The allegations are very serious. Drugs, arms, contraband cigarettes - all are believed to have been handled by a company run openly by Albania's ruling Democratic Party, Shqiponja, while it was in operation. The company, which has also been accused of breaking the international embargo on oil sales to Serbia and Montenegro during the Bosnian war, by shipping oil across Lake Shkoder and by sea to Bar, was wound up in January 1996. But according to intelligence sources contacted by The Independent, its activities are continuing.
Agron Musaraj, Interior Minister until last May's general elections, was pressured out of his job, the intelligence sources say, because the United States, the only Western country twhich has taken a critical stance on Albania, told the government it suspected that he was masterminding the entire drugs racket.
During Mr Musaraj's tenure, the Albanian police made only one significant drugs haul, seizing about three kilos of heroin in February 1995. But sources within the police said at the time that this was only a small portion of a much larger shipment bound for Italy, the rest of which got away across the Adriatic unimpeded.
In the course of 1996 open allegations, considered credible by the intelligence community, surfaced in Albania that the Defence Minister, Safet Zhulali, had used his office to facilitate the transport of arms, oil and contraband cigarettes. He is still in office.
Now much suspicion is focused on Vefa Holdings, Albania's largest private company and the biggest of the country's pyramid schemes which is still in operation. Vefa's chairman, Vehbi Alimucaj, is a former army supplies manager who is accused of becoming rich by trafficking government armaments with the consent of the ruling order.
Why has the West put up with this behaviour, and allowed Albania to turn into a festering sore of criminality and potential destabilisation in what is already the most sensitive region in Europe? The reasons are far from clear but have to do with the international community's misplaced priorities in Albania, a fatal misreading of the nature of President Sali Berisha's government from an early stage and - to believe the intelligence sources - a certain degree of obstinacy and ignorance.
The West allowed itself to be dazzled by the achievements of President Berisha's first two years in office, during which the country was rescued from the brink of chaos and starvation, consumer goods flooded in, inflation was brought under control, the currency was stabilised and the promise of full amenities to outside investors beckoned.
During the recent Balkan wars, it was considered essential for Albania to remain peaceful, and refrain from stirring up trouble among the ethnic Albanian communities in the Serbian province of Kosovo and in Macedonia.
President Berisha was considered the right man for this job, and as a result his ever-deteriorating record on civil liberties, his gradual suppression of the opposition and the independent media, his purges of state institutions, including the judiciary, and his exclusion of more and more of his most talented former colleagues in the Democratic Party, were all overlooked.
In all the euphoria about double-digit growth rates, few bothered to notice that the revenue was almost all coming from criminal activity or artificial sources, such as foreign aid and remittances sent home by Albanians working abroad. For all the talk of free markets, foreign investors have been kept firmly out of Albania's clientelistic system and the country still has little in the way of a legitimate productive economy.
It was only in the run-up to the May 1996 elections that the international community began to worry about the deteriorating political and economic climate - partly, perhaps, because the war in Bosnia was over, and the security priorities had changed. The International Monetary Fund suspended its credit lines because of excessive pre-electoral public spending and initial concern about the sprouting pyramid schemes, and the United States, once President Berisha's greatest champion, began to issue more critical public statements.
In the wake of the blatantly rigged elections, the US refused to recognise the new parliament and issued its private warnings to the government about ministerial involvement in the drugs trade. A CIA report published last June is believed to have been very tough on Albania and grimly pessimistic about the prospects for the future.
This turnaround in US attitudes appears to have passed most of Europe by. During the summer, Italy and Germany, two of President Berisha's closest allies, actively lobbied for a special European Union agreement with Albania - thus opening new credit lines and conferring further legitimacy on the government. The proposal failed largely because at least some European countries had been sufficiently shocked by the rigged May elections to demand some progress on democratisation in return for further favours.
Even with the collapse of the pyramid schemes and the escalating spiral of violence now racking the country, some Europeans have failed to wake up to the gravity of the situation, persisting in the belief that economic and trading interests are best served by this government.
As recently as two weeks ago, diehard Berisha fans such as Leni Fischer, President of the Assembly of the Council of Europe, were issuing statements of support for the Democratic Party and echoing Albanian government rhetoric about "red terrorists" destabilising the country.
According to one intelligence source, politicians in his country have been so dogged in their attitude that they may not have bothered to read the alarming intelligence reports and indeed may not have even seen them because their underlings figured it was futile passing them on.
European diplomats in Tirana appear to have been equally cautious, failing to report back anything that might interfere with the deeply misguided notions about Albania still prevalent in Western capitals. It was a mistake, one that has already cost Albania dearly and which will come back to haunt Europe.