The New Opium Monopoly
Premier Ky's air force career began when he returned from instrument flying school in France with his certification as a transport pilot and a French wife. As the Americans began to push the French out of air force advisory positions in 1955, the French attempted to bolster their wavering influence by promoting officers with strong pro-French citizen, he was promoted to colonel "almost overnight" and became the first ethnic Vietnamese to command the Vietnamese air force. Lieutenant Ky's French wife was adequate proof of his loyalty, and despite his relative youth and inexperience, he was appointed commander of the First Transport Squadron. In 1956 Ky was also appointed commander of Saigon's Tan Son Nhut Air Base, and his squadron, which was based there, was doubled to a total of thirty-two C-47s and renamed the First Transport Group. While shuttling back and forth across the countryside in the lumbering C-47s may have lacked the dash and romance of fighter flying, it did have its advantages. Ky's responsibility for transporting government officials and generals provided him with useful political contacts, and with thirty-two planes at his command, Ky had the largest commercial air fleet in South Vietnam. Ky lost command of the Tan Son Nhut Air Base, allegedly, because of the criticism about the management (or mismanagement) of the base mess hall by his sister, Madame Nguyen Thi Ly. But he remained in control of the First Transport Group until the anti-Diem coup of November 1963. Then Ky engaged in some dextrous political intrigue and, despite his lack of credentials as a coup plotter, emerged as commander of the entire Vietnamese air force only six weeks after Diem's overthrow.
As air force commander, Air Vice-Marshal Ky became one of the most active of the "young Turks" who made Saigon political life so chaotic under General Khanh's brief and erratic leadership. While the air force did not have the power to initiate a coup singlehandedly, as an armored or infantry division did, its ability to strafe the roads leading into Saigon and block the movement of everybody else's coup divisions gave Ky a virtual veto power. After the air force crushed the abortive September 13, 1964 coup against General Khanh, Ky's political star began to rise. On June 19, 1965, the ten-man National Leadership Committee headed by Gen. Nguyen Van Thieu appointed Ky to the office of premier, the highest political office in South Vietnam.
Although he was enormously popular with the air force, Ky had neither an independent political base nor any claim to leadership of a genuine mass movement when he took office. A relative newcomer to politics, Ky was hardly known outside elite circles. Also, Ky seemed to lack the money, the connections, and the capacity for intrigue necessary to build up an effective ruling faction and restore Saigon's security. But he solved these problems in the traditional Vietnamese manner by choosing a power broker, a "heavy" as Machiavellian and corrupt as Bay Vien or Ngo Dinh Nhu - Gen. Nguyen Ngoc Loan.
Loan was easily the brightest of the young air force officers. His career was marked by rapid advancement and assignment to such technically demanding jobs as commander of the Light Observation Group and assistant commander of the Tactical Operations Center. Loan also had served as deputy commander to Ky, an old classmate and friend, in the aftermath of the anti-Diem coup. Shortly after Ky took office he appointed Loan director of the Military Security Service (MSS). Since MSS was responsible for anticorruption investigation inside the military, Loan was in an excellent position to protect members of Ky's faction. Several months later Loan's power increased significantly when he was also appointed director of the Central Intelligence Organization (CIO), South Vietnam's CIA, without being asked to resign from the MSS. Finally, in April 1966, Premier Ky announced that General Loan had been appointed to an additional post - director general of the National Police. Only after Loan had consolidated his position and handpicked his successors did he "step down" as director of the MSS and CIO. Not even under Diem had one man controlled so many police and intelligence agencies.
In the appointment of Loan to all three posts, the interests of Ky and the Americans coincided. While Premier Ky was using Loan to build up a political machine, the U.S. mission was happy to see a strong man take command of "Saigon's police and intelligence communities" to drive the NLF out of the capital. Lt. Col. Lucien Conein says that Loan was given whole-hearted U.S. support because
The liberal naivete that had marked the Kennedy diplomats in the last few months of Diem's regime was decidedly absent. Gone were the qualms about "police state" tactics and daydreams that Saigon could be secure and politics "stabilized" without using funds available from the control of Saigon's lucrative rackets.
With the encouragement of Ky and the tacit support of the U.S. mission, Loan (whom the Americans called "Laughing Larry" because he frequently burst into a high-pitched giggle) revived the Binh Xuyen formula for using systematic corruption to combat urban guerrilla warfare. Rather than purging the police and intelligence bureaus, Loan forged an alliance with the specialists who had been running these agencies for the last ten to fifteen years. According to Lieutenant Colonel Conein, "the same professionals who organized corruption for Diem and Nhu were still in charge of police and intelligence. Loan simply passed the word among these guys and put the old system back together again."
Under Loan's direction, Saigon's security improved markedly. With the "door-to-door" surveillance network perfected by Dr. Tuyen back in action, police were soon swamped with information. A U.S. Embassy official, Charles Sweet, who was then engaged in urban pacification work, recalls that in 1965 the NLF was actually holding daytime rallies in the sixth, seventh, and eight districts of Cholon and terrorist incidents were running over forty a month in district 8 alone. Loan's methods were so effective, however, that from October 1966 until January 1968 there was not a single terrorist incident in district 8. In January 1968, correspondent Robert Shaplen reported that Loan "has done what is generally regarded as a good job of tracking down Communist terrorists in Saigon..."
Putting "the old system back together again," of course, means reviving large-scale corruption to finance the cash rewards paid to these part-time agents whenever they delivered information. Loan and the police intelligence professionals systematized the corruption, regulating how much each particular agency would collect, how much each officer would skim off for his personal use, and what percentage would be turned over to Ky's political machine. Excessive individual corruption was rooted out, and Saigon-Cholon's vice rackets, protection rackets, and payoffs were strictly controlled. After several years of watching Loan's system in action, Charles Sweet feels that there were four major sources of graft in South Vietnam: (1) sale of government jobs by generals or their wives, (2) administrative corruption (graft, kickbacks, bribes, etc), (3) military corruption (theft of goods and payroll frauds), and (4) the opium traffic. And out of the four, Sweet has concluded that the opium traffic was undeniably the most important source of illicit revenue.
As Premier Ky's power broker, Loan merely supervised all of the various forms of corruption at a general administrative level; he usually left the mundane problems of organization and management of individual rackets to the trusted assistants.
In early 1966 General Loan appointed a rather mysterious Saigon politician named Nguyen Thanh Tung (known as "Mai Den" or "Black Mai") director of the Foreign Intelligence Bureau of the Central Intelligence Organization. Mai Den is one of those perennial Vietnamese plotters who have changed sides so many times in the last twenty-five years that nobody really knows too much about them. It is generally believed that Mai Den began his checkered career as a Viet Minh intelligence agent in the late 1940s, became a French agent in Hanoi in the 1950s, and joined Dr. Tuyen's secret police after the French withdrawal. When the Diem government collapsed, he became a close politial adviser to the powerful I Corps commander, Gen. Nguyen Chanh Thi. However, when General Thi clashed with Premier Ky during the Buddhist crisis of 1966, Mai Den began supplying General Loan with information on Thi's movements and plans. After General Thi's downfall in April 1966, Loan rewarded Mai Den by appointing him to the Foreign Intelligence Bureau. Although nominally responsible for foreign espionage operations, allegedly Mai Den's real job was to reorganize opium and gold smuggling between Saigon and Laos.
Through his control over foreign intelligence and consular appointments, Mai Den would have had no difficulty in placing a sufficient number of contact men in Laos. However, the Vietnamese military attache in Vientiane, Lt. Col. Khu Duc Nung, and Premier Ky's sister in Pakse, Mrs. Nguyen Thi Ly (who managed the Sedone Palace Hotel), were Mai Den's probable contacts.
Once opium had been purchased, repacked for shipment, and delivered to a pickup point in Laos (usually Savannakhet or Pakse), a number of methods were used to smuggle it into South Vietnam. Although no longer as important as in the past, airdrops in the Central Highlands continued. In August 1966, for example, U.S. Green Berets on operations in the hills north of Pleiku were startled when their hill tribe allies presented them with a bundle of raw opium dropped by a passing aircraft whose pilot evidently mistook the tribal guerrillas for his contact men. Ky's man in the Central Highlands was II Corps commander Gen. Vinh Loc. He was posted there in 1965 and inherited all the benefits of such a post. His predecessor, a notoriously corrupt general, bragged to colleagues of making five thousand dollars for every ton of opium dropped into the Central Highlands.
While Central Highland airdrops declined in importance and overland narcotics smuggling from Cambodia had not yet developed, large quantities of raw opium were smuggled into Saigon on regular commercial air flights from Laos. The customs service at Tan Son Nhut was rampantly corrupt, and Customs Director Nguyen Van Loc was an important cog in the Loan fund-raising machinery. In a November 1967 report, George Roberts, then chief of the U.S. customs advisory team in Saigon, described the extent of corruption and smuggling in South Vietnam:
It appeared that Customs Director Loc devoted much of his energies to organizing the gold and opium traffic betwwen Vientiane, Laos, and Saigon. When 114 kilos of gold were intercepted at Tan Son Nhut Airport coming from Vientiane, George Roberts reported to U.S. customs in Washington that "There are unfortunate political overtones and implications of culpability on the part of highly placed personages." Director Loc also used his political connections to have his attractive niece hired as a stewardess on Royal Air Lao, which flew several times a week between Vientiane and Saigon, and used her as a courier for gold and opium shipments. When U.S. customs advisers at Tan Son Nhut ordered a search of her luggage in December 1967 as she stepped off a Royal Air Lao flight from Vientiane they discovered two hundred kilos of raw opium. In his monthly report to Washington, George Roberts concluded that Director Loc was "promoting the day-to-day system of payoffs in certain areas of Customs' activities."
After Roberts filed a number of hard-hitting reports with the U.S. mission, Ambassador Ellsworth Bunker called him and members of the customs adviory team to the Embassy to discuss Vietnamese "involvement in gold and narcotics smuggling." The Public Administration Ad Hoc Committee on Corruption in Vietnam was formed to deal with the problem. Although Roberts admonished the committee, saying "we must stop burying our heads in the sand like ostriches" when faced with corruption and smuggling, and begged, "Above all, don't make this a classified subject and thereby bury it," the U.S. Embassy decided to do just that. Embassy officials whom Roberts described as advocates of "noble kid glove concept of hearts and minds" had decided not to interfere with smuggling or large-scale corruption because of "pressures which are too well known to require enumeration."
Frustrated at the Embassy's failure to take action, an unknown member of U.S. customs leaked some of Roberts' reports on corruption to a Senate subcommitte chaired by Sen. Albert Gruening of Alaska. When Senator Gruening declared in February 1968 that the Saigon government was "so corrupt and graft-ridden that it cannot begin to command the loyalty and respect of its citizens, U.S. officials in Saigon defended the Thieu-Ky regime by saying that "it had not been proved that South Vietnam's leaders