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| Walter Grasheim |
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2026-05-17 | 2026-10-12 | Arms Dealers & Brokers |
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New York weapons dealer and U.S. military contractor raided by DEA agent Celerino Castillo, who was found with embassy plates, C-4 explosives, and a massive weapons cache. |
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Walter "Wally" Grasheim was a New York weapons dealer and U.S. military contractor based in San Salvador, El Salvador, who was raided by DEA agent Celerino Castillo on September 1, 1986. The raid uncovered a massive weapons cache, U.S. Embassy license plates and IDs, and evidence linking Grasheim to the Contra operation at Ilopango Airbase.1
Background
The tall, bearded arms broker was the Salvadoran sales representative for the Litton Corporation and other American weapons manufacturers, with a booming business selling night vision goggles, Steyer sniper rifles, and assorted military gear to the Salvadoran military. He was also advising and training Salvadoran army units in long-range reconnaissance operations on behalf of the U.S. government.1
The Raid
Denied access to the military side of Ilopango, Castillo targeted Grasheim as an off-base target linked to the Ilopango operation. One of Castillo's informants told him Grasheim was intimately involved with the Contra drug operation at the base, and DEA computers turned up several references to Grasheim as a suspected drug trafficker. Salvadoran police working with Castillo raided Grasheim's elegant hillside home in San Salvador. A pound of marijuana was found, along with an extraordinary weapons cache. Gary Webb quoted the raid's contents as including: "Some of the rooms in the house had munitions and explosives piled to the ceiling, including automatic weapons, M-16's, hand grenades and C-4 [plastic explosives]." The Inspector General's inventory of the September 1, 1986 search lists "machine guns" and "pistols" and does not list M-16s. The raid also uncovered U.S. Embassy license plates, radios, and IDs in Grasheim's name.12
Grasheim's Claims
Grasheim strenuously denied involvement with either the Contras or drugs and believed Castillo was duped by informants working for the Central Intelligence Agency. "The Agency put Castillo onto me as a way of getting him away from whatever it was they were doing at Ilopango," Grasheim insisted. "The person who claimed I was a drug trafficker was on the payroll of the CIA. I've never been involved with drugs in my life." The marijuana found at his house, Grasheim said, probably belonged to a U.S. Army colonel who was a frequent visitor. Grasheim said the weapons were legally his.1
CIA Infiltration of Castillo's Investigation
The Department of Justice Office of the Inspector General's report partially confirmed Grasheim's account. Webb wrote that Castillo's informant Murga, who directed Castillo toward Grasheim by fingering him as "head of smuggling operations at Ilopango," "was indeed working for the CIA and had been for quite some time," and that soon after putting Castillo onto Grasheim the CIA demanded Murga back.1 The Inspector General's report designates the informant STG6 and records that the CIA asked the DEA in December 1987 to stop using STG6 because he was currently a CIA informant; the DEA reactivated him in 1989. Robert Stia recalled being asked "by the CIA Station Chief in El Salvador to relinquish use of informant STG6," and said "The Station Chief had explained that the CIA had established the informant before he had ever worked for the DEA." Stia complied but complained internally that the CIA had cost the DEA a valuable asset.3 The report does not confirm Grasheim's claim that the informant worked for the CIA against Castillo; it records that CIA records showed STG6 was a CIA informant and that the CIA and the DEA disagreed over his use.3
Investigation Record, 1986
The DEA's case on Grasheim began with a March 10, 1986 cable from Panama, which reported that Grasheim and an Israeli national had flown in from El Salvador and, when questioned by Panamanian authorities, had claimed to be DEA agents. The cable also reported a U.S. Customs Service investigation of Grasheim in New York for arms smuggling.4
On May 3, 1986, according to Castillo's report, Grasheim crash-landed an aircraft six miles northwest of Tamiami airport in Florida while flying from Ilopango to Florida. At the scene he identified himself as a "secret agent" with the U.S. government and turned over a suitcase that Castillo's report says weighed about 60 pounds and contained cocaine. Castillo's report also says Grasheim did not clear Customs. Grasheim told the Inspector General that a clog in his fuel line forced an emergency landing in 1987, that Customs instructed him to proceed to the airport, that he left everything in the plane except a suitcase of business records and flight plans, and that no one searched his person, bags or plane.2
The case opening report, dated October 27, 1986 in the Inspector General's file listing, named the informants STG6 and STG13 and attributed to Grasheim the "air smuggling of cocaine by subjects who were believed to be associated with the Contra movement." Castillo's report said that Grasheim allegedly abused hangars four and five, which the CIA had provided to him. The Salvadoran police search of Grasheim's residence followed on September 1, 1986, and Grasheim filed a sworn statement on September 19, 1986 saying that the Salvadoran armed forces had named him a military advisor and given him the seized items. The armed forces denied that they had done so.4
On October 30, 1986, Castillo and Customs agent Richard Rivera briefed Ambassador Edwin Corr. Corr said he welcomed an investigation but asked that it be conducted discreetly. Corr told the Inspector General that he had canceled U.S. government night vision contracts with Grasheim after the search. Grasheim later came to the embassy and asked to see Corr, and his security staff turned him away.5
The DEA closed the case on November 21, 1986. In the closing report, Country Attache Robert Stia wrote: "DEA has no further interest in Grasheim at this time and it is unlikely to develop further drug information about Grasheim directly." The report noted that Grasheim had questioned "DEA's right and authority to conduct an investigation into his activities." Stia wrote that the DEA's information was passed to Customs and the Internal Revenue Service, which were conducting their own investigation of Grasheim's exports of military supplies.6
Grasheim told the Inspector General that he was never charged with a crime or given a formal explanation for the search. He offered three explanations for why the DEA had targeted him: some of his activities were suspicious, the DEA might have been "led by the nose through the investigation by someone else" who wanted to divert attention from that person, or the investigation resulted from his "high profile" in El Salvador.2
Customs agent Rivera told the Inspector General that Customs never developed enough evidence to charge Grasheim with an offense, and that its case was closed. The Customs file the Inspector General obtained contained nothing on the CIA or the Contras.6
Footnotes
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Webb, Gary. Dark Alliance: The CIA, the Contras, and the Crack Cocaine Explosion. Seven Stories Press, 1998. Chapter 13: "The wrong kind of friends" ↩︎
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U.S. Department of Justice, Office of the Inspector General, Chapter X, part 2, section C.1.b(6) (interview of Walter Grasheim) and section C.1.a (inventory of the September 1, 1986 search). https://oig.justice.gov/special/9712/ch10p2.htm ↩︎
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U.S. Department of Justice, Office of the Inspector General, Chapter X, part 3, section H (informant STG6, CIA use and DEA reactivation). https://oig.justice.gov/special/9712/ch10p3.htm ↩︎
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U.S. Department of Justice, Office of the Inspector General, Chapter X, part 2, section C.1.a (DEA reports on Grasheim, including the March 10, 1986 Panama cable, the October 27, 1986 case opening report and the September 19, 1986 sworn statement). https://oig.justice.gov/special/9712/ch10p2.htm ↩︎
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U.S. Department of Justice, Office of the Inspector General, Chapter X, part 2, section C.1.b(2) (interview of Edwin Corr). https://oig.justice.gov/special/9712/ch10p2.htm ↩︎
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U.S. Department of Justice, Office of the Inspector General, Chapter X, part 2, sections C.1.c (closing of the Grasheim case) and C.1.b(5) (interview of Richard Rivera). https://oig.justice.gov/special/9712/ch10p2.htm ↩︎