Canal N television broadcast images of a handcuffed Fernando Zevallos who in June 2004 was added to the Bush administration's international "drug kingpin" list being led into drug police headquarters in downtown Lima.
Zevallos, who formerly owned an international airline, has never been convicted of a crime and denies any wrongdoing. He shouted that he was the victim of "abuse of authority," CPN radio reported.
Sonia Medina, Peru's state attorney for drug enforcement, told The Associated Press that Zevallos was arrested on allegations of cocaine trafficking, homicide and witness tampering, but declined to elaborate.
Interior Minister Romulo Pizarro told reporters the arrest order was issued by the state prosecutor's office in the northern jungle city of Iquitos, where Jorge Chavez, an alleged Zevallos enforcer, is being tried for drug trafficking.
Chavez pleaded guilty to cocaine trafficking in Miami in 1995 after cutting a deal to become an undercover informant, reportedly against Zevallos.
But before his formal sentencing, Chavez fled back to Peru, where he has managed to sidestep a 2002 order signed by President Alejandro Toledo to extradite him to the United States.
Zevallos is already on trial in Peru for his alleged role in a thwarted 1995 cocaine shipment destined for Mexico. Several witnesses in that case have testified that Chavez threatened their lives if they did not recant their claims against Zevallos.
In the last 25 years, Zevallos has overcome charges in Peru and Chile of money laundering, witness tampering, contract murder and cocaine trafficking.
U.S. law enforcement officials have likened Zevallos to U.S. mobster Al Capone, alleging that he manipulates Peru's courts, media and police and silences witnesses through intimidation, bribes and threats.
Zevallos' inclusion on Washington's kingpin list precipitated the collapse of his airline, AeroContinente, which in 12 years had grown to dominate Peru's domestic aviation market and flew routes to several South American countries and to Miami. Officials allege the carrier was bankrolled by cocaine profits, reported AP. P.T.