The Asia-Pacific Journal | Japan Focus Volume 12 | Issue 32 | Number 2 | Article ID 4160 | Aug 09, 2014

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Dirty Wars: French and American Piaster Profiteering inIndochina, 1945-75 ダーティー・ウォーズ　インドシナにおける仏米ピアストル暴利　1945-75年

Jonathan Marshall

With its economy devastated by war, itsnational glory sullied by ignominious defeats atthe hands of Germany and Japan, and itscolonial legacy morally undercut by the AtlanticCharter, France in 1945 faced immensechallenges. Especially daunting was the job ofrestoring its empire, particularly in distantIndochina.

For French political leaders and imperialistswho equated empire with national greatness,simply granting Indochina its independencewas out of the question. But reoccupying thelost colony would be no easy matter. Certainlythe tremendous task of rebuilding at home leftfew resources to spare for a tropical waragainst native rebels thousands of miles away.Mobilizing the needed resources would requiregenerating political enthusiasm, not merepublic acquiescence, for a costly foreignadventure. Yet the once powerful coloniallobby,1 composed of overseas traders,investors, bankers, soldiers and civil servants,had seen its economic base largely wiped outby the war.

Supporters of France’s imperial mission hitupon a novel way to restore the economicfortunes and thus the political clout of thecolonial lobby: issuing a decree to overvaluethe Indochinese piaster. That obscure andapparently technical financial decision gavesoldiers, bureaucrats and businessmen apowerful profit motive to serve in Indochina.Above all, it greatly inflated their buyingpower. By giving them more francs for every

piaster they earned in Indochina, a highexchange rate allowed them to stretch theirmoney. They could import goods from Franceon the cheap, including luxuries they couldotherwise never afford. Any piasters they choseto save rather than spend could be repatriatedat a premium in francs to family members orothers in France.

Of course, this huge subsidy to colonialinterests was not free: It had to be paid foreither by French taxpayers or through the“printing” of francs by government monetaryauthorities, creating inflation that taxed thepurchasing power of French consumers.

As long as the cost was modest, it could beeasily disguised, minimizing any politicalconsequences. Over time, however, the costsoared and this financial policy blew up in theface of French leaders who instituted it as atool for promoting colonialism. Beneficiaries,including not only French citizens in Indochinabut their privileged Indochinese allies, figuredout how to reap huge profits from currencyexchange rackets between Indochina andFrance. The resulting piaster traffic balloonedthe cost of war and corrupted the Frenchpolity. The profiteering unleashed by thecurrency racket eventually triggered one of theFourth Republic’s worst political scandals andfed the public’s darkest suspicions about theirleaders. The epithet “dirty war” stuckinexorably to the Indochina campaign, settingthe stage for popular acceptance of France’swithdrawal from the colony.

In taking over from France in 1954 as the

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dominant foreign power, the United Statesinherited all the challenges that made Pariscapitulate after immense loss of lives andtreasure. Washington had a chance to learnfrom France’s mistakes. Instead, among themany lessons that American policy makersfailed to learn from the French defeat was thecost—political as well as economic—of trying tobuy support for an unpopular war. In Vietnam,and to a lesser extent Laos, hundreds ofmillions of dollars in U.S. aid went to supportover-valued exchange rates, in turn spawningprofiteering and corruption. As in the Frenchera, these rackets tainted the war effort.Spreading corruption sapped the moralunderpinnings of the anti-Communist cause,casting a mercenary pall over the righteousclaims of war supporters.

Piaster profits did not cause the two Indochinawars, but they did initially sustain—and thenpowerfully undermine—both the French andAmerican operations. This account is the firstto explore the remarkable continuity anddisastrous impact over more than two decadesof the French and American experiences withcurrency corruption. It taps long-forgottenpublished accounts, including the findings ofseveral parliamentary and congressionalinvestigations, as well as unpublished StateDepartment files, FBI records and othergovernment and private archives that shed newlight on the intersection of war, politics andcrime.2

Origins: 1945

World War II had barely ended before attemptsto profit from Indochina’s currency beganguiding struggles over the territory’s politicaland economic future. Those struggles resultedfrom France’s prostrate condition. The July1945 Potsdam Accord acknowledged France’srights as a colonial authority in Indochina, butalso its inability to exercise power there in theimmediate future. The Allies gave China thegreen light to accept Japan’s surrender and

occupy Indochina north of the 16th parallel. Inthe south, thousands of British and Indiantroops landed in September, quicklysupplementing their forces with former Frenchprisoners of war and cooperating Japanesetroops. By the time General Philippe Leclercmanaged to lead a French contingent to Saigonin October 1945, the nationalist Viet Minhresistance had formed a provis ionalgovernment in Hanoi and was regularlyattacking the British-led military coalition inthe south.

Under cover of the British military campaign tosuppress the Viet Minh, the French beganreasserting administrative control. As one ofhis f irst moves, the new French HighCommissioner in Saigon, Admiral GeorgesThierry d’Argenlieu, proposed setting a highvalue on Indochina’s currency, the piaster, todemonstrate France’s resolute commitment tothe colony. In December 1945, the Frenchgovernment pegged the rate at 17 francs to thepiaster—far above its prewar value of 10francs.3

100 Piaster note, circa 1925. Source:W i k i p e d i a(http://en.wikipedia.org/wiki/French_Indochinese_piastre)

Two key decision makers were the HighCommissioner’s chief financial adviser,

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François Bloch-Lainé, and Finance MinisterRené Pleven. Both were allies of the Bank ofIndochina, one of the leaders of the coloniallobby in France.4 The private but government-sanctioned bank enjoyed the sole privilege ofissuing currency in the colony, giving it apowerful financial interest in a strong piaster.But the bank and its political allies faced twomajor obstacles to the strong-piaster policy:Guomindang China’s rapacious occupation inthe north, and Japan’s decision in March 1945to print thousands of 500 piaster notes,triggering widespread inflation. If holders ofthose notes could convert them into francs atthe new exchange rate, the cost to the FrenchTreasury and the franc would be enormous.

The 500-Piaster Note Crisis

China’s theater commander, General Lu Han,lost no time plundering northern Vietnam,using the piaster as one of his weapons. In thefall of 1945, he issued a decree increasing theexchange value of the Customs Gold Unit (acurrency issued by the Central Bank of China)by 50 percent, from one to 1.5 piasters. Thisfiat devaluation of the piaster made goods inIndochina look cheap to holders of Chinesecurrency, while making imports dear toIndochinese farmers and workers. The new rateallowed Chinese occupiers to buy up food, realestate and entire businesses at bargainbasement prices, squeezing out resentful nativebuyers.5

Americans in the theater enjoyed a good deal,too. They could buy Chinese gold units cheaplyin Hong Kong, taking advantage of the wartimedepreciation of China’s currency against theU.S. dollar,6 and then exchange them forpiasters, earning up to six times the officialdollar rate of exchange for piasters. No wonderone U.S. diplomat in Hanoi commented in1946, “Commerce in the past year has beenchiefly a matter of gambling with exchange .”7

Equally threatening to the French—and to the

value of the piastre—was Lu Han’s insistencethat the Bank of Indochina redeem any and all500-piaster notes issued by the Japaneseearlier in the year. In November 1945, seekingto reassert their economic and politicalauthority and prevent runaway inflation,French authorities announced they would nolonger redeem the big notes. Thousands ofChinese merchants and Vietnamese familieswho held those notes faced significant lossesand even bankruptcy. The Viet Minh, which hadalso amassed the notes, organized a massdemonstration outside the bank’s Hanoi office.When guards fired on the crowd, killing severaldemonstrators, merchants and workers thenwent on strike and refused to sell food to theFrench. Lu Han’s troops arrested the bank’sgeneral manager and Hanoi branch manager.8

After mediation from a senior American officer,the French allowed the 500-piaster notes tocirculate north of the 16th parallel, at full parvalue for those held by the Chinese army, butat a discount for Vietnamese holders.9 Thebitterness created by the incident took longerto address. A month after the settlement, theBank of Indochina’s Hanoi branch manager wasmurdered. Pinned to his chest was a note:“Thus will die those who put themselves in theway of the Vietnamese economy.”10

The Viet Minh’s e f forts to create anindependent Vietnamese economy as a steptoward full national sovereignty advanced withthe signing on March 6, 1946 of a landmarkFranco-Vietnamese accord, which grantedVietnam rights as a free state within the Frenchunion. The accord, signed by the same Frenchdiplomat who negotiated a resolution to the500-piaster note controversy, represented thehigh point of efforts by French realists tonegotiate a peaceful future for Indochina. But itran afoul of opposition from die-hardcolonialists—who manipulated concerns overthe piaster to frustrate implementation of theagreement and plunge the territory into war.

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The immediate concern raised by Frenchofficials was the flooding of Vietnam withconsumer goods imported by Chinesemerchants. Excessive imports put pressure onthe value of the piaster, which the French weretrying to boost. To curb imports and protect thepiaster, French authorities in October 1946established a customs house in Haiphong, themain northern port. Not by accident, thisunilateral assertion of French authority alsohad the effect of denying customs revenues toHo’s government. The Viet Minh cried foul,claiming that the French had violated terms ofthe March 6 accord. The customs dispute,which now raised fundamental questions ofpolitical sovereignty and nationalism, triggeredstreet fighting in Haiphong on November 20.Commissioner d’Argenlieu, who never acceptedthe premise of a peaceful devolution of powerto the Vietnamese, had been looking for justsuch an opportunity to strike back against HoChi Minh and his supporters in the North. TheFrench military launched a savage navalbombardment of the port, killing severalthousand civilians. Military officials inIndochina suppressed news of the massacre.They also held up transmission of a telegram byHo Chi Minh to French Premier Léon Blumproposing a peaceful compromise. Hearingnothing back from Paris, Viet Minh forcesattacked the French, killing about 40 soldiersand capturing about 200. When French militaryforces counterattacked throughout Tonkin,there was no turning back from war.11

As France’s High Commissioner inIndochina, Admiral d’Argenlieu supportedthe overvaluation of the piaster tostrengthen France’s ties to Indochina.S o u r c e(http://www.findagrave.com/cgi-bin/fg.cgi?page=gr&GRid=8474221)

The Piaster Traffic

Defenders of the official overvaluation of thepiaster justified it, without embarrassment, as afinancial reward to those who supportedFrance’s colonial mission: the soldiers whoendured hardship and danger to fight the VietMinh, and native supporters of France in the

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Associated States of Indochina. ExpeditionaryCorps soldiers were able to stretch theirpaychecks every time they remitted piastershome to France at the official exchange rate.And France’s local clients, who gave thecolonial mission its thin veneer of legitimacy,enjoyed great buying power at 17 francs to thepiaster. The strong piaster also made Indochinaa profitable market for French exporters, thusbuilding political support for colonialism inmetropolitan France.12 But the yawning gapbetween the official rate and the black marketrate of 7 or 8 francs to the piaster also createdan irresistible lure to profiteers who gamed thesystem.13

Official exchanges of piasters to francs wentthrough the Bank of Indochina. Any resident ofIndochina could make bank transfers of up to50,000 francs a month or remit up to 5,000francs a month via postal orders. Soldiers andpublic officials had some special transferrights. Other transfers required specialauthorization from the Office Indochinois desChanges—the official gatekeeper to the piastertraffic.14

A trafficker would typically start by buyingdollars or gold outside of Indochina. A U.S.dollar purchased for 350 francs in France, thensmuggled into the colony, might buy 52piasters from a local black marketeer.Delivered to the Bank of Indochina for legalremittance to France, those piasters in turnwould buy 884 francs—well over double theinitial investment. The profits on this “roundtrip” were limited only by how much currencyone could carry, and how many piasters wereapproved for exchange at the official rate.15

A simple, and nearly undetectable, means ofexploiting the artificial exchange rate was tounder-invoice imports.16 Either using a foreignsubsidiary or secret agreement with anothercompany in France, an importer in Indochinawould overpay for goods received. Theimporter would receive authorization from the

exchange office to remit the inflated sum at thehigh official exchange rate. The partner oraffiliate in France would then bank the extrafrancs on behalf of the importer.

Under-invoicing was a common practice.French investigators found examples of ashipment of watches, worth 21 million francs,that was valued at 149 million; bolts of clothworth 10 million francs that were valued at 28million; and worthless old boat motors valuedat nearly 39 million francs. In some casesparties made requests for piaster transfers forentirely fictitious imports.17

The exchange office had neither the staff northe expertise to check the bona fides of suchtransactions. Nor did it have much motivationto crack down, given the climate of officialco r rup t i on f o s te red by the Frenchadministration, which earned millions of dollarsfrom gambling revenue and the sale of opium.As Life magazine’s David Duncan reported in1953, “In the background of this war is asociety that has become corrupt. As far as Icould determine everything is for sale, fromlittle favors in police courts to the highestoffices.”18

The Generals’ Affair

Rampant corruption played into the hands ofthe French Communist Party, the one reliablyanti-colonialist political faction. In 1948 itintroduced the epithet, the “dirty war.” Twoyears later, a huge scandal with links to thepiaster traffic helped make that term ahousehold phrase. As historian Jacques Dallozdescribed it,

The affair of the generals was inthe headlines for the whole of1950. To top it all, the pressdevoted passage upon passage tothe Indo-China war, but only tomention obscure plots, dubiouspeople, stories about cheques,

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secret ambitions and the secretservices, and even secret societies.. . .The public could only beworried by these revelations whichthrew a harsh l ight on therelationships between militarychiefs and political circles . . . onthe rivalries between specialservices, and on the corruptionwhich had increased in the shadowof the war.19

The Generals’ Affair involved factionalstruggles between the Socialist Party and theCatholic, pro-colonial ist MouvementRépublicain Populaire (MRP); between theforeign intelligence service, Service deDocumentation Extérieure et de Contre-Espionnage (SDECE), and the domesticDirection de la Surveillance du Territoire(DST); and even between Catholics andMasons.20 It began with the embarrassing leakof a top-secret report on the Indochinacampaign by Army Chief of Staff GeneralGeorges Revers, who was sent on a studymission to the territory in mid-1949 by theSocialist defense minister, Paul Ramadier.Revers’s critical report recommended pullingback French forces to shorten their supplylines, turning the fighting over to nativesoldiers, and unifying civil and militaryauthority under one leader. His pessimisticconclusions reflected badly on the MRP’s hard-line colonial policies, including those of HighCommissioner Léon Pignon. 21

After the Viet Minh began airing embarrassingexcerpts on its radio broadcasts, Frenchauthorities traced the leak to a man close toEmperor Bao Dai’s delegation in Paris, RogerPeyré. This thoroughly unscrupulouscharacter—a convicted embezzler, Nazicollaborator, postwar SDECE agent andinfluence peddler—managed to use his masonicconnections to win Revers’s confidence. Reverssent Peyré to Indochina to influence the

appointment of a trusted friend as civil-militaryleader in the territory.

Investigation revealed that one of Peyré’s aimsin getting close to Revers and other seniorofficials was to gain “control of the IndochinaExchange Office” in order to profit from thepiaster traffic.22 He allegedly told a seniorofficer in SDECE, “There’s certainly quite a lotof money to be made from the piaster. It’sinteresting with the exchange, one can do quitea lot of things.”23 Meanwhile, one of Peyré’sother defenders in SDECE campaigned behindthe scenes against key Socialist ministers,accusing them of trying to hide their party’sfinancial reliance on the piaster traffic.24

These associations brought the piaster traffic towidespread public attention for the first time.Questioned by one Communist member of aparliament commission that investigated theaffair in 1950, Revers confirmed the existenceof the traffic and named major banks andtrading companies as likely profiteers fromovervaluation of the piaster.25 “For six monthsall of France read the accounts every day fornew revelations,” the acting head of SDECErecalled years later. “Politicians had receivedgraft money . . . An ugly traffic in monetaryexchange existed between Vietnam and Francewhile French soldiers were being killed. . . . Itwas like a sewer suddenly opened. The publicwas nauseated by the dishonesty of theirpoliticians and the administration.”26

Doubts about the Piaster

But further efforts by members of parliament toinvestigate the piaster scandal went nowhere.27

One inhibiting factor was the untimely death oftwo key individuals in back-to-back crashes ofdecrepit Saigon-to-Paris airliners in thesummer of 1950. Among the dead was the headof the exchange office in Saigon, whodisapproved of the special treatment granted topolitically connected Indochinese, allowingthem “to profit from the disparity of prices

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between Indochina and France to effectmassive transfers of their fortunes to France.”Another victim was a leading French reporterwho was investigating leading officials in theSaigon administration and Bao Dai’s entouragefor currency profiteering.28

Behind the scenes, Finance Minister Pleven in1950 was having serious doubts about thewisdom of maintaining the piaster’s severelyovervalued rate, given the growing burden offinancing the war in Indochina.29 The volume ofofficial piaster exchanges—and thus arguablythe burden on the French Treasury—wasroughly doubling every two years, from 61billion francs in 1948, to 135 billion francs in1950, to 224 billion in 1952.30 (The latter sumwas equal to about $5.7 billion in 2014dollars.31)

Pleven dispatched a senior Finance official toIndochina in early 1950 to study the viability ofdevaluing the piaster. He reported back thatthe official exchange office represented at bestonly a “fragile barrier” against currency fraud.It had woefully inadequate staff, little fundingfor investigations, and virtually no legalauthority to block dubious transfer requests.His report recommended devaluing the piasteras the “most effective” way to curb the growingtraffic.32

But Pleven got cold feet when other adviserswarned that devaluing the piaster coulddemoralize hard-pressed French expeditionarytroops. The Minister of the Associated States,Jean Letourneau, threatened to resign if thepiaster were devalued. Pleven ended up doingno th ing , s ave a sk ing the new h ighcommissioner for Indochina to put an end tothe traffic. “It was a situation that disquietedus, that preoccupied us, for which I truly hadthe feeling that, from Paris, we had done all wecould do,” Pleven later testified.33

Despuech’s Exposé

Finally, in late 1952, a former employee of the

exchange office blew the whistle on the piastertraffic in a long article in Le Monde, which hefollowed the next year with a book-lengthexposé.34 Jacques Despuech claimed thatfraudulent transfers were costing the FrenchTreasury a staggering 100 billion francs eachyear (more than $2.5 billion in 2014 dollars).35

Prominent among the profiteers, according toDespuech, was the Vietnamese figurehead BaoDai, who was permitted to transfer piastersworth 176.5 million francs in 1949 alone, as theprice of his support. The total volume of“political” transfers on behalf of France’s localclients came to 426.7 million francs that year,Despuech claimed.36

Jacques Despuech’s 1953 blockbusterexposed what one French newspaper called“the scandal of the century.”

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Also implicated were members of the powerfulCorsican community in Indochina. Chief amongthem was Mathieu Franchini, owner of two ofSaigon’s largest hotels, and reputed to be oneof the country’s leading opium traffickers. Hewas suspected of corrupting employees in theexchange office to facilitate his trafficking,possibly with help from a French militaryintelligence officer.37

Perhaps the most prominent target ofDespuech’s expose was André Diethelm, thesenior Gaullist parliamentarian, Vice Presidentof the National Assembly, former FinanceDirector of Indochina, and a close ally of theBank of Indochina.38 Diethelm initially deniedeverything, but eventually colleaguesconfirmed that he had remitted 17 millionfrancs in 1949 on behalf of the Gaullist party torescue its perilous finances. If Diethelm neededany help with this transaction, he could haveturned to many of the experienced Corsicangangsters in Saigon who were Gaullistactivists.39

Despuech also condemned various financialtrusts, led by the Bank of Indochina, forengaging in capital flight at the expense of theformer colony.40 A Communist member of theNational Assembly accused the Bank ofIndochina of using secret accounts with falsenames to swindle France out of vast sumsthrough the exchange racket. Such chargesstruck many French observers as entirelyplausible, but the bank’s leading historian,Marc Meuleau, concluded that it “did not seekto make an illegal profit from the disparitybetween the official market and the blackmarket.”

On the other hand, Meuleau readily concededthat the Bank of Indochina made outexceptional ly wel l , quite legal ly , bysystematically selling its assets in Indochinaand repatriating the profits at a premium. From1946 to1953, he est imated, the banktransferred the equivalent of 6.9 billion francs.

Given the artificial value of the piaster, thebank’s profit on those transfers amounted toabout 2.9 billion francs.41

Many in France were scandalized most byDespuech’s claim that the Viet Minh wereprofiting from the same racket. His claim wassupported by a 1951 story by Associated Pressreporter Seymour Topping, which Frenchauthorities tried to suppress. Topping reportedthat French racketeers were “helping tofinance large scale purchases of war materialby the Communist-led Viet Minh” by turningover a million dollars a month or more in hardcurrencies in exchange for piasters “at theexpense of the French taxpayer.” A key playerin this corrupt network was said to be “a seniorChinese employee of the Bank of Indochina.”42

Topping concluded that the French governmenttook no action because it “feared a scandal thatwould damage it politically.”43

Unknown to the French public, members of theU.S. embassy and aid mission in Indochina, andeven American evangelical missionaries, werealso playing the black market to avoid payinginflated official prices for piasters.44 A seniorofficial of the U.S. Mutual Security Agencyexplained, “Living conditions in the AssociatedStates are notoriously difficult—humidity,insecurity, insects and disease are only part ofthe troubles encountered—so that theAmericans in charge in the area felt themselvesin no position to insist on strict adherence tothe letter of the law.”45 The State Departmentwarned the Saigon embassy in a top secretdispatch that this practice “leaves us open toallegation that US [dollars] emanating officialpersonnel Indochina [are] finding way into CHICOMMIE, Vietminh and other enemy hands andfacilitating illegal transfer of capital fromVietnam.” The embassy replied that exchangingat the official rate would impose an “intolerablehardship” on financially strapped foreignservice and aid mission personnel and “make itimpossible for us to operate.”46 Washingtoneventually backed down, accepting the

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embassy’s assurances that French officials“tacitly approve our proposed methodobtaining piasters.”47

Public Outrage

Publication of Despuech’s first article inNovember 1952—in a political climate alreadypoisoned by the Generals’ Affair—caused aninstant stir. The chair of the parliamentarycommittee overseeing pensions for veteransdemanded an accounting. “The Governmentcannot be ignorant of this scandal,” hecharged. “The piaster traffic continues to thedetriment of our currency, of our reserves, andof our budget, and to the profit not only ofnotorious traffickers but also of the Viet-Minh.”48

The Minister of the Associated States,Letourneau, said he was making “every effort”to quash currency rackets but insisted that “thefamous piaster scandal . . . is enormouslyexaggerated.” Any move to devalue the piaster,he claimed, would simply force Paris toincrease pay for soldiers, thus canceling anybudgetary savings.49

Critics had their eye on profiteers other thanordinary soldiers, however. Claude Cheysson,Socialist counselor to the president of thegovernment of Indochina in 1952, complainedprivately that the French business communityin Indochina “will never hesitate to turn adishonest piaster into an even more dishonestfranc and while engaged in these lucrativepursuits, will continue to operate with serenedisregard for major permanent interests ofFrance, as well as those of her soldiers andtaxpayers.”50

American officials privately griped as wellabout the corrosive effect of the piaster traffic,and particularly its effect on the Frenchbudget, which Washington increasinglysubsidized. The Saigon embassy noted that “thepolit ical ly powerful French businesscommunity, the French bureaucracy, and

military are opposed to devaluation because itwould reduce the high profits and salaries theynow enjoy.” It argued in early 1953 that thetime had come

to begin to condition public andofficial opinion in the [AssociatedStates], and in France, towardsadvantage of an early devaluationof piaster. It is almost certain thatwe will be asked to increase ourarms aid program in 1954 and willbe faced with a request forfinancial assistance to pay forenlargement of Vietnamese army,which must be increased if we aregoing to have an early victory overcommunism in this area. . . . Wewill expect to get value receivedfor any additional contribution wemake, which we cannot (repeatnot) get at present rate of piaster.51

The embassy was painfully aware, however, ofthe French argument that prematuredevaluation could “evoke social unrest andpolitical disturbances and add considerably tothe burden and problems of war of theGovernments of the Associated States.”52 As asenior official of the U.S. Mutual SecurityAgency cautioned, “this is a matter of extremedelicacy. The fate of all Southeast Asia may beat stake in this active battlefield” and “the costof the loss of the area to the free world wouldbe incalculably large.” For that reason, “Wewould be wiser to let the present situationcontinue, even at very large cost to the Frenchgovernment and to the United States taxpayer,than to proceed until we were fully convincedthat we knew exactly where we stood.”53 Theadministration did gently broach the issue ofdevaluing the piaster in talks with FrenchPrime Minister René Mayer in Washington inM a r c h 1 9 5 3 , w i t h o u t g e t t i n g a n ycommitments. 5 4

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Meanwhile, criticism within France continuedto mount against piaster profiteering, peakingin early May, 1953. In the pages of Le Monde,journalist Jean-Jacques Servan-Schreibercondemned “certain French political groups”who “found in the Indochina war one of theprincipal sources of their revenue.” A seniorGaullist deputy acknowledged in the samepages that the traffic had created a deplorableclimate of corruption in Indochina. Theindependent left Franc-Tireur ran threesuccessive front-page editorials in early May1953 denouncing the traffic as “the greatestscandal of the Fourth Republic.” Even theconservative political scientist and journalistRaymond Aron ca l led for an of f ic ia linvestigation, lest “war profiteers” be blamedfor the continuation of the conflict.55

Devaluation

As this criticism reached a crescendo, theFrench Treasury announced on May 8 that itwas slashing the official exchange rate for thepiaster to 10 francs.56 A French adviser inSaigon described the reaction of powerfulfinancial interests, and particularly the Bank ofIndochina, as “violent and almost hateful.”57

Vietnam’s President Nguyen Van Tam sharplyprotested France’s failure to consult with theAssociated States and warned that it couldprovoke “strong social agitation.”59 Even theViet Minh condemned the devaluation in theirpropaganda.60

On the other hand, the Saigon embassyreported that the decision was “applauded ingeneral by French political circles as means toend illicit financial transfers” and predicted “asavings to French mil i tary budget ofapproximately 50 to 70 billion francs peryear.”61 Indeed, all evidence suggests that thedevaluation dramatically curbed the currencytraffic, as intended.62

On May 30, Franc-Tireur announcedpublication of Despuech’s book, saying it would

expose the “scandal of the century” and “havethe effect of a bomb.” Little more than a monthlater, the National Assembly voted unanimouslyfor a special committee to investigate thepiaster traffic. It did not issue its report untilJune 1954, after the fall of Dien Bien Phu. Longbefore then, however, highly publicizedrevelations from the commission’s hearings haddragged France’s moral claims into the sewer.As historian Alain Ruscio put it, “The scandalsof the Indochina war added to an alreadydetestable political climate a note of stink.”63

After hearing stories of piaster profiteering bypublic officials and business leaders fromSaigon to Paris, few in France could any longerdefend the “dirty war” and those with “dirtyhands” who ran it.

100 Piaster note, circa 1954. Source:W i k i p e d i a(http://en.wikipedia.org/wiki/Piastre)

The Americans take over

For Washington, the French failure inIndochina was not an object lesson but achallenge: Surely with enough resources, andthe right choice of local allies, the UnitedStates could succeed in preventing the furtherspread of communism in Indochina. Surely nopeasant insurgency could defeat the strongestsuperpower on the globe.

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I r o n i c a l l y , t h e p r i m a r y U . S .weapon—money—became a two-edged swordthat eventually cut deep into the legitimacy ofthe American intervention and of local regimessustained by the dollar. As in French Indochina,American financial support to win the loyalty oflocal elites fostered immense corruption,sullying the mission that Washington strived sohard to sell as noble and selfless.

The French had overvalued the piaster, in part,in order to create artificial economic prosperityin Indochina, while dampening the risk ofinflation. Through the magic of the exchangemechanism, money printed in the territorysimply financed more imports at France’sexpense, mitigating disruptive local priceincreases.

The same logic underpinned the chief U.S. aidprogram to the area after the French defeat.Called the Commercial Import Program, or CIP,it provided U.S. dollars to pay for hard-moneyimports. Licensed importers received dollarsfrom their government, generally at a highlyfavorable exchange rate, in return for localcurrency. Those payments in turn financed thegovernment’s military and civil functions. Andcheap imports helped the emerging middleclass to afford the trappings of Westernaffluence. Arthur Gardiner, director of the U.S.Operations Mission in Vietnam in 1959, calledCIP “the greatest invention since the wheel.”64

Getting Rich Quick in Laos

But by supporting overvalued exchange rates,the program unintentionally became a magnetfor corruption. In Laos, for example, thegovernment set the official value of the kip, forlicensed importers, at 35 to the dollar—threetimes its actual value. From 1955 to 1957, theUnited States contributed $40 million annuallyto finance Laos’ import program—a sum equalto about 40 percent of the country’s grossnational product.65

“It did not take long for opportunists to amass

fortunes by buying America’s aid dollars fromthe Lao government at the legal rate and thenselling them on the open market, or byimporting goods solely for transshipment toother countries,” writes historian Seth Jacobs.66

These opportunists included corrupt Americancontractors, who were allowed to convertpayments from the Laotian government intodollars at three times the free-market rate.67

A 1958 expose by the Wall Street Journal,wh ich prompted two congress iona linvestigations, described imports of fancy cars,musical instruments, French perfume and othergoods that were far beyond the means of all buta handful of Laotians. “Much of this isunsalable,” the story noted, “but it doesn’tmatter; the importers have already made theirprofits from foreign exchange manipulations.”The drastic overvaluation of the kip, it noted,“sets the stage for fantastic profits. . . . ALaotian trader can buy 100,000 kip on the freemoney market for $1,000. He then applies foran import license for, say $1,000 worth ofbuilding cement, but puts up only 35,000 kip toget the $1,000 from the government at theofficial rate. This leaves him with 65,000 kipbefore he has even moved the goods.”68

One prominent critic of the program was KingSavang Vatthana, who believed the American-financed tide of imports threatened to wipe outtraditional handicraft industries. “Worst of all,”he said, “by promoting a desire to get richquickly,” the program “destroyed thetraditional concept of service which theLaotians expected from those in positions oftrust and responsibility.”69

The growth of corruption within Laos fedsupport for the Communist Pathet Lao whileundercutting support for aid in Congress. Noless than Vice President Richard Nixon warnedPrime Minister Souvanna Phouma in January1958 that abuses were jeopardizing the futureof the U.S. aid program. A senior StateDepartment official told the prime minister that

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Laos must correct its unrealistic exchange rateand eliminate import licensing. But SouvannaPhouma and his finance minister insisted—ashad French and Indochinese officials beforethem—that devaluing the kip “would haveserious political, social, and economicconsequences just before the upcoming Laoelections.”70

Washington backed off—but as it feared, publicdisgust with rampant corruption handed leftistparties a resounding victory in the Mayelections. Alarmed by the outcome, the U.S.embassy in Vientiane declared that to ensure aconservative victory in the next elections andprevent Communist domination, Vientiane must“promptly carry through monetary reform toeliminate source of corruption . . . Such ameasure now more essential than ever to‘purify’ morals of governing class.”71 To enforceits will, the Eisenhower administration brieflycut off aid, forcing the neutralist SouvannaPhouma from office and bringing Vientianequickly to heel. By October 1958, the regimeagreed to a new exchange rate of 80 kip to thedollar.72

However, history in Laos had a way ofrepeating itself, both as tragedy and as farce.In 1973, a congressional hearing would cite areport that a recent overvaluation of the kiphad once again “proved convenient meanswhereby the Lao elite and Vietnamese andChinese merchants have been able to converttheir kip profits to dollars and put the money inSwiss and other banks, to import luxury goodsfor themselves and keep thriving Thai and Laosmuggling rackets in merchandise going fullblast.”73

Vietnam: Licensed to Steal

In Vietnam, the Commercial Import Programprovided more than $1 billion from 1955-60alone to pay for imports and raise piaster“counterpart” funds for pay for the Saigonregime’s military and security programs.

Peaking at just under $400 million a year in1966, CIP enabled some genuine economicimprovements, including the importation ofthousands of sewing machines to revive thecountry’s clothing industry.74

Mostly, however, it propped up successiveSaigon regimes by creating economicprosperity for some members of the urbanmiddle class. According to the head of the U.S.aid mission in Vietnam, CIP “served thepolitical value of supplying the Vietnamesemiddle-class with goods they wanted and couldafford to buy,” thus creating “a source ofloyalty to [Ngo Dinh] Diem from the army, thecivil servants and small professional people,who were able to obtain better clothes, betterhousehold furnishings and equipment, thanthey had before.” Turning that benefit on itshead, the regime critic Dr. Phan Quang Dancountered that the program “brings in on amassive scale luxury goods of all kinds, whichgive us an artificial society—enhanced materialconditions that don’t amount to anything, andno sacrifice; it brings luxury to our ruing groupand middle c lass , and luxury meanscorruption.” 7 5

The biggest winners were cronies of the regimewho were given licenses to import goods at theofficial exchange rate, which typically valuedpiasters at double or more the free market rate.With such an advantage, they “were assured awindfall profit whether or not they hadentrepreneurial acumen,” notes historianGeorge McT. Kahin. “Those who did not simplysold their licenses to experienced Chinese andstill gained a large profit immediately.” A 1966Pentagon analysis concluded that theovervalued exchange rate handed profitsranging from $200 million to $600 million ayear to favored license holders. “So long asimport profiteering is permitted to continue,” itconcluded, “every $1 spent . . . on CIP canresult in a 100% piaster domestic profit at leastfor some favored importer and about 50¢‘banked’ safely in the US through the black

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market by such political friends of the presentregime in Saigon.”76

The rampant fraud offended Americans of allpolitical stripes. Said Clement Johnston,chairman of the U.S. Chamber of Commerce,“The $20 million a month loss entailed by ourmaintenance of the fantastic artificial piastrerate is not going into public treasuries, it isgoing into private pockets.” Public support forthe government in Vietnam, he warned, was“being shaken by the spectacle of theunderserved enrichment of a favored group.”77

But corruption was not a Vietnamese monopoly.At a summit meeting of senior American andVietnamese officials in 1965, the Minister ofEconomy and Finance, Truong Tai Ton,complained that, “The rush of US military menand their expenditures in US dollars haveseriously disturbed our economy. The blackmarket flourishes. Dollars introduced in theblack market then feed illegal transactions(illicit trading of foreign exchange, smuggling,flight of assets, and, undoubtedly, even [VietCong] financial operations). The value andsovereignty of our currency are at stake.”78

This concern went largely unheeded bygovernments on both sides of the Pacific. OneAmerican who tried to blow the whistle was acivilian contract employee, CorneliusHawkridge. Early on he learned of a huge blackmarket in Saigon for Military PaymentCertificates (MPCs), non-negotiable scripusable only by accredited personnel in militaryestablishments such as Post Exchanges (PXs),which sold a cornucopia of duty-free consumerand luxury goods. Hawkridge was able to tradedollars for MPCs at a 1:1.5 rate, convert themby various means back into dollars, andcontinue until he tired of the process.79 Similarprofits were available from dollar-piasterexchanges. Civilian contractors could engage insuch crimes with relative impunity, since theywere not subject to military justice, andVietnamese courts were reluctant to prosecute

Americans.80

Military Payment Certificates were tradedin Vietnam’s currency black market.S o u r c e(http://www.ichiban1.org/html/memorabilia.htm)

Senior American investigators determined thatthe currency black market was led by a tight-knit syndicate of money changers from theMadras area of South India, with bankingconnections throughout the world. Theyworked closely with Chinese bankers inparticular.81

The Indians had no shortage of clients. “Nearlyeveryone in Vietnam appeared to be engaged incurrency manipulations,” Hawkridge recalled.“There was little point in exchanging money atthe legal rate if one could get twice thatamount from the Indian dealers.” When theU.S. military issued new MPCs to foil blackmarketers in 1969, “their business neverfaltered. The next day they had apparentlyunlimited stocks of the new issue.”82

Hawkridge also witnessed wholesale theft ordiversion of U.S. military supplies and PX goodsonto the vast Saigon black market—everythingfrom cement and antibiotics to cases ofweapons and ammunition. As Hawkridge noted,the underground commerce in stolen U.S.supplies fueled the black market in currency. Inhis jaundiced view, “Fighting the war wasalways a secondary issue; making money wasthe overwhelming consideration.”83

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His complaints to U.S. officials, like those ofother whistleblowers, mostly went unheeded.84

Eventually, however, the Senate PermanentSubcommittee on Investigations exposed one ofthe more unseemly frauds of the era: thelooting of the military clubs and PXs by a ringof sergeants that was led by the Army’shighest-ranking non-commissioned officer,Sergeant-Major William O. Woolridge. At leasttwo generals were implicated as well. Theinvestigation went all the way up to GeneralWilliam Westmoreland, with predictablyinconclusive results.85

Bankers and Currency Racketeers

Some of the corrupt sergeants made moremoney through black-market currency dealsthan through kickbacks from military clubsuppliers.86 One of them told a subcommitteeinvestigator, “every man I dealt with . . . duringmy entire tour in Vietnam was involved incurrency manipulation. I don’t recall onecompany or one outfit that was not involved init. This includes entertainers that only cameover there . . . on a two-week tour.”87

Subcommittee investigators traced the blackmarket exchange profits deposited into 13accounts at several American and foreignbanks. About $75 million a year flowed throughthose accounts f rom 1965 to 1968 .Subcommittee investigator Carmine Bellinoestimated the total size of Vietnam’s currencyblack market at a quarter of a billion dollarsannually.88 Republican Senator Karl Mundt ofSouth Dakota called it “absolutely incredible”that major U.S. banks lent themselves to suchan obviously criminal enterprise. He rightlyobserved that “Without a laissez-faire or ‘seeno evil’ policy on the part of the Americanbanks which carried the code-named accounts .. . those accounts could not have been used soflagrantly as conduits for black marketmoney.”89

One of the accounts, at Irving Trust, was first

opened by a group of ethnic Chinese in 1949,most likely in order to profit from the piastertraffic under the French.90 Another big accountat Manufacturers Hanover Trust, calledPrysumeen, handled tens of millions of dollarsin profits for clients of several Indian currencytraders.91

One modest but notable user of the Prysumeencurrency trading account was Frank Furci, sonof a South Florida gambler and mobster.92 Furcijoined the Army in 1960 and went to Vietnamas part of the U.S. military mission in 1962.There, according to an FBI report, he was“alleged to be involved [in] black marketactivities.” He stayed on in country with afriend after his military discharge to run abusiness that imported restaurant equipmentand supplies, doing about $2.5 million worth ofbusiness with military clubs and messes.93 Furcibecame a silent partner in a company used bythe corrupt sergeants to profit from the clubsin Vietnam. He paid kickbacks into theiraccount at the International Credit Bank ofGeneva, a notorious money laundromat forsophisticated mafia leaders, founded by Mossadagent Tibor Rosenbaum.94

Frank Furci entered Vietnam in 1962 as amember of the U.S. Military AssistanceAdvisory Group

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Furci bought piasters at black market ratesfrom the Hong Kong branch of Deak & Co., oneof the world’s largest currency trading firms.Deak used Indian traders in Saigon to movemoney illegally in and out of the country.Clients like Furci would call Hong Kong toplace an order. Six to eight hours later, acourier would deliver a heavy box filled withpiasters, to their door.95 Eventually Furci andhis partner were ratted out to Vietnamesepolice by a competitor with high-level militaryconnections. Furci resigned himself to runninga restaurant in Hong Kong.96

Faced with evidence of the enormity of thecurrency traffic, one senator remarked, “Thereobviously has been a great deal of laxness onthe part of our intelligence community, ourTreasury department, and also variousbanks.”97 The committee did not explore, atleast in public, the most likely reason for thatnegligence: Like the ring of sergeants, thebanks had friends in high places. NicholasDeak, for example, had served as anintelligence officer in the Office of StrategicServices during World War II, ending up ashead of operations in Indochina, where hehelped the French regain their foothold. Withcovert government help, he founded Deak andCo. in 1947. In 1964, Time magazine called him“the James Bond of the world of money.” Formore than three decades, his company“functioned as an unofficial arm of theintelligence agency and was a key asset in theexecution of U.S. Cold War foreign policy,”according to Mark Ames and AlexanderZaitchik:

Because it carried out the foreign-currencytransactions of private entities, Deak and Co.could keep track of who was spiriting moneyinto and out of which countries.

In 1962, for example, Deak warned the CIA thatChina was planning to invade India after hiscompany’s Hong Kong branch was swampedwith Chinese orders for Indian rupees intended

for advance soldiers. Deak’s offices were morethan observation posts. His company played acrucial role in executing some of the UnitedStates’ most infamous covert ops. In 1953, CIAdirector Alan Dulles tasked Deak withsmuggling $1 million into Iran through hisoffices in Lebanon and Switzerland. The cashwent to the street thugs and opposition groupsthat helped overthrow Iran’s prime minister,Mohammad Mossadegh, in favor of the U.S.-approved shah. Deak’s network also financedthe CIA-assisted coups in Guatemala and theCongo. . . .

Sen. Frank Church inflicted the first hit onDeak’s public image in 1975. During the Idahosenator’s famous hearings into CIA black ops, itwas revealed that Deak’s Hong Kong branchhelped the agency funnel millions in Lockheedb r i b e m o n e y(http://en.wikipedia.org/wiki/Lockheed_bribery_scandals) to a Japanese yakuza don, politicalpower broker, and former “Class A” warcriminal named Yoshio Kodama. . . . The Houseof Deak began its rapid collapse in 1983 when afederal informant accused the firm oflaundering hundreds of millions of dollars inColombian cartel cash.98

In 1976, the Washington Post reported that theCIA’s station in Saigon acquired nearly all of itsloca l currency—mi l l ions o f do l larsworth—through black market transactions“while other U.S. agencies worked to stamp outcorruption.” The Agency was able to double itsmoney by evading the official exchange rate,stretching its budget. No doubt Deak and Co.was one of its principal agents for suchtransactions.99

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In 1964, Time magazine called NicholasDeak—featured on this gold coin—“theJames Bond of the world of money.” Images o u r c e(http://polizeros.com/tag/nicholas-deak/)

Hearings into currency and PX fraud, whichbegan in 1969, riveted Washington andprompted President Nixon to establish a high-level inter-agency committee to address theproblem. Authorities took steps to dramaticallytighten access to PXs and to punish Americansoldiers or civilians caught violating currencyregulations. But they could do little todiscourage organized smuggling ringsprotected by senior Vietnamese officials.Ambassador Ellsworth Bunker complained toPresident Thieu in January 1970 that the costto South Vietnam of black market currencytransactions was “spectacular,” depriving theSaigon regime of “billions in revenue” while“weakening the piaster.” He warned that“unless there is some real progress in theattack on corruption I see serious troubleahead—politically, economically, and . . . withthe US.”100

Thieu promised to act, but nothing changed,

and Washington did not force the issue with itsdifficult but well-entrenched client. A year anda half later, Time magazine blamed Thieu forsurrounding himself with cronies “who aredeeply involved in profiteering.” Organizedtheft was nearly as rampant as ever—with “asmuch as 50% of the oil, PX-bound appliancesand other nonmilitary freight arriving at localports . . . being ‘diverted.’" But, the storyadmitted, “it is probably fair to say that muchof the high-level corruption in Viet Nam todaycan be traced directly to the complicity ofAmericans.”101

Conclusion

The French Socialist leader Léon Blum onceexpressed disappointment in “the exasperatingindividualism of the French people, theirweakness for rackets--in a word, their displayof 'Balkan' traits, . . . a corrupt state of mindspreading throughout every class of society,and despair because of it.”102 The Americanexperience in Vietnam suggests there wasnothing especially unique about the moralfailings of the French people. On the contrary,one is struck by the similarities and continuityof their experiences. Like France, America hadimperial aspirations, attempted in vain to winthe “hearts and minds” of the people ofIndochina, and failed to defeat an economicallyand technologically inferior—but morepassionately committed—enemy. And likeFrance, the United States allowed its war effortto descend into crime and profiteering, makingthe enteprise ever more costly, unpopular andultimately unsustainable.

The pervasive corruption that characterizedboth the French and the American wars hasbeen blamed by some on the Vietnamese.Historian William Allison called America’sfailed attempts to resist these criminal currents“symbolic of the fundamental challenges theUnited States faced in a land peopled with atruly foreign set of cultural mores that matchedpoorly with American liberal democratic

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values.”103 Yet the desire to make a quick profitwas hardly a poor match with America’scapitalist values. And in the case of currencyprofiteering, Vietnamese were rarely thecriminal masterminds. Robert Parker, whochaired the Irregular Practices Committee setup by U.S. Ambassador Bunker to investigateblack market activities, observed, “The Indianmoney changers are making huge profits, to besure, but there would be no such profitswithout Americans or other free world civiliansto write the checks or effect the banktransfers.” 1 0 4

In both the French and American eras,corruption inevitably followed attempts to buylocal allies in the face of rising nationalism andanti-colonialism. Whether for Bao Dai, Diem orThieu, currency support and over-valuedofficial exchange rates served to enrich localclients and augment the buying power ofFrench and American nationals servingthousands of miles from home. Loyaltypurchased at such a price, however, was fickle.The beneficiaries engaged in rampant capitalflight, enriching themselves while exchangingfunds for safekeeping abroad. The financialburden fell increasingly on taxpayers in Franceand later the United States. The electorate’sresentment burst after widespread disclosuresof criminal profiteering put the lie to officialdenials and coverups. Public support for thewar, already weakened by the specter ofendless human sacrifices, eroded further asrevelations of racketeering called into questionthe ultimate point of those sacrifices.

Within Indochina, the impact of corruptioncontributed to the toxic political environment.As Ambassador Bunker lectured PresidentThieu to no avail, corruption not only ruinedthe economy and sapped the country’s politicalstrength, but also undercut the morale “of themilitary, of the government servants, of thepeople generally.” A corrupt society, he said,“is a weak society. It is a society in whicheveryone is for himself, no one is for the

common good.” In short, it threatenedeverything Washington hoped to achieve.105

Bunker’s warning was prophetic. An officialpost-mortem on Vietnam by USAID concluded“there is little question that corruption . . . wasa critical factor in the deterioration of nationalmorale which led ultimately to defeat.”106

Certainly many other factors contributed asmuch or more to the defeat, but a postwarsurvey of Vietnamese military and civilianleaders supported the view that corruption hadbeen “a fundamental ill that was largelyresponsible for the ultimate collapse of SouthVietnam.” Significantly, they also observedthat, “with Thieu involved in the corruption,there was no way of curbing it as long as theAmericans supported him in office.”107 And,they might have added, there was no way ofcurbing it as long as the Americans, like theFrench before them, tolerated, enabled andprofited from currency rackets and piasterprofiteering.

Jonathan V. Marshall is an independentscholar living in the San Francisco Bay Area.He has published five books, including TheLebanese Connection: Corruption, Civil Warand the In ternat iona l Drug Tra f f i c(http://amzn.com/0804781311/?tag=theasipacjo0b-20) (Stanford University Press, 2012) andTo Have and Have Not: Southeast Asian RawMaterials and the Origins of the Pacific War(http://www.amazon.com/To-Have-Not-Southeas t -Materials/dp/0520088239/?tag=theasipacjo0b-20) (Berkeley: University of California Press,1995). His scholarly articles have appeared inAsia-Pacific Journal, Bulletin of ConcernedAsian Scholars, Crime, Law and Social Change,Journal of American History, Journal ofIntelligence History, Journal of Policy History,and Middle East Report. He thanks Eric Wilson,Mark Selden, and an anonymous reader forhelpful comments on this article.

Recommended citation: Jonathan V. Marshall,

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"Dirty Wars: French and American PiasterProfiteering in Indochina, 1945-75," The Asia-Pacific Journal, Vol. 12, Issue 32, No. 2, August11, 2014.

Notes1 A. Schweitzer, “The French Colonialist Lobbyin the 1930s: The Economic Foundations ofImperialism” (Ph.D. diss., University ofWisconsin, 1971); Stuart M. Persell, TheFrench Colonial Lobby, 1889-1938 (Stanford:Hoover Press, 1983).

2 I was inspired to investigate this topic byPeter Dale Scott’s brief observation many yearsago that “political corruption by the traficsbecame a major factor underlying France’sinability to disengage from Indochina” and “theapparatus and personnel of the trafic depiastres have continued with little abatementfrom the French through the American phasesof the Vietnam War.” See Peter Dale Scott,“Opium and Empire: McCoy on Heroin inSoutheast Asia,” Bulletin of Concerned AsianScholars, 5 (September 1973), 52.

3 C.-J. Gignoux, “L’Affaire de la Piastre,” LaRevue des deux mondes, August 1, 1953, 555.

4 Jonathan Marshall, “Jean Laurent and theBank of Indochina Circle: Business Networks,Intelligence Operations and Political Intriguesin Wartime France,” Journal of IntelligenceHistory 8 (Winter 2008), 43-74. One U.S.diplomat called the bank “all powerful,” whilethe Viet Minh denounced it as “the epitome ofcolonialism.” See Reed (Saigon) to Departmentof State, April 9, 1946, 800-Indochina file,Record Group (RG) 84, National Archives (NA);James O’Sullivan (Hanoi) to Department ofState, September 14, 1946, Hanoi consulatefiles, RG 84, NA.

5 King Chen, Vietnam and China, 1938-1954(Princeton: Princeton University Press, 1969),134-135, 138-139; Jean Sainteny, Histoired’une paix manquée (Paris: Amiot-Dumont,1953), 162-163; intelligence memorandum

R-3190-CH-45 from Col. Harold Price and Lt.Richard Poole, JICA/China at Hanoi, October30, 1945, re “French Indo-China: Economic-Financial Situation,” XL 26111, Records of theOffice of Strategic Services, RG 226, NA.

6 Richard Ebelling, “The Great ChineseInflation,” The Freeman, 54 (December 2004)a thttp://www.fee.org/the_freeman/detail/the-great-chinese-inflation.

7 James O’Sullivan (Hanoi) to Department ofState, October 18, 1946, in MiscellaneousConfidential File, Records of the Consulate(Hanoi), RG 84, NA.

8 Ironically, the bank’s general manager, JeanLaurent, had warned against an even moreextreme plan to retire 100 piaster notes, sayingit could “set fire to the smallest Annamitevillage and turn against us the last of theundecided.” See Hugues Tertrais, La piastre etle fusil: Le Coût de la guerre d’Indochine,1945-1954 (Paris: Comité Pour l’HistoireÉconomique et Financière de la France, 2002),37.

9 Brig. Gen. P. E. Gallagher, “The 500$ NoteIncident, French Indochina, November 1945,”Gallagher mss., Hoover Institution; ReginaldUngern to Gallagher, January 19, 1946,Gallagher mss.; O’Sullivan dispatch October 18,1946, see note 7; Sainteny, Histoire d’une paixmanquée, 161-162.

10 Chen, China and Vietnam, 135-138; PhilippeDevillers, Histoire du Vietnam de 1940 à 1952,3rd edition (Paris: Seuil, 1952), 213. Eventuallythe bank mended relations with the NationalistChinese, opening a branch in Kunming (CentralDaily News [Kunming], April 22, 1947).

11 Stein Tonnesson, Vietnam 1946: How theWar Began (Berkeley: University of CaliforniaPress, 2010), 106-145; George Armstrong Kelly,Lost Soldiers: The French Army and Empire inCrisis, 1947-1962 (Cambridge: MIT Press,

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1965), 44-45; Alexander Werth, France,1940-1955 (New York: Henry Holt and Co.,1956), 338.

12 Tertrais, La piastre et le fusil, 330.

13 Jacques Despuech, Le Traffic des piastres(Paris: La Table Ronde, 1974), 81.

14 Journalist Lucien Bodard noted, “Theimportance of the Exchange Office was noteconomic but political. It was an instrument ofgovernment. All the great secrets of Indochinaat war, the Indochina of the palaces and thearmy staffs, led to these dusty, moth-eatenoffices in the Rue Guynemer where sanction forthe transfers was given or refused.” TheQuicksand War (Boston: Little Brown, 1967),86.

15 Gignoux, “L’Affaire de la Piastre,” 558-559;Despuech (1974), 214.

16 The same technique also serves to evadetaxes, launder money, conceal i l legalcommissions, and engage in capital flight. JohnZdanowicz, a finance professor at FloridaInternational University, states that, “The useof international trade to move money,undetected, from one country to another is oneof the oldest techniques used to circumventgovernment scrutiny.” See ”Trade-BasedMoney Laundering and Terrorist Financing,”Review of Law and Economics 5:2 (2009),855-878. For a more general and theoreticaldiscussion, see Pierre-Richard Agénor, “ParallelCurrency Markets in Developing Countries:Theory, Evidence, and Policy Implications,”Essays in International Finance no. 188,Department of Economics, PrincetonUniversity, November 1992. Only in recentyears have government agencies seriouslycome to grips with invoice fraud as a means ofmoney laundering. For a notable report on thischannel, see Financial Action Task Force[OECD], “Trade Based Money Laundering,”June 23, 2006.

17 Final Report of the National Assembly’sCommission to Investigate the Traffic inIndochinese Piasters, June 17, 1954 (hereafterFinal Report), reprinted in Despuech (1974),203-208.

18 David D. Duncan, “Indochina, All But Lost,”Life, August 3, 1953, 73-91. Although Franceofficially abolished its colonial opium monopolyin 1946, the local administration continuedselling opium through official “detoxification”clinics. By the late 1940s, opium salesaccounted for anywhere from a fifth to a thirdof government revenues. See Consul CharlesReed II to Department of State, June 13, 1947,851g14 Narcotics/6-1347, RG 59, NA; StateDepartment to Paris embassy, June 7, 1948,851g.114 Narcotics/6-748, RG 59, NA; GeorgeM. Abbott, Consul General Saigon, toDepartment of State, October 1, 1948,851g.00/10-148, RG 59, NA; Acting TreasurySecretary William Sanders to Secretary ofS ta te , Oc tober 21 , 1948 , 851g .114Narcotics/10-2148, RG 59, NA; “Indo-China,”Life, March 7, 1949, 99; “In French Indo-Chinait’s ‘Disintoxication,’” U.S. News and WorldReport, October 15, 1948, 69-70; William O.Walker III, Opium and Foreign Policy: TheAnglo-American Search for Order in Asia,1912-1954 (Chapel Hill, NC: University ofNorth Carolina Press, 1991), 177. For thememoirs of one opium buyer for the Frenchadministration, see André Roland, L’Actiondans l’ombre (Paris: Editions du Dauphin,1971). In 1945, François Bloch-Lainé, financialadviser to High Commissioner d’Argenlieu,said, “it would be absurd to dismantle themonopoly immediately to obey some puritanicalinjunctions that no one in the Far East actuallyfollows.” Tertrais, La piastre et le fusil, 251.

19 Jacques Dalloz, The War in Indochina,1945-54 (Dublin: Gill and Macmillan, 1990),117.

20 In addition to those cited elsewhere, sourcesfor this section include Col. Pierre Fourcaud,

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“L’Affaire des Généraux,” Historia, hors série24, 1972, 140-152; Jacques Fauvet, Le IVeRépublique (Paris: Fayard, 1959), 160-162;Kelly, Lost Soldiers, 65-69; Philip Williams,Wars, Plots and Scandals in Postwar France(Cambridge: Cambridge University Press,1970); P. L. Thyraud de Vosjoli, Lamia (Boston:Litt le, Brown and Co. , 1970); Werth,France:1940-1955, 458-466; and ClaudeGuillaumin, “L’affaire des généraux,” in Lesgrandes énigmes de la IVe république, II, ed.Bernard Michal (Paris: Editions de Saint-Clair,1967), 79-117.

21 Werth notes that under Pignon, there was “aspectacular development of corruption and ofsome of the more grandiose rackets: the racketin import and export licenses, the opium racketand, above all, the piastre racket—on whichimmense fortunes were made at the expense ofthe French Treasury, and which was alleged toprovide a constant flow of money into certainParty funds in France itself.” Werth, France:1940-1953, 459. Pignon was a fierce opponentof devaluing the piaster. Tertrais, La piastre etle fusil, 83.

2 2 E d w a r d F r a n c i s R i c e - M a x i m i n ,Accommodation and Resistance: the FrenchLeft, Indochina, and the Cold War (Westport,CT: Greenwood Press, 1986), 87.

23 Paul Marcus, La République trahie: Del’affaire des généraux à l’affaire des fuites(Paris: le cherche midi, 2009), 33.

24 Georgette Elgey, La Republique des illusions,1945-1951 (Paris: Fayard, 1965), 482-3.

25 Dalloz, The War in Indochina, 118-119.

26 de Vosjoli, Lamia, 203.

27 Final Report, 239.

28 Werth, France: 1940-1953, 468; Tertrais, Lapiastre et le fusil , 312; Rice-Maximin,Accommodation and Resistance, 89.

29 Tertrais, La piastre et le fusil, 86, 245-6,308-311. U.S. officials were concerned that thecost of the colonial war was gravely weakeningFrance while Western Europe was in peril:“Indochinese expenditures impose such aburden on the French public finances as toconstitute an important obstacle to the successof the whole French recovery and stabilizationeffort. The 167 billion francs spent in Indochinain 1949 is not only equivalent to over two-thirdsof the total direct American aid to France for1949-50, but some ten billion francs greaterthan the estimated French budgetary deficit forthe year. . . . It is clear that the struggle tocreate conditions necessary for the continuedgrowth of a non-Communist Viet Government inIndochina, to which the French are apparentlyirrevocably committed, constitutes for themoment a major obstacle in the path of Frenchfinancial stabilization and economic progress,with all that that implies for the EuropeanRecovery Program as a whole.” See Parisembassy to Department of State, December 22,1949, 851g.00/12-2249, RG 59, NA.

30 Tertrais, La piastre et le fusil, 180.

31 Based on an exchange rate of 350 francs tothe dollar. 2014 dollars calculated fromhttp://www.bls.gov/data/inflation_calculator.htm (accessed April 16, 2014).

32 Final Report, 176, 188. On the remarkablelack of legal sanctions against fraudulenttransfers, see Saigon embassy to Department ofState, July 28, 1953, Confidential SecurityInformation, 851G,131/7-2853, RG 59, NA.

33 Quoted in Marcus, La République trahie,81-83.

34 Le Monde, November 20, 1952; JacquesDespuech, Le Traffic des piastres (Paris: DeuxRives, 1953).

35 More conservatively, Tertrais estimates thetotal sum of fraudulent transfers at between130 billion and 200 billion francs, “around a

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year of Treasury disbursements to Indochina inthe last years of the war.” Tertrais, La piastreet le fusil, 321.

36 Despuech (1953), 62-64; Despuech (1974),73.

37 Despuech (1953), 83; Final Report, 200, 245;c.f. Mag Bodard, L’Indochine, c’est aussicomme ça (Paris: Gallimard, 1954), 142-143;Alfred W. McCoy, The Politics of Heroin: CIAComplicity in the Global Drug Trade (Brooklyn:Lawrence Hill Books, 1991), 157. The directorof SDECE in Saigon, Col. Belleux, told anAmerican diplomat in 1951 that although it was“exceptionally difficult to get proof regardingillegal piaster transactions,” he “expectedwithin several months to be able to bring aboutthe expulsion from Indochina of several of theleading traffickers, among whom he includedMr. Franchini and Mr. Adriani, Director of theCroix du Sud night club but also the director ofa large gambling, narcotics, and white slaveryorganization.” Evidently the Corsican mafiaproved more resilient than he expected. SeeSaigon embassy to Department of State, April6, 1951, 851G.131/4-651, RG 59, NA.

38 Despuech (1953), 104-6. American diplomatsregarded Diethelm’s administration ofIndochina’s finances in the early 1930s ashighly corrupt, noting that his officialsregularly allowed illegal smuggling of opiumfrom Yunnan into Indochina, undercutting theofficial opium monopoly. See W. Evertt Scottenreport , January 12, 1933, 8516.114Narcotics/53, RG 59, NA.

39 Frédéric Turpin, De Gaulle, les gaullistes etl’Indochine, 1940-1956 (Paris: Les IndesSavantes, 2005), 484, 389-90; Frédéric Turpin,André Diethem (1896-1854): De GeorgesMandel à Charles de Gaulle (Paris: Les IndesSavantes, 2004), 236-242.

40 Despuech (1953) 35-37. Another leading ifmuch less credible critic of the Bank ofIndochina at the time was Arthur Laurent,

author of La Banque de l’Indochine et la piastre(Paris: Deux Rives, 1954). Laurent wasconvicted of using fraudulent documentation toobtain financing from the bank for his rumimportation business.

41 Marc Meuleau, Des Pionniers en Extrême-Orient: Histoire de la Banque de l’Indochine,1875-1975 (Paris: Fayard, 1990), 488-500. Theparliamentary commission noted that the Bankof Indochina “always opposed devaluation” andadded, “It is undeniable that the Banque del’Indochine sought to take out of Indochina themaximum capital and thus it could not butbenefit from the disparity in value of thepiaster and franc.” The commission concludedthat the bank deserved “a very severe inquiry”into its affairs and “very serious oversight.”Final Report, 228-233.

42 Saigon embassy to Department of State, April6, 1951, 851G.131/4-651, RG 59, NA. Theambassador noted the view of the embassy,however, that the piaster traffic contributedonly a small percentage of funds available tothe Viet Minh. See also his dispatch to theDepartment of State, August 30, 1952,851G.131/8-3052 (Secret Security Information),RG 59, NA. For a more alarmist view of howthe Viet Minh and Communist China allegedlyprofited from the traffic, see Despuech (1974),119-154; Frederik Logevall, Embers of War:The Fall of an Empire and the Making ofAmerica’s Vietnam (New York: Random House,2012), 348; and Victoria Pohle and William J.Mazzocco, Office of Vietnam Affairs, U.S.Agency for International Development, “Viet-Minh Economic Warfare and the Traffic ofPiasters” (no date, probably 1960s).

43 Seymour Topping, Journey Between TwoChinas (Harper & Row, 1972), 128. The head ofthe French Sûreté admitted paying agents and“prominent personalities in Saigon” with profitsfrom the piaster traffic, and accused his rivalsin SDECE of funding its operations through theillegal sale of import licenses. At least one

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SDECE agent who later became notorious as aheroin trafficker, André Labay, was said tohave engaged in piaster trafficking. See PierreGalante and Louis Sapin, The MarseillesConnection (London: W.H. Allen & Co., 1979),224.

44 With regard to the missionaries, an Americandiplomat in Saigon observed that “whereas theLord once drove the money changers from thetemple, it now seemed that in order to do theLord’s work it was necessary to bring themback again.” Robert McClintock, Chargéd’Affaires, to Department of State, April 27,1954, 861G.131/4-2754 (Secret file), RG 59,NA.

45 Report of C. Tyler Wood, Associate DeputyDirector, Mutual Security Agency, “Relative tothe Exchange Rate in the Associated States ofIndochina,” January 7, 1953, 851G.131/1-753(Top Secret), RG 59, NA. See also Bonsalmemorandum to Allison, “Possibility ofSecuring a Diplomatic Exchange Rate inIndochina,” March 25, 1953, 851G.131/3-2553(Secret Security Information), RG 59, NA.

46 State Department to Saigon embassy, August15, 1952, 851G.131/8-1552, RG 59, NA; Saigonembassy to Department of State, August 20,1952, 851G.131/8-2052 (Secret SecurityInformation, Personal and Eyes Only Allisonand Bonsal), RG 59, NA.

47 Department of State to Saigon embassy,September 12, 1952, 851G.131/9-1252, RG 59,NA.

48 Debate of December 4, 1952, in JournalOfficiel de la République Française, DebatsParlementaires Assemblée Nationale ,December 5, 1952.

49 Quoted in Donald J. McGrew, assistantTreasury representative, dispatch 1726 forState, Treasury and Mutual Security Agency,February 16, 1953, 851G.13/2-1653, RG 59,NA.

50 Saigon embassy to Department of State,March 12, 1953, in U.S. Department of State,Foreign Relations of the United States [FRUS],1952-1954, Indochina, XIII, 407.

51 Saigon embassy to Department of State,March 8, 1953, 851G.131/3-853, RG 59, NA.

52 Memorandum by E. Donegan, March 2, inSaigon embassy to Department of State, March17, 1953 851G.131/3-1753, RG 59, NA.

53 Report of C. Tyler Wood, Associate DeputyDirector, Mutual Security Agency, Relative tothe Exchange Rate in the Associated States ofIndochina, January 7, 1953, 851G.131/1-753(Top Secret), RG 59, NA.

54 Department of State circular airgram 523,June 4, 1953, 851.131/6-453 (secret), RG 59,NA.

55 Ambassador Douglas Dillon, Paris embassy,to Department of State, May 15, 1953,851G.131/5-1553, RG 59, NA.

56 Evidently the devaluation did not surpriseeveryone. As the Saigon embassy reported,“there seem to have been a few individuals whohad enough advance notice so that they hadmade the necessary transfers beforedevaluation. Most of these individuals seemedto have excellent trading or polit icalconnections in Paris. . . . One local Frenchobserver considered that leaks in theannouncement did occur, because it is hisunderstanding that Dreyfus and Company, alarge French export-import firm, madeconsiderable commodity purchases both locallyand externally on Friday and Saturday beforedevaluation.” Saigon embassy to Department ofState, June 4, 1953, 851G.131/6-453, RG 59NA.

57 André Valls, quoted in Tertrais, La piastre etle fusil, 302.

58 Saigon embassy to Department of State, May

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11, 1953, 851G.131/5-1153, RG 59, NA.Another report claimed, however, that Tam was“secretly elated” by the devaluation since itgave him license to act more independently ofFrance. See Charge at Saigon (McClintock) toDepartment of State, May 21, 1953, #2273, inFRUS, 1952-1954. Indochina, XIII, 577.

59 Chargé (McClintock) to Department of State,May 13, 1953, #2190. FRUS, 1952-1954.Indochina, XIII, 562.

60 Saigon embassy to Department of State, June4, 1953, 851G.131/6-453, RG 59 NA.

61 Saigon embassy to Department of State, May12, 1953, 851G.131/5-1253, RG 59 NA.

62 Paris embassy to Department of State,September 16, 1953, 851G.131/9-1653, RG 59NA.

63 Alain Ruscio, Les communistes français et laguerre d'Indochine, 1944-1954 (Paris:L'Harmattan, 1985), 382.

65 Testimony of George Staples, GeneralAccounting Office, in U.S. Congress, House,Committee on Government Operations, UnitedStates Aid Operations in Laos: Hearings, 86thCongress, 1st Session (Washington: USGPO,1959), 259.

66 Seth Jacobs, The Universe Unraveling:American Foreign Policy in Cold War Laos(Ithaca, N.Y.: Cornell University Press, 2012),65-66; cf. Martin Goldstein, American PolicyToward Laos (Cranbury, N.J.: AssociatedUniversity Presses, 1973), 179-200; DenisWarner, The Last Confucian (New York:Macmillan Company, 1963), 203; WilliamConrad Gibbons, The US Government and theVietnam War: Executive and Legislative Rolesand Relationships, Part 1: 1945-1960(Princeton: Princeton University Press, 1986),316-317.

67 See terms of the Laotian government’s

contract with Universal Construction Co. Ltd.,whose performance was deemed fraudulent byan auditor for the International CooperationAdministration, in United States Aid Operationsin Laos, 365. One of the two main principals ofUniversal Construction was Willis Bird, whoseconnections to the CIA and drug trafficking arediscussed in Jonathan Marshall, “Cooking theBooks: The Federal Bureau of Narcotics, theChina Lobby and Cold War Propaganda,1950-1962,” The Asia-Pacific Journal, Vol. 11,Issue 37, No. 1, September 14, 2013.

68 Quoted in Jacobs, The Universe Unraveling,114.

69 Warner, The Last Confucian, 203-4.

70 Memorandum of a Conversation, Departmentof State, January 15, 1958, in FRUS,1958-1960. XVI: East Asia-Pacific Region;Cambodia; Laos, 420-422.

71 Vientiane embassy to Department of State,May 19, 1958, FRUS, 1958-1960. XVI: EastAsia-Pacific Region; Cambodia; Laos, 443.

72 Ibid., 455n7; United States Aid Operations inLaos, 8, 48.

73 United States, Congress, Senate, Committeeon the Judiciary, Subcommittee to InvestigateProblems Connected with Refugees andEscapees, North Vietnam and Laos, Relief andRehabilitation of War Victims in Indochina,hear ings, 93 r d Congress , 1 s t sess ion(Washington: USGPO 1973), 119.

75 Quoted in George McT. Kahin, Intervention:How America Became Involved in Vietnam(New York: Alfred A. Knopf, 1986), 86-87.Rutherford Poats, assistant administrator forthe Far East, USAID, called the CIP “ourprimary weapon in the battle to preventrunaway inflation which could cause abreakdown in Vietnamese support of the wareffort.” See United States, Congress, Senate,Committee on Government Operations,

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Permanent Subcommittee on Investigations.Improper Practices, Commodity ImportProgram, U.S. Foreign Aid, Vietnam: Hearings.Ninetieth Congress, First Session (Washington:USGPO, 1967), 6.

76 Kahin, Intervention, 87. See also Douglas C.Dacy, Foreign Aid, War, and EconomicDevelopment: South Vietnam, 1955-1975(Cambridge: Cambridge University Press, 1986,33, 153.

77 Hillaire du Berrier, Background to Betrayal:The Tragedy of Vietnam (Belmont, Mass.:Western Island, 1965), 197.

78 Memorandum of Conversation, July 16, 1965;and Saigon embassy to Department of State,July 17, 1965, in FRUS, 1964–1968 Volume III,V i e t n a m , J u n e – D e c e m b e r 1 9 6 5(http://history.state.gov/historicaldocuments/frus1964-68v03/d60 accessed April 15, 2014).

79 James Hamilton-Patterson, The Greedy War:How Profiteers Made Billions Out of YourBlood, Sweat and Taxes in Vietnam (New York:David McKay Co., 1971), 68-70, 123-124.

80 William Allison, “War for Sale: The BlackMarket, Currency Manipulation and Corruptionin the American War in Vietnam,” War &Society, 21 (October 2003), 148-9.

81 Robert Parker testimony, in United StatesSenate, Committee on Government Operations,Permanent Subcommittee on Investigations.Fraud and Corruption in Management ofMilitary Club Systems: Illegal CurrencyManipulations Affecting South Vietnam.Hearings. 9/1. (Washington: USGPO, 1970)[hereafter SPSI hearings], 536, 545; Hamilton-Patterson, The Greedy War, 89-90. TheseIndian money changers were Muslim, unlikethe traditional Hindu Indian money lendersoften known collectively as “Chettys” or“Chettiars.”

82 Hamilton-Patterson, The Greedy War, 89-90,

122-124.

83 Ibid, 188-90.

84 Rufus Phillips, who ran the Office of RuralAffairs for the U.S. aid mission in Vietnam inthe mid-1960s, exposed the blatant diversion ofgoods from American PXs to the Saigon blackmarket in a memo to Edwin Lansdale, who saidhe forwarded it to Ambassador Lodge andGeneral Westmoreland. Phillips recalls thatwhen he got back to Washington, “I askedLansdale by phone about any action resultingfrom my corrupt ion memo. ‘Nothingsignificant,’ he said. When I checked about ayear later, during my next visit, I heard theblack market depot had been moved but wasstill in operation and that corruption in generalhad gotten worse. . . . I found it amazing thatthe issue was never directly addressed byGeneral Westmoreland or Lodge. How couldthis be allowed to continue, when Americansand Vietnamese were dying in combat? Howdid we expect the Vietnamese to be honestwhen Americans were either fomenting orallowing such corruption and our highestofficials appeared unconcerned? It was hard totake and hard to blame on the Vietnamese.”Why Vietnam Matters: An Eyewitness Accountof Lessons Not Learned (Annapolis: NavalInstitute Press, 2008), 273-4.

85 Woolridge told a committee investigator,“There’s a lot of senior officers and GeneralWestmoreland included knew of wrongdoings,and I think they wanted to control thatinvestigation from Washington to be sure thatcertain names never came up. . . . I believethere was a coverup, yes sir.” (United StatesSenate, Committee on Government Operations,Permanent Subcommittee on Investigations.Fraud and Corruption in Management ofMilitary Club Systems: Illegal CurrencyManipulations Affecting South Vietnam(Second Series). Hearings. 93/1. (Washington:USGPO, 1973) [hereafter SPSI hearings,Second Series], 150). For a discussion of the

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Army’s alleged “obstructionist tactics” towardthe Senate investigation, see Clark Mollenhoff,Game Plan for Disaster (New York: W.W.Norton, 1976), 39-41. The PX scandals were thesubject of a novel by Robin Moore, The KhakiMafia (New York: Crown Publishers, 1971).

86 SPSI hearings, Second Series, 23.

87 Sergeant William Higdon, in SPSI hearings,Second Series, 161

8 8 United States Senate, Committee onGovernment Operat ions, PermanentSubcommittee on Investigations. Fraud andCorruption in Management of Military ClubSystems: Illegal Currency ManipulationsAffecting South Vietnam . Report, 92n d

Congress, 1st session (Washington: USGPO,1971), 189.

89 Ibid., 534. See also statements of Sen.Ribicoff and Carmine Bellino, SPSI hearings,657-8. Since then, his observation has beenrepeatedly borne out by the involvement ofmajor U.S. and international banks inlaundering money for drug traffickers and eventerrorists. For two particularly notorious recentexamples, see Michael Smith, “Wachovia’sDrug Habit,” Bloomberg News, July 7, 2010,and United States Senate, Committee onHomeland Security and Governmental Affairs,Permanent Subcommittee on Investigations.U.S. Vulnerabilities to Money Laundering,Drugs, and Terrorist Financing: HSBC CaseHistory. Report, 2012.

90 SPSI report, Fraud and Corruption inManagement of Military Club Systems, 189;SPSI hearings, 646. Jacques Despuech (1953)linked Irving Trust to the piaster traffic (98,102) . The bank had a long history ofinvolvement in money laundering and othercontroversial banking operations, ranging fromNugan Hand Bank (Jonathan Kwitny, Crimes ofPatriots (New York: W. W. Norton, 1987), 154)to the complex dealings of the Israeli bankerBaruch Rappaport (SPSI, Role of U.S.

Correspondent Banking in International MoneyLaundering: Hearings, 107th Congress, 1st

session, (Washington, D.C.: USGPO 2001) tosuspected Colombian drug accounts(“Suspected Drug Cash Sparks Legal DisputeOver Pursuit by U.S.,” Wall Street Journal,April 25, 1985).

91 SPSI report, 194-7; Allison, “War for Sale,”151. One significant source of transfers to thisaccount was the Bank of Indochina in Laos(SPSI hearings, 830).

92 Scott Deitche, Cigar City Mafia: A CompleteHistory of the Tampa Underworld Fort Lee, NJ:Barricade Books, 2004), 111, 274; ScottDeitche, The Silent Don: The CriminalUnderworld of Santo Trafficante Jr. (Fort Lee,NJ: Barricade Books, 2007), 79, 191. Frankmoved out to live with his mother after hisparents divorced when he was a youngteenager.

93 SPSI report, 198; SPSI hearings, 277; FBIinterview with Lucretia G. Furci, March 25,1968, by SAS John A. Ambler and Patrick T.Laffey, TP-92-900 NARA Record Number:124-10197-10287; Cablegram from DirectorFBI to Legat Hong Kong, January 25, 1968,NARA Record Number: 124-10205-10245; copyof Furci’s entry visa, January 25, 1962, inauthor’s possession.

9 4 SPSI hearings, Second Series, 195(International Credit Bank); Sunday Times,June 8, 1975 (Mossad). International CreditBank’s liaison to American organized crime,John Pullman, paid a visit to Hong Kong, alongwith other promising business venues, in 1965.See Hank Messick, Lansky (New York: G.P.Putnam’s Sons, 1971), 241.

95 SPSI hearings, 276-7; SPSI hearings, SecondSeries, 23, 159-161;

96 SPSI report, 133-4; McCoy, The Politics ofHeroin, 252-3. In my view, McCoy makes toomuch of a visit to Furci in Hong Kong by his

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father, Dominic, and the mafia boss of Tampa,Santo Trafficante, Jr., in January 1968. The twomen were traveling together on around-the-world tickets. Despite investigations federalagents, officials found no evidence to supportsuspicions that the men might have beenpursuing a narcotics trafficking conspiracy.One informant said Trafficante, tired of beingharassed, was thinking about leaving theUnited States permanently if he could get hiswife to agree. Another source said Frank Furciasked his father not to visit again for fear ofruining his reputation. See Report by WendellW. Hall, Jr., February 26, 1969, re SantoTrafficante, Jr., MM 92-88, NARA RecordNumber: 124-10213-10207.

97 Sen. Abraham Ribicoff, in SPSI hearings, 690.Ribicoff said earlier that “various governmentalagencies had knowledge of these transactions,the thefts and black market and all types ofwrong-doing and dishonesty, but paid noattention to the information they werereceiving.” Bellino noted that the Treasury’sForeign Assets Control Division “did nothingwhatsoever to determine about this black-market activity” (SPSI hearings, 657).

98 Mark Ames and Alexander Zaitchik, “JamesBond and the killer bag lady,” Salon, December2 , 2 0 1 2 , a thttp://www.salon.com/2012/12/02/better_than_bourne_who_really_killed_nick_deak/ (accessedApril 16, 2014)’ Time, June 12, 1964.

99 “CIA Currency Deals Alleged,” WashingtonPost, June 9, 1976.

100 Saigon embassy to Department of State,January 31, 1970, in FRUS, 1969–1976

Volume VI, Vietnam, January 1969–July 1970,D o c u m e n t 1 7 5 ,http://history.state.gov/historicaldocuments/frus1969-76v06/d175 (accessed April 15, 2014).

101 “Viet Nam: A Cancerous Affliction,” Time,June 7, 1971. The story added, “SomeVietnamese charge that the real motive behindthe current U.S. investigations is to protectAmerican smugglers against their Vietnamesecompetitors. One newspaper cited the case ofMaj. Delbert W. Fleener, occasional pilot forAmbassador Bunker, who was convicted lastyear of smuggling 850 pounds of opium intoViet Nam from Thailand aboard Air Forceplanes.”

102 Quoted in Sallie Pisani, The CIA and theMarshall Plan (Lawrence: University Press ofKansas, 1991), 83.

103 Allison, “War for Sale,” 135.

104 SPSI hearings, 540.

105 See n. 100.

106 James Carter, “’A National Symphony ofTheft, Corruption and Bribery,’ Anatomy ofState-Building from Iraq to Vietnam,” inVietnam in Iraq: Lessons, Legacies and Ghosts,ed. John Dumbrell and David Ryan (MiltonPark: Routledge, 2007), 98.

107 Stephen T. Hosmer, Konrad Kellen, Brian M.Jenkins, The Fall of South Vietnam: Statementsby Vietnamese Military and Civilian Leaders(Santa Monica: Rand, 1978), 31. See alsoJeffrey Record, The Wrong War: Why We Lostin Vietnam (Annapolis: Naval Institute Press,1998), 123-133.