WHILE Peru's disgraced former spymaster Vladimiro Montesinos awaits trial in a maximum security jail in Lima, it has emerged that millions of dollars donated by the United States' Central Intelligence Agency not only helped him amass a small personal fortune, but was also responsible for one of the most embarrassing espionage debacles of recent years.

Skimming off money that the CIA intended for use in Peru's anti-drug trafficking efforts, Montesinos set up a major arms deal in the Middle East that funnelled 10,000 AK47 rifles to left-wing FARC guerrillas in Colombia, thereby fomenting the very uprising that America has pledged .3bn to stamp out.

FARC has transformed itself from a Marxist insurgency group trying to seize power in Colombia into a quasi-drug cartel, making millions from the drug smugglers who operate under their protection.

Bill Clinton's administration decided it was worth investing spectacular amounts of cash to help the Colombian government stamp out the guerrillas and thus leave the smugglers unprotected.

At first Vladimiro Montesinos looked as if he could be a significant asset in the US fight against both Communism and the drugs trade. In the mid-1970s, while an officer in the Peruvian army, he came to the US to show the CIA evidence of Soviet arms deals with Peru. It was enough to get him on the agency's payroll.

Montesinos rose to become spymaster for the controversial former president of Peru, Albert Fujimori, himself now being sought on suspicion of human rights violations.

Throughout the 1990s the flow of money became a torrent, the stated intention being to help Peru fight the trans-Andean drug trade.

But after years of little or no oversight over how the cash was spent, Montesinos started turning the money to his own ends. He was, according to prosecutors, also guilty of flagrant human rights violations against political opponents, including murder.

The CIA was well aware of his actions but did little to rein Montesinos in. But the CIA had not banked on Montesinos' double-dealing. According to Peruvian prosecutors he was also taking protection money from drug traffickers, which joined a stream of corrupt cash that amassed him a fortune close to 4m.

The CIA decided to call a halt when the FARC arms deal demonstrated conclusively that he had gone too far.

Montesinos became a fugitive in October 2000 and was captured at the end of last month by Venezuelan agents in Caracas.

Today Montesinos is on hunger strike in protest against being held in the same jail, one he actually designed, as many of his former enemies.

If found guilty, the ex-spymaster faces the rest of his life in prison.

That at least would ease the CIA's embarrassment.

But in the US, the CIA's involvement in the Montesinos case has raised barely a ripple of comment.