Montesinos, who now faces trial on murder, arms and drug trafficking charges, among others, had founded and personally controlled a counter-drug unit within Peru's National Intelligence Service, known by its Spanish acronym SIN.

It was to that Narcotics Intelligence Division, known as DIN, that the CIA directed at least $10 million in cash payments from 1990 until September 2000, U.S. officials told the Center's International Consortium of Investigative Journalists. Most of the money was to have financed intelligence activities in the drug war, though officials acknowledged a small part was for antiterrorist activities.

The CIA knew the money was going directly to Montesinos and had receipts for the payments, the sources said. "It was an agency-to-agency relationship," said one U.S. official, speaking on condition of anonymity in Lima, the capital, "with Vladimiro Montesinos as the intermediary.... Montesinos had the money under his control."

The new information on Montesinos is part of an extensive soon-to-be-released report by the International Consortium of Investigative Journalists (ICIJ) on U.S. aid to Latin America. The material on Montesinos is based on multiple interviews with U.S. and Peruvian officials.

A CIA spokesman in Washington refused to confirm or deny that the agency had helped fund DIN, and that part of those funds went into Montesino's pockets.

However, an intelligence official who asked not to be further identified confirmed that Montesinos had pocketed some, but not most, of the funds. He said that the CIA had been fully aware that Montesino was involved in corrupt deals and that the CIA had briefed the National Security Council, State Department and Pentagon about the alleged corruption. He said the agencies directed the CIA to continue to work with Montesinos because he was Peru's designated chief of counternarcotics and the only game in town.

Montesinos disappeared in October as the regime of Peruvian President Alberto Fujimori collapsed under wide-ranging corruption allegations and was seized in Venezuela on Saturday night, June 23. Montesinos was returned to Peru on June 25 to face an array of government charges.

U.S. Shrugged Off Reports

Over the years, the United States accumulated plenty of evidence of corruption, human rights abuses and other anti-democratic actions by Montesinos, but it shrugged off the reports because Montesinos -- the unofficial head of the National Intelligence Service -- was a CIA asset deemed key to Washington's drug war in the Andes.

But the final blow appeared to be Montesinos double-dealing in Colombia. In what is surely among the most embarrassing turns in post-Cold War U.S. foreign policy, Montesinos used his CIA-backed position of influence to get rich and to betray his benefactors. He arranged an arms deal that sent at least 10,000 AK-47 assault rifles from Jordan to Colombia's leftist FARC guerrillas, collectively public enemy number one in the U.S. war on drugs in Latin America and the main target of Washington's $1.3 billion counternarcotics aid package to Colombia.

Montesinos had long been fingered as corrupted by drug money, although many of the earlier claims that surfaced came from arrested drug dealers. But by 1997, the State Department began to document Montesinos' questionable activities in its annual human rights reports. The Senate Appropriations Committee noted in 1999 that it had "repeatedly expressed concern about U.S. support for the Peruvian National Intelligence Service" and requested that it "be consulted prior to any decision to provide assistance to the SIN."

Diversion of Funds No Surprise

The CIA suspected that Montesinos was involved in some illegal activities and was not surprised when informed of the diversion of funds, U.S. sources said. It continued doing business with him "because he solved problems, including problems he created himself," one U.S. source told ICIJ.

The U.S. Embassy has provided Peru's anti-corruption prosecutor with detailed information about the CIA's payments to Montesinos in response to the Peruvian government's wide-ranging investigations into Montesinos' malfeasance. The prosecutor, Ana Cecilia Magallanes, has told U.S. officials that she has documents showing the diversion of SIN money, including the CIA payments, toward illegal activities. Sources would not elaborate on what those activities included, but the prosecutor said it did not appear that those monies were diverted into Montesinos' personal accounts.

However, Peruvian prosecutors also allege that Montesinos collaborated with drug traffickers, who paid him and his associates protection money. After 10 years as the power behind Fujimori, Montesinos had at least $264 million deposited in foreign bank accounts in Switzerland, the United States, the Cayman Islands and other nations, Peru's equivalent of attorney general, Nelly Calderon Navarro, announced in June.

According to U.S. embassy officials in Lima interviewed by ICIJ, the SIN's narcotics intelligence unit was funded and assisted by both the CIA and the State Department's Bureau for International Narcotics and Law Enforcement. The State Department's share included $36,000 in 1996, $150,000 in 1997 and $25,000 in 1998, according to U.S. Embassy officials. In 1999, State withheld aid to the SIN because of congressional anger about reports that Montesinos was using the unit to gather intelligence on the regime's political opponents.

Three separate Peruvian military intelligence sources told ICIJ that surveillance equipment provided by the CIA for use in the drug war was instead used by the SIN to intercept the conversations of opposition political figures, journalists, businessmen and military officers suspected of disloyalty to the Fujimori regime. "Intelligence services" were sold to wealthy individuals, corporations or influential officers. A buyer could pay $1,000 to $2,500 per week to receive intercepts from the tapping of a single phone. Or, the military intelligence sources said, the wealthy buyers could pay spies to gather other information about individuals of their choosing.

Support Began in 1970s

The CIA began supporting Montesinos in the mid-1970s when he, as a middle-ranking Peruvian army officer, came to Washington on an unauthorized visit and handed over documents concerning Soviet arms deals with Peru. When the CIA learned of Montesinos' double-dealing with Colombia's FARC guerrillas, according to U.S. and Peruvian sources, it decided to try to bring him down.

The demise began with the mysterious release of a videotape showing Montesinos paying a $15,000 bribe to an opposition politician in September 2000. Hundreds of videotapes subsequently made public showed Montesinos and his subordinates paying off politicians, businessmen and journalists. Former military officers and civilian officials have since come forward to provide court testimony about the regime's involvement in bribery, arms and drug trafficking, and human rights violations including torture, espionage, extortion of political opponents and harassment of the press.

Peruvian military sources, speaking on condition of anonymity, told ICIJ that they believed that the CIA leaked some of the videotapes showing Montesinos' dirty deals.

Fujimori, who was re-elected president in June 2000 and amended the Peruvian constitution in order to retain the office for nearly three presidential terms, fled to Japan, where he resigned from office on Nov. 20, 2000.

Angel Paez is a Peruvian member of the Center for Public Integrity's International Consortium of Investigative Journalists.