Noriega Role Reported in Coffee Smuggling Scheme : Corruption: Panama’s deposed strongman allegedly collected millions in kickbacks on Colombian exports.

A federal money-laundering investigation has uncovered evidence that Gen. Manuel A. Noriega received millions of dollars in kickbacks from a coffee-smuggling scheme, according to sources close to the inquiry.

The allegations involve contraband Colombian coffee that was shipped to Panama, rebagged as Panamanian coffee and exported to the United States and elsewhere. The scheme enabled the Colombian producers to evade export quotas and sell the coffee for a higher price.

A Panamanian company run by a Noriega associate allegedly played the role of middleman and funneled payments to Noriega, according to two sources close to the inquiry, who spoke on the condition that their names not be used.

Noriega, facing trial in Miami and Tampa on charges of drug trafficking and money laundering, is not a target of the separate money-laundering probe by the Internal Revenue Service and U.S. attorney’s office in Miami, the sources said.

Noriega’s attorney in the Miami drug case, Frank Rubino, said he had no knowledge of the coffee-smuggling investigation. The assistant U.S. attorney handling the case did not return a telephone call.

Federal authorities contend that the coffee operation reflected Noriega’s extensive control over the Panamanian economy. Some law-enforcement officials even assert that the money Noriega allegedly received for protecting Colombian cocaine traffickers was dwarfed by payoffs from other forms of corruption.

Panama’s controller general, Ruben Carles, said in an interview last month: “The extent of the corruption was more than we thought.”

For instance, U.S. officials contend that Noriega collected as much as $100 million selling Panamanian visas to Cubans who wanted to enter the United States and Chinese fleeing their country. The deposed strongman also has been accused in Senate testimony of helping Cuban fishermen evade a U.S. ban on Cuban products.

The Miami money-laundering investigation is aimed at customers of the Bank of Credit and Commerce International, a Luxembourg-based bank, and is several months away from returning any indictments, the sources said. The Bank of Credit recently pleaded guilty to money-laundering charges in federal court in Tampa and is cooperating with investigators.

The bank’s plea bargain specifies that no further charges will be filed against the institution in Tampa. An attorney familiar with the plea negotiations said the deal also covered the Miami money-laundering inquiry, which began more than a year ago.

According to an attorney connected to the bank, the IRS is investigating whether bank customers evaded taxes and violated other laws. Some customers were involved in the coffee scheme, which led federal investigators into the little-known realm of international coffee smuggling, according to two attorneys familiar with the inquiry.

Coffee is the world’s second-most-heavily traded commodity, trailing only petroleum. For years, coffee exports to most countries were regulated by an international agreement. The pact expired last July after negotiations failed to resolve complaints of inequities in the quotas.

The previous agreement restricted the amount of coffee a producer could ship to the 74 nations that adhered to the pact. Countries that produced more than their quota, such as Colombia, had to sell the excess to non-member countries at deeply discounted prices.

For instance, a pound of coffee that sold for $1.50 to a member nation would bring 70 cents or 80 cents on the non-member market because of the excess supplies.

The arrangement created a booming black market. The International Coffee Organization estimated that 650 million to 750 million pounds of coffee was smuggled into member countries annually, according to an analysis by the U.S. Trade Representative’s Office.

Sometimes, coffee sold to non-member nations was smuggled into member nations and resold at the higher price. Mislabeling schemes also thrived because some nations, such as Panama, had export quotas that exceeded the amount of coffee they produced.

According to two sources--a former government prosecutor and a defense attorney--excess Colombian coffee was shipped to the duty-free zone in Colon, Panama, where it was rebagged as Panamanian coffee and sold to member nations at the premium price.

Certificates authenticating that the coffee was Panamanian were controlled by a private company, Transit S.A., which was run by Carlos Duque, according to one of the sources. Duque was Noriega’s hand-picked candidate for president of Panama in last year’s election.

The source said investigators uncovered evidence that Transit S.A. collected a fee for each 132-pound bag of contraband coffee and passed the money on to Noriega. The source said the total reached several million dollars over an eight-year period.

Attempts to reach Transit were not successful, and U.S. officials have said that Duque is in hiding.

In testimony before a Senate committee two years ago, former Noriega political adviser Jose Blandon said Transit S.A. collected a fee from every company doing business in the duty-free zone and paid it to Noriega and other members of the Panamanian military.

Blandon, who is expected to be a witness against Noriega in the Miami drug trial, did not mention the coffee scheme in his Senate testimony. But he described a similar arrangement for evading the U.S. ban on Cuban products.

Under an agreement between Noriega and Cuban President Fidel Castro, Cuban fishermen brought their lobster and shrimp catches to a Panamanian port for shipment to the United States as Panamanian, said Blandon.