.

Among the most successful of these servants were Allen and John Foster Dulles, whose father gave Sunday sermons at a church in a community of ‘Illuminati’. In due course, the Dulles brothers became powerful servants of the Harrimans, Morgans, Mellons, Warburgs and Rockefellers, from the 1920s to the ends of their lives.4 The Bush family climbed similarly.

Another comer was John J. McCloy, who rose from relative poverty to become a top Rockefeller man and head of the World Bank. These were some of the spiders who wove the web linking the Fed to the Black Eagle Trust, the M-Fund, Project Hammer, the CIA, a string of CIA black banks around the world, and CIA savings and loan companies inside America.

James Jesus Angleton once told a journalist bitterly that the only reason he was named chief of counter- intelligence at the CIA was because he had taken an oath that he would never subject the Dulles brothers to lie-detector tests about their collusion with Nazi Party bankers in the 1930s. Men in black need to remain unseen.

As they put the black economy in place, behind the curtain of National Security, they found ways to make most gold reserves disappear into coffers only they could access – as illustrated by the numbered Swiss accounts held by White House staffers during the Iran-Contra scandal, and the way Santa Romana’s gold accounts have been blocked, or moved offshore, by banks that refuse to acknowledge the rights of his heirs.

Look closely enough, however, and the hand does not move faster than the eye. Just follow the filaments in the web. For example: Currently, when “black gold” is recovered from Japanese treasure vaults in the Philippines it enters the world market through an agency in Australia with genetic ties to the Bank of England. First the ingots are taken to Manila where they are assayed by international gold buyers (one of whom is our source). Once satisfied with the assay, the broker buys the gold at a deep discount, then airlifts or sealifts it to Australia where it is “sanctified” by Johnson Matthey Bank (JMB), the UK gold bank that worked with President Marcos.

Following a major scandal with questions in Parliament, JMB was absorbed in late 1984 by the Bank of England. Two years later, in April 1986, the JMB bullion operation was sold to the biggest Australian banking, mining, and bullion syndicate, Mase-Westpac. Our gold broker source swears that upon reaching Australia the gold is re-smelted to London standard by JMB and re-papered by JMB, and then simply joins the flow of newly-mined gold shipped from Australia to the City of London, where it enters the world market.5 That at least appears to establish a direct link between gold laundering and the BoE.

Sources in Manila also insist that Sir Evelyn de Rothschild, whose family is so closely identified with the Bank of England and the US Fed, is the true majority owner of the Benguet goldmines in the Philippines. There is nothing startling about that, in and of itself, but the Benguet board has long been dominated by members of Imelda Marcos’s Romualdez family, and still is today. Imelda’s children had the use of a Rothschild mansion in London when they were attending school.

As the biggest goldmine in the Philippines, Benguet always has been one of the primary channels for war-looted gold leaving Manila. During the Marcos years, a big piece of Benguet was acquired by a group of Wall Street venture capitalists who shared property ownership and a casino in the Bahamas with the Mafia’s Meyer Lansky. So there are interlocking directorships that reveal more when seen together, than when seen apart.

Let’s follow the filaments further: Lansky, in turn, was closely associated with top CIA banker Paul Helliwell, also based in the Bahamas, who created the chain of CIA black money banks throughout the world, including Castle Bank in the Bahamas, Nugan Hand Bank in Sydney and Honolulu, and BCCI (Bank of Credit and Commerce International), now said to be reincarnated as Pinnacle. Helliwell’s ultimate boss during and after WW2, was Wall Street attorney and former OSS chief William “Wild Bill” Donovan, who also was the boss of Allen Dulles, William Colby, Bill Casey, and others who later became heads of the CIA – and an intimate friend of Meyer Lansky.

“Almost every key man in the OSS had direct connections with large international industrial and banking interests; among those listed as having been key OSS executives were Julius Spencer Morgan, and Henry Sturgis Morgan, sons of the late J.P. Morgan, who were special assistants to Donovan…”6

The front man for Helliwell was banker General Erle Cocke, a Grand Commander of the Knights of Malta, to which Donovan and many other OSS and CIA brass belonged – which was, in turn, closely linked to Vatican secret services. Knights of Malta membership is dominated by reactionary European aristocracy and Americans whose names read like a Who’s Who of the Black Eagle Trust: Former OSS chief Donovan, former CIA top brass William Colby, John McCone, William Casey, George H. W. Bush, James Jesus Angleton, and Vernon Walters. Also on the roster were General Douglas MacArthur’s intimates, General Charles Willoughby and General Bonner Fellers. Last but not least, former Secretary of State Alexander Haig who negotiated the “57” in Tokyo with the help of the first President Bush, described in Chapter 9.

Donovan was the chief spider – America’s original man in black. It was Donovan, working behind the scenes with John J. McCloy and the Dulles brothers, who set up the global network of secret funds and black banks that made creative use of the Black Eagle Trust, and laundered drug profits before they entered U.S. banks to bolster the American economy. This was racketeering on a global scale, run by covert agents of the U.S. Government, with proceeds so huge the only way to hide them was by claiming National Security was constantly at stake.

Far more effective than two sets of accounting ledgers, National Security kept everything off the record. To protect BCCI, Nugan Hand, and other black banks, people were murdered, including Frank Nugan, journalist Danny Casolaro, and former CIA Director William Colby, “legal counsel” to the black banks, whose body was found floating in the Potomac River estuary in 1996.

Like the careers of the Dulles brothers, Donovan’s life wove gold, drugs, espionage, underworld, and global politics together using personal connections. In 1923, he was a little-known Assistant U.S. Attorney in the state of New York, who became friends with super-rich Albert Lasker, one of the heads of the General American Tank Car Company, which had the first patent for a welded petroleum railway tank car (without rivets) and dominated the shipment of Rockefeller petroleum on Harriman railways. This, plus Lasker’s tight family connections with Germany, and his financial cronyism with most of the Robber Barons, allowed him to introduce Donovan to all the right people.

With Lasker’s encouragement, Donovan became a celebrity when he and Federal Bureau of Narcotics agent Ken Oyler cracked an major drug ring in Buffalo, and made a huge drug seizure in Canada, making America look virtuous just before the 1924 Geneva Opium Conference. These drugs were traced to the Golden Triangle, where the borders of Burma, China, Laos and Thailand meet. Lasker introduced Donovan to the Rockefellers and Harrimans. Oyler introduced Donovan to FBN chief Harry Anslinger, who got his job as drug czar because he married the niece of Coolidge Administration Treasury Secretary Andrew Mellon. Mellon was one of the Robber Barons who had set up the Federal Reserve system. Mellon’s son-in-law, diplomat David K. Bruce, later helped Allen Dulles, Anslinger and Donovan organize the OSS.7 It was practically a Mellon family enterprise.

Once OSS was set up, Donovan became heavily involved in opium and heroin, mingling narcotics with espionage during the war.8 He learned a lot from the Brits. In China, he worked with SOE’s William and John Keswick of Jardine-Matheson, Britain’s biggest opium cartel in Asia, with a controlling interest in Hongkong & Shanghai Banking Corporation, and ties to the Openheimer family through the giant mining firm Rio Tinto Zinc. (HSBC was one of the main repositories of Santy’s gold, and has blocked all efforts by his heirs to access it.) Together, Donovan and the Keswicks arranged deals with KMT spy-boss General Tai Li and his underworld business partner, druglord Du Yueh-sheng. So did Commander “Mary” Miles of SACO, the Sino American Cooperative Organization set up by Donovan’s old friend Navy Secretary Frank Knox, as cover in China for the Office of Naval Intelligence (ONI). Their currency in covert operations was drugs, gold, and diamonds.


Donovan also set up a special office in OSS called X-2, which spied on foreign insurance companies – many of the biggest being in Nazi Germany. His partner in running X-2 was Cornelius Starr, who started out selling insurance in Shanghai in 1919 and went on to build American International Group (AIG), into one of the largest insurance companies on earth today.9Early in the war, Donovan sent James Jesus Angleton to Rome as chief of X-2 and other OSS black operations there. Angleton paid Sicilian and Calabrian Mafiosi to smuggle OSS agents into Sicily and across to the toe of Italy.10 In appreciation, Angleton and Donovan put Sicilian gangsters in positions of political leverage in Palermo and Rome, and kept them supplied with gold and guns. In America, the Mafia helped government agents keep an eye out for Nazi spies along the Atlantic and Gulf waterfronts, on the understanding that when the war ended, Mafia dons currently serving time in federal penitentiaries would be freed and “deported” back to Sicily. In effect, Donovan and his circle of intimates wove a web linking the underworld in Asia, Europe, and America, to U.S. banks and the U.S. Government. This would pay off richly during the Cold War.

In 1946, when the OSS was shut down by Truman, to be succeeded by the CIA, Donovan pretended to resume private practice as a Wall Street attorney, but in reality spent most of his time helping Paul Helliwell set up black banks to make use of the Black Eagle Trust. To disguise these postwar operations, Donovan founded World Commerce Corporation (WCC) with financial backing from the Rockefellers, particularly Nelson Rockefeller.


One of WCC’s main objectives was to buy and sell surplus U.S. weapons and munitions to foreign underworld groups, like the Chinese and Italian mafias, in return for their cooperation against communist and socialist political parties, or labor unions. Author Douglas Valentine called it a sort of private Marshall Plan, a cross between “an import-export combine and a commercially oriented espionage network”.1112 To maintain secrecy, WCC was registered in Panama. Many of its operations involved the Nationalist Chinese in Asia, and the Sicilian and Calabrian Mafia in Europe. The Nationalist Chinese provided the hard drugs, and the Sicilians moved them into the US through Meyer Lansky in Havana and Santo Traficante in Tampa, or through Mexico to Bugsy Siegel in California.

Mixing drugs and espionage in Italy, Donovan and Angleton forged a three-way alliance with the Mafia, the postwar Christian Democratic Party, and the Vatican. New York narcotics boss Frank Coppola was recruited to be Donovan’s liaison with Sicilian godfather Salvatore Giuliano. In May 1947, paid by Donovan and provided with guns by Coppola, Giuliano’s men murdered eight people and wounded 33 in a Sicilian village that had made the mistake of voting for Communist Party candidates. Coppola’s main mission was to get Mafiosi into the Christian Democratic party, and the party’s deputies into government, while eliminating rival Communist candidates, killing them if necessary. Their reign of terror was so successful that by 1948, Italian Communist Party boss Palmiro Togliatti accused the US of subverting Italy’s elections, not the first or last time that was voiced. The point here is that it was not strictly a CIA operation, it was a Donovan operation supported by the CIA, and Donovan’s WCC had been set up with Rockefeller money. Where do you draw the line?


In Asia, Donovan was a registered agent of the Thai government, creating an alliance between the disgraced Nationalist regime on Taiwan and crooked Thai generals. Together, they moved opium and heroin out of the Golden Triangle, bypassing old French channels of the Union Corse, which had gone through Laos and Vietnam. To dominate the Asian drug trade, remnant Nationalist Chinese armies stranded in southwest China crossed the border into Burma where they seized control of the Golden Triangle.

They were lavishly supported by Washington on the pretext that they were carrying out guerrilla operations against the Chinese Communists. These KMT forces became the main movers of drugs into the international market, aided by the CIA airline Air America, and the CIA shipping line Sea Supply, set up by Helliwell and Donovan.


Air America was dreamed up by Donovan and Old China Hands William Pawley, Whiting Willauer, and General Claire Chennault. In the 1930s, Pawley had set up the Central Aircraft Manufacturing Company (CAMCO) for Madame Chiang Kai-shek, to assemble planes for what later were called the Flying Tigers. Pawley was paid lavishly by the Chiang regime, the Soong family, and druglord Du Yueh-sheng. In 1950, Donovan and Pawley bought out Chennault and took over his beat-up airline.

They persuaded the China Lobby to pay Chennault $5-million for his airline, which was re-named Air America. Pawley then “retired” to Havana where he went into business with Meyer Lansky. Pawley spent lavishly, buying sugar plantations, an airline, and a bus company. When Fidel Castro seized control of Cuba from the Batista regime, Pawley escaped to Miami where he continued his alliance with Lansky, using a Miami bus company as his front.13 Meanwhile, Pawley helped Donovan persuade Texas right-wing oil man H.L. Hunt to support the KMT regime with millions of dollars for covert operations. Valentine points out that Pawley and Donovan were aided in all this by CIA’s Allen Dulles, Admiral Charles Cooke, ambassador William Bullitt, Brooklyn publisher M. Preston Goodfellow, former SOE agent William Keswick, and Satiris Fassoulis, vice president of Commerce International China, a subsidiary of Donovan’s WCC.

Donovan kept up his close ties to General Chennault and former Flying Tigers’ physician Dr. Margaret Chung, said to be a key link between the KMT drug generals and Bugsy Siegel. While the China Lobby insisted that all narcotics came from Communist China, the KMT’s General Tuan and General Li assured us over dinner in Chiangmai that they were the ones moving the drugs.14 We observed their opium-laden mule trains, trucks, and planes, and airdrops over the Gulf of Thailand to waiting Taiwanese cargo and fishing vessels.

One of Donovan’s top financial allies was Helliwell’s front man General Erle Cocke, whose family had been in banking for generations. After WW2, Cocke served in the World Bank and IMF, and as head of the American Legion, but also on the board of CIA banks such as Nugan Hand. In April 2000, just two weeks before he died of pancreatic cancer, General Cocke agreed to give a legal deposition to the attorney of six plaintiffs who said they had been swindled by former intelligence agents of the South African Apartheid regime.


The scam was typical of many rackets run under a part of the Black Eagle Trust called Project Hammer, in which unsuspecting investors were encouraged to put up money for projects in the Third World, which then collapsed, swallowing their money.15

In his deposition, reproduced on our CDs, General Cocke said he knew a lot about the Black Eagle Trust’s Project Hammer because he had been a part of the Donovan spider web for decades. He testified that by the 1990s, he knew personally that Project Hammer had assets exceeding $1-trillion. Cocke testified that no Project Hammer transaction could take place without the personal approval of Citibank CEO John Reed.

General Cocke explained that Reed was “the cheese” (the Big Cheese, boss, or overseer) of Project Hammer. “I had no problem seeing the president of the United States, but I could never get in to see John Reed.” Reed was third in a string of Citibank CEOs groomed by Donovan, each the mentor of the next, starting with George Moore who was an OSS agent during the war. Rising quickly to head Citibank after the war, he trained Walter Wriston as his replacement, who in turn trained John Reed.16

Ties between Citibank and the CIA were always close, and a number of top spooks joined the bank when they left the Agency, such as former DCI John Deutsch, who left Langley under a cloud to immediately become a member of Citibank’s board. John Reed, who denies knowing anything about Project Hammer, has since left Citibank under a cloud, and is now head of the U.S. Stock Exchange.

It is curious that in the 1990s – while Reed and Citibank were being sued for moving $50-billion in Santa Romana’s gold from New York to the Bahamas, and General Cocke testified that Reed was overseeing Project Hammer with assets of over $1-trillion – that Citibank claimed to be going bankrupt. It was not the only player in the game of musical chairs by major banks, as various Rockefeller Holdings absorbed each other and their offshore holdings companies like hungry amoebas.

By this time, Spain’s Santiago Vila Marques, also was serving as the attorney for Alberto Cacpal’s huge gold deposits, many of them at Citibank. Before John Reed retired, Vila Marques cabled him asking for a meeting to “clarify” Cacpal’s assets in Citibank, which totalled hundreds of millions of dollars. Reed never replied.17 

In effect, Reed was succeeded at Citibank by President Clinton’s Treasury Secretary Robert Rubin, the new chairman of Citigroup, who has been equally opaque and evasive. As documented in earlier chapters, Santy’s Bengal Trading stashed most of his gold at UBS in Zurich, in the name of Pedro Palafox Laurel. These bonds, which UBS first acknowledged were redeemable in 2003, then reversed itself by claiming then were now considered false.

This is odd because when Santy’s daughter Diana Luatic visited UBS as an adult, the official in charge of the gold repository said in front of witnesses that he remembered first meeting her as an adolescent when he had taken her prints as part of security measures for her gold accounts. Vila Marques, as attorney for Loretta Laurel, is preparing to launch a legal battle with UBS, as soon as he has washed his hands of the US Fed.18 Seen as a giant spider web, the involvement of a great many organizations and individuals becomes apparent. 

Of one thing we can be sure: Since the Federal Reserve system was established in 1913, privatising the money supply and making gold vanish, it has served “The Illuminati” and their servants in “The Octopus” far better than it has served the great majority of American citizens. Interlocking directorships and personal networks reveal an astonishing variety of racketeering between the moneymen, the spooks, the druglords, and the underworld. National Security hides little from America’s enemies. But it hides a great deal from U.S. citizens.

The fact that the US Government has been able to pull in all this gold, both Japanese and Nazi war loot and gold from a large number of endangered banks and desperate individuals, and then renege on redeeming their holdings, has enabled the US to acquire companies and properties throughout the world that represent an American financial global empire by massive fraud. One is tempted to speculate that these manuevers were part of what put the Clinton Administration in the black. US imperial policy pretends to occupy a theological and morale highground compared to Old Europe and Old Asia, but it is a farce. It was all summed up brilliantly by Henry Ford:“It is well enough that the people of the nation do not understand our banking and monetary system for, if they did, I believe there would be a revolution before tomorrow morning.”19


1 Briody, The Iron Triangle. Among top men in The Carlyle Group are former president George H.W. Bush, former British Prime Minister John Majors, former Philippine President Fidel Ramos, former Defense Secretary Frank Carlucci, former Treasury Secretary James Baker III, former Attorney General William Barr, Defense Secretary Donald Rumsfeld (as an associate).

2 Marrs, Rule by Secrecy, pp. 13-14

3 Marrs, Rule by Secrecy, pp. 13-14

4 One of the clients of Sullivan & Cromwell, the Dulles brothers’ law firm, was Franco.

5 In its 2002 annual report, The Manila Mining Corporation said, “In 1999, 66 percent of the company’s revenues were generated by sales of gold to Johnson Matthey…”

6 FBI, Memo for Mr. Nichols, from Mr. Jones, 3-28-49, available on line as William Donovan and the OSS.

7 Valentine, Strength of the Wolf, p.26.

8 Seagrave interviews with General Ray Peers. Detachment 101 used opium to pay agents. Ray Peers: “If opium could be useful in achieving victory, the pattern was clear. We would use opium.” Valentine [p47]

9 Mark Fritz, “The Secret Insurance Agent Men,” Los Angeles Times, 22 September 2000.

10 Valentine Strength of the Wolf, p75.

11 Valentine Strength of the Wolf, p76.

12 Remnants of OSS personnel in France worked for Donovan and Britain’s MI-6 under cover of a company called Electronatom Corporation. FBI, bureau memo, 4 March 1954.

13 Valentine, Strength of the Wolf, p76, and interviews with Pawley by Sterling Seagrave in 1960.

14 See Seagrave & Seagrave, Lords of the Rim.

15 One of the investors provided us with a transcript of the Cocke deposition and a copy of their lawsuit, which was awaiting trial before TK District Court in Virginia. [CK] These documents are reproduced for interested readers on the new Volume 3 of our CDROM set.

16 Roberts, The Blood Bankers, p.77/.

17 Vila Marques’ cable is reproduced on our CDs.

18 The Laurel UBS files are reproduced on our CDs.

19 Ford’s quote is found in Jim Marrs, Rule by Secrecy, p. 76

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