JEFFREY ROBINSON

THE LAUNDRYMEN

Inside Money Laundering - The World’s Third Largest Business

© 1996, 2009

This Book Is For Uncle Tonton Robby

With Love From Joshua Seth and Celine Chelsea

AVANT-PROPOS TO THE E-BOOK EDITION

The Laundrymen came about in an odd way and has had quite a history. It began in London in the early 1990s when I first met John Hurley, who was then the Customs Attaché at the US Embassy on Grosvenor Square.

When people find out that you write for a living, it’s a given that they will suggest topics of interest to them for your next project. John was no exception. "Why don't you write a book about money laundering?" This time, instead of my stock response, "Interesting idea, let me think about it," I had to answer, "What's that?" These were the dark ages, long before dirty money was the flavor of the month subject for cop dramas and films.

He began telling me stories of drug traffickers and huge amounts of cash, of sting operations and exotic locations where money could be hidden in shell companies and secret bank accounts, and my eyes opened wide. Writers are like second-story men. We work the same neighborhood rich in jewels until we stumble across a new place to ply our trade. I told him I wanted to know more, so he took out a piece of paper and, off the top of his head, wrote down ten names and phone numbers. He offered, "Just tell them I said to call."

That afternoon I started with the first name on the list. The man answered his own phone, which is not always a good sign because the better the neighborhood, the better hidden the jewels. But this turned out to be a great neighborhood --- the private line of the man in charge of enforcement at the US Justice Department. I explained that I was ringing on the advice of John Hurley. And he said, "Whatever you need, you got it."

It was the same with the second name and number on the list --- the private line of the fellow in charge of enforcement at the Treasury Department. "If John said to call, you’re okay with me."

Long before I’d dialed everyone on John’s list --- and I called them all that day --- I realized that he’d hooked me up with the top people in the business. "I’m looking into the subject of money laundering," I said to each of them, and each responded, "Come see me. I’ll give you everything you need."

Thanks entirely to John and his contacts, I was able to work myself deep inside a subject where no author had been before --- or, for that matter, where very few authors have been since. I spoke at length, on the record and off the record, to those ten people who told me their stories, and each of them then put me in touch with dozens of others with stories to tell. I worked hundreds of primary sources and was given access to thousands of documents, many of them classified. I talked to all the good guys. And I talked to loads of bad guys, most of whom were, bizarrely, happy to brag about the cash they had washed. I even found one man in Witness Protection who was, perhaps understandably, less than thrilled that I could find him. But he spoke with me, nonetheless.

The field was wide open for me and I broke bread with all of the major players.

Before long I phoned my publisher, the wonderful Nick Webb at Simon & Schuster in London, and simply told him, "Money laundering." He responded the same way I had when I first heard the term, "What’s that?" I said, "Nick, trust me." He did and The Laundrymen hit the UK best-seller list the same week it was published.

The US edition appeared a year or so later. This Kindle version is the 1996 US edition, with light revisions to bring a few of the stories up to date.

The Laundrymen has now appeared in more than a dozen different foreign languages, and wherever it has been published, the book has generated its own stories. For instance, in Portugal where it was a front page news story, The Laundrymen was instrumental in getting money laundering legislation through parliament. In the Czech Republic, where it was the main feature on a television evening news program --- cameras followed me as I showed them how easy it was to launder drug cash at a bureau de change --- the book also helped get new anti-money laundering legislation in place. The book changed the way Caribbean banking and shell company formation is viewed, and in a few instances, changed the way that Caribbean jurisdictions operate. The book was, as well, one of the first --- if not the first --- to fully explain Nigerian 419 fraud. That’s the letter, or email, each of us has received dozens of times from some phony official saying that if we will allow him to put a huge sum of money through our bank account, we can keep up to half of it. Within months of exposing that fraud, I actually received a 419 letter addressed to me as "Author of The Laundrymen."

In Switzerland, the book brought out the wrath of the Swiss Banking authorities for claiming --- rightfully so --- that secret banking laws aided and abetted drug traffickers. Authorities in Liechtenstein were equally displeased for much the same reason. Nor were they terribly pleased in Luxembourg, where shell companies were being used by traffickers. And in Canada, where money laundering laws were then non-existent, the book helped to reinforce our closest neighbor’s image as "the Maytag of the north."

In France and Germany, The Laundrymen was the basis of a major television documentary, which I scripted and narrated, the English language version of which has been seen around the world. I also wrote the script and did the narration for the BBC’s television version of the book.

Clearly instrumental in popularizing the subject of money laundering, The Laundrymen and I still show up on news programs around the world. Off the back of the book, I have spoken at hundreds of major meetings and corporate events about money laundering and organized crime. In two instances, The Laundrymen was even mentioned in criminal court trials, specifically by defendants who blamed me for their troubles. One of them actually testified under oath, "I got the idea from Jeffrey Robinson’s book on money laundering." In another case, television cameras accompanied police on a raid of a lawyer’s office. He was being busted for money laundering. And the first piece of evidence the cops seized was a copy of The Laundrymen.

The single most laudatory comment about the book came from a young detective whom I met at a conference. He told me that he’d been working in a dead end job until he read The Laundrymen, which had inspired him not just to become a cop, but to specialize in financial fraud and money laundering investigations.

Of course, when it comes to flattery, imitation is said to be the sincerest form. Accordingly, I suspect, I should be wildly flattered because The Laundrymen has been plagiarized --- not once, but twice! A professional conman in Holland waited a couple of years after the Dutch edition of the book came out, scanned it word for word into his computer, changed the title to the aptly named, "Fraud" and published it as his own. We had to sue to stop him. More recently, a German sleazebag pretending to be an author, lifted chapters out, reprinted some in their entirety and slightly rewrote others, before publishing my book under his name. We’ve had to stop him, too.

And then there has been near-plagiarism. A handful of authors in the States and the UK have merely taken my research, quotes and all, and used it in ripped-off versions. One actually had the temerity to publish with an almost identical title and, then, to ask me for a cover quote. His book, like most of those others, was rife with factual errors and, justifiably, sank without a trace. Sadly, for people who paid money for a copy, none of these guys have the primary sources I do and therefore can’t possibly provide their readers with the depth of knowledge that John Hurley’s contacts --- and all the contacts who followed --- have bestowed on me.

Sensing that depth of knowledge, when the book was first published, several reviewers described The Laundrymen as the definitive book on the subject. In the years since, as the world has moved on, I’ve tried to keep readers up to date with subsequent books such as The Merger, which deals with the conglomeration of international organized crime, and The Sink, which dives into the murky world of offshore money laundering, organized crime and terror funding. But neither of those books could have happened had it not been for The Laundrymen.

While The Merger and The Sink have enjoyed their own success, I’d like to think the book reviewers were right about The Laundrymen and that, given the test of time, it is still worthy of being the definitive book on the subject.

JR/ New York 2009

--- Table of Contents ---

PROLOGUE

Chapter One --- THE MAGIC TRICK

Chapter Two --- DOING THE WASH

Chapter Three --- TAKING CARE OF BUSINESS

Chapter Four --- A TALE OF TWO BANKS

Chapter Five --- FUNNY MONEY

Chapter Six --- THE PROFESSIONALS

Chapter Seven --- THE MARLBORO MURDER

Chapter Eight --- THE LAWYERS

Chapter Nine --- BRINKS-MAT MELTDOWN

Chapter Ten --- THE ADVENTURERS

Chapter Eleven --- SORTING OUT THE SINKS

Chapter Twelve --- ISLANDS IN THE SUN

Chapter Thirteen --- DOWN AND OUT IN SWITZERLAND

Chapter Fourteen --- ELI PINKUS - A MYSTERY STORY

Chapter Fifteen --- THE COKE CONNECTION

Chapter Sixteen --- THE STINGS

Chapter Seventeen --- THE OLD THREAT

Chapter Eighteen --- THE NEW THREAT

Chapter Nineteen --- FACTORIES SOUTH - MAYTAG NORTH

Chapter Twenty --- HANGING OUT THE WASH

Acknowledgements

Bibliography

Prologue

Robert Torres had it all.

He had money. He had fancy cars. He had status. He had all the women he could ever want.

For a guy who started out in life as a welder, a cook and a gas station manager and once thought that the big time meant peddling dope on street corners in the Bronx, Torres came as close to living the American dream as anyone he was ever going to meet.

It started out as a family business. His cousins set him up in 1978. He was 22, a kid from small town Puerto Rico, a place called Guayama, who’d come north to New York to grow a chip on his shoulder because life had dealt him a rotten hand. The great melting pot was more like a cauldron where you could drown. So he told his cousins that he needed a job, that he wanted a shot at making it, and they supplied him with little plastic bags of product.

For a while, Torres thought he had life knocked. He had the cash that he earned and what cash he could steal. But the more he watched his cousins getting rich, buying cars and buying property and keeping pretty women in expensive clothes, the more he realized that dope was strictly nickel-and-dime stuff. He reminded himself that he had ambition, that he had plans. He persuaded himself that selling "shit" to kids and whores and getting beaten up by pimps was not the ticket. So he hit on his cousins for more of the action and they made him a manager. Now he ran other guys hawking stuff on street corners and had more cash in his pockets.

By 1985 he’d been on the streets for seven years. Closing in on 30, he got it into his head that he needed to branch out, to take a better shot at machine’ it. That meant going out on his own. And going out on his own meant heroin.

It took time. And because dealing heroin is a business in which one wrong step can mean a violent death, it also took cajones. But Torres managed to muscle his way in. He was smart enough to do it slowly, step by step. He was also lucky enough to stay alive while he worked his way up.

First he sold product himself. Then he put salesmen on the street to hustle it for him. Then he found ways to import it and he learned the tricks of wholesaling it. He even had his own brand names - Liberty, Blue Moon, Turbo Powder, Midnight Train, Sunshine, White Eagle, White Tiger, and Pink Diamond.

Within five years he had a hundred amigos working for him - he called them Los Brujos, the Warlocks - and commanded twenty distribution centers in Manhattan and the Bronx. To defend his network, he armed Los Brujos to the teeth. He loved guns and every now and then he’d go on a buying spree, such as the afternoon he bought nineteen semi-automatic pistols, thirteen .38 calibre pistols and a classic .45 that he wore in a shoulder holster because it made a macho bulge under his armpit.

He owned twenty properties in New York and forty more in Puerto Rico, including a tourist resort near San Juan. He owned a sand and gravel company, two beauty parlors, a restaurant, a garage, three heavy equipment rental companies, seventy pieces of heavy construction equipment, a wood working shop, a limousine service, a pile of blue chip securities, a 46-foot boat, a handful of professional race cars and a semi-pro basketball team in Puerto Rico that also called themselves Los Brujos.

By the beginning of 1993, Torres was moving close to half a million dollars worth of heroin every day.

That's when the Feds busted him.

They swooped down on him like a heavily armed commando force taking a beachhead, shackled him in chains, rounded up Los Brujos, and started unraveling his financial empire.

Once upon a time, Robert Torres had it all.

He had fancy cars. He had status. He had all the women he could ever want. At the age of 37, he was worth in excess of $60 million.

And all the time, lurking in the background was a man who showed Torres how to grab the American dream by the throat, a former senior officer at the Chase Manhattan Bank. His laundryman.

*****

Chapter One

THE MAGIC TRICK

"When the President does it, that means it is not illegal."

- Richard Nixon

Money laundering is all about sleight of hand.

It is a magic trick for wealth creation.

The lifeblood of drug dealers, fraudsters, smugglers, kidnappers, arms dealers, terrorists, extortionists and tax evaders, it is perhaps the closest anyone has ever come to alchemy.

Myth has it that the term was coined by Al Capone who, like his arch rival George "Bugs" Moran, used a string of coin-operated laundromats scattered around Chicago to disguise his revenue from gambling, prostitution, racketeering and violation of the prohibition laws.

It's a neat story, but not true.

"Laundering" perfectly describes what takes place: illegal, or dirty, money is put through a cycle of transactions and comes out the other end as legal, or clean, money. In other words, all traces of illegality are scrubbed away by a succession of transfers and deals, so that those same funds reappear as legitimate income.

Romance has since been added to myth with the name Meyer Lansky.

Whereas cronies like Capone, Luciano and Frank Costello made their way through the world using muscle, Lansky - a 5 foot 3 inch, Polish-born, New York-raised, 9th grade drop-out - used his wits to become the highest-ranking non-Italian in what used to be called "The Syndicate." He was affectionately known in those days as the mob's accountant. He is often affectionately remembered these days as the patron saint of money launderers. It's an epitaph that would have amused him.

Lansky became particularly distressed in October 1931 when Capone's carelessness allowed the Feds to send him to Alcatraz for something so obvious as tax evasion. Determined to avoid a similar fate, he theorized that any money the Internal Revenue Service didn't know about was, by default, not taxable. With that as his premise, he embarked on a quest for ways to hide money, and soon discovered the benefits of numbered Swiss bank accounts. Some 20 years later, after helping his long-standing partner in crime, Benjamin "Bugsy" Siegel, to finance The Flamingo - the first major hotel and casino complex in the desert that would become Las Vegas - Lansky convinced his pals that their non-taxable future lay in offshore expansion. Even if the IRS suspected money was being stashed outside their jurisdiction, they couldn't get their hands on it. So he took the mob to Havana and with the blessings of strongman Fulgencio Batista, Lansky almost single-handedly turned the Cuban capital into a boomtown. But his dreams of a world beyond the reach of the IRS ended with a rude awakening. In 1959 Fidel Castro battled his way down from the mountains and with the help of guns provided by American gangsters, threw out all the Americans.

Some of Lansky’s cohorts brooded over such bad luck, but he was typically philosophical. He admitted he'd backed the wrong horse - very few people believed that Castro, his comrade Che Guevara, and their ragtag band of merrymen could pull off an entire revolution - took his losses, and learned the lesson that the best guarantee for any offshore investment is a politically stable environment.

In pursuit of somewhere safe and sound, he turned to the Bahamas. Thirty minutes by air from Miami and in the same time zone as the eastern United States, the 700 islands and cays that made up the then-British colony were ideal. Communications were good, real estate was cheap, access was easy, the market was ripe and, best of all, the local politicians were crooked.

The fly in the ointment, where Meyer Lansky's beatification is concerned, is that he was hardly a saint and definitely not a money launderer. His fundamental concern was with evading taxes. He did little more than come up with some basic procedures for capital flight. There's nothing to suggest he ever intended to repatriate any money and spend it legally. Lansky is to money laundering what the Wright Brothers are to the Concorde. He got the business off the ground, but it was left to other people to break the sound barrier.

In fact, it wasn't until 1973 that the term "money laundering" actually appeared in print for the first time. And when it did, it had nothing to do with Meyer Lansky. The earliest sightings were in newspapers covering the Watergate scandal.

At the end of February 1972, Richard Nixon took the first formal steps towards renewing his tenure at the White House. He announced the creation of the Committee to Re-elect the President - abbreviated to CRP and, bizarrely, pronounced "creep" - and named his former law partner, Attorney General John Mitchell, to run it. But that was strictly for public consumption. The real campaign drive had begun at least a year before when Mitchell and Secretary of Commerce Maurice Stans, who later took the chair of CRP's Finance Committee, secretly built a presidential war chest. Among the earliest contributors was the American dairy industry, which wanted to reward Nixon for having raised federal milk subsidies. Also on the Stans-Mitchell list was the recluse billionaire Howard Hughes, who reportedly handed $100,000 directly to Nixon's closest friend, Florida banker Charles "Bebe" Rebozo.

Then there was the international financier Robert Lee Vesco. Under investigation at the time by Mitchell's Justice Department, Vesco thought enough of Nixon and, evidently, the prospect of some Oval Office sympathy, to arrange a cash donation of $200,000.

When Mitchell and Stans squeezed American Airlines for $100,000, George Spater, then chairman and chief executive of the airline, was faced with the dilemma of how to divert corporate funds that were otherwise accountable. He arranged to have a Lebanese company called Amarco submit a fraudulent invoice as commission on parts sold to Middle East Airlines. American Airlines paid the invoice and Amarco deposited the money in Switzerland, then wired it to their account in New York. There, Amarco's agent withdrew $100,000 in cash and handed it to Spater, who turned it over to Mitchell and Stans.

Braniff Airlines, also hit by the duo, laundered their beneficence through Panama. The airline's regional vice president for Latin America collected $40,000 by instructing the company's man in Panama City to raise a false invoice from a local company for "goods and services." To cover the shortfall, they sold blank tickets for cash.

Next Stans turned to the oil industry. Ashland Oil's chairman, Orin Atkins, obliged with money funneled from a subsidiary in Gabon. Gulf Oil laundered its $100,000 gift to Mr. Nixon through a subsidiary in the Bahamas.

Vesco's donation was eventually returned, but under the statutes then in force, CRP was not technically under any obligation to report these contributions. However, Congress had just passed a law that was to come into effect on April 7, specifically prohibiting anonymous campaign donations. Knowing that it would severely cramp their style, Mitchell and Stans decided to pull in as much as they could before the deadline. They dusted off an old Mexican connection to guarantee that anonymous donations could not be traced, and went back to work, now targeting private citizens who would appreciate discretion in these matters. They also went in search of corporations that might otherwise be banned by the new law from making substantial and undeclared political contributions.

Never known for a subtle approach, Stans bullied potential donors with lectures on the debt of gratitude that they and all patriotic Americans owed to Richard Nixon. In the same breath he reminded them that his Mexican connection was not subject to American audits.

With hindsight, it was a fairly adolescent scheme. Among the contributions Stans raked in were four cashier's checks in sums of $15,000, $18,000, $24,000 and $32,000. Totaling $89,000, they were each drawn on a different bank in the United States and made payable to a Mexico City lawyer named Manuel Ogarrio Daguerre. In mid-April Ogarrio forwarded the checks to Miami, where on April 20 they were deposited into the bank account of a local real estate salesman named Bernard L. Barker. Were anyone ever question him about the source of the money, Barker was under instructions to say that it was his share of a land deal he’d made with an anonymous Chilean businessman. Were anyone ever ask why he subsequently withdrew the $89,000 in cash, Barker was to answer that the deal had fallen through and he needed to repay the commission.

Had Mitchell and Stans then gone on a binge, blowing the money on wine, women, song - or even campaign advertising - it's likely no one ever would have found out about it. Instead, they decided to finance a crime.

On the evening of June 17, 1972, five burglars broke into the Democratic National Committee headquarters at the Watergate office building, west of Juarez Circle. They were: Virgilio Gonzalez, a Cuban-born locksmith; Eugenio Martinez, a Cuban-born anti-Castro activist and CIA informant; Frank Sturgis, a Miami soldier of fortune with CIA connections; James W. McCord, Jr., a former employee of both the FBI and the CIA; and one Bernard L. Barker of Miami, Florida. As it turned out, Barker had also worked for the CIA and been involved in the 1962 Bay of Pigs invasion.

The five men were arrested immediately. At first, the most interesting member of the group appeared to be McCord, because at the time of the break-in he was coordinating security for the CRP. Then came the arrest of G. Gordon Liddy and E. Howard Hunt. The brains behind the break-in, both had direct links to the CIA, the CRP and, shockingly, the White House.

Yet the thread that would unravel the conspiracy turned out to be Barker.

Too clever by half, Mitchell and Stans never reckoned that anything could go wrong. Nor had it dawned on them that if anything did go wrong someone might somehow find those four checks and trace them back through the Mexican lawyer to the CRP. Once Bob Woodward and Carl Bernstein of the Washington Post broke the story, however, and it had gained enough momentum for them to run with it, every other investigative reporter in America tried to get in on the act. Competition for front-page scoops became red-hot. In the end, it was the New York Times that headlined the Mexican money connection.

Subpoenas flew and investigators got inside Barker's bank account. A fifth suspicious check was uncovered, this one for $25,000 and dated April 10. Drawn on the First Bank and Trust Company of Boca Raton, Florida, it was made payable to Kenneth H. Dahlberg, a Nixon fund-raiser. When a reporter asked him about the check, Dahlberg admitted he'd long since turned it over to Maurice Stans.

Bathed in Mexico, $89,000 was just the tip of the iceberg. The amount soon jumped to $750,000. That's when it was revealed that Stans was maintaining a huge and unquestionably illegal slush fund at the CRP.

The sheer amateurishness of their money laundering scheme linked the CRP to the Watergate break-in. By March 21, 1973 Nixon, already so tangled in his own lies that his fate was sealed, tried to convince his legal adviser John Dean that he might be able to buy his way out of the crisis with more laundered money.

Prophetically, in a private Oval Office conversation, Dean warned Nixon, "People around here are not pros at this sort of thing." He went on, "This is the sort of thing Mafia people can do, washing money, getting clean money and things like that. We just don't know about those things, because we are not criminals and not used to dealing in that business."

It was only a matter of time before the President’s meager lines of defense were split open so wide that no one, least of all Richard Nixon playing the laundryman, could have halted the process that brought him down.

Like any great thriller, the story is filled with ironies. One is that Nixon had been so far ahead in the polls, and his opponent, George McGovern, politically so far out in space, that the CRP hadn’t needed to solicit illegal funds. He could have stayed in the Oval Office, never made a speech, never kissed a baby, never hit the campaign trail, and still have won in a landslide.

A second is that in the wake of Watergate, Congress took action to prohibit government intrusion into the lives of ordinary citizens. One new law virtually enjoined financial investigators from comparing notes, which has turned out to be a boon for the laundrymen.

A third irony is that money laundering was not yet a crime anywhere in the world.

*****

Chapter Two

DOING THE WASH

"Money possesses a strange kind of purity."

--- Bernie Cornfeld

There are four factors common to all money laundering operations.

First, the ownership and source of the money must be concealed. There's no sense in laundering money if everyone knows who it belonged to and where it originated after it comes out the other end.

Next, the form it takes must be changed. No one wants to wash $3 million in $20 bills only to wind up with $3 million in $20 bills. Changing the form also means reducing the bulk. Contrary to popular belief, you cannot stuff $1 million into an attaché case. A stack of $100 bills would stand five feet high and weigh over 22 pounds.

Third, the trail left by the process must be obscured. The whole purpose of money laundering is defeated if someone can follow the money from beginning to end.

Finally, constant control must be maintained over the process. After all, many of the people who come into the picture while the money is being laundered know that it is dirty money, and if they steal it there's little the original owner can legally do about it.

That said, there are three distinct stages to the washing cycle.

To begin with, there is immersion, which means consolidation and placement. A drug dealer who amasses $5 million in cash is faced with the Herculean task of introducing as many as a million pieces of paper into the banking system. Unlike the counterfeiter, who only needs to get his forged notes into circulation, the laundryman is forced to rely on bank accounts, postal orders, traveler's checks and other negotiable instruments to funnel the cash into the world’s financial system.

The second step, known as layering, might also be called heavy soaping. This is where the laundryman disassociates the money from its illicit source. By moving the money between as many accounts as he can - in and out of dummy companies that he's set up around the world for just this purpose - and by relying on bank secrecy and attorney-client privilege to hide his own identity, he creates a complex web of financial transactions that frustrates any audit.

The last stage is the spin dry, sometimes described as repatriation and integration. The washed funds are brought back into circulation, now in the form of clean, and often taxable, income.

With small amounts of money, the three-step process can be quick. If all you want to do is wash $20,000, you merely have to walk into ten banks and buy $2000 worth of traveler's checks at each one. Or stop by the same number of post offices and purchase international money orders. Negotiable anywhere in the world, traveler's checks and money orders can be deposited in any foreign bank account, or held onto until you want to spend them. As long as you keep the acquisitions down to realistic sizes - and $2000 in cash isn't going to set off alarm bells the way a single $20,000 cash transaction might - you can manage it with little or no inconvenience.

If, say, you find yourself with $400,000 in cash, you might swagger into a Rolls Royce showroom and turn the money into a brand-new Silver Spirit. As cash is not the usual form of payment in places like that, it's fair to assume that the dealer will sit up and take notice when you produce a Bloomingdale’s big brown bag stuffed with banknotes. Legally, the dealer’s obliged to report such a cash transaction. Except, he may not be aware of his obligation to do that. Or, for the sake of a sale, he might not be willing to do that. If he deposits the cash in his bank, the bank will report it. To avoid that, he could keep the cash in his safe. But even if he does deposit it and even if the bank reports it, by the time the Internal Revenue Service spots the transaction, you'd have had plenty of time to sell the Rolls and deposit your cashier's check, made out to a false name, into your offshore bank account.

To launder ten times that amount, you might opt for any of several traditional cash business, such as the antiques trade. You begin by purchasing a $100 shell company. Agents selling ready-made companies advertise them every day in the financial section of most newspapers. Now, as an employee of your new company, you drive around the country paying cash for Chinese vases, or Louis XV chairs, or George II candelabras, or fine Persian carpets. Gems, stamps and rare coins are also easily converted into and out of cash.

Say you buy 40 Ming vases for $5000 each. You put everything up for sale, dividing the cache between a dozen auction houses, preferably in a dozen different cities. When one of the vases comes up, either you allow it to be sold to the highest bidder or you send your favorite uncle into the saleroom to buy it back. You are paid for every item sold by check, so when your uncle hands the auction house $5500 in cash for one of the vases - that's the $5000 hammer price plus the 10 percent buyer's commission - they give you a check for $4500, which is the hammer price minus the 10 percent seller's commission. The fees are simply written off as the cost of washing the funds. And, in this case, you also have the vase to sell again.

Retail stores, bars, and restaurants are even more cash-intensive, making them all the more attractive in high-density drug trafficking areas. Perhaps that’s why South Florida abounds with restaurants that don’t accept credit cards or checks. Take-out goes out by the front door, dirty money comes in the back door.

The video rental business provides another ideal sink. You simply feed cash into the system. Done gradually, it is almost impossible to spot an extra $500 coming in daily through the tills of a storefront stocked with 15,000 videos. Nor would anyone question the accountant who certified that the owner took a legally declared $182,500 bonus every year. Nor would anyone's suspicions necessarily be raised if that same owner ran a chain of 20 video rental stores and, backed up with the appropriate audits, awarded himself an annual bonus of $3.56 million.

Laundrymen have long understood that contrary to Gordon Gekko's much-quoted line in the film Wall Street, greed is not good. It's possible, with only little long-term planning, to build a network of small businesses into a money laundering conglomerate.

Take the actual case of the Italian American who set his son up in the grocery business. Papa gave Figlio enough cash to open a store and Figlio paid his carpenters, painters, and delivery people with cash, which they were happy to accept because they saw it as non-taxable. Figlio then stocked his grocery through a wholesaler who happened to be Papa's brother. But when Figlio ordered 50 cases of tagliatelle from Uncle Zio, he only received 40. So Papa gave Figlio cash to make up for the shortfall. The same happened when Figlio ordered milk, cheese, and frozen brownies. Uncle Zio shorted the delivery and Papa made up for the missing 20 percent. At the end of the month, Papa also topped up Figlio's accounts with additional cash. Figlio's bookkeepers were happy, the taxman was happy, and before long the business was making enough profit that Figlio open a second grocery. Two became four and four became eight.

As his empire expanded, Figlio decided to import olives from the old country. Luckily, Papa had a cousin in Palermo. But Figlio didn’t buy it direct from him. Instead, Papa set up a business in the Bahamas called Mio Cugino, Inc. His cousin sold 100 cases of olives to the Bahamian company for $5 a case. The Bahamian company billed Figlio for 120 cases at $10 each. At the end of every month, Papa was there to make up the difference.

Several hundred million dollars got washed that way before anyone noticed.

*****

No one knows for certain how much dirty money circles the globe looking to get scrubbed clean, but a reasonably authoritative guess in 1996 put the range from $200-$500 billion. By 2009 that figure has probably doubled. After foreign exchange and the oil industry, dirty money is the world's third-largest business.

For this alternate economy to function, two things are necessary, and the coffee pot analogy is still the best one: When coffee is poured from a pot into a cup, there must be enough room in the cup to hold the coffee and enough coffee in the pot to fill the cup. Similarly, there has to be enough money available to create an infrastructure and an infrastructure capable of handling so much money.

The world's parallel, or underground, banking system was apparently invented by the Chinese, who named it fei ch'ien - literally, "flying money." Known in other parts of the world as chop, hundi or hawalah, the system was born out of political turmoil and a hearty distrust of banks. It is almost always based on family or tribal connections and traditionally reinforced with retributive violence.

In its simplest form, chits or tokens are substituted for cash. Money deposited at a Hong Kong gold shop is exchanged for a small card bearing a picture of a dragon, or a $10 bill stamped with a special seal, or a small, innocuous piece of paper, such as a laundry ticket that has been secretly coded. When the object is presented to a money changer in San Francisco's Chinatown, the bearer is given cash.

During the days when certain European countries had strict exchange controls, a variation on the fei ch'ien system was facilitated by the tourist trade. For example, a Parisian businessman would stake American friends to whatever money they needed while visiting France. When the Americans got home, they added up what they owed their host and deposited it into his undeclared US bank account.

Throughout most of the Vietnam War, for example, a thriving black market propelled the underground economy across Southeast Asia. At least until the Tet Offensive in January 1968, Saigon was alive with all sorts of scams and swindles. The official exchange rate in those days was 118 Vietnamese piastres to the dollar, but the black market rate was closer to 200. A lucrative corner of that trade was controlled by a small group of Indian nationals who'd emigrated to South Vietnam from Madras. They bought dollars at black market rates and smuggled them out of the country to be deposited in Hong Kong and Singapore. From there the money was wired either to Europe or, more often, to the Middle East, where it was used to purchase gold. The gold was smuggled back into Vietnam and sold for piastres, which were in turn sold to the Americans for more dollars, completing the circle.

By the time the South Vietnamese authorities were wise to the Indian laundrymen and began confiscating dollars leaving the country - in contravention of the currency restriction laws - the Indians were already working an improvised version of the hawalah system. They traded GIs' personal checks drawn on American banks for chits. The checks were deposited into accounts held by the Indians in New York. When the checks cleared, the chits were exchanged for piastres and the New York banks wired on the dollars to pay for gold.

These days, a staggeringly large but very straightforward hawalah business exists between India, where currency controls are in force, and Great Britain, where a sizable Indian population has a substantial interest in transferring funds from the subcontinent into Europe. You find an even more thriving hawalah market post 9/11 between Pakistan and Dubai. Facilities abound for people at one end of the deal to deposit money with hawalah bankers and within hours to collect their money at the other end, minus a commission of 5 to 15 percent. The system works because there are enough people in both countries with large cash surpluses - legitimate businessmen as well as criminals - willing to pay for the privilege of using a paperless banking system.

The British have been particularly concerned for years with hawalah networks linking London with two Indian regions, the Punjab and Kashmir. Laundered money has been known to finance terrorist violence, specifically by Sikh and Kashmiri secessionists, and to finance drug traffickers working out of Pakistan. While the Pakistan-Dubai connection is said to be worth as much as four to five times what the legitimate banking network between those two places is worth.

Back in the 1990s, Scotland Yard busted a hawalah banker whom they'd had under surveillance for several months. After watching him work 12 hour shifts, seven nights a week, police officers raided his house and found bags of cash in his livingroom containing more than $1.5 million. His scribbled notes showed he was moving $12 million a week. They later arrested a consortium of six hawalah bankers who admitted to having laundered, annually, $120 million.

*****

Crooks need money washed because they need to avoid the kind of attention that comes with sudden wealth and to place the proceeds of crime beyond the reach of asset forfeiture laws.

In 1986, when the FBI finally arrested him, Dennis Levine was a 33-year-old New York investment banker and a managing director of Drexel, Burnham Lambert's mergers and acquisition department. For eight years, using inside information to deal in the stocks and bonds of 54 different companies, he’d amassed illegal profits of $13 million.

Knowing from the outset that he’d have to wash his money before he could spend it, Levine bought a pair of Panamanian-registered companies. Both Diamond Holdings SA and International Gold Inc. came complete with nominee directors, so his name never appeared in any company documents. When he opened accounts for the two companies at Bank Leu International in Nassau, in the Bahamas, he made equally certain that his name was not used on any of the bank's records.

Levine’s main contact was the portfolio manager, a Swiss national named Bernhard Meier, who was under strict instructions never to phone or write to him, under any circumstances. Extremely cautious, Levine would always call Meier, and then only from a pay phone so that no one could trace calls back to him. When he wanted to see his money, Levine flew to the Bahamas using an assumed name and never stayed overnight for fear that someone working in a hotel might later identify him.

Unfortunately for Levine, he became a victim of his own success. He got his trades right so often that some people, including Meier, decided to follow his lead. They piggy-backed, buying and selling whenever he bought or sold. That, coupled with an abnormally high batting average, eventually attracted too much attention. The Securities and Exchange Commission (SEC), which unashamedly monitors big hitters, moved in for a closer look. Discovering that Levine had accomplices in other brokerage houses, they began to put pressure on him. Levine elected to save himself by selling everyone else down the river. When the SEC later managed to intimidate a few Bank Leu officials, Levine's friends returned the compliment and sacrificed him, trading information for immunity.

Beno Ghitis-Miller suffered a similar fate. A 32-year-old travel agent from Cali, Colombia, he moved to Florida in early 1980 and set up a currency business called Sonal. He opened a corporate account at the Capital Bank in downtown Miami and during the first seven months of his business deposited large amounts of cash, occasionally as much as $1 million.

That spring, a man named Victor Eisenstein, whose business card indicated that he ran a company called American Overseas Enterprises, waltzed into the bank and introduced himself as Beno's agent. Eisenstein told bank officials that he too would be making deposits for Sonal. Within a month, Capital Bank notified Eisenstein that they could no longer accept his money. Someone at the bank was apparently beginning to have some doubts about their clients. Eisenstein objected, but the branch manager said the decision was irreversible. And so it was, at until Beno went over the manager's head and met with the bank's president.

Sonal had been paying Capital one-eighth of one percent for sorting and counting each deposit. Now, to stay friends, Capital offered to maintain the account, but only if Sonal upped the commission to one-half of one percent. Beno agreed.

Over the next several months, as the cash deposits fast approached $2 million each, the local manager again expressed his concern. This time, though, it had nothing to do with the quality of Capital’s clients. He was simply wondering whether Beno and Eisenstein would move their account to a better-equipped branch. They happily switched to Capital's North Bay Village office. And when Beno was told that the bank had commercial space for rent upstairs, he moved Sonal to North Bay Village, too.

Before long, Beno and Eisenstein were depositing several million dollars per visit to the bank, three and four times a week.

Claiming that he didn't know the true nature of Beno's business because he was only acting as Sonal's agent, Eisenstein decided it might be prudent to ask where all this cash was coming from. Beno explained, in a friendly and straightforward letter, that the money was connected with exchange transactions involving the importing and exporting of agricultural products, and with sales commissions earned by Colombian businessmen. He insisted everything was perfectly kosher. He added, although they were handling a lot of cash, none of it was derived from illegal operations.

Apparently no one spotted the humor in Beno's reference to agricultural products and sales commissions. More to the point, no one at the bank bothered to walk upstairs and look at Sonal's new offices. If they had, they might have asked themselves why a company dealing in cash, especially the sums that Sonal was, had no security. There was no armored door. There were no video cameras. There was hardly had any furniture. There wasn't even a safe.

But then, the folks at Capital liked Sonal's business. Beno and Eisenstein were reasonably friendly. They dealt in big numbers, amounts that substantially increased the branch's "cash in" figure, making the manager look like an aggressive young banker on the way up. In fact, the folks at Capital liked Sonal's business enough to negotiate a flat fee for sorting and counting Beno’s cash - $300,000 per month.

Between January 1 and August 20, 1981, Beno and Eisenstein and Sonal's so-called "staff" - 37 Spanish-speaking guys who had only nicknames - deposited $240 million at Capital. That included the $7 million they dropped off in the final two days of their operation. Until the US authorities said enough was enough and shut them down, Sonal’s deposits averaged $1.5 million per day.

The greedier they are the cockier they become and, given enough time, greed and cockiness undo them. The converse is also true. The French father and son team, Henri and Charles Borodiansky, were slightly less greedy and slightly less cocky than Beno and Eisenstein and subsequently fared slightly better.

But only just.

Their act was maritime fraud in general and phantom cargoes in particular. In early 1990, the Borodianskys claimed to have 14 shipping containers of Hennessy VSOP Scotch whiskey for sale. The price was right so a department store in Tokyo took the bait. It forwarded a letter of credit for $3.3 million to a shell company called Mozambico Inc. Ltd, whose registered office was a convenience address in central London.

When the cargo failed to arrive, the Japanese store officials asked the police to find out why. An inquiry was conducted by the International Maritime Bureau (IMB) in London, the Interpol of the shipping business. It revealed that Charles Borodiansky, using the alias Manuel Martins Casimiro, had negotiated the letter of credit in June through the Banque Bruxelles Lambert in Brussels. He'd then moved the funds to Liechtenstein's V&P Bank, straight into an account opened by his father under the alias Jose Costa Da Santos. Over the next few weeks, half a million dollars was wired from Liechtenstein to a bank in Luxembourg. The rest of it, the IMB learned, had been sent to an account at the Commerzbank in Cologne, Germany.

The Borodianskys had been at this for several years. Using names such as Deck, Borod and Da Silva, in addition to the ones they chose for the Hennessy scam, they'd set up shell companies across Europe. There were at least four in Belgium, one in the Netherlands, one in Spain, five in Britain, two in Luxembourg, one in Hong Kong, and four in Germany. They are known to have sold 2000 tons of non-existent maize bound for Dakar, $2.6 million worth of non-existent commercial fertilizer bound for China, 6000 tons of non-existent steel bound for Vietnam, and 2000 tons of non-existent cement bound for Aqaba.

After IMB agents discovered that the Borodianskys had paid cash for at least one vessel, they were able to locate the ship and impound it. But they needed to prove that the men calling themselves Casimiro and Da Santos and Da Silva were in fact the Borodianskys. So they published a photo in a Norwegian shipping trade magazine and asked if anyone knew the whereabouts of these two men. A ship broker in London identified them immediately and provided enough information for the German police to find them.

For some reason, it took the Germans six days to arrest Charles Borodiansky. By then, Henri was gone. And three safe deposit boxes in which they'd supposedly hidden $3 million in freshly washed cash, were empty.

*****

Crooks aren't the only ones who launder money.

Corporations do it to avoid or evade taxes, to defraud their shareholders, to get around currency control regulations, to bribe prospective clients. That's what Enron was all about. But Enron was the only one, or even the first one. Long before Enron and its chairman Ken Lay formed several thousand shell companies in the Cayman Islands to wash money, Gulf Oil moved $4 million through the Bahamas to bribe Korean and Bolivian politicians, and the Lockheed Corporation laundered $25.5 million through a Liechtenstein trust to pay off Italian politicians. Lockheed also subscribed to the laundry facilities of Deak-Perera, then an important American foreign exchange dealer, to bribe Japanese politicians. At Lockheed's behest, Deak put $8.3 million into the washing cycle then brought it out as 15 untraceable payments to a Spanish priest in Hong Kong, who hand-carried the cash in flight bags and orange crates to Lockheed's customers in Tokyo.

Individuals do it to hide money from a divorcing spouse, or if they need to halt erosion of their assets by inventing a business deal that moves those assets through a shell company and into a less taxed jurisdiction. Italian designer Aldo Gucci washed more than $11 million through shell companies, stashing it in Hong Kong to keep it out of the hands of the IRS.

Governments have been known to do it as well, whether to subvert terrorists or to arm "freedom fighters." That's what Iran-Contra was all about.

In November 1986, Ronald Reagan confirmed the much-circulated rumor that the United States had surreptitiously sold arms to Iran. His initial version of the events was that this had been done to improve relations with Iran, not to obtain the release of American citizens held in the Middle East by terrorists. But that soon got changed to an embarrassed admission that indeed this had been an arms-for-hostages swap.

Although some elements of the scandal still remain clouded in mystery, it appears that the United States, with the help of Saudi Arabia's King Fahd, furnished the Iranians with weapons in exchange for payments that were then diverted to the Contra rebels to aid them in their fight against the Marxist regime in Nicaragua. All of this in direct violation of a Congressional prohibition on any such aid.

CIA Director William Casey wanted to find a way to open a dialogue with the Iranians, the direct route having been closed off by the arms embargo that followed the 1979 seizure of American hostages in Teheran. He turned to his old pal King Fahd, who had no trouble securing the services of Saudi arms dealer Adnan Khashoggi. Once touted as the richest man in the world - he never was, but for obvious reasons didn't spend a lot of time correcting that misconception - Khashoggi was a professional middleman, a globe-trotting broker who knew how to get a deal going and cut himself in on the action. Through him, two other players came on stage: Manucher Ghorbanifar, a Iranian middleman who, while having gone into exile at the same time as the Shah, still maintained high-level contacts with the Revolutionary Government; and Yaaccov Nimrodi, an Israeli with intelligence experience and considerable contacts in Teheran.

Enter Lieutenant Colonel Oliver North, US Marine Corps, and deputy director of political affairs at the National Security Council. Beginning in late August or early September 1984 - working initially under the President's National Security Advisor, Robert McFarlane, and later in partnership with McFarlane's successor, Vice Admiral John Poindexter - North formulated, then executed the plan. Within a year, he'd convinced the Israelis to sell 500 U.S.-made TOW anti-tank missiles to Iran.

Because the contracts were guaranteed by Khashoggi, the Iranians paid him. He took his share, then passed the rest along to the Israelis. They paid North, who diverted the funds through Swiss banks, and on to the Contras. North recruited Richard Secord, a retired Air Force general, and Secord's business partner, Albert Hakim, an Iranian-American. The three were so successful that by early 1986 they'd managed to buy some 2000 TOW missiles from the CIA for $12 million and, again with the intervention of Khashoggi and Ghorbanifar, to sell them to the Iranians for $30 million.

In Switzerland, that money was washed through a dummy Panamanian company called Lake Resources. The chairman of Lake Resources was a Swiss accountant named Suzanne Hefti, who worked for Auditing and Fiduciary Services in Fribourg. Her firm was directly tied in to Stanford Technology Trading Group International, a California company controlled by Albert Hakim. In turn, Stanford Technology's Swiss affiliate was headed up by a man named Jean de Senarclens, who also happened to run an accounting firm in Geneva called CSF.

First, North moved money from Lake Resources’ Swiss account to a CSF account in the Cayman Islands. Next, a CSF subsidiary in Bermuda wired the money to Alban Values, a Panamanian corporation in which CSF owned an interest. Alban Values then sent it to Amalgamated Commercial Enterprises, a shell company registered in Panama but owned by a Miami freight carrier called Southern Air Transport. And they were the ones who actually supplied the Contras.

It's believed that in just two years, from 1984 to 1986, as much as $50 million might have gone this route. But the Contras claim they never got anywhere near that amount. Despite 250 hours of testimony before the Senate Select Committee on the Iran-Contra scandal, including sworn statements from 29 witnesses and some 250,000 pages of documents, it is unlikely that anyone will ever know the full extent to which the government joined the laundrymen in making a fortune evaporate.

One prominent variation on the government-as-laundryman theme is political insurance. Despots of all shapes and sizes insure against unexpected retirement by shifting money from their own national banking system into less hostile environments. Most of the more visible political heads of state throughout the Middle East and Africa have set up financial arrangements in Switzerland. Apparently, having them goes with the turf. The Shah of Iran hid a king's ransom in secret bank accounts as an emergency pension fund.

So did Ferdinand and Imelda Marcos of the Philippines. Hardly able to manage on a presidential salary of $4700, the couple reputedly stashed $5 to $10 billion in various parts of the world, much of it laundered through Hong Kong. According to the Philippine government commission originally assigned with tracking down the Marcos money, Ferdinand and Imelda used at least ten dummy corporations registered in the Philippines, Hong Kong, Panama, and the Dutch Antilles to get half the assets into the United States, a third into Switzerland, and the rest into France, England, Italy, Panama, and Australia. Recently, a stash of Marcos money was uncovered in the Cook Islands, although the bulk of it was lost when the local branch of BCCI went out of business.

Obsessed with secrecy, Ferdinand Marcos was committed to weaving an impenetrable web of deceit around his looted fortune. For instance, to purchase three buildings in Manhattan, he used three different bearer share companies registered in the Dutch Antilles, each of which was owned by a separate Panamanian bearer share company. In other words, whoever physically held the stock certificates owned the dummy company that owned the other dummy company and ultimately, the property. By making each and every transaction so complicated that no one could trace anything back to him, Marcos lost track of which name went on which account and which company controlled which property.

The Marcoses have since been accused of using the same dummy corporation formula to help friends finance property deals, among them, George Hamilton who purchased Charlie Chaplin's former home in Beverly Hills. Hamilton denied those allegations when they were lodged in a lawsuit against him and has since sold the house to a company registered in the Cayman Islands, rumored to be controlled by the Khashoggi family.

The Marcos' finances became such an international embarrassment that even the otherwise unblushable Swiss decided to give up on him. They froze nearly $1.5 billion in bank accounts he'd used, many of them ascribed to aliases, including 14 he'd set up in the names of various foundations.

Needless to say, Ferdinand and Imelda are not the only ones known to have gotten carried away with preparing their nest egg. The Ceausescus of Romania harbored stolen assets in Switzerland, as did most of Latin America's tin-pot dictators. The same goes for literally hundreds of former Communist officials, many of who raked in fortunes from drug trafficking. One of the most flagrant offenders was East Germany's Erich Honecker. It's no coincidence that a company registered in East Berlin, Novum Handelsgesellschaft, and controlled by an Austrian communist named Rudolfine Steindling, moved $260 million out of East Germany within hours of the fall of the Berlin Wall in 1989. The money was washed through the Z-Laenderbank - known as Bank Austria - and its subsidiary in Zurich, which was then called Bankfinanz. While $150 million was eventually transferred back to Communist party accounts in Vienna, at least $3 million was later withdrawn in cash.

It was standard procedure for Communist leaders to salt something away, hedging their bets, as it were, on the remote possibility that Marx and Lenin were wrong.

*****

Chapter Three

TAKING CARE OF BUSINESS

"You don't refuse a customer just because his money isn't clean."

--- Nicholas Deak

It's like a stone tossed into a pond.

You see it hit the water because it makes a splash. As it begins to sink, the water ripples and, for a few moments, you can still see the spot where the stone hit. But as the stone sinks deeper, the ripples fade and by the time the stone reaches the bottom, any traces of where it hit are long gone and the stone itself may be impossible to find.

That's exactly what happens to laundered money.

The immersion stage is when the laundryman is most vulnerable. If he can't get his dirty money into a washing cycle, he can't clean it. However, once his cash is converted into numbers - blips on a computer screen - and those numbers are flashed back and forth across the globe, the ripples have disappeared and the stone is buried in silt.

Realizing that the optimum time to strike is when the laundryman is most exposed, the Bank Secrecy Act of 1970 attempted to force banks, savings and loans, and other financial institutions to report all cash transactions over $1000 to the Internal Revenue Service. But the ceiling proved to be too low. In spite of a provision exempting certain retail businesses, allowing banks to set higher limits based on a client's specific requirements, the government was still inundated with forms. Because there weren't enough people to process them, most of those forms wound up decomposing in a Detroit warehouse. Anyway, far too many legitimate non-retail businesses deal in large amounts of cash. Compliance became so time consuming and awkward that banks either exempted all their biggest and best customers, or simply gave up.

Over the years, the scope of the law was broadened to include non-bank financial institutions, such as travel agencies, money wire services, credit unions, car dealers, insurance agencies, money changers, brokerage houses and check-cashing businesses. Even a local convenience store selling money orders was expected to comply. Finally, Congress dictated that "all trades and businesses" dealing in cash fell under the scope of the act and increased the cash limit to a more realistic $10,000.

Although 43 otherwise upstanding banks, including Chase Manhattan and Bank of America, were penalized for a total of $20 million, the currency-reporting requirement was still widely disregarded until 1985. That's when the government decided to call time. It accused the Bank of Boston of gross and flagrant violations of the Bank Secrecy Act, alleging that the bank had failed to report some 1163 cash transactions amounting to $1.22 billion. Among the companies the Bank of Boston had supposedly exempted from cash reporting was the law firm of F. Lee Bailey. More ominously, the bank had given dispensation to a pair of real estate agencies controlled by a local organized crime boss. In the face of overwhelming evidence, the Bank of Boston pleaded guilty, admitting to an additional $110 million-worth of violations, and was fined a then-record $500,000.

The government drove home its point by going after another 60 banks. Chemical Bank admitted to 857 non-reported cash transactions worth $26 million. Irving Trust Company acknowledged 1659, worth $292 million. Manufacturers Hanover Trust confessed to 1400, worth $140 million. But the process was still in its teething stage and justice was arbitrary. When the Bank of New England was found guilty of 31 offenses, it was fined $1.2 million. When Crocker National Bank was found to have committed 7877 infractions, worth $3.98 billion, it was merely fined $2.25 million.

Despite such anomalies, banks across the nation were forced to sit up and take notice. Over the years, the Justice Department has become more adroit at digging deeper into a bank’s affairs and rooting out the laundrymen, and more severe about holding the bank responsible for the actions of its employees. At the end of 1994, the government’s wrath was directed at the American Express Bank International, after two of its senior officers were indicted in Houston for helping to wash $40 million belonging to Mexican drug trafficker, Juan Garcia Abrego.

A Mexican gas station owner named Ricardo Aguirre Villagomez - known by his friends as Kenny Rogers because he looked like the singer - was Abrego’s primary laundryman. Under Villagomez’s supervision, drug money collected on the streets of Texas was sent through exchange houses and banks along the Mexican border to Switzerland. From there it was wired to a holding company in the Cayman Islands established for Villagomez by Antonio Giraldi and Maria Lourdes Reategui at the Beverly Hills branch of AMEX. Some of his money was invested in a Blockbuster Video franchise, and some in lithographs by the Mexican artist, Rufino Tamayo. But the lion’s share went into American real estate. Giraldi and Reategui accepted $29 million as collateral for $19 million-worth of property loans, reputedly making Villagomez the bank’s biggest customer. At least until US Customs identified and froze the funds in the Caymans. Giraldi and Reategui both pleaded not guilty to several charges, including money laundering, but a Brownsville, Texas jury found otherwise. He was sentenced to 10 years, and she got 3 1/2. The government then went after the bank, fining it $7 million. American Express Bank International also had to forfeit $40 million of Villagomez’s laundered money and assets, and was obliged to spend $3 million on employee training.

The fine is the largest assessed to date against a US bank for money laundering. But that’s a record that probably won’t stand for very long.

*****

In the name of responsible banking, but largely at the insistence of the United States, Great Britain, France and Japan, nations around the world have endorsed the doctrine that financial institutions must do their part to help identify money being laundered at any stage of the washing cycle. The result is "Know Your Customer", a campaign to target clients who maintain accounts that are not in keeping with the type of business they do; or clients with accounts fed by deposits from a large number of different individuals; or anyone opening a low-interest-bearing account with a sizable sum of money. Cash remains the give-away, especially when someone makes unusually large deposits; or makes multiple deposits at different locations; or transfers large deposits quickly to other accounts; or makes an inordinately high number of very small deposits that add up to a very large sum.

For the most part, banks throughout the industrialized world have shown a sportsmanlike willingness to cooperate, despite the fact it means they have to spend their own money to train staff in the skills of financial vigilance. A front-line strategy, akin perhaps to reminding children to drink their milk and brush their teeth, it sometimes works. But not all the time.

Agip (Africa) Ltd. was a Jersey, Channel Islands-registered company drilling for oil in North Africa. A wholly owned subsidiary of the Italian state oil company, its chief accountant was a crook who over the course of several months, used fraudulent invoices to wire $10.5 million from the Banque du Sud in Tunis to the London account of the Baker Oil Corporation, a shell registered on the Isle of Man.

Any bank manager might fairly assume that Baker Oil was in the petroleum business. However, almost as soon as funds were bedded down in that account, instructions arrived directing the bank to transfer everything to the Euro-Arabian Jewelry company. The money was then immediately wired to company in Paris pretending to be a jewelry store. Suspicious? Perhaps. Illogical? Almost certainly. Yet the bank manager who handled the transfers, and charged Baker Oil a fee for the service, earned his living not by knowing his customers but by catering to his customers. His job description did not include interfering with an oil company sending all its money to a jewelry store.

Responsible banking, it must be said, is a terribly vague concept. Admitting as much, some governments do more than merely encourage bankers to know their customers: they force banks and other businesses to engage the enemy by decreeing that ignorance of the laundrymen's methods will not provide an adequate defense where laws have been violated. The onus therefore falls on corporate officers to monitor and report suspicious activities. Any officer of a financial institution in America who is found guilty of being involved in money laundering risks up to ten years’ imprisonment and/or a fine of $500,000. Under certain circumstances, the government can also impound the offending company.

That was the dilemma faced by Banque Leu, a Luxembourg corporation operating in Northern California, after agents from the IRS and the Drug Enforcement Administration followed a trail of drug money from Los Angeles to Colombia then back to a pair of accounts at the bank. Several arrests ensued, including those of two Colombians and a rogue bank officer. Confronted with the threat of a federal grand jury indictment against the corporation that, in theory, might have shut them down, executives at Banque Leu opted for damage control. They accepted legal responsibility for the actions of their account officer, conceding that he "either knew or was willfully blind" to the fact that specific accounts were used to launder drug money. In exchange for the US Attorney’s waiver of that indictment, the management of Banque Leu pleaded guilty to money laundering, forfeited $2.3 million, paid an additional $60,000 fine, agreed to submit special audit reports to the US government for the next three years, and further agreed to conduct an anti-money laundering education project.

According to a recent federal court ruling, foreign corporations with branches or subsidiaries in the United States can now be prosecuted no matter where they're laundering money. A classic illustration came out of a 1988 Securities and Exchange Commission investigation into insider trading.

Stephen Sui-Kwan Wang was a trainee analyst in the Mergers and Acquisition Department of merchant bankers Morgan Stanley in New York. Lee Chwan-hong, an investor who called himself Fred Lee, was president of two British Virgin Island companies with headquarters in Hong Kong. According to the SEC, over the course of 18-24 months, Wang provided Lee with non-public information which allowed Lee to take positions in 25 companies through 30 different brokerage accounts. Lee came out the other end with a profit of $19.4 million.

In keeping with current procedure, the SEC filed against Lee for $19.4 million, then used the Racketeer Influenced and Corrupt Organizations Act (RICO) to seek a civil penalty of three times that amount, for a grand total of $77.8 million. Knowing that Lee had moved his money out of several company accounts around the country and put the bulk of it in the New York branch of the Standard Chartered Bank, the SEC attempted to freeze his accounts. But Lee was one step ahead. He'd already ordered Standard Chartered New York to wire his money to Standard Chartered Hong Kong. So now the SEC sought an order against the Hong Kong bank to repatriate the assets.

Standard Chartered's lawyers argued that the American courts had no jurisdiction in the matter and could not enforce an action in Hong Kong. But a US district court thought otherwise. It agreed with the SEC, ruling that if Standard Chartered Hong Kong did not return the money to the United States, the New York branch could be held in contempt. Risking daily fines and the possibility that its bank officers in the US could be arrested, Standard Chartered sent the funds back to New York, to be held there by the courts, awaiting the determination of the SEC's claims against Lee.

Needless to say, Lee was anything but pleased, and demanded that his money remain at his disposal in Hong Kong. He insisted that Standard Chartered had a contractual duty to him. When the bank pointed out that the money was already in the States, two of Lee's companies sued Standard Chartered in Hong Kong on the grounds that it had acted unlawfully.

The case posed the terribly awkward question, where does a bank's allegiance lie? Must a bank comply with a court order, albeit in another jurisdiction, or are banks bound by contract to their client, no matter what?

The High Court in Hong Kong ruled against Lee, saying that because the money was a result of a crime, the bank had acted correctly in sending it to the US, subject to a ruling there. The underlying message was a warning by the US Justice Department to all banks: When you deal with the proceeds of crime, we reserve the right to hold you responsible.

At first glance, a ruling like that would appear to be an effective weapon. But it can take forever to locate the proceeds of the crime and work the case through several jurisdictions. The world is no longer a collection of independent financial markets. It's a global bazaar, backed by an electronic infrastructure that permits the instantaneous transfer of funds from anywhere on earth to anywhere else. Pinpointing one or even a series of transmissions is extremely difficult. So Congress now takes the approach that banks and non-bank financial institutions have a watchdog’s role to play.

As dangerous as that might be, and there are civil libertarians who argue that bankers should not be turned into policemen, as of 1996 Wall Street broker-dealers and other non-bank financial institutions are required to determine, as best they can, that wired funds are not crime related. They must also maintain their wire transfer records for five years.

Simply because a client represents himself as being engaged in a lawful business, the government no longer excuses the companies he hires from reporting inconsistencies that might document an illegal source. Because laundrymen prefer financial institutions where they aren’t known and where they can’t be identified through records of previous transactions, the government insists companies pay particular attention to clients who don’t normally hold accounts or otherwise transact business. That’s lead one critic of the law to call it, "Know Your Non-customer."

As banks have cracked down, laundrymen have turned to non-bank financial operators. They use money changers - known as casas de cambio along the US-Mexican border which is crawling with them - money transmitters, such as Western Union and American Express, neighborhood check-cashing businesses and Giro houses, which are wire-transfer businesses. But more often than not, finding dirty money in a sea of wire transfers means putting the dirty money there in the first place.

World Telecom was a store front business at 373 Broadway, Chelsea, Massachusetts. Owned by a 32-year old man named German (pronounced Herman) Cadavid, the company offered various services, such as faxes, post office boxes, beeper rentals, and money exchange. Five doors down was the World Travel Service, a money transmitter and licensed franchise agency for Vigo Remittance Corporation of New York. It was also owned by Cadavid. Both were related, through Cadavid, to World Travel Service and World Telecom offices in Rhode Island.

US Customs had reason to believe that from the time he went into business in 1992, and for much of the next two years, Cadavid and his associates were laundering dirty money. His volume of transfers was greater than it ordinarily might have been for a new business, almost all of the transfers went to the Dominican Republic, and the local Dominican population was not affluent enough to account for the sums he was moving. However, without someone on the inside, busting him was next to impossible. So Customs set up a sting. An undercover operative convinced Cadavid to handle three transfers totaling more than $100,000. After taking his usual seven percent commission, Cadavid unsuspectingly wired the money into the Barclays Bank account of a US Customs front company in London.

As a Vigo franchisee, he was under an obligation to observe certain strict rules, such as never accepting an order over $5000 without demanding proper identification to verify the full name and address of the sender. To get around Vigo’s rules, Cadavid simply assigned the transfers to fictitious names, partitioned them into $4500 parcels, and staggered transmissions.

By isolating specific transfers and following the money trail, Customs was able to arrest him. But, in those days, more than 500,000 wire transfers, representing in excess of $1 trillion, electronically circled the globe daily. And even if there weren't too many to keep tabs on - and there most definitely were - there wasn't enough information on any single wire transfer to determine whether the money is clean or dirty. There still isn't. Changing the system would mean implementing a global strategy for accurately identifying the sender, the recipient, and the source of all wired funds. Any hope of doing that, of getting every country in the world to make wired monies ultimately traceable when it is clearly not in the every country’s interest to do so, far exceeds sane wishful thinking.

*****

American law requires that a Cash Transaction Report (CTR), technically known as IRS Form 8300, be filed with the Internal Revenue Service for any and all cash dealings over $10,000. This not only applies to banks and other financial institutions, but affects all sorts of businessmen, from antique dealers, builders and shop owners to garage owners, restauranteurs, barbers and dentists. Banks and financial institutions have the added responsibility of maintaining records of every cash transaction of $3000 or more for five years.

Although a CTR is also mandatory if the sum of all cash transactions over a 12 month period exceeds $10,000, one way laundrymen get around the law is by structuring their dealings. In a recent case, $29 million in cash become almost invisible on its way to Ecuador because the laundryman was willing to lumber through 40,000 separate transactions.

Phony bank accounts are another ruse and, believe it or not, the government has investigated cases where accounts were opened in the names of Marilyn Monroe, Abraham Lincoln, James Bond, Mae West and Roger Rabbit.

Nevertheless, cash remains legal tender. It even says so on the front of every bill. That means there's nothing to prevent someone from handing their bank $1 million in used $5 bills. But when that happens, the government wants to know who's doing it and where the money is coming from. Consequently, more than eight million IRS 8300 forms are now being filed annually. They wind up at a collation center in Detroit, where the information contained on them is fed onto computer tape. From there, the tapes are sent to the headquarters of the Financial Crimes Enforcement Network (FINCEN) in Vienna, Virginia.

Housed in a modern office complex with a huge ellipse on the front of the building, FINCEN is several floors-worth of locked doors protected by security cameras and armed guards, of restricted-area open-plan offices where desks with computer terminals are separated by half-height partitions, and of over-air-conditioned rooms access to which is off-limits to just about everyone because that’s where they keep their super-powerful computer mainframes.

Information on the tapes from Detroit are fed into those mainframes, melded into FINCEN’s already enormous database of cash transactions. Specialists continually prowl through the database, looking for patterns of unusual financial transactions from which to build a detailed diagram of illegal activity. Whether they’re working on an investigation for the Treasury Department, or answering one of the more than 6000 requests for information that come in annually from diverse law enforcement agencies across the country, the bedrock of FINCEN’s research is the set theory of Venn diagrams - overlapping circles to indicate relationships.

Say the search begins with the names of five individuals who are suspected by Customs of money laundering. Checking those names in the database reveals several different residential addresses. Cross-checking those addresses matches one with a company under investigation for drug dealing by the San Francisco police department. That company has used several bank accounts, one of which shows up on an IRS Form 8300, having accepted a cash deposit from a gentleman whose home address is the same as a company that is currently the object of a probe by the Pittsburgh office of the DEA. As the search broadens, FINCEN links the original five individuals to a dozen more, adding 15 companies and 30 bank accounts to the investigation.

It is an expensive and lengthy process, and all too often, by the time programmers input the paperwork and the analysis section sorts through the data, many trails have gone cold. But when FINCEN does score, the results can be staggering. In June 1995, a pair of law enforcement agencies requested information on two individuals who had no apparent affiliation. By cross checking patterns of their financial dealings, a FINCEN specialist was able to tie both to two small business. Although neither business reported annual sales of more than $1 million, the specialist soon linked those businesses to $120 million in cash deposited across the country at the rate of $50,000-$80,000 a day. By August, the FBI was on to a huge drug and arms dealing conspiracy.

Further strengthening the government’s hand is the 1990 Depository Institution Money Laundering Amendment Act which reemphasizes that the burden is on banks to report. By turning a blind eye, bank directors are risking everything, including the possibility of the government taking over any financial institution convicted of money laundering offenses.

Along with those laws, the RICO statutes permit the government to seize laundered money, regardless of the source, to confiscate all assets derived from the use of those funds, and to levy fines of up to three times that amount against anyone involved with money laundering.

In turn, RICO gave renewed vigor to the asset-forfeiture program. Today, thanks entirely to drug traffickers and laundrymen, the government has owned horse farms, yachts, planes, cars, watches, oil wells, cattle, hotels and for a while, a house of prostitution. It has seized and sold enough art to fill dozens of museums. Not long ago it grabbed a 1972 Salvador Dali "Self Portrait." The painting had been bought in Spain with drug money by a known trafficker who’d taken it back to Colombia, then shipped it to Miami, intending to sell it at auction. The government obligingly put the painting on the block, but after the hammer went down at $500,000, Uncle Sam kept the money.

The government has also owned the occasional film set. When Ken Mizuno and an associate sold 52,000 memberships to an exclusive Japanese country club that only allowed 1800 members, bilking investors for nearly $800,000, the Feds got Mizuno for fraud and money laundering. They confiscated his mansion in LA and sold it for $1.8 million, having marketed it as any good real estate agent might - with a glossy brochure emphasizing that the house had been widely featured in Eddie Murphy's 1987 movie, "Beverly Hills Cop II."

*****

Nowhere else in the world is money laundering given the same prestige.

In the United Kingdom, several pieces of legislation have been aimed at thwarting the laundrymen, yet each falls short of America’s get-tough approach. Instead of requiring that cash transactions over a certain amount be reported, the British chose a system called suspicious cash transaction reporting. Which means the front-line battle against the laundrymen gets bogged down in the definition of the word "suspicious."

If someone deposits £50 in cash and an employee at the bank thinks there's something odd about it, he is obliged by law to file a CTR. If another client deposits £500,000 in cash and no one finds anything odd about it, the deposit goes unreported.

Having opted for suspicious cash transaction reporting because mandatory reporting costs more than they were willing to spend, the British are getting what they paid for. In the mid-1990s, a two-year survey by the British Police Foundation revealed that 20,000 suspicious cash transaction reports had led to fewer than six investigations and that out of those six investigations no one could say how many arrests were made, or if any convictions resulted. Today, the Serious Organised Crime Agency (SOCA) handles the cash/suspicious transaction reports that used to go to the National Criminal Intelligence Service (NCIS). They reportedly receive in excess of 250,000, but with a permanent staff to process those reports smaller than the one that was incapable of handling 20,000.

The police can confiscate drug-derived assets. However, bankers can defend against this by proving they did not know or did not suspect that they were dealing with laundered money. Or, having suspected as much, that they disclosed the facts to the proper authorities.

It is much the same story throughout Europe.

The Dutch have anti-money laundering laws, and have made a conscious effort to force banks to report. But it doesn’t always work. A drugs cartel from Surinam, working out of a gold and jewelry shop, washed $59 million through two Rotterdam branches of the Dutch bank ABN AMRO between 1989 and 1993. There have since been prosecutions, but when bank officials first reported suspicious transactions, the Central Bank told them to leave the matter alone, that it was of no real interest.

In 1995, the Dutch police decided that at least half of Holland’s 110 foreign exchange bureaus were laundering drug-tainted guilders. The Central Bank took over direct supervision of those exchanges and many of them, especially those owned by foreign bearer-share companies, quickly folded. But almost as many have since reopened just across the border in Belgium.

Although no one can put an accurate figure on the amount of money being washed through the Netherlands, a former minister of justice said in 1993 that it could be more than twice as much as flower exports, Holland’s most profitable crop.

In Germany, money laundering has only recently become a crime. Unification, which soldered an important chunk of the Eastern Bloc to the West, created a massive sink. Helmut Kohl's government had no choice but to fly in the face of a traditionally secretive banking industry and comply with European Community directives. He signed a law that requires banks to record the names of anyone depositing cash in amounts over DM 20,000 ($12,000), and to alert the police when they suspect that money has come from drug dealing or other criminal activity. But prosecutions haven’t followed.

The French, too, have made money laundering a criminal offense but weakened the effort by using a suspicious cash transaction reporting system. They created TRACFIN, modeled after FINCEN, specifically to expose money launderers. But in the end, TRACFIN is like an NFL expansion club: all the players know the rules of the game, they've got the jargon down pat and they wear nifty multi-colored uniforms, but they just haven't learned how to win. It took the French over six years to bring their first money laundering prosecution to court. And then, it only happened because the DEA handed it to them.

It is an offense in Italy to launder money, but only in cases involving kidnapping, robbery, or blackmail. In 1989, the Italian Banking Association asked that member banks identify every cash transaction in excess of 10 million lira, not quite $7000. They are also supposed to register all bearer savings passbooks, and to refuse service to any customer who fails to cooperate. Ignorance, abuse, and sheer disregard of the law are widespread. Promises of change have come fast and furious ever since recent scandals have rocked the government and implicated so many politicians of complicity with organized crime. But before Italy can tackle the laundrymen, it needs a government with credibility, one that will last long enough to survive the constant mayhem that has been Italian politics since 1945.

In Luxembourg, banking secrecy is guaranteed by legislation that prohibits any bank from disclosing information either to local or foreign tax authorities. Luxembourg has been known in the past to cooperate with other countries investigating drug-related crimes. But the Grand Duchy emphatically draws the line there. One result of its blatantly freewheeling company registration policy is that banks such as BCCI could be securely headquartered in Luxembourg while running amok throughout the rest of the world. A 1989 law did make money laundering a crime there. However, it stipulated that the authorities could only seize assets after the owner of the funds had been convicted of a crime. As a result, the courts found themselves in a very embarrassing position. $36 million belonging to known drug trafficker Heriberto Castro Mesa had been laundered through 33 banks in Luxembourg and eight other European countries. When Mesa was killed in a shoot-out with police, Luxembourg authorities arrested and convicted his two laundrymen, Franklin Jurado Rodriguez and Edgar Garcia Montilla, and ordered all their assets frozen. That’s when Mesa's widow, Esperanza, and his daughter, Ampara Castro de Santacruz - who was married to Jose Santacruz Londono, a founding member of the Cali cartel - went to court to get those funds unfrozen. In January 1993, the case reached the court of appeals, which ruled that the money must be released because its owners, Esperanza and Ampara, had broken no laws. Their links to Cali drug trafficking were of no significance. They'd never been convicted of a crime. Nor, for that matter, had Castro Mesa.

In the midst of the ensuing publicity and international criticism, the Grand Duchy decreed that any money confiscated in drugs cases would be used to fight trafficking and money laundering. It also promised to shut the offending loophole. Credit institutions and professionals in the banking sector would now be required to report any activities that might be construed as money laundering. The immediate response was a blood-curdling scream from local bankers, who insisted that the decrees jeopardize the nation's unique financial position by nullifying banking secrecy. Weighing one argument against the other - the social consequences of drug trafficking and money laundering versus the pecuniary benefits of secret banking - the legislators did precisely what you might expect them to do. They voted for their wallets. A compromise bill was passed, allowing the authorities to clamp down on money laundering. But the information they would need before they could act would be made available only by banks only "on their own initiative." Business in Luxembourg is back to normal.

The European Community set the tone right from the beginning, letting banks off the hook by declaring that it was not their responsibility to detect money laundering. Instead, bankers are politely requested to know their customers so that money launderers will find it harder to operate; to comply with existing legislation and law enforcement agencies in the fight against money laundering; to improve their record-keeping systems so that suspicious activities can be detected early; and to train their staffs so that they can recognize and report money laundering activities.

The Japanese have copied the British, obliging banks to report suspicious cash transactions, though they've gone one step further in forcing banks to report all domestic cash transactions in excess of $240,000, and all foreign cash transactions in excess of $40,000. Where drugs are concerned, prosecutors can put banks and financial institutions in the dock for laundering money.

Closer to home, Canadian banks sometimes report suspicious transactions, but only on a strictly voluntary basis, and following procedures instituted by the banks themselves. The government does not demand reporting.

The United Nations climbed on the bandwagon in 1988, proposing that money laundering be an internationally extraditable offense. Some 80 nations agreed in principle to ratify a pact. But 80 nations is much less than half the UN membership. And in the first five years, only four actually signed. Notable among the hold-outs were Luxembourg, Liechtenstein, the Netherlands Antilles, the Cayman Islands, Panama, Uruguay, Hungary, Russia, Pakistan and Bulgaria.

Brian Bruh, the first director of FINCEN, is quite frank when he compares the American system with what’s practiced elsewhere in the world. "A suspicious cash transaction reporting system is essentially a voluntary system. If someone walks into a bank, a narcotics trafficker or a money launderer, and wants to conduct a financial transaction, and he sees that the bank officer is very alert, he simply says, ‘I forgot something’ and walks down the street to another bank, until he’s able to conduct a transaction where the bank official is not so suspicious. In our country, if someone walks into a bank, conducts a large cash transaction, a report must be file. If I were a money launderer, I would prefer to do business in a country with suspicious cash transaction reporting. Although, suspicious cash transaction reporting is still better than no cash transaction reporting."

*****

In the good old days before cash transaction reporting, laundering huge sums of dirty money used to be a fairly easy stunt. All anyone had to do was send runners around the country depositing cash a lot of different bank accounts. Each runner, known in the trade as a "smurf" - the nickname was first used by investigators in Florida because the runners reminded them of the television cartoon characters - would be assigned a daily route, exactly like a postman or a milkman. Once the runners had collected the day's cash from their contacts, they'd work their territory. If each runner deposited $200 in 20 accounts, hardly enough in any one bank to raise suspicions, ten runners could put $40,000 in dirty cash per day into the banking system. That's $200,000 a week, $10.4 million a year. One California drug trafficker bragged when he was arrested that his smurfs had gotten so good at it, they could buy up to 2000 cashier's checks a day and deposit them, within a few hours, in 513 different banks.

The secret of good smurfing is speed. To deposit the most money in the shortest amount of time, areas are targeted where banks are located close to each other and business isn't too hectic. Small towns are no good because tellers there remember clients. Banks with little business are no good because tellers have too much time to think about a deposit or a familiar face. The best smurfing is done in affluent suburbs where there are just enough banks with just enough customers. Big cities, it turns out, are as bad as small towns. Lines are usually too long.

Anyway, that's the way the game used to work, before the government got wise to such capers and forced the laundrymen to find new approaches. So the laundrymen turned their attention to non-bank financial institutions, such as casinos.

A cash-intensive industry, casinos routinely perform many bank-like services. They cash checks, exchange foreign currency, offer the use of safe deposit boxes and pay out large sums in cashier's checks. They also frequently extend credit, which means you can leave your money on deposit in one casino and get it back from a casino in another jurisdiction. Not only is a well-established, well-organized gambling den an obvious place to reduce the bulk of a stash, to change $10 and $20 bills into $50s and $100s, it is a believable source of revenue. All you have to do is stroll into a casino, buy $1000 worth of chips, play for a few hours, cash out and hand your bank manager $500,000. You might someday have to substantiate your claim of having won it at a casino, but that's no problem for anyone with a friend high up in the casino's management.

Better still, if you owned a casino you wouldn't have to bother pretending to play the roulette wheel. You'd simply shove your cash into the till and make sure your accountant lists it in the profit column when he files your tax returns.

Acknowledging this natural alliance, Congress subjects casinos to the same cash transaction reporting requirement as banks. Furthermore, a 1993 law requires casinos to file suspicious cash transaction reports if they witness questionable transactions; to institute programs for training employees; and to improve the procedures they use to identify customers applying for credit accounts. But the law as it was passed and the law as it was proposed turn out to be two different matters. "Pending further study," Congress backed down from forcing casinos to maintain a list of customers who are known by aliases; to keep a chronological record of all transactions at the cashier's window; and to verify the identity of any customer whose cash transactions exceed $3000.

The casino lobby had also taken a healthy bite out of the suspicious cash transaction requirement by getting Congress to exempt smaller casinos from the obligation. Nor did Congress include all of the Indian reservation casinos, of which there are around 130 in 16 states, doing an estimated $27 billion a year in business.

At the beginning of 1993, the Treasury Department fined ten casinos in Atlantic City a total of $2.5 million for "willfully failing" to report cash transactions that took place between 1985 and 1988. The gaming industry now insists that it’s cleaned up its act and is in full compliance with the 1993 law. But then it always said it was in compliance with the 1985 law, which requires any commercial casino with a turnover of at least $1 million a year to keep records of large cash transactions - except if they happen to be located in Nevada.

And from Capital Hill came the perfectly straight face affirmation that Congress continues to have every reason to believe casinos will faithfully comply with the suspicious cash transaction requirements - tantamount to a government endorsement of the tooth-fairy.

Racetracks provide laundrymen with much the same kind of opportunity. The strategy here hangs on the natural reluctance of some winners to let the IRS know just how much they're putting in their pocket. A winning ticket is a negotiable instrument and laundrymen are only too happy to help the lucky punter avoid taxes by giving him cash for his ticket. Racecourses across the country are filled with these "flies" who stalk the tracks looking for folk with tickets to sell.

Purchasing lottery tickets is slightly more complicated because the winners aren't in a single place at any given moment. But here again, it's a no-lose situation for all parties involved, even the IRS. The big prizes in most state lotteries are paid out over a 20-year period, so a $10 million win is worth $50,000 a year for the next two decades. From the laundrymen’s point of view, a 20-year annuity is well worth a suitcase filled with cash. The original winner gets his money up front - although the burden of dealing with so much cash now rests on his shoulders - while the laundryman has turned millions of dollars of dirty money into a totally legal, tax-declarable entity.

Such stunts have been going on for the past decade, but the FBI only cracked their first major lottery laundering scheme in 1995, when they stopped a fugitive from collecting $1.9 million from the Massachusetts lottery.

In July 1991, Michael Linskey’s ship came in, bringing him a $14.3 million jackpot in the state’s Mass Millions game. A few days later he sold half his winnings to a syndicate lead by James "Whitey" Bulger. Brother of Massachusetts Senate President William Bulger and leader of Boston's so-called Winter Hill Gang, Whitey had apparently joined forces with the Patriarca crime family run by "Cadillac Frank" Salemme, uniting New England’s Italian and Irish underworld. Indicted in 1994 on federal racketeering charges, Whitey promptly went on the lam. So did Cadillac Frank, though he was soon arrested in Florida thanks to tips from viewers who recognized him from the show "America's Most Wanted." To get at Whitey, the FBI went after his lottery winnings. Three days before he would have been eligible to collect his annual installment, they filed a seizure warrant with the Massachusetts Lottery Commission.

*****

Casinos, race tracks and lotteries offer variations on Meyer Lansky's legacy to the money laundering industry. He instinctively understood, and helped to nurture, the natural coalition between organized crime and licensed gambling. Lansky was, after all, the man who once said, "There is no such thing as a lucky gambler. There are just winners and losers. And the winners are those who control the game."

One man who controlled the game for a very long time was Nicholas Deak, once the uncrowned laundry king of the non-bank financial operators. In 1953, the 48-year-old refugee from Hungary helped his pal Kermit Roosevelt launder money for the CIA when it wanted to finance the overthrow of Iran's Mossadegh regime and reinstate the Shah. The empire he subsequently built, Deak and Co, was for a time America's largest retail foreign-exchange and precious metals brokers. The holding company's subsidiary, Deak-Perera, was America's foremost retail currency and gold trader.

President Reagan's 1984 Commission on Organized Crime added another feather to Deak’s cap, naming the company one of the biggest money laundering sinks of all time. In its report, "The Cash Connection," the Commission’s detailed the extent of Deak's laundry services. For instance, on October 5, 1981, Humberto Orozco and his brother Eduardo - professional drug-money launderers - walked into Deak-Perera's office in downtown Manhattan carrying 233 pounds of cash stuffed into cardboard boxes. It took the staff there most of the day to verify the total of $3,405,230. At the brothers’ instructions, the money was deposited into Deak account #3552, held in the name of Dual International (Interdual). Over the next two weeks, Orozco made four more cash deposits, putting $3,892,889 into the #3552 account. Before the month was out, he topped it up with another $3.3 million.

When the brothers were finally arrested, investigators established they'd systematically used 11 banks throughout New York to launder $151 million. Between November 1980 and March 1982, they'd washed nearly two-thirds of their stake, close to $100 million, through 232 unreported deposits at Deak-Perera.

The absence of any serious money laundering laws allowed Deak to construct his sink, and though that is a defect that has since been corrected, there are still enough loopholes in the laws to drive a cash laden armored car through. And because the bad guys these days tend to have more money than the good guys, driving through loopholes is a productive business.

Today’s non-bank battlegrounds are the securities and commodities markets. Under the banner of "Operation Eldorado," a joint task force created in 1992 and made up of agents from US Customs and the IRS, is probing Wall Street to determine whether brokers have willfully invested drug profits or otherwise engaged in transactions to conceal the source and ownership of dirty money. Word came out in September 1994 that several Wall Street firms were under investigation and that clients’ accounts had been examined at Merrill Lynch, Dean Witter Discover, Bear Stevens, Prudential Securities and Paine Webber. A specific area of interest appeared to be brokers’ business in offshore havens, among them Panama. In March 1993, two Merrill Lynch brokers working out of the company’s office there were indicted for money laundering by a federal grand jury in Tampa, Florida.

Federal interest in Wall Street may be new but the fundamentals of the game have been around for centuries.

*****

Chapter Four

A TALE OF TWO SINKS

"Because banks is where the money is."

--- legendary bank robber Willie Sutton

Roberto Calvi, a 62-year-old Italian with mournful eyes and a distinctive black mustache, was found hanging under Blackfriars Bridge in London on June 18, 1982. At first glance, his death appeared to be suicide. Today, hardly anyone believes it was.

Known as "God's Banker" because of his close associations with the Vatican, Calvi had been chairman and president of the Milan headquartered Banco Ambrosiano. Having started work there in a very junior position in 1946, he rose slowly through the ranks to until the mid-1960s, when he met the Sicilian financier, Michele Sindona. Six years after that, thanks to Sindona's encouragement, friends and backing, Calvi was not just running the bank, he was well on his way to owning a good chunk of it.

Banco Ambrosiano soon became Italy's largest private banking group. But, for a bank with that sort of prestige, it seemed odd that there were no offices in the City of London or on Wall Street. Instead, there were branches in the Bahamas, Luxembourg and Nicaragua.

And all sorts of strange dealings were going on.

In June 1979, the Nicaragua branch loaned $9 million to Nordeurop, a Liechtenstein shell company set up by Calvi in the United States. Nordeurop sent the money to another Calvi-created shell, this one in Panama, where it was recorded as a fee. No proper explanations for the movement of this money have ever been located. There was no paperwork to support the original loan, no paperwork to substantiate the payment of a fee. By May 1982, newspapers reported that $1.3 billion of the bank's money was unaccounted for. Three weeks later, Calvi was dead.

The mystery surrounding his death unquestionably revolves around that missing money, much of which turns out to have been washed through shell companies registered in Panama and Liechtenstein - shell companies that had affiliations, direct or otherwise, with the Vatican's private bank.

The Instituto per le Opere di Religione, which translates literally as the Institute for the Works of Religion and is usually referred to as the IOR, functioned as an offshore merchant bank in the heart of Rome. The Vatican was its principal client. By design, the bank's directors were never answerable to anyone outside the hierarchy of the Roman Catholic Church. Suitably beyond the reach of the Italian banking authorities, the IOR could send currency anywhere in the world without contravening any currency control laws. For Calvi, who needed to fund the web of shell companies he was establishing around the globe, the IOR was an ideal sink.

To cement the relationship, he brought the IOR in as his partner on several offshore deals. One of them was Cisalpine, Banco Ambrosiano's subsidiary in the Bahamas. The chairman of the IOR sat next to Calvi on Cisalpine's board. Together they used that bank to loan each other money, creating an elaborately tangled paper trail. By 1978, the IOR reportedly had $114 million on deposit with Cisalpine, while Cisalpine, in other words, Calvi, had $236 million on deposit with the IOR.

The chairman of the IOR in those days was the athletic, American-born Archbishop Paul Marcinkus. Michele Sindona had also been influential in his appointment to the bank. Marcinkus later claimed not to have had any knowledge of Calvi's machinations and maintained that the IOR was the real victim, having lost a fortune when it was naively lured into an elaborate fraud, enticed by Calvi’s attractively high interest rates. Never admitted, but now known to be true, is that as a result of the Calvi-Marcinkus relationship the IOR skirted the brink of bankruptcy. When the Banco Ambrosiano scandal broke, Marcinkus sequestered himself in his offices at St. Peter's, protected from questioning and prosecution by the immunity afforded to the Vatican City as a foreign state.

Another key figure was Tuscan businessman Licio Gelli. An admirer of Mussolini and Juan Peron, Gelli was Grandmaster of the Masonic-like lodge Propaganda Due (P-2), a secret Italian society, among whose members were cabinet officers, leading parliamentarians, financiers, high-ranking military officers, the heads of all three secret services and the nation's most influential jurists. Not surprisingly, it functioned very much as a parallel government, wielding real influence and enormous power. It has since been revealed that P-2 received financial support from various factions of organized crime in Italy and that these monies were laundered through Switzerland by Gelli. He knew Swiss banking well, having spent much of his life in the murky world of illicit arms dealing. When the Banco Ambrosiano scandal broke, he fled the country, was arrested in Switzerland, bribed his way out and spent the next five years hiding in South America, where he had heavyweight contacts, especially in Argentina.

A third player was Calvi's mentor, Sindona. Born in 1920, he was generally considered to be one of the wealthiest, most important businessmen in Italy. Fond of saying, "Money launderers bridge the gap between the underworld and the rest of society," he claimed to be worth $500 million. A devotee of Mussolini and Machiavelli, he advised Pope Paul VI on financial matters - which accounted for his nickname, "The Pope's Banker" - controlled half a dozen banks in four countries, owned the CIGA hotel chain and controlled nearly 500 other corporations. One of his companies was Moneyrex, a currency brokerage in Milan and a major conduit for Mafia money laundering. Another, ironically, for a money launderer, owned the Watergate complex in Washington.

Sindona's financial muscle was such that he was the predominant force on the Milan stock exchange and could, literally, hold it for ransom. Less visibly, he was Gelli's partner in P-2, and the Mafia's foremost financial consigliare. In 1980, Sindona had been convicted by an American court for fraud and perjury and sentenced to 25 years for having used $15 million of misappropriated funds to buy shares in two American banks illegally, one of them, Franklin National, crashed spectacularly in 1974. Coinciding with that bankruptcy, Finabank, a private bank in Geneva also went under. It was a funnel for Mafia and P-2 funds earmarked for the United States and Sindona maintained a numbered account code-named MANI-1125. His co-signatory was the IOR.

When the Banco Ambrosiano scandal broke, he was in prison in the States. Two years later he was extradited to Italy to face fraud charges and sent to prison there. In 1986, the man who knew where all the skeletons were buried was found dead on the floor of his cell. Someone had laced his coffee with cyanide.

It was Sindona who taught Calvi the ins and outs of laundering money through offshore companies. Quick study that he was, Calvi had formed several offshore shells over the years, using many of them in his deals with Marcinkus and the IOR. They supported Banco Ambrosiano's share price, bought companies with questionably exported lira and, with or without Marcinkus, defrauded Banco Ambrosiano's investors.

When the Italian parliament passed a law in 1976 that made it a criminal offense to export lira illegally, until then, it had only been a civil offense, Calvi faced a massive investigation into the way he'd been using the bank's funds. To cover his tracks, he devised a restructuring scheme that increased the Banco Ambrosiano's share capital by 50 percent. But to pull it off, and at the same time to underpin the bank's precarious share price on the Milan exchange, he had to bring funds into Italy from those shell companies. Frantically juggling his assets, he moved money in and out of shells to create the aura of stability. But his timing was off and his creditors were nervous. Worse still, his luck had run out.

In June 1980, one of Banco Ambrosiano's biggest clients, a leading Italian construction company, went bankrupt putting a huge dent in the Calvi's treasury. In January 1981, the government clamped down on all Italian banks owning non-bank foreign holding companies. Three months later the Milan stock exchange changed the dealing rules for Banco Ambrosiano. Previously, its shares had been traded only weekly, over the counter. The exchange ordered that they now be traded daily, and on the main floor. Calvi could no longer support his own shares. The following month Calvi was arrested for illegal currency transactions.

Many people expected Banco Ambrosiano to go down with him, yet it somehow managed to stay in business. One very good reason might have been that Marcinkus was handing out letters on IOR stationery confirming that his bank was the beneficial owner of 11 shell companies registered in Panama and Liechtenstein which were now holding Banco Ambrosiano shares and assets. Suddenly it appeared as if the IOR was covering Calvi's debts.

Calvi hoped to salvage the situation. On bail at the time and awaiting an appeal hearing, he managed to persuade the entrepreneur Carlo de Benedetti into both becoming deputy chairman and purchasing two percent of the bank's shares. But de Benedetti, who'd been chairman of the Olivetti group, resigned after three months because he couldn't get past the bureaucratic brick walls Calvi had built to protect his own fraudulent activities. De Benedetti later claimed that he had received phone calls at home threatening his life if he maintained a presence at the bank.

For the rest of 1981, the pressures on Calvi grew to the point of being intolerable. The Bank of Italy was closing in on him. Utterly desperate by early 1982, Calvi turned to Marcinkus, asking him to confirm that the IOR was indeed responsible for those shell companies and, therefore, would back up Banco Ambrosiano's outstanding loans.

Now Marcinkus refused. The Vatican was on his back about money missing from the IOR. Various "guestimates" put the total anywhere from $100 million to $500 million. So Marcinkus gave Calvi until June 30, 1982 to pay it back. When Calvi realized he couldn't meet it, he begged for more time. But Marcinkus said no.

That's when it was discovered that the Banco Ambrosiano had a gaping $1.3 billion hole right through its middle.

Marcinkus would later conveniently produce a secret letter, claiming it had been signed by Calvi, absolving the IOR from any debts incurred by those 11 shell companies. He used this letter as the basis for his argument that the IOR had no financial obligations whatsoever in the Banco Ambrosiano bankruptcy. The liquidators and the Italian banking authorities weren't so sure, and, although Marcinkus never gave evidence about the affair, the Vatican did eventually agree to a relatively minor settlement.

Intriguingly, the authorities soon uncovered evidence that Calvi had paid more than $100 million to Licio Gelli and to one of his henchmen, Umberto Ortolani. Those funds were washed by the Banco Ambrosiano through the complex web of Calvi shells and at least some of it wound up in a secret account controlled by Gelli on the Caribbean island of St. Vincent. This money was sent, according to the Italian authorities, "without any commercial justification."

Yet there might well have been a very good reason, specifically, Calvi's health. It's known he'd been paying Gelli and the P-2, and therefore the Mafia, since 1975 to protect him from the Italian authorities. He apparently laundered as much as $10 million just to hand out as bribes. But he obviously didn’t get what he was paying for because some people now viewed him as a liability. And as he grew increasingly desperate, he also became increasingly dangerous.

He left Italy on Friday June 11, 1982 with his briefcase, going first to Austria, then to London. On Monday Banco Ambrosiano's shares crashed. On Wednesday the bank's board was dissolved. On Friday Calvi was dead.

Rumor has it that Calvi was murdered for the contents of his briefcase. There is a strong suspicion, shared by some of the people with inside knowledge of the saga, that Calvi came to London to meet with certain bankers in the hopes of blackmailing them into bolstering his bank. To convince them that he was serious, he'd brought with him documents showing how those particular bankers had knowingly laundered money for Licio Gelli. Calvi's papers apparently proved that the money had been washed through the heart of the British capital and then used by Gelli, who was at the time acting for the Argentineans, to buy Exocet missiles which were fired at British forces during the Falklands War.

*****

Banco Ambrosiano was the biggest banking collapse in Europe since World War II. It was shortly to be followed by the biggest banking collapse in the history of banking.

In 1988, the Feds launched Operation C-Chase, the letter "C" standing for currency. Posing as drug dealers, undercover agents put out the bait that they had loads of currency to launder. And the Bank of Credit and Commerce International (BCCI) fell for it.

A complicated, costly five-year operation involving agents from Customs, the IRS, the DEA and the FBI, C-Chase produced more than 1200 secretly recorded conversations and nearly 400 hours of clandestinely recorded video tape. By assisting drug dealers to wash $34 million, the Justice Department was able to indict, and in 1990 to convict, several BCCI bankers plus dozens of other individuals. In one blow, the Americans had unknowingly pulled the bottom out from under a gargantuan house of cards.

The man who built that house was Agha Hasan Abedi. Born in 1922 in Lucknow, India, heart of the former Mughal Empire, he always claimed to be the son of a wealthy landowner. And he might well have been, except that a lot of what Abedi said over the years wasn’t true. He was, however, president of Pakistan's United Bank Limited from 1959 to 1972, when Pakistan nationalized its banking industry. Abedi, who'd spent those years building up a network of wealthy Arab clients and friends, now appealed directly to them and with their deep pockets started his own bank, initially capitalized at $2.5 million.

His main backer was Sheikh Zayed Bin Sultan Al-Nahayan, the ruler of Abu Dhabi and president of the United Arab Emirates. Also behind Abedi were various members of the Saudi royal family as well as the Bank of America, then the largest bank in the world. Bringing the Bank of America on board was an enormous coup because it gave Abedi's venture instant credibility. Needless to say, he shamelessly capitalized on the association. When the Bank of America finally got wise to him and pulled out in 1980, Abedi was cool-headed enough to play it down so that at least some people actually believed he was the one who had ended the marriage.

His skill in setting up what he claimed would be the first multinational bank for the Third World was staggering. To begin with, he deliberately registered the holding company in Luxembourg so that he could hide behind the Grand Duchy's strict banking secrecy codes. A year later, Abedi opened BCCI branches in four Gulf states and in Asian neighborhoods in several British cities. Then, in 1975, he registered the bank in the Cayman Islands but moved his top management to London, where the Bank of England gave BCCI additional credibility by awarding it a sound bill of health every year for the next 15 years.

As set out by Parliament, the Bank of England authorizes and oversees all banking activities in the UK. To make certain that everyone complies with the rules, it sends accountants into banks to spot irregularities. It is therefore the direct responsibility of the Governors of the Bank of England to ensure that all irregularities are properly dealt with. If, on the other hand, a bank operating in the UK can convince a Bank of England accountant that it is doing business by the book, that's the end of the matter until the next audit.

Until a few years ago there were two types of banks in the UK. There were full-status banks, which, having complied with a set of very orthodox requirements, were empowered by the Bank of England to offer a complete range of financial services. And there were Licensed Deposit Takers, smaller banks offering a limited range of services. The public often confused them for being much the same thing. In reality, authorized banks were the genuine article and Licensed Deposit Takers were not. Because they were not supervised as thoroughly, they did not enjoy the full confidence of the Bank of England.

BCCI was a Licensed Deposit Taker.

By 1977, Abedi was bragging that BCCI was the world's fastest-growing bank, with 146 branches in 32 countries and total assets of $2.2 billion. Although he had 45 offices in the UK, the grand prize, as Abedi saw it, was a banking network in America. To help him get that, he turned to Jimmy Carter’s friend, and slightly disgraced former Budget Director, Bert Lance. Initially, Abedi hired Lance as a BCCI consultant. Shortly thereafter, when Lance needed to sell his shares in a Georgia bank, Abedi came up with willing buyer named Gaith Pharaon, a Saudi businessman whose father had once been a court physician in Riyadh. Pharaon fancied himself a young Khashoggi and tried to do flashy deals throughout the West. Some of them went right. Many of them didn't. Still, when Abedi needed a front man, Pharaon was available.

Abedi also helped Lance pay back a $3.4 million loan. Such kindness gave Abedi access to Carter, whom he proudly declared to be one of his closest friends. While Carter has, these days, tried to explain away the relationship in a very different vein, there's no denying that Abedi was generous in his support for Carter's pet charity, Global 2000, and for the Carter Presidential Center in Atlanta.

Three years after his initial foray into the US, Abedi expanded into Panama, where General Noriega soon became one of his largest clients. A year later, Abu Nidal, the Middle Eastern terrorist, began channeling funds through BCCI. Nidal was soon followed by members of the Medellin cartel. By 1988, Abedi controlled 417 branches in 73 countries and reported assets of $20 billion. And, all this time, the Bank of England maintained that everything was just dandy.

Clearly, it had somehow missed a few vital points.

Under the provisions of the act that established Licensed Deposit Takers, BCCI should never have been allowed to use the word bank in its name. When BCCI attempted to buy the Chelsea National Bank in New York in 1976, state regulators weren't happy with what they saw and refused to approve the deal. An affidavit lodged in a US court in 1978 showed that Bank of America, then holding a 30-percent share in BCCI, wasn't pleased with the way Abedi's managers were lending money.

The Bank of England was aware of all this, but apparently didn't feel that any of it should affect BCCI's status in the UK. To give the Bank of England some credit, in 1980 it did refuse a BCCI petition for full status. But five years later, when banking regulators in Luxembourg tried to get the Bank of England to assume full responsibility for BCCI, the Governors flatly refused. It was around this time that the Bank of England received an anonymous letter outlining massive fraud at BCCI, and took no formal action.

It was also around this time that BCCI's treasury posted such huge losses from its irregular practices that Abedi became desperate to find fresh cash and turned to Latin America. He'd already opened an outpost in Colombia. Now he added seven branches, five in Medellin alone, and increased his assets there to over $200 million. It's hardly surprising that the Medellin offices were awash with cash. One of their major depositors was Jose Gonzalo Rodriguez Gocha, known even in those days as a cartel kingpin. Establishing an important presence in Colombia was a logical extension of BCCI's corporate culture. Abedi exerted such severe pressure on his employees to bring in deposits, putting their jobs and lifestyles on the line, that no one much cared where those deposits were coming from.

BCCI Miami was another noteworthy base, constantly accepting cash deposits in excess of $10,000 and not reporting them to the IRS. In some cases, the bank's private jets would fly the cash to branches in Panama or the Caymans, deposit it there, then wire it to BCCI in Luxembourg, where it disappeared. In other cases, to get around reporting regulations, large cash deposits made in Miami were receipted as if they'd been deposited at BCCI Bahamas - this at a time when BCCI did not even have a bank in the Bahamas.

On the heels of the Bank of Boston affair in 1985, BCCI shifted a lot of its laundry work to Canada. Abedi also opened extensive networks in the United Arab Emirates (UAE) and in Hong Kong. He explained BCCI's success by saying that he’d found small, lucrative niches that other banks weren’t willing to exploit. Many people thought he was talking about foreign exchange dealing. But the UAE operation was put in place to serve drug traffickers who dealt in heroin from the Golden Crescent, and the Hong Kong operation catered to the Golden Triangle crowd. BCCI also did remarkably lucrative business in Nigeria, despite the world oil glut that had depressed the local economy, and became the most important sink for the massive heroin trade being developed in black Africa. Knowing his clients, Abedi quickly expanded BCCI’s operations throughout the Caribbean, opening branches in marijuana-rich Jamaica, Barbados, Curacao and Trinidad and finally the Bahamas, where he also set up strings of shell companies to facilitate the movement of dirty money.

But the faster he opened banks, the faster leaks started to spring. In 1986, Abedi stole $150 million from a staff pension fund to plug holes in his balance sheet. Now, fearful that the Bank of England was on to him, he decided to take the treasury out of Britain. International banking supervisors in Basle had by this time examined how Abedi was managing his assets, and duly reported their concerns. Yet the Bank of England's auditors still did not cotton on to what Abedi was doing and categorically failed to uncover any fraudulent practices at BCCI. And so the Governors approved Abedi's request to move the treasury to the sanctuary of Abu Dhabi.

The following year, auditors Ernst & Young reviewed the books of the holding company and informed Abedi that they were worried about "excessive management power" and serious weaknesses in BCCI's systems and controls. Meanwhile, in Basle, those bank supervisors were so unhappy with BCCI that they forced Abedi to appoint one auditor for the entire international network. Then came the indictments in Florida. BCCI was fined $15.3 million for its money laundering activities. Despite Abedi’s insistence that it was an isolated incident, official investigations were launched in Canada, France, Luxembourg, Brazil, Singapore, Bermuda, the Caymans, Cyprus and even Nigeria. While several of these investigations involved currency control violations, a number of them uncovered evidence of more sinister endeavors.

At the Bank of England, the Governors were handed two reports, one from the City of London Fraud Squad, the other from a Middle Eastern accountant, both of which indicated fraudulent practices at BCCI. Nothing was done about either report. It wasn’t until 1989, after the Governors were shown a Price Waterhouse audit revealing a series of false and deceitful practices, that they finally took action. Too little, too late. The Governors merely approved a bail-out scheme that had been proposed by BCCI investors in Abu Dhabi who claimed they were ready to save the bank from total collapse. And in spite of the incontestable discovery of fraud, no official inquiry was ever requested by the Bank of England.

In the States, one investigation went back ten years, to the time when BCCI had romanced Bert Lance and wound up owning Financial General Bankshares, a financial holding company in Washington DC. Under American law, anyone controlling more than five percent of the shares in a public company must file a disclosure form with the Securities and Exchange Commission. But Abedi thought he’d found a way around the law. He’d convinced a group of BCCI clients each to buy less than five percent. When the SEC ultimately sussed out what was happening, it filed suit against 11 people, including Abedi. Faced with the prospect of going to jail, the defendants worked out a deal, part of which gave them the right to make a tender offer to all of Financial General's shareholders.

The takeover took several years and when it was finally completed, in 1982, Financial General was renamed First American Bankshares, a new entity totally independent of BCCI. The Americans demanded this because the Office of the Comptroller of the Currency didn't trust BCCI and said as much in a letter to the Federal Reserve Bank. The exact wording was, "BCCI is not subject to regulation and supervision on a consolidated basis by a single bank-supervisory authority." In other words, they weren't about to permit a rogue like BCCI to run a bank in the United States.

Nonetheless, the National Bank of Georgia and the Independence Bank of Encino California, both supposedly owned by Pharaon, had been surreptitiously funded by Abedi through a $500 million loan from BCCI. As collateral, Pharaon had signed over the shares of the two banks. And while Abedi later arranged for First American Bankshares to buy the National Bank of Georgia, he had effectively, but illegally, gained control of three US banks.

Being a staunch believer in the doctrine that "credibility is contagious," Abedi and his cronies installed prominent Americans on First American's board. Clark Clifford, an elder statesman who’d served as an adviser to and/or personal friend of almost every President since Harry Truman, and one of the most exalted attorneys in Washington, was named chairman. His law partner and protégé Robert Altman, who was married to TV's "Wonder Woman," Lynda Carter, became the bank's president.

By the time C-Chase indicted BCCI in 1988, the dossier on Abedi had become pretty weighty. Senator John Kerry had already opened subcommittee hearings on BCCI and its relationship with Manuel Noriega. Under oath, a pair of convicted drug dealers claimed they'd laundered funds through BCCI in Panama and that their introduction to the bank had come from Noriega himself. A further Senate inquiry revealed that Noriega had used BCCI since 1982 to wash millions of dollars.

New York Country District Attorney Robert Morgenthau had also taken an interest in BCCI's activities, specifically in Abedi's manipulation of First America. Already in his 70s, Morgenthau's half-century of legal experience, including more than 30 years as a prosecutor, had produced sharply honed instincts where financial crime is concerned. An authentic hero and a major political force in New York since the days when Jack Kennedy asked him to serve as the US Attorney there, it was Morgenthau who went after the local Mafia, winning convictions against 52 members of the Luchese, Bonanno, Gambino and Genovese families. It was Morgenthau who brought indictments against Roy Cohn, Joe McCarthy's partner in the Communist witch hunts of the early 1950s. It was Morgenthau who attempted to shut the door on Americans hiding funds in Swiss bank accounts.

Because First America had branches in New York, Morgenthau claimed jurisdiction. On several occasions, attorneys and investigators from his office traveled to London, hoping for assistance from the Bank of England. And for the most part, they were turned down.

Undaunted by either the Bank of England's obstructive attitude or the lethargy displayed by US federal prosecutors, Morgenthau took aim with his biggest guns. Knowing that the best way to nab white-collar bad guys is "to follow the money," he and his brilliant assistant John Moscow, tenaciously went after Abedi and everyone involved with the takeover of First American, including Clifford and Altman.

By March 1990, the Governors at the Bank of England had their eyes forced open by the British intelligence services which had produced evidence that Abu Nidal was among the many dubious account holders at BCCI, and that he held no fewer than 42 accounts at branches around London. Eight months later, a report to the Governors compiled from private files seized from Abedi's right-hand man, BCCI's chief executive Swaleh Naqvi, detailed extensive fraud throughout the bank. Among the practices outlined by the Naqvi files were diverted deposits, phantom loans to Abedi's friends and totally fictitious loans that were laundered through other banks to obliterate the money trail. Two months after that, in January 1991, the Governors were informed that BCCI had amassed some $600 million in unrecorded deposits. On March 4, 1991, almost as if they had at last run out of excuses, the Governors ordered an audit of the bank, using the independent accounting firm of Price Waterhouse. It was only when that report was finished in July, that the Governors shut down BCCI.

Back in New York, Morgenthau and Moscow had indicted several people, among them Clifford, Altman, Abedi and Naqvi. The first two were ordered to stand trial, although the case against them subsequently petered out. The second two became the subject of extradition warrants. A separate warrant was issued for Gaith Pharaon. Among other things, they wanted him to explain his dealings in the failed Florida savings and loan, CenTrust.

It seems that in 1989, when Abedi realized First American was not properly situated to expand his money laundering activities in Miami, he’d conspired with Pharaon to buy CenTrust. So, the prosecutors allege, Pharaon secretly acquired five percent of CenTrust on behalf of BCCI. By the time federal banking regulators closed down CenTrust, Abedi and/or Pharaon and/or BCCI owned, and never declared, at least 28 percent of it. The government claimed Abedi and Pharaon not only used CenTrust to launder BCCI funds, but also funneled various political donations through CenTrust, mainly to Democratic campaign funds, including a $50,000 gift from Pharaon to the Carter Presidential Center.

In May 1994, Abedi’s number two man at BCCI, Swaleh Naqvi, was extradited to the United States from Abu Dhabi. A month later, a court in Abu Dhabi convicted 12 BCCI officials in absentia. Naqvi was sentenced to 14 years in jail. Abedi, who by that time was bedridden in Pakistan, was sentenced to eight years.

With very little left to gain, Navqi pleaded guilty in America to conspiracy, wire fraud and racketeering charges. He was sentenced to 11 years in prison and ordered to pay $255 million. Pharaon's assets in the States, valued at more than $37 million, were frozen. Although the Pakistani government never formally replied to the US application for Abedi’s extradition, the chief minister of the Sindh province, where Abedi was living, repeatedly told journalists that he would never consider such a request. It became a mute point when Agha Hasan Abedi died in Karachi in August 1995. He was 73.

With as much as $9.5 billion believed to be missing worldwide from BCCI's books, seven times more than disappeared from the Banco Ambrosiano, it would be unfair to say that there was just one culprit. It took a lot of people a lot of time, and it took a lot of people to turn a blind eye, for that much money to disappear.

It's true that the CIA had amassed damning information about Abedi and BCCI that should have been passed along to other federal agencies, and wasn't. It's also true that various US law enforcement agencies made bad decisions which severely delayed any direct action against BCCI. But if only one damning finger is to be pointed, it must be at the Bank of England.

A House of Commons Treasury and Civil Service Select Committee felt that, as the supervisor of BCCI, the Bank had to accept responsibility for its failure. The committee believed that the Bank could have prevented the fiasco had it not been party to a tragedy of errors, misunderstandings and failures of communication. In his 1992 report to Parliament, Inquiry Into The Supervision Of the Bank of Credit And Commerce International, the Lord Justice Bingham wrote, "The Bank of England failed to discharge its supervisory duties in respect of BCCI."

By virtue of their mandate from Parliament, the Bank of England could have been expected to have taken appropriate action to straighten out inefficient or non-satisfactory practices. Where money laundering is concerned, the Bank of England must meet the same conditions as all other banks. It seems reasonable to conclude therefore, if the Governors knew that BCCI was laundering dirty money, then they were clearly delinquent and in violation of the law. If they didn't know, then they were incompetent because it was their obligation to know.

Yet, as if they were impervious to criticism, the Governors have arrogantly maintained that the Bank of England did nothing wrong. Facing a Select Committee of Parliament, the then Governor of the Bank of England, Robyn Leigh-Pemberton, made the astonishing statement, "If we closed down a bank every time we found an incidence of fraud, we would have rather fewer banks than we do at the moment."

One would have thought that was exactly what he was supposed to do.

In the end, BCCI unraveled, not because the Bank of England was doing its job, or even because Abedi had been so greedy for so long. It fell apart because Robert Morgenthau and John Moscow wouldn't be placated.

Since BCCI's closure on July 5, 1991, banking authorities around the world have tried to jam plastic wood into the holes that permitted such a thing to happen. There are those who believe that the full facts will never be known. The most interesting of blanks in the Bingham Report come in Appendix No. 8, headed: "The Intelligence Services."

The role of the intelligence services in the BCCI debacle will not be revealed in Britain for at least 30 years, if ever, although it should eventually come to light in the US thanks to the Freedom of Information Act. When it does, both the American and British intelligence services are expected to have a lot of questions to answer.

One of them is, why did the UK security services insist that the Bank of England delay closure of BCCI for perhaps as much as 15 months?

Another is, why did the Bank of England comply?

Both answers lie in the fact that BCCI had a working relationship with Saddam Hussein. The National Security Council used BCCI to launder funds for the Iran-Contra affair. The CIA maintained accounts with BCCI in order to wash money destined for Afghan rebels. The Defense Intelligence Agency also kept a slush fund with BCCI. One of Abedi's front men in the US was Kamal Adham, the former chief of Saudi intelligence, who was allowed to bargain a $105 million fine to avoid a jail sentence. Through him, it has been suggested, the British MI6 found BCCI to be a convenient channel as well. It is known that BCCI was involved in the transfer of North Korean Scud-B missiles to Syria. It is known that BCCI helped to broker and then to finance the sale of Chinese Silkworm missiles to Saudi Arabia. It is known that BCCI acted as middleman when the Saudis needed Israeli guidance systems for those missiles.

Whether or not the Bank of England was doing the bidding of the intelligence services, a) to protect an ongoing intelligence operation, b) to allow the intelligence services time to cover themselves, or c) both, people living in a democracy have an inalienable right to know what is being done in their name and why.

Appendix No. 8 is guaranteed to make interesting reading. But because the red faces that would result are certainly not confined to the Board of Governors at the Bank of England, the public may not be permitted to see it for a very long time. What's more, there's no reason to believe that the lessons of BCCI have been learned by any of the banking regulatory bodies around the world.

Although, there's little doubt that the lessons of BCCI have been learned by those bankers who are running more modest versions of BCCI.

*****

Chapter Five

FUNNY MONEY

"'Funny money' is a highly sophisticated, logically alternative economic system used by a long list of international criminals, tax evaders, drug traffickers, arms dealers, terrorists and governments. The difficulty is often to decide which is which."

--- Former British Fraud Squad detective, Rowan Bosworth-Davies

When he raped Kuwait in 1990, Saddam Hussein ordered his soldiers to commandeer whatever automobiles they could drive away. A few of the more expensive cars --- Rolls, Mercedes, Lamborghinis, Porches, BMWs and Ferraris --- were given to Ba'ath Party officials as a gift from Saddam, or appropriated for use by the government. When he visited Baghdad during the Gulf Crisis, former British prime minister Edward Heath was chauffeured about in a stolen Kuwaiti Mercedes.

However, 50 of the choicest cars, including an armor-plated Mercedes and an armor-plated BMW , were sent overseas. They were driven from Baghdad to Amman, then flown to Geneva by Royal Jordanian Airline cargo planes, under the protection accorded diplomatic shipments. Once in Switzerland, they were put on the market and, within hours of their arrival, turned into cash.

Months later, after their country was liberated, the Kuwaitis discovered what they'd always suspected, that the Iraqis had stormed across the border with shopping lists. Not only had they come looking for cars, but the invading army had pillaged with a very elaborate, predetermined agenda. They were under orders to plunder machinery, entire factories were emptied out, computers, construction cranes, plus parts and supplies from ports and airports. They were told to steal 200,000 books from the Central Library in Kuwait City, as well as books, furniture and even blackboards from schools. They had instructions to take hospital fixtures and furnishings and every piece of medical equipment they could find. They were directed to drive away with 3500 school buses and most of the nation's public transport system.

One obvious Iraqi target was Kuwait's central bank, where Saddam looted gold and currency. After the war, however, he was forced to repatriate all of that money because the exact amount of the bank's reserves was known. But the invading army also raided private homes and offices, tens of thousands of them, pilfering a fortune in cash and jewels, and none of that was ever returned. Some of the ransacked gold was melted down and sold by Saddam in the amenable markets of Yemen, the Sudan and Mauritania. Most of the jewels were broken up and sold in the souks. The cash is still being used to pay the hoards of smugglers from Iran and Turkey who have successfully broken the embargo ever since it was imposed.

Although incidental shipments of Iraqi oil continued to turn up in Turkey and Jordan, in direct violation of the boycott, the country's primary source of revenue was cut off. It's reckoned that, without his oil income, Saddam fed his people with those Kuwaiti assets, managing to launder enough money to keep the country alive. It is known, for instance, that in order to soak up whatever precious metals or stones appeared in Baghdad after the Gulf War, Saddam merely printed more banknotes. The inflationary effect on the economy was of little significance as far as he was concerned because he needed those Kuwaiti assets to survive the coalition embargo. Still, the money he stole from Kuwait turned out to be small potatoes compared with the money he systematically stole, and successfully laundered, from his own country.

In June 1972, Iraq nationalized its petroleum interests. Saddam, who was then Deputy President, convinced the ruling revolutionary council that the commissions they'd been paying to westerners under long-standing agreements should instead go to the Ba'ath Party. So he took a page out of the life of Calouste Sarkis Gulbenkian.

A Turk of Armenian descent, Gulbenkian was the founding power behind what came to be known as the Iraqi Petroleum Company. For his efforts, he laid claim to a royalty on every drop of its oil. His fee gave birth to his nickname, Mr. Five-Percent. When he died in Lisbon in 1955, the royalty was passed on to his son Nubar. Some 17 years later, Saddam confiscated Nubar's five percent in the name of the Ba'ath Party. Saddam personally assumed joint custody of the funds, sharing signature authority with Defense Minister Adnan Khairallah and Petroleum Minister Adnan Hamdani.

According to a document claiming to be a true accounting of those funds, $51 million was deposited in a major Swiss bank in Geneva in 1972. With interest, the balance in the account climbed to $92 million the following year and, as the price of oil quadrupled during the Yom Kippur War, to $327 million in 1974. By the time the Iran-Iraq war broke out, with Saddam firmly in control of the country, the account held in excess of $1.69 billion. Today, it is reliably believed that Saddam controls funds worth far in excess of $32 billion.

His power base was his grip on the nation's only political organization. He and the Iraqi Ba'ath Party were, for all intents and purposes, one and the same. Some of this money went to buying continued reverence. He paid handsomely for loyalty. And on those occasions when devotion proved less than unremitting, he stopped writing checks and had people killed. In 1979, he ordered the execution of his old friend, and co-signatory, Adnan Hamdani. Ten years later, his pal Adnan Khairallah died in a mysterious helicopter crash. The full extent of Saddam's early interests in Swiss banking went to the graves with them.

Some of the money was spent on whims and fancies. When the Empress Faradiba, wife of the late Shah of Iran, sold a few of her jewels, Saddam pulled $352 million out of Switzerland to buy them for his wife. Faradiba denied it, for obvious reasons, but two sources, both reliable and both independent of the other, confirmed the story.

For the most part, though, Saddam converted the five percent into a giant safety net for himself, his family and his closest Ba'ath Party associates. It was supposed to keep them in the game, no matter what cards Fate handed out. To protect his nest egg, he moved a lot of the money out of Geneva, washing it through a network of companies he set up around the world. One of them, Montana Management, a holding company registered in Panama, was controlled by Midco Financial, a Geneva shell. In 1981, Midco, through Montana, began buying into the French broadcasting and publishing conglomerate, Hachette SA. At one point, Saddam is said to have owned as much as 8.4 percent of Hachette's shares.

Another Saddam company was Al-Arabi Trading, headquartered in Baghdad, which purchased a large stake in the British-based Technology and Development Group. In 1987, TDG bought a precision engineering firm called Matrix-Churchill. A few years later, UK Customs and Excise became aware of the connection, took a closer look at Matrix-Churchill, moved in on them, and wound up confiscating parts of an alleged super-gun that was destined for Iraq.

The Americans also took a closer look at Saddam's dealings and by April 1991, the US Treasury's Office of Foreign Asset Control identified 52 businesses and 37 individuals with direct financial links to him and/or his Ba'ath Party. Of those 52 companies, 24 were in the UK, a number of them using the same address, 3 Mandeville Place in London's West End. Of the 37 named individuals, a dozen also had addresses in Britain.

American sources quickly determined that "Saddam International Inc" was run by his half-brother Barazan al-Takriti. Officially Iraq's special ambassador-at-large, he lived for years in Switzerland, always protected by diplomatic status, where he was known regularly to have received currency, gold and jewels by diplomatic pouch that he easily washed through Swiss banks. But his main contribution to Saddam's retirement fund was to have sought the best western legal advice that money could buy, and to have used that counsel to design a fabulously intricate laundromat. This was not about 52 companies and 37 people supplying Iraq with super-guns, this was about 500 shell companies and as many people who were paid handsomely to wash Saddam's money.

Intelligently and with enormous patience, Barazan spent two decades setting up a worldwide network of friendly businessmen, taking most of what's accumulated from the five percent royalty and bedding it down for safe keeping with them. There were some Iraqis in on this, but for the most part they were mainly Jordanians and Palestinians. The money was in their name, washed by Barazan via bank loans and investments, so that it showed up on the books of legitimate businesses in Spain, France, Brazil, Indonesia, Hong Kong, Britain and the US.

Ultimately, the funds were administered by Barazan and so skillfully disguised that none of the money could be traced back to Saddam Hussein or the Ba'ath Party. Those friendly businessmen know who owned the money and were constantly reminded what the penalty was should they ever think it belonged to them. Of course, that all changed the day Saddam was hung. So thanks entirely to Barazan and his network of docile custodians, when the western allies set out to seize Saddam's assets, the lion's share of them had long since been scrubbed clean.

*****

Perhaps Manuel Antonio Noriega should have taken lessons from Saddam Hussein.

In the early 1970s, as chief of Panama's military intelligence, Noriega discovered how to play both ends against the middle by turning himself into a CIA spy, a DEA informant, a staunch American ally, a Panamanian diplomat and an international drug trafficker. He also dabbled in gun running, supplying arms to leftist guerrillas in El Salvador and right-wing guerrillas in Nicaragua. In his spare time, he became commander of the Panamanian Defense Forces, which made him de facto ruler of the country.

Unlike Saddam, he wasn't clever enough to become a major league laundryman.

The heart of Panama's money laundering industry is the Colon Free Zone, a 500 acre site on the Atlantic end of the Panama Canal. Established in the 1950s, it is today the second-largest duty-free trading center in the world after Hong Kong. With minimal government regulation, hundreds of ships carrying tens of thousands of containers move in and out of the Free Zone daily, carrying everything imaginable, from Japanese electronic goods, Scotch whiskey and French perfumes to German precision widgets, American running shoes and Colombian cocaine.

Nearly $10 billion worth of duty-free goods are traded annually in the Free Zone. But that’s not counting narcotics: Such as 19 tons of cocaine stuffed inside containers of Brazilian tiles destined for Maryland; and 5.2 tons of cocaine shipped to Miami, packaged in the Free Zone as 318 cases of coffee.

For years, Celeste International operated in the Free Zone without anyone knowing that it was owned by the Cali cartel. In fact, the authorities only got wise to Celeste when they stumbled across a multi-ton shipment of cocaine sitting in a warehouse. Until then, Celeste had spent years issuing false invoices for consumer goods, against which it deposited tens of millions of drug dollars in Panamanian banks.

Unfortunately, for every company like Celeste that the authorities discover, there may be 10 or 20 or 50 they haven’t yet heard about.

Under the terms of a 1904 treaty with the United States, the dollar is legal tender in Panama. In compliance with that treaty, whenever there is a shortfall in the supply, the US Treasury ships dollars to the Panamanian National Bank, which acts exactly like a Federal Reserve for the local banking system. But it seems that cash transactions over the past few years in the Free Zone have been so enormous that the US Treasury Department has demanded a formal investigation.

In one instance, 12,000 US money orders had been sent in a container from New York to Panama. They were cashed by 13 companies, mainly jewelry stores set up for the sole purpose of laundering these money orders, then deposited in accounts held at the Hongkong Bank of Panama. Mostly in the $500-$700 range, to stay well under the US reporting limit, each canceled money order was stamped on the back with tiny seals used by the Colombian cocaine cartels to help compliant banks identify the correct account to which the deposit should be credited. Once deposited, the money was wired back to the States to an account at the Marine Midland Bank of New York, owned by the drug traffickers who originally bought the money orders.

Although the Justice Department seized $7.7 million in New York, it represented probably only about 10 percent of the money these particular traffickers had laundered over a two-year period. And when US agents handed their Panamanian counterparts detailed information on those 13 local money laundering enterprises, the Panamanians said thank you, but made no effort to do anything about them.

Panama has always been the perfect stage for someone like Noriega.

Born in 1934, he seized the reins of the government at the age of 39 and held on to them for five years. One of the traditional perks of high office in Panama is a cut of the various rackets that go on just beneath the surface of local officialdom, including regular handouts from all sorts of traffickers.

Noriega had personally been in touch with the Colombian cartels for several years. In the mid-1970s, he'd met and helped to protect Ramon Millan, a Miami accountant who shuffled money out of the States to Panama for drug baron Carlos Lehder Rivas. In 1979, along with Pablo Escobar and Jorge Ochoa, Lehder asked Millan to set up a deal with the Panamanian strong man, Omar Torrijos. Noriega, as Torrijos' henchman, was assigned by his boss to negotiate a standard protection racket contract, whereby the Panamanian government would safeguard Lehder's drug trafficking and money laundering in exchange for a slice of the action.

When Torrijos was killed in a July 1981 plane crash, command of the Guardia, the real power in Panama, passed first to Florencio Florez. He was betrayed and unseated by Ruben Paredes. And Paredes was, in turn, betrayed and unseated by Noriega. He renamed the Guardia, calling it the Panamanian Defense Forces, reassured his old pals at the CIA, who were reportedly paying him $200,000 a year, that he was still America's man, and picked up where Torrijos left off, banking Lehder's protection money. But then Noriega went Torrijos one better. He set up a series of well-hidden airstrips and allowed Lehder to transship cocaine bound for the US. Noriega reportedly charged the cartel $500,000 per flight, representing one percent of the cargo's wholesale value, and by the end of 1983 was said to be pulling down $10 million a month.

The DEA came to Noriega, concerned about drug trafficking and money laundering that might be coming through Panama. So Noriega handed them Ramon Millan. Thanks to evidence provided by Noriega, Millan was convicted by a US court and sentenced in 1983 to 43 years, and the DEA reckoned Noriega was their best friend.

He reinforced that notion two years later when he ordered the closure of the First Interamericas Bank. A few of his Colombian chums had been a little too obvious this time. It wasn't just that they were using the bank to wash dirty money, they owned it outright. The majority shareholder was Gilberto Rodriguez Orejuela, head of the Cali cartel. Also on the board were Orejuela's brother, Miguel Angel Rodriguez Orejuela, and Edgar Alberto Garcia Montilla, the cartel's main financial adviser and the brains behind their international money laundering activities.

Shutting down First Interamericas might have endeared Noriega to the DEA but it didn't do much for his relationship with the cartels. Insult was added to injury when Noriega ordered a raid on a drug lab he'd personally allowed the cartel to set up in Panama. The Colombians felt that for $10 million a month he might be a little more sensitive to their business needs. Their response was to order Noriega's murder. One source says they asked the Basque separatists to kill Noriega next time he came to Europe. And ETA was certainly in a position to do so. The claim is supported by the fact that Noriega never accepted Spanish asylum when it was offered, preferring to take his chances with the American courts.

The story goes that Mossad agents got wind of the contract, the Israeli secret service maintains an active interest in all terrorist groups around the world, and alerted Noriega. Knowing first hand that Colombian drug dealers have no sense of humor, the Panamanian turned to the one man who could have some influence over them, Fidel Castro. Noriega begged for help and the Cuban dictator intervened, negotiating a truce with the cartels.

Not that there was any love lost between the two men, but Noriega and Castro were also in business together and Castro felt it made good economic sense to keep his partner alive. With the US still enforcing an embargo on Cuban goods, Castro had been sending produce, mainly shrimp and lobster, to the Colon Free Zone where Noriega's people repackaged it as Panamanian produce and shipped it to the States. In return, Noriega paid Castro with embargoed US high-tech merchandise which Castro sold to the Russians.

In the beginning, Noriega used Panamanian banks to hide his money. When he hit the big time, he branched out and began laundering his money around the world. He used a large network of banks, among them BCCI, Banque National de Paris, First American and the Algemene Bank Nederland. In some cases, he kept accounts in his own name. But a number of his larger accounts were in the name of the Panamanian Defense Forces (PDF), with his signature being the only one that could authorize the use of funds. Records confiscated from BCCI show that Noriega had, at one time, as much as $50 million on deposit, much of it in a PDF account in London. BCCI not only hired Noriega's daughter to work in its Miami branch, it issued him and his family with Visa cards, against a PDF account, with which the Noriegas ran up monthly bills in excess of $25,000, shopping at Gucci in Paris, Bloomingdale's in New York and K-Mart in Miami.

With his share of the cartels' money, Noriega bought houses all over Panama, an apartment in Paris, a chateau outside Paris, a home in Spain, two houses in Israel and one in Japan. He also had places in the Dominican Republic and Venezuela. He invested in local cable TV companies, a newspaper, an explosives manufacturer and four retail stores in Panama City. He owned commercial real estate in Panama, Florida and New Orleans. And all this time the DEA thought of their pal "Tony" --- which is how he signed hundreds of photos of himself that wound up hanging proudly on office walls across Washington --- as a swell guy.

Noriega's troubles began in the mid-1980s. They stemmed from a routine investigation into a laundryman working out of a warehouse on the perimeter of Miami International Airport. DEA agents infiltrated the place and identified one man as Floyd Carlton Caceres, who turned out to be Noriega's personal pilot. When they arrested him, Caceres immediately asked if there was any way to make a deal.

Indicted by a pair of US grand juries in 1988 --- a lot of those autographed pictures were suddenly taken down --- Noriega was charged with drug trafficking, including conspiracy to smuggle cocaine and marijuana into the US, racketeering, and money laundering. As quickly as they could, the Americans froze $26 million of his assets, which was all they could find at the time, although they were required eventually to turn $2 million of that back to him so that he could pay for attorneys.

The evidence presented to the grand juries was largely circumstantial. A mountain of paperwork --- fuel receipts from private airplane rides, records from visits to hotels, sales slips from whatever he bought and phone logs of whatever calls he made --- none of it actually proved that Noriega was drug trafficking and money laundering. But it did help to substantiate the government's case for his double-dealing. It also backed up the testimony of a whole slew of less-than-respectable witnesses, convicted smugglers, drug dealers, laundrymen and other Noriega associates, who in exchange for lighter sentences, were willing to testify.

Obviously, Noriega wasn't in much of a hurry to answer those accusations, so in December 1989, George Bush sent an expeditionary force to Panama to kidnap him. When Noriega sought refuge in the Vatican Embassy, the Americans smoked him out with their secret weapon, non-stop, over-amplified rock 'n roll! The Army delivered him to Florida and into the hands of the Justice Department, which held him without possibility of bail, in a suite of cells, as Federal Prisoner # 41586. When his legal appeals ran out, he was put on trial. Convicted in 1992 on eight of the 11 counts lodged against him, Noriega was sentenced to 40 years in prison.

As one of Noriega's supporters said at the time, "This is no way to treat a friend."

It was then revealed that on December 14, 1978, DEA administrator Peter Bensinger wrote to Noriega to thank him for his "excellent efforts which have contributed substantially to the on going battle against drugs." Such praise was repeated six years later by DEA administrator Francis Mullen, Jr. who assured Noriega, "Your long-standing support of the Drug Enforcement Administration is greatly appreciated."

Two years after that, in May 1986, DEA administrator John Lawn echoed those sentiments. "I would like to take this opportunity to reiterate my deep appreciation for the vigorous anti-drug trafficking policy that you have adopted, which is reflected in the numerous expulsions from Panama of accused traffickers, the large seizures of cocaine and precursor chemicals that have occurred in Panama and the eradication of marijuana cultivations in Panamanian territory."

Ironically, Lawn added, "I look forward to the day when all governments develop the means to systematically identify and seize those illegal profits and drug trafficking starts becoming a self-defeating enterprise."

The following year Lawn heaped even more praise on Noriega, this time for his assistance with a multinational drug bust called Operation Pisces. "Many millions of dollars and many thousands of pounds of drugs have been taken from the drug traffickers and international money launderers. Your personal commitment to Operation Pisces and the competent, professional, and tireless efforts of other officials in the Republic of Panama were essential to the final positive outcome of this investigation. Drug traffickers around the world are now on notice that the proceeds and profits of their illegal ventures are not welcome in Panama."

Little did anyone at the DEA realize that Noriega was simply helping them eliminate the competition.

Besides taking out Noriega, the American invasion of Panama unearthed a huge cache of bank records, tapes and documents, five tons that helped make money laundering cases against a group of major players, plus 100 pounds of cocaine and $6 million in cash. However, it did not necessarily end the problem. Panama is still struggling to clean up its reputation as a major international cocaine market and sink.

In early 1992, two containers were confiscated in the Colon Free Zone when they were found to be holding $7 million in cash. No one ever claimed the money and some of it has since disappeared. At the end of that year, Panama's Attorney General, Rogelio Cruz, was charged with illegally releasing $37 million in previously frozen bank accounts that were believed to belong to the Colombian cartels. His Deputy Attorney General for Drug Prosecution, Ariel Alvarado, was also arrested. It's hardly a coincidence that Cruz once served on the board of First Interamericas Bank.

Very little seems to have changed since Noriega's ouster. The Colon Free Zone is alive and well and despite rhetoric aimed at pacifying Washington, every indication is that it's going to stay that way. The secret banks are wide open. Cash is the commodity of the day. And everyone agrees that asking too many questions is bad for business. It's a pipe dream to think that any Panamanian leader is going to risk 13,000 jobs and $10 billion worth of business by cooking up regulations that might make the place less attractive than it already is.

Just in case Washington hasn’t yet gotten the hint, in Panama City they restored one of Noriega's million dollar mansions and turned it into a tourist attraction.

*****

When Harry Truman signed the 1947 National Security Act, creating the Central Intelligence Agency, he seriously believed its mission was nothing more sinister than the collection and collation of foreign intelligence information. He seriously believed that it was strictly an "overt" operation.

His mistake was to staff it with highly motivated men, like Allen Dulles, who'd learned the old-fashioned spying trade during the war in the Office of Special Operations at the knees of the famous General William "Wild Bill" Donavan. To a man, they believed that "overt" was not the way this game should be played.

Right from the beginning, the Agency's more consequential role would be "covert." Officially included in that category have always been: subsidies to individuals; financial support and "technical assistance" to political parties; support of private organizations, which includes labor unions, business firms, cooperatives, and so forth; economic operations; and para-military or political actions designed either to overthrow or to support a regime.

Obviously, the CIA could never finance any of these things publicly. It was out of the question for the nation's primary espionage service to go to Congress begging for funds to kick the Mossadegh regime out of Iran. So they operated their own laundry.

Even today, the Director of Central Intelligence maintains a top-secret slush fund, a huge pile of invisible money for which he is accountable directly, and only, to the President. What's more, Dwight Eisenhower created, and every President since has followed suit, a top-secret group to advise the CIA on the best use of those funds and, when necessary, to procure additional monies for specific covert operations. In Ike's day, the group was called the 5412 Committee, named for the National Security Council paper that authorized it. It was then, and remains today, the most secret organization in the United States of America.

A sub-cabinet level organization, it's charged with reviewing and approving all of the nation's clandestine operations in order to protect the President from any clandestine operation gone wrong. Considered so ultra-sensitive that not even the National Security Council is kept informed of its activities, those few men who know about it refer to it simply as "The Special Group."

For whatever reason, various administrations have changed the name from 5412 to such obscurely derived numbers as "The 303" and "The 40 Committee." But the concept behind it remains the same: that it must be the Special Group, and not the President, who officially approves certain plans, such as illegal interventions into the internal affairs of another sovereign state. Traditionally, the cabal consists of a chairman, most often the President's National Security Advisor, the Secretaries of State and Defense and the CIA chief. For obvious reasons, the President is not a member.

There's no denying that the buck stops at the Oval Office and it is ultimately the President who must authorize such projects, but his approval of a Special Group proposal is only given verbally. The members of the group work it out among themselves, then brief the President. Nothing is written down with his name on it. Nothing is ever signed by him. That way, should something go wrong, the CIA can rightfully claim they acted on the authority of the Special Group, which means the President can ostensibly deny that he has ever approved of such an activity.

It was the 5412 Committee that approved the CIA's building of and subsequent use of the U-2 spy plane, which Allen Dulles and his assistant Richard Bissell financed entirely out of the director's slush fund. If, as it has been alleged, the CIA murdered Salvador Allende in Chile in 1973, it would have been Richard Nixon's Special Group discussing that. And if, as has often been suggested, Ronald Reagan knew anything at all about Iran-Contra affair, that would have been down to his administration's equivalent of the 5412 Committee.

Iran-Contra is, in fact, a perfect example of what the committee is supposed to do. If you accept the premise that William Casey, as Director of Central Intelligence, committed the CIA to engage in the illegal activities for which Oliver North was tried, then the plan would almost certainly have been brought up in a Special Group meeting. The Secretaries of State and Defense would have known about it, agreed to it, and presented it for final approval to the President. But because nothing is written down and therefore nothing can ever be traced back to the President, Ronald Reagan's denial of any knowledge of the affair is an impenetrable defense.

During those years, Reagan's Special Group empowered the CIA to funnel money to right-wing forces that were trying to overthrow the leftist government of Mauritius, to spend millions trying to destabilize Colonel Qadhafi's regime in Libya and to bankroll the Afghan rebels with hundreds of millions of dollars. White House and CIA records now suggest that in the first six years of his administration, Reagan knew of and/or approved of at least 60 money laundering plots to finance CIA covert activities.

One of the greatest CIA-financed covert operations came out of John Kennedy's Special Group. It was Operation Mongoose, a White House sanctioned plot to assassinate Fidel Castro.

After the Bay of Pigs invasion failed, Bobby Kennedy, who was then the Attorney General, convinced his brother that getting rid of Castro had to be a priority of the administration. The President turned to the CIA. They were already manning a huge command post on the campus of the University of Miami. Code-named JM/WAVE, operatives there directed the activities of a reported 3000 Cuban agents whom they'd set up in false businesses, known in the vernacular as cut-outs. The CIA not only paid the bills for these business, but washed money through them to pay for all sorts of covert activities. They poisoned the cargo of a Russian ship that had docked in Puerto Rico, counterfeited Cuban money, broadcast propaganda to the island, and regularly financed anti-Castro guerrilla warfare. They paid for planes, speedboats and arms.

One CIA operator found that he could make more money running an Agency cut-out than he could by staying on the payroll. According to the rules, he was required to turn over the extra money to the government. So he simply resigned from the CIA, kept the business and kept the profits. The CIA never said a word because they couldn't admit they'd owned the business in the first place.

They have, however, admitted to eight different plots to murder Castro. In an early attempt, they shipped poison pills to Cuba, but the operative in Havana failed to get anywhere near his target. In another, several devices were sent to a Cuban dissident in Havana who was believed to have access to Castro. Included in this box of toys were: a poison pen, pills, bacterial powders, an exploding cigar and a cigar deeply impregnated with bolulinium toxin, a poison so potent that it would kill Castro the moment he put the cigar to his lips. This too failed. In a third plot, organized crime was recruited and professional hitmen were dispatched.

The roots of that cabal were planted in the summer of 1960, under Eisenhower, when ex-FBI agent Robert Maheu was instructed by Richard Bissell to find some men who might be willing to do the CIA's bidding. First to sign up was Johnny Rosselli, a Las Vegas gangster who'd previously been connected to gambling interests in Havana. Next was the man who ran the mob in Chicago, a fellow who called himself Sam Gold but whose real name was Momo Salvatore Giancana. Then there was the ex-pat, Cuban Mafia don living in Miami, known as Joe to his friends and Santos Trafficante to everyone else. Together, they located a Cuban who worked at a restaurant frequented by Castro and convinced him to drop pills into Castro's food. They even supplied the pills. But by the early spring 1961, when the plan was scheduled to come to fruition, it seems that Castro had changed restaurants.

A year later, post Bay of Pigs, the poison pill plan was resurrected. With Kennedy in the White House, the gangsters were asked to try again. This time they retained a Cuban who was willing to carry out the murder but, as payment, demanded a small cache of weapons and communications equipment. The Mafia trio turned to Bissell and the CIA agreed to fund the operation through their cut-outs in Miami. The assassin failed, but by then the CIA's front companies had already financed the purchase of explosives, boat radar, radios and handguns, and shipped them off to Cuba. Years later, it would be revealed that some of the people who dealt with the CIA at JM/WAVE, or who were involved with the washing of funds through cut-outs for Operation Mongoose, also had links to the assassination of John Kennedy in Dallas in 1963. Circumstantially related or otherwise, included in that bunch are Lee Harvey Oswald, Jack Ruby, the Mayor of Dallas --- who mysteriously changed the parade route at the very last minute so that it would pass directly in front of the Texas School Book Depository --- Sam Giancana and Santos Trafficante.

Conspiracy theories being what they are, it should be noted that the five guys who broke into the Watergate building to do Richard Nixon's bidding in 1972 also had direct links to Operation Mongoose. No conclusions here, just food for thought!

The point is, that with the tacit approval of the White House, the CIA might well be the greatest laundrymen of all time. In the name of national security, they continue to run more businesses than most Fortune 500 conglomerates. None of these cut-outs are in any obvious way associated with the US government. Often staffed by retired military officers and former CIA operatives, they tend to employ Cuban exiles, Vietnam veterans, Israeli agents, soldiers of fortune, Middle Eastern businessmen and, on some occasions, international drug traffickers. Services on offer can be anything from air cargo to money laundering. At least 30 cut-outs were created just to back up Iran-Contra.

Under the auspices of George Bush's presidency, the CIA went into the coke smuggling business. Using a cut-out in Venezuela, in 1990, the Agency adroitly smuggled a ton of pure cocaine into the United States. It was supposed to help snare traffickers. Instead, it wound up being sold on the streets. It came to light only three years later, thanks to the investigative skills of the CBS television program "60 Minutes," which later revealed that when that CIA cut-out tried to work its routine as a joint venture with the Drug Enforcement Administration, the DEA refused to take part. They argued that the plan was unworkable. The CIA eventually admitted it was "most regrettable."

The classic CIA cut-out was Air America. Based in Southeast Asia throughout the Vietnam War, the airline was hardly what might be considered a thriving masquerade, in that every peasant in every rice paddy from Saigon to Hanoi knew that Air America was the CIA. In other instances, despite a natural tendency towards clumsiness, they have shown a touch of subtlety.

In 1973, two young men went into the banking business. One was Michael Hand, a 31-year-old former CIA operative from the Bronx. The other was Frank Nugan, 30-year-old Australian playboy and heir to a fruit-processing fortune that had been built on Mafia connections. The Nugan Hand Bank was headquartered in Sydney and survived seven years.

It collapsed when Frank Nugan was found sitting in his Mercedes with a rifle in one hand, a bible in the other and a hole through his head. Stuck into the pages of the bible was a list of names, including Bob Wilson, then the ranking Republican on the House Armed Services Committee, and William E. Colby, former director of the CIA. Also on the list were the names of known international drug dealers, plus personalities from politics, business, sports, films and television. Next to those names were five- and six-figure dollar amounts. Shortly after Nugan's body was found, Michael Hand made a hasty exit from Australia and supposedly hasn't been seen since.

A precursor of BCCI, Nugan and Hand were running a con game, bilking investors, cutting themselves in on arms' dealing, handling drug deals and laundering cash. Oddly, the bank's president was retired US Rear Admiral Earl Yates, who'd once been in charge of the Navy's strategic planning; Colby was its legal counsel; Walter McDonald, a former deputy director of the CIA, was a consultant; Richard Secord, of Iran-Contra fame, had a business connection with the bank; while one of the banks in-house commodity traders was also one of Australia's major heroin importers.

In February 1977, Nugan Hand opened a branch in the unlikely outpost of Chiang Mai, Thailand. Unlikely, that is, until you know that's where most of the opium produced in the Golden Triangle gets turned into money. The bank's office was next door, apparently with connecting doors, to offices used by the US Drug Enforcement Administration.

The US Senate investigated the Nugan Hand bank and its connections with the CIA, heard sworn testimony from the agency behind closed doors, then promptly locked that testimony away.

It's a typical pattern. In 1980, a company called Associated Traders Corporation went into business in Baltimore, Maryland. At first sight, ATC appeared to be involved with import or export or general trading, something vague like that. At least they must have had some international connections because from 1980 to 1985 they deposited millions of dollars in an account at the First National Bank of Maryland, then wired the money on to other companies in the Cayman Islands and Panama. Compounding the vagaries of their business dealings, every now and then ATC asked their Maryland bankers if they wouldn't mind making certain that the name ATC was removed from, and could therefore never be associated with, these transfers.

Over those five years, ATC laundered at least $20 million through First National. In one particular deal, $5.2 million was wired to Associated Traders Grand Cayman, moved from there to a dummy company account in Panama and then transferred on to Switzerland. In another, $2.25 million followed the usual route through Grand Cayman and Panama, before making its way to India where it financed the purchase of 60,000 Enfield rifles for the Mujaheddin rebels in Afghanistan.

By 1986, ATC had folded its tent and gone out of business. It was no coincidence that ATC's demise corresponded with the unraveling of Iran-Contra.

None of this would have come to light had a young banker at First National not discovered who his client was, stressed-out on the thought that he might be breaking the law, suffered a nervous breakdown and then sued both the bank and the CIA for putting him under enough pressure to endanger his health.

But then, this is nothing new.

Towards the late 1970s, the Junta ruling Argentina decided to help General Luis Garcia Meza Tejada, a known cohort of South American drug traffickers, to launch a coup to take over the Bolivia. To help finance it, the Argentine intelligence service planned to open a laundromat in Florida. To help them do that, they approached their contacts in the CIA. In fact, two businesses were opened in Miami. One was called Argenshow, which was supposed to be a booking agency to bring music groups to Argentina. The second was a pawnshop called The Silver Dollar. Deliberately opened next to a gun shop, perhaps hoping to pick up some business in illegal weapons, it was to be the operations center for Argentinean intelligence activities throughout Latin America.

Serving US interests, the CIA believed it was safer to have Argentinean military advisers in El Salvador, Costa Rica and Honduras than Americans stationed there. So, Argenshow and the Silver Dollar arranged weapons shipments to Central America, laundering the necessary funds from Switzerland, the Bahamas, the Cayman Islands and Liechtenstein, through Panama, to wherever they were needed in Central America. In just 18 months, one shell company in the Bahamas facilitated the transfer of $30 million for the pawnshop.

To fulfill its original mission, Argenshow and the Silver Dollar handled a multi-million dollar deal between the Junta generals and Roberto Suarez Levy, a prominent Bolivian drug dealer. Funds from the drug dealer were washed through Florida. In exchange, Argentina shipped ambulances to Bolivia, every one of them loaded with weapons to overthrow a center-left coalition and restore the military to power in what came to be known as "the cocaine coup." Later that same year, it was Argenshow that first recruited the Nicaraguan Contras to attack a short-wave radio station in Costa Rica. It's not clear whether that contact was made through an already established CIA channel, or whether that contact became the original CIA channel, but it turned out to be at the heart of Iran-Contra. A few months later, Argenshow was dissolved, the silver Dollar was sold and the CIA moved on to the next gig.

*****

Chapter Six

THE PROFESSIONALS

"There's no such thing as good money or bad money. There's just money."

--- Charlie "Lucky" Luciano

Enhanced compliance with reporting requirements has not solved the problem. Instead, it has made the laundryman’s cost of washing money that much more expensive and, in turn, displaced the problem.

Laundrymen have been forced to seek "user-friendly" nations where there are no currency controls, where banking secrecy is assured, where no one cares who deposits what. It's true that there are international agreements which are supposed to enhance collaboration among law enforcement agencies and thwart this kind of cross-border ablution. But, compared with the extent of smuggling that goes on, the amount of cooperation is negligible. It seems that where crime is concerned, especially money laundering, jurisdiction all too often ends at the airport.

Most borders are sufficiently porous that even where they are heavily patrolled, the amount of contraband getting stopped represents only a tiny percentage of the contraband coming through. What’s more, many borders are single-sided, in that goods are checked at the point of entry and not at the point of departure. Theoretically, it is easier to get cash out of the US than to get drugs in, and literally billions of dollars are leaving the country every year, according to the Senate Permanent Subcommittee on Investigations. However, $1 million in $20 bills weighs 15 times as much as the cocaine it buys, so the laundryman has a bulk problem that the drug trafficker doesn’t.

The US Post Office used to be the preferred choice of courier for sending dirty money out of the country, mainly because it’s so secure. Commercial services such as Fedex and DHL have, unknowingly, taken some of the business away from Uncle Sam. But as inspectors have learned what to watch for, seizures have risen. In response, the laundrymen have diversified, hiding cash inside cars, furniture, tires and television sets which they ship out of the country labeled as gifts or commercially. One group working in LA had a thriving venture in export fridges to Colombia until the Feds got wise to them. Another in New York was in the sealed metal container trade, until US Customs at Kennedy Airport opened some of their sealed metal containers and discovered $6.5 million.

Lifting another page out of the drug traffickers book, many laundrymen reverted to basics and continue to smuggle money out of the country with mules. They hire people to stuff cash in their underwear, suitcases, socks and pockets, or to tape it around their bodies. Increasingly, condoms are filled with cash and then ingested. A relatively new phenomenon, the first reported case of "cash swallowing" was in 1991. Working on a tip-off, Customs agents at Kennedy stopped a woman from Ghana boarding a flight to Europe. They asked how much money she was carrying. She told them $9000. A search of her luggage uncovered $24,000 stuffed in clothes and several bottles of shampoo packed with wads of $100 bills. A medical search then revealed that she’d hidden six more vaginally and had swallowed a dozen condoms with money rolled inside. The total haul was $55,000.

As the authorities shut one door, the laundrymen open two more.

The so-called "South African Method" is a brazen approach concocted by a Johannesburg businessman who beat currency export controls by faking a badly sprained ankle. Booked on a flight to London, he asked the airline to supply a wheelchair to help him get to the gate because he had a cast on his leg. Departure scrutiny in those days was very strict and on the day of his flight, an anonymous call came into South African Customs that a man with a cast on his leg was using it to smuggle a large sum of money out of the country.

When he wheeled up to the Customs and Immigration checkpoint, he was stopped. Officers opened his luggage, went through it, found nothing, then announced they wanted to search him. He refused. They insisted. He demanded that he be permitted to ring his solicitor. Senior officials were summoned and the argument continued long past the point where the plane was scheduled to leave. By the time his lawyer arrived, the flight had taken-off without him. Now the man threatened to sue. His lawyer managed to calm him down and explain that the officers were well within their right. Protesting to the very end, the fellow had no choice but to sit there while his cast was sawn off.

It was empty.

Now he raised hell. He started ringing everyone he knew in government. Red-faced apologies, though plentiful, were inadequate. The man ordered his solicitor to file law suits against the government and the airline for allowing this to happen. He said he not only wanted retribution, he wanted blood. He caused such a rumpus that the following day, with a new cast plastered over his ankle, cash packed firmly inside, Customs and Immigration officials personally helped him onto the plane.

A less nerve-racking method is the identical suitcases trick. More difficult to do these days than it used to be --- for security reasons, airlines demand that every suitcase be accountable to a passenger on board --- it is nevertheless, still manageable.

One suitcase is packed with clothes, the other is packed with money. The trick is getting the second suitcase onto the plane without it being linked in any way to the laundryman. At his destination, the laundryman then retrieves the suitcase with the money and takes that one through Customs. If he's stopped and the suitcase is opened, he says with appropriate shock, this isn’t mine. He returns to the luggage racks to show the officers the identical suitcase, properly registered to him, with his clothes and identification inside. The money is abandoned, written off as the cost of doing business.

Professional smugglers who service the laundry trade may be a rare breed but they are hardly an endangered species. Their numbers are growing because the work is so handsomely rewarded.

Call this man Pancho.

A medium sized man with delicate features and thick glasses which give him an innocuous look, his biggest single coup to date was making $18 million in small bills disappear for a New York drug dealer. Working on a fee of 10 percent plus expenses, Pancho began by getting the cash out of the US and into Canada. That proved no more difficult than driving it to Montreal himself, with a woman and two kids in the car, making the border crossing look like a mundane family outing.

Next, he sent runners to airports, railroad stations, post offices and crowded banks where they posed as tourists, converting $10, $20 and $50 American bills into $100 Canadian bills and US dollar travelers’ checks. Because of the sum involved, reducing the bulk of the cash took nearly one month.

From Montreal, he dispatched mules to London. Well-dressed men traveling alone and well-dressed couples carried cash in attaché cases and stuffed the overflow into their pockets. Arriving at Heathrow, they walked innocuously through the "Nothing to Declare" channel along with thousands of other ordinary businessmen and tourists.

Much of what Customs does relies on "profiling," the officer's ability to spot certain characteristics common to smugglers. Sometimes criticized today as "politically incorrect" because there are racial overtones, it was a method perfected many years ago by US Customs, when someone high up in the bureaucratic maze wondered what would happen if he fed into a computer all sorts of seemingly unrelated facts about people who'd been apprehended bringing illicit goods into the country. The result was a list of several dozen shared traits, the profile of a smuggler, which is these days deeply embedded into the psyche of customs inspectors. Hardly mysterious, it's mostly common sense.

For example, an extremely well-dressed elderly woman traveling alone with nothing to declare will almost always get stopped and searched because profiling says she's the sort of person who has probably bought something expensive. An equally well-dressed couple in their mid-30s who hand the inspector a written declaration will almost always be waved through because profiling says they're probably too scared to cheat. A man who is obviously traveling on business, using a Business Class ticket paid for by his company, wearing a rumpled suit with only carry-on luggage and an especially jet-lagged expression will have less trouble strolling through Customs than a neatly dressed, First Class flying, one-eyed, 300lb Pakistani man with an Italian passport on a flight from Colombia, carrying a blond-haired, blue-eyed, two year old baby girl.

Pancho understood that unless he made a serious error of judgment in the couriers he used, or unless customs was tipped off, or unless an officer somehow recognized the same courier coming in every third day, the odds were weighted in his favor. As long as he never gave Customs a reason to suspect something, it was unlikely they would ever get their hands on this money.

From Britain the cash was sent to the Channel Islands where it was deposited, by pre-arrangement with a friendly banker, into 14 different accounts. No sooner was it bedded down there, than it was wired out. Some of it is known to have headed for Luxembourg. The rest evaporated into thin air.

In order to increase their gain, some professionals are willing to increase their risk by combining money laundering with drug smuggling.

John is in his late 20s, tall with an athletic build and a very particular philosophy of life. He says, if you’re going to do it, do it once but do it right so that you make enough to absolutely change your life, so that you never have to do it again, then get out and stay out.

He decided to change his life in Gibraltar. Because "The Rock" is over-populated with company formation agents who never ask questions, John had no trouble establishing himself there with a £100 import-export company. Using cash he’d collected from tobacco smuggling to the Spanish mainland, his company bought hi-fis, VCRs, CD players, televisions, portable telephones, answering machines, fax machines and camcorders. He obtained the necessary export licenses and shipped the inventory across the Strait of Gibraltar to Tangiers. After declaring everything at Customs and paying Moroccan import duties, he sold it. With that money he bought cannabis which he smuggled by fast boat into Spain. Selling his dope there, he deposited cash back in Gibraltar, authenticating the source of it with his export license and Moroccan import receipts. Then he closed his business, took his money, moved away and, at least so far, has never been back.

The trickiest part of the equation is dealing drugs. However, triangular trade in the region has gone on for centuries, making the Strait of Gibraltar one of the most congested smuggling routes on the planet. Little has changed since the days of the Barbary Coast pirates, except the value of the cargoes and the sophistication of the smugglers. In early 1993, for example, two rings working out of the Spanish North African enclave of Cueta were known to have ferried 100 tons of Moroccan hashish across the Strait hidden in trucks carrying fresh flowers. They’d washed their profits, $220 million worth, through seven different banks in Cueta, Morocco, Spain and Gibraltar.

So John knew what he was doing when he put his chips on this roll of the dice. After all, Morocco is Europe’s principal exporter of marijuana and hashish; because of its historical, cultural and linguistic ties to Central and South America, Spain is Europe's premier port of entry for the Latin drug trade and has a highly developed trafficking infrastructure; and Gibraltar is the region’s most suitable sink.

Despite Spain’s occasional draconian border checks and British threats to impose direct rule if sufficient action is not taken by the Gibraltarians themselves, the Rock remains fertile territory. It’s true that, reacting to London’s caveat in June 1995, Gibraltar's customs police intercepted 42 smuggling crews and confiscated 63 vessels. But Spanish officials say that at least 100 new Gibraltar-registered fast launches have taken up the slack. It’s also true that Gibraltar has had laws against money laundering on its books since 1988. But it wasn’t until late 1995 that anyone was ever prosecuted there for it.

Admittedly, Pancho and John are the exceptions. The difference between them and the amateur smuggler-laundryman is that they approached it like professionals, having worked out ways to minimize risk and maximize gain. Amateurs learn on the job and hope to get lucky, which can make for a very expensive education.

A fellow with a pilot’s license in Ft. Lauderdale, Florida decided there was no trick to moonlighting as a flying laundryman so he found some people who were looking to get cash out of the country, stuffed his plane with their money and flew it south. Before long, he had more clients than he could handle, so he upgraded to a Learjet.

Obviously, there are plenty of people in the States who fly privately, but when you regularly file a flight plan in Ft. Lauderdale that says you're going to the Bahamas and air traffic control regularly tracks you to Panama, it shouldn't come as a surprise when someone starts wondering what you’re up to.

The usual ruse is to file point-to-point. You go from Ft. Lauderdale to Nassau. In Nassau you file to Caracas. When you land in Venezuela, you file to Costa Rica. From there, if you want to go to Panama, it's a good bet that the American authorities have long since lost track of you. But the fellow from Ft. Lauderdale hadn’t worked that out and one morning, just before he left on a run, the DEA came to call. Inside his plane they found $5.5 million in cash. At his home, they discovered nearly $20 million worth of drugs and a small cache of weapons, including a submachine gun. They not only arrested him, they confiscated his new toy.

*****

It's well known that the airlines cooperate with law enforcement agencies. Air crews arriving in Miami on flights from drug-related destinations such as Colombia, Peru, Ecuador and Venezuela, are offered cash rewards by US Customs for pointing out passengers who did not eat or drink anything during the flight. It’s gets back to profiling. Most people eat something on a four hour flight, unless there’s a particular reason not to, such as a stomach laden with drug-filled condoms.

Less publicized is that the airlines themselves are encouraged to look out for and report frequent flyers making unusual journeys. Someone departing from Chicago, going to the Bahamas, on to the Caymans, then to Cali, back to the Bahamas and into Miami every week is bound to attract attention.

To get around ambitious airline employees, some laundrymen have friendly travel agents who ticket them on circuitous routes. Smarter laundrymen own travel agencies, pay for tickets with cash and write their own tickets to suit their own circumstances. There's never any need to arrive in Miami on a flight from Cali. He can issue himself a ticket in one name from Bogota to Rio, in another name from Rio to Paris, in a third name from Paris to London and in his own name from London to New York. That way, he is not only impossible to track, he also avoids entry into the United States from someplace suspect.

Travel agencies come with the added benefit of being an ideal sink. Cash can simply be funneled into the agency. Cash can be substituted for legitimate payments meaning that the client’s check can be deposited off-shore. And cash can pay for blank tickets, which are negotiable outside the country. The Orozco brothers, of Deak-Perera fame, proved the point by purchasing the Calypso Travel in New York. They opened an account at Chase Manhattan after the bank agreed to put the agency on its exemption list for reporting. At least three cash deposits were made before Chase withdrew the exemption, not because the Orozcos were money launderers, but because the bank had changed their own administrative procedures.

*****

A professional group operating out of Marseilles found they could wash funds through plastic surgery clinics, where wealthy French and Italians paid to have their bodies adjusted. It was no problem for the laundrymen to find physicians happy to up their turnover with cash from drug sales.

Another gang, this one working in Paris, laundered money through the European thoroughbred market. They registered race horses with the various Jockey Clubs and hired professionals to help them put their horses up for sale. Other gang members bought the horses back. The nags' names were changed after each transaction and fed through the system again. When suspicious authorities asked to inspect the thoroughbreds, they were told the poor things had tragically died.

Actually, the racing industry is a favorite with professional laundrymen. They hang out at small tracks, where it’s easy to make contacts with jockeys, drivers and trainers, and pay cash for tips. It’s known as "The Sydney Method," having been made famous by an Australian drug dealer who legitimized hundreds of thousands of dollars that way. He’d bribe an insider up to $5000, bet his cash on the winning horse and use the betting receipt to corroborate his cash deposits.

Over the past ten years, as legislation aimed at stopping the laundrymen has become more sophisticated, a new breed of laundrymen has come into the business. Respectable white collar professionals who are intellectually equipped to manipulate complex laundering schemes have been enticed with commissions ranging from 5-25 percent. Particularly where drugs are involved, the guys moving the narcotics no longer have to worry about moving the money and the guys moving the money never have to touch the drugs.

For many, it turns out to be a hugely lucrative sideline. A politician from Georgia found money laundering an easy way to finance an $850,000 mortgage; a California businessman got involved because washing $1.1 million through his company's account required very little effort and the $77,000 he was paid for the use of the account was too much to pass up; while Richard Silberman, a fund-raiser for Jerry Brown's 1980 presidential bid, admitted to an undercover FBI agent that he'd been making fast money as a laundryman for 20 years.

In New York, Eddie Antar, owner of the now bankrupt Crazy Eddie discount electronics chain, got into money laundering because it was a expeditious way of boosting his share price. Over a period of several years he siphoned cash from his business, carted it away in shopping bags and deposited it in a secret account in Israel. From there, the money was washed through a Panamanian bank before coming back to the Crazy Eddie stores in the form of checks payable to the company. Increased sales artificially inflated the company's profits. When his share prices peaked, he sold and pocketed $74 million.

Fast money was also undoubtedly the motivation for car salesmen in the Washington DC area who were willing to take cash from self-proclaimed drug traffickers. And sending out a message to car salesmen across the country was what the government had in mind when Larry Best and Tyrone Evans, a pair of DC cops, went undercover.

Cars are a favorite with laundrymen because they’re easily resold in South America. The streets of Bogota, for example, are flooded with newly imported BMWs, Mercedes and Toyota Land Cruisers which are so popular among traffickers that the Colombian police call them Narcotoys. There is also a gigantic market in Harley-Davidson motorcycles.

So in the spring of 1991, Best and Evans walked into Rosenthal Nissan-Mazda in Vienna Virginia and paid cash for a Nissan Maxima. A CTR was filed for $23,560, listing the buyer with the fictitious name Jerry Johnson. A few weeks later, they were back with $46,600 in cash, this time to buy an Infiniti Q45. The CTR listed the buyer under the fictitious name of Raymond Steven Smith. Next came $42,190 for a Nissan 300ZX sold to a fictitious William Thomas Jones, then $53,000 for a Jaguar Sovereign sold again to Jerry Johnson.

It went on like that, at several dealerships, for two years. During that time, the undercover cops testified, they regularly explained the source of their cash to be drug money and made it perfectly clear to everyone they were dealing with that they could never be associated with any of these cash payments, that false names had to be used. In all, they bought or contracted to buy 85 cars for cash, which lead to five convictions for money laundering offenses. The government then saw to it that the case was publicized in the trade press, so that auto dealers would now have to consider that any customer coming in with cash might be an undercover cop.

A few million dollars might have been enough to tempt some car dealers, but the amount pales by comparison with the sums that actually went through the books of a gold and coin trader in Cranston, Rhode Island. 34-year-old Stephen Anthony Saccoccia, his wife Donna, plus seven of employees of Trend Precious Metals and Saccoccia Coin were arrested on 100 counts of money laundering, with several million dollars contained in each count.

Saccoccia had opened a shop after leaving high school in 1973, building his business by fencing gold and coins for his teenaged friends who were stealing it from their parents. In 1985, he pleaded guilty to a federal charge of tax evasion. Following his release from prison in 1988, he began laundering money for a local Mafia family. But it wasn't until a few years later that he opened a sink to service the rival Medellin and Cali cartels, supposedly becoming the first and only laundryman ever to do business with both of them at the same time.

Drug money was collected at dummy jewelry shops in New York and Los Angeles, bundled as gold shipments and crated to Saccoccia's offices in Rhode Island, New York and California. He converted the cash to cashier's checks which he deposited in various company accounts. Using falsified invoices and sales receipts to explain the sudden increase in turnover, the funds were then wired out of the country, through phantom companies, to Colombia.

Saccoccia worked on a flat 10 percent commission. And whereas one report noted that in under 15 months he and his employees washed $200 million for the cartels, federal authorities claim that the total was closer to $750 million. In May 1993 he was convicted on 54 counts of money laundering and conspiracy, fined $15.8 million, subjected to a confiscation order for $136.3 million and sentenced to serve 660 years in prison.

It now turns out that Robert Maxwell also did his share of money laundering. Not that such a claim would necessarily come as a surprise to anyone who knew the flamboyant Czech born, British businessman. But it seems he did his money laundering in the States, which many Brits fund highly amusing.

Maxwell bought the New York Daily News in March 1991, nine months before he fell or was pushed off the stern of his yacht. Within a few days of his death, the paper filed for bankruptcy. Accountants trying to figure out his bookkeeping, discovered that he’d siphoned company money and pension funds from Maxwell Group Newspapers PLC in London and sent it to the Daily News, depositing as much as $238 million in accounts controlled by the parent company, Maxwell Newspapers. But the money didn’t stay in New York for very long. It was wired to any of several hundred other Maxwell-controlled companies, most of them designed to be inaccessible to anyone except Maxwell himself.

In one case, the money was used to secure a $78 million loan for the Daily News from Bankers Trusts, but only $8.45 million ever showed up on the newspapers books. In another, he borrowed $86 million from Bankers Trust for Maxwell Group Newspaper which made its way through several different accounts before coming out of the Daily News to repay a different loan to Bankers Trust.

With the Daily News on the verge of bankruptcy in October 1991, and one his newsprint suppliers refusing to deliver unless he was paid cash, Maxwell spun $113 million through the Maxwell Newspapers account, left it there for four days so that he could borrow enough against it to pay the supplier, then wired the money out, leaving the newspaper with $376,000 less than it had before he brought the laundered money in.

Undoubtedly, Maxwell ran an audacious scam. But the prize for irrefutable moxie must go to the money laundering Rabbi.

Abraham Low, an ultra-orthodox Los Angeles clergyman, was arrested by the FBI in early 1993 when they uncovered a $2 million laundry operation that was soon dubbed, "the holy network." Taken into custody along with a Hollywood physician named Alan Weston and Bernadette Chandler, a woman known to the FBI simply as Charlie, his synagogue was having financial difficulties. Realizing that his congregation stood to lose $18 million in bad investments overseen by Low, he claimed all he was trying to do was keep the synagogue solvent.

The FBI had already stumbled onto Low during an investigation into a stolen check racket. In September 1991, his wife went into a bank and turned a single $500,000 cashier's check into four smaller checks. When the bank discovered that the original check was stolen and forged, they called the police. Agents learned that Low had been combining cashier's checks pilfered from a bank in West Los Angeles with phony loan papers to show a legitimate source for the funds. Using bank accounts held by various charitable organizations, hence the "holy network" tag, he was laundering large cash deposits. Chandler came into the picture when Low purchased a stolen $500,000 check and two diamond rings from her for $30,000. After Chandler set up a $1.5 million money laundering deal with an undercover agent, Low and Weston bragged that they could provide the same service. A special agent, pretending to be a loan-sharking drug dealer named Ronnie, was introduced to them by an FBI informant. Low and Weston offered Ronnie use of their sink, assuring him that they were prepared to handle substantial amounts on a weekly basis. Low even outlined the system, explaining that money delivered to trusted members of his congregation, in this case diamond dealers, could be washed through those charitable accounts and then wired anywhere in the world. Ronnie agreed to a test transaction and provided $10,000 in cash. The moment the deal was done, the FBI moved in.

If nothing else, a money laundering Rabbi must be proof positive that laundrymen these days don't fit any of the usual hoodlum stereotypes. They are not machine-gun toting men in black shirts with white ties. Nor are they to be confused with street-level drug dealers, who are predominately black. For the most part, they don't have previous criminal records. In many cases, they are people who might not otherwise consider crime but who are keenly attracted to a quick-buck, clean-hands hustle. Working on their own account, or on behalf of their drug-dealing, fraudster, smuggling, kidnapping, arms-dealing, terrorist, extortionist and tax-evading friends, these people have turned money laundering into the most sophisticated element of organized criminal activity.

White, affluent members of the professional classes have turned money laundering into the world's leading financial growth industry.

*****

The Money Laundering Control Act of 1986 upped the stakes for professionals by making money laundering a criminal offense when associated with any crime. The theory is, because nine out of ten crimes are profit-motivated, to do something about crime society must go after the profit. If someone merely wants to move their own money through a whole series of jurisdictions, in and out of shell companies, to see what comes out the other end, that's their business. But if someone is doing it in conjunction with insider trading, fraud, drug trafficking, income tax evasion, theft, whatever, then money laundering now gets tagged onto the charge sheet. It is very much the flavor of the month, the in-vogue catch-all offense, taking over from such old favorites as income tax evasion and conspiracy to defraud.

The government used the act to get the founder and former president of the Phar-Mor discount drugstore chain. Indicted for defrauding investors of $1.1 billion and embezzling a further $1.1 million, the charges against him included 118 counts of money laundering.

Just as they used it to get William Aramony, the man who’d turned The United Way of America into the nation’s biggest charity. Over much of the 22 years he served as president, he defrauded the charity of more than a million dollars to support a lavish lifestyle. His seven year sentence was based on convictions for fraud, tax evasion and money laundering.

Not to be outdone by a laundryman rabbi, there was the Rev. Martin Greenlaw, a Roman Catholic priest in San Francisco. When parishioners noticed that he was buying property, which was hardly in keeping with his vow of poverty, they contacted the archdiocese. The DA was called and the result was an indictment against the priest for embezzlement, grand theft, tax evasion and 10 counts of money laundering.

They got "Chuckie the Meat Man" Cugliari for money laundering. A Trenton, New Jersey meat broker, he’d engineered a pyramid scheme that cost his investors as much as $80 million. Selling single shares in his company for $25,000, he’d promised an annual return of 40 percent on contracts for the delivery of meat and seafood. But instead of investing the money, Chuckie ran a Ponzi scheme, using money from new investors to pay dividends to old investors. It’s fraud. And these days, it’s also money laundering.

When Marcus Arthur Rodriguez, deputy director of the Los Angeles County Museum of Natural History, was arrested for embezzling more than $2 million, they charged him with five counts of grand theft, two counts of misuse of public money, one count of forgery, two counts of conspiracy and 12 counts of money laundering.

And when Richard Hersch, president of the tax preparation service Quick Tax Dollars, was convicted for filing 431 falsified tax returns and claiming more than $1 million in refunds, the jury agreed with the prosecution that he’d laundered the proceeds through several bank accounts and sent him to jail for five years.

But most of all, they got Heidi Fleiss for money laundering.

A 28 year old highschool dropout, she was arrested in June 1993 after a sting operation in Beverly Hills rounded up some call girls. Because they were working for Fleiss, she was charged with pandering and a drug violation. She pleaded not guilty.

It’s likely that none of this would have mattered to anyone if she’d been living in Eufala, Alabama, but the "Hollywood Madame" was a tabloid’s dream come true. As the story of her life unfolded --- told in vivid detail by just about everyone who’d ever met her and lots of people who hadn’t --- it was revealed that she had a reputation for being into anything and everything as far as sex was concerned, gorgeous girls working for her and famous clients. Among them were actor Charlie Sheen, the former owner of the Denver Nuggets and part owner of the Houston Rockets Sidney Shlenker, Mexican businessman Manuel Santos, Australian tycoon Kerry and real estate magnate Bob Crow.

Capitalizing on her 15 minutes of fame, she encouraged more headlines by posing for magazines, selling interviews and opening Heidi Wear, a Pasadena lingerie boutique.

But the fun was short-lived. In July 1994, a federal grand jury considered her case. They were told that her call girls, some of whom were charging up to $10,000, kicked back 40 percent as a commission to her. The money was put through family accounts to hide its source. She hadn’t filed income tax returns for 1991 or 1993 and in 1992 only declared $33,000. It then came out that her father, Dr. Paul Fleiss, a 60 year old Beverly Hills pediatrician had deceived a bank into thinking that he was the purchaser of a $1.6 million home that had once belonged to actor Michael Douglas, when she was actually buying the house with her laundered money. So a grand jury indicted daughter and father for money laundering.

While the state case against her brought convictions for pandering and a three year sentence, federal prosecutors quickly put her in an untenable corner by working out a deal with her father. If convicted of the original charges, he faced a maximum sentence that exceeded 100 years. So on the promise that he would not have to testify against Heidi, Paul Fleiss pleaded guilty to one charge of conspiring with her to launder money and two charges of making false statements to banks. He also agreed to surrender $375,187 which were the proceeds from the sale of the house. In return, he was sentenced to one day in prison, fined $50,000, ordered to serve three years probation and to perform 625 hours of community service.

Heidi refused to plea bargain and mounted a defense. Part of it was based on her claim that ex-boyfriend Bernie Cornfeld had regularly been sending her gifts and that she therefore didn’t need money from prostitution. Cornfeld, of IOS fame "discovered" Fleiss when she was still a teenager. Over the course of several years, while living in Beverly Hills, he jet-setted her around the world. But Cornfeld’s attention span with ladies was famously short. And anyway, tax problems with the IRS drove him into European exile. It’s true that he stayed friends with her, and even though he was the object of an IRS probe right up until the time of his death, he did send her some money. But not $1.6 million. He hadn’t seen that much in years. And anyway, what little he sent her was mainly to help pay legal bills after she’d been arrested.

The jury convicted her.

*****

When Alex Daoud, the former three-term mayor of Miami Beach, was accused of taking bribes, a grand jury indicted him for racketeering, extortion and money laundering.

When California State Senator Paul Carpenter and lobbyist Clayton Jackson were arrested on political corruption charges, because they’d tried to make bribe money disappear, prosecutors threw in money laundering.

But there have been occasions when a scam has been constructed specifically to launder money and the statutes have been shoved conveniently to one aside. By coincidence, most of them involve politicians. This is not to insinuate that any specific politician has taken part or is otherwise indictable. But somewhere along the way, a politician or two may have benefited.

During a routine audit of San Francisco’s 1991 mayoral race, election officials uncovered several suspicious contributions. Much to their surprise, the source of the funds appeared to be the San Francisco 49ers. It turned out that the team had, in fact, made 30 contributions which they clearly knew were questionable because they washed the funds through 30 different individuals in order to circumvent the city’s contribution limit of $500 per person. The 30 individuals were later reimbursed by the 49ers. The club and its chief financial officer got off with a $60,000 fine.

The company that stages the LA marathon did much the same thing, although they fared less well. After admitting in 1994 to laundering $73,000 in order to make illegal campaign contributions to members of the city council and former Mayor Tom Bradley, Los Angeles Marathon Inc. was fined $436,250.

However, money laundering carries a totally different cache if you happen to be a Congressman.

US Senator Rick Santorum, a conservative Republican from Pennsylvania decided he could help the party’s cause in the 1996 elections by setting up a "leadership fund." Usually the prerogative of more senior legislators, it is essentially a discretionary account through which contributions are funneled.

The law stipulates that no individual can give more than $2000 to a Senate candidate every six years. As Santorum is not up for reelection until the year 2000, contributions to his leadership fund legally evade those federal contribution limits.

So that no one should think he was trying to hide anything, it’s only fair to point out that he very publicly announced the creation of the fund, explaining that he was using it to support GOP campaigns and pay for his travel expenses.

It is, arguably, money laundering. Although in this form it seems to be perfectly illegal.

Apparently, there are 50 leadership funds in alive and well and living on Capital Hill.

*****

Chapter Seven

THE MARLBORO MURDERER

"The crooks keep so far ahead of us,

we'll never completely close the net."

--- The US Department of Justice

Colonel Hector Moretta Portillo, sporting a nifty, multi-braided, starched white uniform, held a privileged place in the Mexican army. As a relative of a former President, he was an accredited member of his country's delegation to the United Nations. In his spare time he sold gold and whiskey.

Stocky, 5 feet 6 inches, with black hair and a black mustache, at one point in his career --- while on holiday at the home of the Minister of Interior on the island of Cozumel --- he was murdered. Press reports noted that his bullet ridden body was found floating face down in the swimming pool and that his killer was still at large.

A few years after his assassination, he turned up in Santo Domingo as Colonel Gomez, an officer in the army of the Dominican Republic and a relative of a former president. Sporting a brand new, nifty, multi-braided, starched white uniform, in his spare time he sold sugar.

But in 1988, when clients complained to the authorities that the Colonel’s sugar was non-existent, just as his gold and whiskey had been, he was arrested. Under questioning, he told the Dominicans that his name was Michael Austin Smith, which might be the closest he's ever come to telling the truth because that is his name, except it wasn't the name he was born with. Although it was only later revealed that he’d used as many as 30 aliases, when he came into this world, in Brooklyn, New York, in 1955, he was Michael Sporn. He changed his name to Austin somewhere along the line, adding Smith to the end of it whenever it suited him, much the way he changed, almost effortlessly, back and forth from fluent Spanish to the broken English you'd expect from your average, well connected, Latin American Colonel.

By the time the ‘90s came along, he was Hector Portillo again, alive and well living in New York. Now his angle was cigarettes.

Knowing how the world is awash with commodities in the parallel markets --- you can buy and sell just about everything, from oil, pork bellies, precious metals and timber, to grain, steel, precious stones, sugar, gold, whiskey and cardboard boxes --- he was taking aim at the lucrative, well established traffic in Marlboros.

An ideal commodity for a con, not only is the brand name instantly recognized, it is globally traded outside the manufacturer's normal distribution routes. For all sorts of reasons, gargantuan parcels of legitimate Marlboros are forever spinning around the world through divers wholesale channels: A state tobacco monopoly buys too many and needs to sell the surplus; a cargo gets stolen that needs to be fenced; a middle man buys a shipment at an advantageous price and wants to unload them for a fast profit; someone defaults on a payment and needs to sell the cargo to recoup costs.

In many Third World countries, notably the former Communist bloc, Marlboro plays an additional role, as a kind of currency. Cases of cartons are often the icing on the cake, the bribe that caps a deal. In Russia, for example, you barter with dollars then throw in Marlboros. In fact, for years, the best way to get a taxi on the streets of Moscow was to wave the familiar red and white box, a signal that you've got something to offer which even non-smoking taxi drivers can use.

It's the old joke about the soldier with his single pack of Marlboros, which he sells to another soldier for a dollar. The second soldiers sells it to a third for two bucks. The third sells it to the fourth for $3, and so on until the price reaches $10. The soldier who paid that for the pack rips it open and starts smoking. The other soldiers are aghast. What's wrong, puffs the soldier with the cigarettes? Pointing to the Marlboros, the first soldier explains, they’re not for smoking, they're for buying and selling.

So Austin cooked up a scheme to sell 100 containers, 4.8 million cartons, of non-existent Marlboros. Enough cigarettes to supply the entire Russian Confederation for four months, the bait was more than handsome enough to attract the attention of literally thousands of middlemen who were constantly prowling the parallel markets, hungry to deal. But flogging something in this game was not like finding some tourist and selling him the Brooklyn Bridge or the Mona Lisa. To make the scam work, he had to create what is known as "evidence of reality." He had to convince some relatively sophisticated buyers that the product was available and, at the same time, that he had access to it.

In order to cover those bases, Austin in the guise of Portillo, scripted a few variations of the same story. One went: factories in Mexico that Philip Morris had closed were back in operation producing fraudulent Marlboros. Another claimed: factories that never had anything to do with Philip Morris were banging out counterfeit Marlboros. A third was: through his connections with the Mexican government, he'd acquired the cigarettes illegally and wanted to move them as quickly as he could. He supported all three with official-looking documents proving that the cigarettes were, in fact, waiting for him in Mexico.

He needed to make the punters believe they were getting a bargain, but that was the easy part because P. T. Barnum was right: there’s a sucker born every minute. Austin knew from experience that you beat them by playing to their greed. That when you dangle easy profits in front of guys who live for easy profits, half their brain shuts off --- the half warns, when something is too good to be true, it generally is. So he built into the equation plenty of room for everyone to make a killing off his back. He put out the word that he was looking to wholesale each container for a nominal $160,000, about $3.33 a carton, or roughly 15-cents on the retail dollar.

Now, commodities of any kind, whether they're on clandestine offer in parallel markets or moved openly in any market, are bought and sold on letters of credit. One bank guarantees payment to another bank without money changing hands before the cargo does. The buyer pays his bank and it’s the bank that holds onto the money until the seller delivers the cargo, which the seller does as soon as the buyer's bank promises to pay for it. The system is predicated on mutual trust between banks, guaranteeing that payment has been arranged and will be made. It makes sense because, when high-priced cargoes are at stake, there's little reason for either the buyer or the seller to trust each other.

Understandably, before a bank will make any such guarantee, specific documents are required. Austin needed to provide: bills of lading that adequately defined the cargo; a certificate of inspection, to affirm that the cargo, as described by the bills of lading, was on board a ship going to the buyer; a certificate of freshness, which is peculiar to the cigarette business so that the buyer knows his assets have not passed their sell-by date; and a certificate of insurance to protect the cargo.

Forged papers were never a problem as he had access to people who could forge anything, including passports. But maritime transport documents listed the name of the ship carrying the containers, and the whereabouts of the ship, plus the cargo on board, which were all things that anyone with a little know how could readily verify.

So, to get the scam going, Austin decided he needed a ship.

*****

David Wilson was a fool.

At times too gullible, at other times too susceptible to avarice, he was the sort of man who was always just within arm's reach of the next get-rich-quick scheme. Having long ago convinced himself that he was more savvy, more talented, than he really was, he was the sort of man who was only too willing to gamble with his family's future by staking his own money for pie in the sky.

Born in England in 1944, Wilson studied to be an accountant, but he never qualified as a CPA and wound up calling himself a "financial adviser." He did tax returns for small firms and dabbled in whatever business ventures came his way.

Basically, he was an man. The people who hired him to handle their bookkeeping spoke well of him. The police never found any evidence that Wilson was personally involved in any criminal activities. However, because he wasn't above the odd minor-league fiddle --- he toyed with dubious offshore shelters and loved to show clients how to pay their personal taxes out of company funds --- it wasn't long before he was operating on the fringe of some intelligent, well-connected, company-owning criminals. They were the ones who told him about the untold wealth on offer in Marlboro cigarettes. He could taste the millions pouring in. They were the ones who told him that a plugged in Mexican Colonel was looking for an accountant in Europe, preferably in England because of the language, to set up a company to buy a ship. It was a perfect match. In Portillo, Wilson saw someone offering him the biggest get-rich-quick scheme of his life. In Wilson, Austin had a stooge.

The two men promptly struck a deal and on Portillo’s behalf, Wilson bought a company called Alamosa Ltd in the Isle of Man, housed it at his office in Lancashire and went in search of someone to finance a ship. He found the backing they needed in Norway, where a fellow with shipping interests agreed to put up $2.8 million to purchase a 3400 ton bulk carrier built in 1970 called the Gregory.

On paper, the business was sweet for everybody. The vessel would be purchased by Alamosa, then transferred to Wilson Overseas Ltd. a holding company registered in the Bahamas. For his money, the Norwegian would be the main shareholder of Wilson Overseas which meant that he would retain title to the ship. As a bonus, for every ten containers of cigarettes the Norwegian subsequently purchased, Portillo was willing to throw in one container free. It worked out that, if the Norwegian took the entire cargo, he'd be paid back in full for the ship, and therefore wind up owning it for nothing.

Once those papers were signed, Wilson changed the name of the ship to the Lisa Marie, after his youngest daughter.

With Wilson running interference for him on the high seas, Austin hoisted an impenetrable shield to protect himself from the land-based punters. He stipulated that none of them could deal directly. If they wanted to buy cigarettes, they had to go through agents, whom he seduced by offering jumbo commissions on each container. When any of those agents asked why Portillo wasn't selling the cigarettes himself, he explained that, because of his position with the government of Mexico, he couldn't be seen to be taking part. It was plausible enough. The truth however was, because the world is filled with agents --- middlemen who earn their living like pilot fish, hanging off the backs of people trading in the parallel markets --- there was no reason for Austin to take any unnecessary risks that might expose his true identity.

Then, not even those agents could contact him directly. They were each given his private number in New York, and made to feel all the more special by being sworn to secrecy, made to promise that they would never reveal it. But the best they ever got was someone on the other end saying that Colonel Portillo wasn't in and asking if they wanted to leave a message. The New York number was nothing more than a legitimate answering service.

From what little Portillo told him, Wilson soon realized that the really big money was going to the middlemen. So he convinced Portillo to let him sell some containers. His first client was a Scotsman living in Houston named James McMillan, who paid his share in cash. Alamosa then used that cash to refit the Lisa Marie.

Had anyone bothered to check which, clearly, no one did, he might have noticed that the Lisa Marie was not a container ship. And even after the refit, there was still no way she could handle 100 containers. But details like that didn't seem to concern Portillo's agents, least of all Wilson who, together with the others sold several times the ship's maximum cargo.

Suddenly, there were too many people selling too many Marlboros into this parallel market. But whether anyone of them knew what was actually going on is a matter of conjecture. Then again, if any of those agents did suspect something, it was easy to rationalize that they were only acting only as agents. It was easy to write off minor details, such as whether or not the cigarettes really existed, as Hector Portillo's problem.

*****

Now that he had a ship, Austin's next step was paperwork.

For forged insurance documents, he called on an ex-public school boy, one of those frightfully British "Hooray Henry" types, who'd been thrown out of Lloyd’s of London and was otherwise available for dubious projects.

Bills of lading were no problem, either, as they were also easily faked.

But to obtain the certificates of freshness Portillo needed the services of a maritime survey company. The most convenient way to arrange that was to invent one called Sealand Maritime Surveyors. And as long as the Lisa Marie was getting overhauled in Miami, Portillo put Sealand Maritime Surveyors there, too.

On its letterhead, Sealand’s phone number noted the appropriate 305 area code. However, thanks to Call Forwarding, anyone who dialed the number in Miami was answered by an Englishman in Spain. Except for those odd occasions when someone asked what the weather was, and the Englishman mistakenly explained that it was sunny when Miami was deluged with rain, no one ever suspected that they weren't speaking to a company of surveyors in south Florida.

*****

Originally, Portillo claimed that the 100 containers were waiting for the Lisa Marie in Vera Cruz, Mexico. Yet, the first batch of paperwork that arrived on David Wilson’s desk stated that 50 containers were loaded in Miami on November 12, 1991, and that when she sailed on the 23rd, instead of going to Mexico, the Lisa Marie was bound for Hamburg.

That didn’t necessarily bother Wilson, because he knew that ships were always being rerouted.

But a couple of weeks later, he received documents dated December 3, indicating that the Lisa Marie had loaded only three containers of Marlboros and was destined for Naples, Italy.

To protect his own clients, he’d agreed with Portillo that letters of credit could not be exchanged until a full inspection of the cargo was carried out at the port of delivery. So he felt confident that everyone’s money was safe. However, the conflicting paperwork bothered him. The more he looked at it, the more he began to think that something didn’t ring true.

He wasn’t the only one asking questions. After paying cash for two containers, James McMillan had also signed on as a Portillo agent. Hoping to interest a group of punters in some or all of the 50 containers supposedly en route to Hamburg, he’d set up a December 2 meeting at the Rotterdam Hilton. His idea was to bring all his prospective clients together into one room and make a great pitch. To entice them to the meeting, he’d furnished them with copies of the November 12 documents.

One of McMillan’s prospective clients read the documents and got an odd feeling in his gut. It struck him as one of those too-good-to-be-true deals. And he had enough common sense to seek professional advice. He forwarded copies of the paperwork to the International Maritime Bureau.

They landed on the desk of the IMB's director, Eric Ellen. A former Chief Constable for the Port of London Police and an acknowledged world-class expert in maritime fraud, Ellen instantly spotted the fly in the ointment.

The bill of lading showed the containers on board the Lisa Marie to be numbered 440001-440050. Although every container bears its own serial number, because they are constantly on the move around the world, with each one carrying different cargoes to different ports, finding 50 consecutive numbers like that on one ship is as much a virtual impossibility as finding 50 cars in a traffic jam with consecutively numbered license plates.

Ellen notified the Dutch police and the Dutch police raided McMillan's meeting.

The Scotsman's excuse was that he was merely acting as an agent. He swore that he firmly believed the cargo existed and reminded the police that he'd even put his own cash on the line. He said, if you don't believe me, ask David Wilson.

When Wilson heard of McMillan's arrest, he demanded to know where the ship was. So did Wilson's Norwegian backer.

By phone, supposedly from New York, Portillo reassured them, explaining how, at the last minute, he'd diverted the ship to Hong Kong to deliver a cargo of cigarettes there. That sounded plausible enough Then, he added, that instead of sailing through the Panama Canal and into the Pacific, the Lisa Marie was taking the long way, via South Africa and the Cape of Good Hope.

As bizarre as that sounded, because Wilson wanted to believe, he did believe. That is, until January, when he received a distraught phone call from the Lisa Marie's captain.

Having failed to reach Portillo through the answering service in New York, the captain wanted Wilson to know that the ship had taken water into the engine's cooling system and that he’d been forced to limp into his scheduled port of call, Puerto Cabello, Venezuela, where he was stuck, awaiting repairs.

Venezuela? In a panic, Wilson and the Norwegian jumped on a plane and flew to South America. They found the Lisa Marie there, sure enough, with 50 containers securely strapped down onto her decks. But when they ordered the crew to open the containers, all 50 were empty. Immediately, Wilson took steps to stop the ship from leaving Puerto Cabello, then began notifying his clients that the whole thing was a scam.

On the night of March 5, two men forced their way into Wilson's house. Their faces shielded by ski masks, they tied his hands behind his back, frog-marched him into his garage and, at point-blank range, shot him twice in the head.

*****

There were a lot of things that David Wilson didn't know when he arrived in Venezuela looking for the Lisa Marie.

He didn't know that Puerto Cabello is one of the main drug transit ports for Colombian cocaine. He didn't know that numerous police authorities around the world were collecting evidence which suggested that Austin, still as Portillo, had Colombian drug contacts. He didn’t know that to hedge his bets, Austin had secretly purchased a second ship, the Wei River, and was working the same swindle without him. He didn't know that Austin had already put out a contract on his life.

Among Portillo’s new clients was a man in Greece who'd agreed to take five containers for just under $1 million. Austin forwarded the necessary paperwork to show that the cargo had been loaded in Houston and that the Wei River was expected to sail to Holland on February 24. In fact the Wei River was still in dry dock.

With the Greek’s money, he bought a third ship, the Infanta, and supplied new agents, who in turn supplied new clients, with identical paperwork for identical cargoes on the Wei River and the Infanta.

Before long, almost as if he was drunk with success, he’d boldly invented ownership of the six other ships, six ships he knew nothing about, having picked names out of a hat, and had forged documents to prove that the promised cargoes were loaded and on the way.

With tens of millions of dollars at stake and Wilson, his major liability, now eliminated, Austin convinced himself that he was under no further threat. He especially didn’t fear the police, firmly believing that international cooperation among the law enforcement agencies was as non-existent as his cigarettes.

And in that assumption, he was fundamentally correct. It would take months before the FBI and Customs in the States, and the numerous authorities throughout Europe, all of whom had, at some point, been alerted to Austin’s scam, started comparing notes. And then, not every agency was willing to share whatever it knew about Austin. In fact, the only thing that worried Austin was that this game, just like genuine Marlboros, also had a sell-by date. He knew he could fend off disappointed customers and their hassled agents only so long. He understood that unless he moved on soon, his excuses and, invariably, his luck, would run out. But not just yet.

It was still going too well.

An agent in California sold $1.6 million worth of Portillo's phantom cargo to a businessman in Hong Kong. A month later, when the cigarettes hadn't arrived, the man in Hong Kong refused to be placated any further and changed the tone of his complaints from mild to very angry. So the California middleman switched gears, turned the man’s anger around and sold him another $800,000 worth.

A second punter took the documents given him by an agent to his bank to secure a letter of credit. The bank pointed out a whopping 40 errors, leading them to conclude that this was a hoax. But the client didn't want to know. The bank's officers spoke to him until they were blue in the face. The client insisted they pay out. And they did.

To avoid his day of reckoning, Portillo planned to cover himself with the perfect excuse, a sinking ship. And there is every reason to believe he planned to sacrifice the Lisa Marie.

The 50 empty containers he'd taken to Puerto Cabello were to be filled with drugs, or arms, or both, which he intended to off-load on the high seas off the coast of South Africa. As soon as the containers were empty again, he would scuttle the ship. Because Hector Portillo didn't really exist, the Mexican Colonel would also sink without a trace. Then, with his profits from the cigarette fraud, the money he’d raise on the drugs and/or the arms, plus whatever he could collect on the ship's insurance, he intended to live in the lap of luxury for the rest of his life.

And he might well have gotten away with it had he not murdered David Wilson.

*****

In an earlier guise, this time as Michael Smith Austin, he claimed to have had dealings with the Pentagon. According to sources who are usually referred to as "well informed," he’d once tried to arrange a defense contract as a supplier in the aerospace industry. Later, as Portillo-unmasked, Austin made claims to the FBI that he had, and still maintained, connections with the CIA. Not surprisingly, neither the Pentagon nor the CIA ever admitted to knowing him.

However, as Austin told the story, the markers he held with the CIA were for the minor role he played, this time under the banner of Colonel Rodriguez, a Nicaraguan army officer, in the Iran-Contra affair.

It turns out that there was a Nicaraguan Colonel Rodriguez involved with Iran-Contra, a fact made public by the US Senate Hearings. And sure enough, during a television program about Iran-Contra, a man claiming to be Rodriguez was dredged up for the cameras. He didn't look anything like Austin, but that doesn't necessarily mean anything. The man on camera may or may not have been the real Colonel Rodriguez.

It is known, though, that when Austin was arrested in the Dominican Republic, as Colonel Gomez, he confessed to several crimes, among them fraud and dealing in forged passports. It is, therefore, reasonable to expect that he would have been charged and brought to trial. It is equally reasonable to expect that, after pleading guilty, he would have been sentenced to prison in the Dominican Republic. Except, at the very last minute, the Dominicans set him free.

The official reason was that he'd been released "by instructions of the judiciary." But no one is quite sure what that means. And the judiciary never offered any explanations.

Initially, Austin said he’d bribed someone $1 million to get out of Santa Domingo. Then he changed his story, claiming that unnamed American authorities had arranged his release as a thank you for his help in Iran-Contra.

If he did, in fact, have some connection with the CIA, and the more you know about them the more you realize that anything is possible, especially the most unlikely affiliations, it didn’t seem to help him this time.

The Lancashire Constabulary opened an incident room into Wilson's murder on the morning of March 6 and, as the investigation became more complex, more officers were called in to help. At one point, and for a period of nearly six months, there were over 100 policemen working full time on the case.

On July 15, some 17 weeks after David Wilson was assassinated, Austin was arrested in New York on his way to pay $3.2 million in cash for an apartment in Trump Towers. He was charged with murder and ultimately extradited to Britain. His trial took seven weeks, but the jury only needed two hours. In February 1995, they convicted him of first degree murder and sent Austin to jail, without the possibility of parole, for the rest of his life.

The hired gunmen were eventually found, prosecuted and sentenced.

*****

There is some suggestion that, just during the Lisa Marie stage of the scam, each of the 100 containers Portillo claimed to have had were sold as many as five times. There were customers in Bulgaria, Poland, Italy, Denmark, the United States, Hong Kong, Austria, Sweden, Greece, France, Germany, Belgium, the United Arab Emirates, China, Holland, the UK, Australia, Singapore, Jamaica, Bermuda and a man purporting to represent the Russian Army. No one is sure how many times he sold the cigarettes he claimed to have on the Wei River and the Infanta. Even less certain is the amount of money he generated with the six ships that didn’t exist. Records show, however, that David Wilson, in the name of Alamosa Ltd, opened bank accounts in several countries and moved money through Switzerland, Belgium, Holland, Luxembourg, Germany and Britain. The largest account was at the Bank of Greece in Rotterdam. But the most active account was in the name of a holding company registered in St. Kitts, which was placed with Credit Suisse in Zurich.

It is also known that three weeks before the murder, Portillo set into motion some very specific steps to get money out of Switzerland. In particular, he contacted, negotiated with and then engaged a professional money laundering service operating out of the UK.

For a fee, this bunch will reliably move any amount of money in any direction for anyone who employs them. They run a full-service underground banking facility, dealing in all aspects of money laundering, in addition to providing a host of affiliated functions --- notably forged documentation, smuggling, drug trafficking and arms dealing.

And their track record is impressive. Some years ago, members of this group sold $6 million worth of illegal arms to the government of Sierra Leone, which almost simultaneously, fell to a coup. The shipment was, therefore, never delivered. The money for the guns, minus expenses, was returned to an official whose death was reported in the papers, just like Hector Portillo’s liquidation in a Mexican swimming pool. That same official has since turned up in Europe, living on the arms’ money.

There is reason to believe that Portillo had also secured this group's help in whatever his proposed drugs/arms deal was in Puerto Cabello and engaged them to sink his ships.

The police uncovered evidence that, within a day or two of Wilson's hurried flight to Venezuela, Portillo arranged overnight accommodation in Zurich for 7-9 people. There is also evidence to show that a day after those 7-9 people arrived in Switzerland, they traveled from Zurich to New York, and that at least three of them arrived on the same flight.

Walking into the cavernous International Arrivals Hall at JFK, the three deliberately got onto three different lines for US Customs. As they were legally required to do by American law, all three affirmed that they were bringing cash into the country. The proper forms were filled out and because the only restriction on anyone bringing in more than $10,000 is that the money be declared, once they did that, all three were permitted to go about their business. Together the three declared a total of $700,000.

Unfortunately, at no point did anyone at Customs notice that three large cash declarations had been made by people arriving off the same flight. In fact, it was only when the British asked Customs for certain records that they became aware of this delivery.

Still, it is not the cash from Zurich to New York that makes this a money laundering story. There is a neat twist in the tail.

Only a relatively small amount of Portillo’s money has ever turned up. If he did make tens of millions of dollars, no one has been able to find it. According to the FBI, Portillo, or Austin or Sporn, didn't live like a man with tens of millions of dollars. And at his trial, he denied that any of these millions existed. The amount officially claimed as lost, by those few punters and agents who were willing to come forward, puts the total at $20 million. Yet four unrelated sources have confirmed that, at one point, the main Credit Suisse account contained $80-$90 million. And a few people close to the case are convinced there was more. A lot more. So the question is, how much was there and what happened to it?

Consider the fact that the discrepancy between the amount admittedly lost and the amount that went through just that single Credit Suisse account, stems entirely from one simple premise: that many of the people involved with this matter can't come forward because they have no way of legally accounting for the money they put into the deal.

That's a common phenomenon in con games. It's also a factor in money laundering. The suggestion is, then, that Portillo was working both. That he was conning some people while offering others --- certain, very specific people --- a way to wash substantial amounts of dirty money. That this wasn't merely a sting turned sour because of a murder, that it was a gigantic and adroitly managed money laundering operation --- a major sink purpose-built to accommodate major players.

Portillo stole what he could from the punters and washed what he could for his heavyweight clients, bringing their money out the other end of the cycle; as genuine cigarettes that he purchased in the parallel market; or as a phony insurance payment on the non-existent cargo; or as money easily moved from one numbered account to another.

Money laundering explains why no one has ever found the missing $20-$90 million.

Money laundering explains why no one is ever likely to.

*****

Chapter Eight

LAWYERS

"I’m gonna get rich patenting a better mousetrap."

"Not me, I’m gonna get rich finding a bigger loophole."

--- Conversation between two law school students

Harold Ackerman was a 51-year-old south Florida vegetable importer who was arrested in 1992 for smuggling cocaine. At first he staunchly maintained his innocence, a position that was highly questionable, especially when Gilberto Rodriguez Orejuela, head of the Cali cartel, and his brother Miguel went public with a passionate plea for Ackerman’s release. It was a curious thing for them to do. And a bunch of people at the Justice Department started asking questions.

Described at the time by the DEA as the highest-ranking Cali trafficker to be arrested in the US, Ackerman first came to their attention in late 1991, after a raid on a Miami warehouse uncovered 15 tons of cocaine in hollowed-out concrete fence posts. In the spring of 1992, agents found six more tons of coke in a shipment of broccoli and okra in Ft. Lauderdale. The investigation led to the arrest of several Colombians operating in south Florida, plus Jaime Garcia-Garcia, a 43-year-old Cali laundryman in Bogota. The good guys picked up $600,000 in cash, four planes, a cache of weapons, a network of computers, 94 bank accounts in Latin America and seven more in the States.

Ackerman now changed his tune, contending that he'd been forced to sell drugs by left-wing paramilitary groups in Colombia who'd threatened to kidnap his family if he didn't cooperate. The jury didn't buy it and convicted him. In a show of support, the Orejuela boys published an open letter to the DEA, pleading Ackerman’s innocence and accusing the agency of "unfounded, permanent aggression." The DEA responded by inviting the brothers to come to Florida to make their case in person.

Understandably, the brothers refused. But as a result of their intervention, prosecutors’ now looked beyond Ackerman, towards some of the seemingly legitimate acquaintances he had in common with Gilberto and especially Miguel. Financial documents and Ackerman’s computer files had been seized at the time of his arrest, and a closer appraisal of those turned up what appeared to be a group of lawyer criminals.

One of the men who caught their attention was Michael Abbell, a partner in a Washington DC law firm with an office in Florida. In 1981, his 14th year as an attorney at the Justice Department, he’d worked on a case that the government was making against one of the Cali cartel leaders, Jose Santacruz Londono. Part of his job was to try to secure information from the Swiss about bank accounts held by Londono.

When he left the Justice in 1984, he joined Kaplan, Russin & Vecchi where within six months he was hired to help Gilberto fight an extradition charge. Orejuela been arrested in Spain and the US wanted him to face charges in New York. After obtaining a conflict-of-interest clearance from the Justice Department, Abbell testified as an expert witness against the very people he’d worked with at Justice, who’d prepared the extradition request. Instead of being extradited to New York, the Spanish returned him to Colombia. Orejuela was tried there and Abbell was in the courtroom. Apparently he’d been hired to brief Orejuela’s lawyers because of his extensive knowledge of the evidence. In 1987, he was again working for Orejuela, this time to write a legal opinion about Colombia's ban on extraditing its citizens to the US. The next year, he submitted statements to the Senate Foreign Relations Committee during a review of evidence-gathering provisions in legal assistance treaties with various countries. Abbell’s position was consistent with a often heard plea from lawyers defending Colombian drug traffickers, that defendants should have greater use of foreign obtain evidence. In 1989, he showed up in Miami for the drug trafficking trial of Luis Echeverri Santacruz, Jose Londono’s half-brother. Supposedly retained by Orejuela and Londono to assist on legal and factual issues, he was not otherwise participating at the trial. Sitting next to him throughout the case in the back of the courtroom was Joel Rosenthal, a defense attorney in Miami who had been similarly retained to help the defense.

It was around this time when Abbell and the firm of Kaplan, Russin & Vecchi parted company, citing incompatible interests. He went into practice with Bruno Ristau, who’d directed the Justice Department’s Office of Foreign Litigation for 18 years. They opened an office in Washington and another in Florida which they eventually stocked with Francisco Laguna, a Bogota born attorney.

Next, Abbell found himself representing Londono’s wife. The DEA had uncovered a significant laundry cycle with a money trail leading to Luxembourg and $60 million that they said belonged to Londono. They also located $12 million in New York. Abbell, now accompanied by Laguna, attended court hearings in both places, then filed a claim for the money in New York on behalf of Ampara Castro de Santacruz. He asserted her right to it as her inheritance from her father. But the jury said no.

Ironically, after the US District Court judge who’d heard the case labeled Londono a well-organized, multi-national drug trafficking fugitive, Abbell wrote a letter, criticizing him for misrepresenting his client’s husband. This, just nine years after Abbell had pursued her husband’s money because it had belonged to a well-organized multi-national drug dealer.

Five years later, in part through evidence uncovered in Ackerman’s files, Abbell stood accused of knowingly securing false sworn statements from arrested members of the Cali cartel; submitting fraudulent documents to courts in New York and Luxembourg on behalf of the cartel; arranging, receiving and transmitting cartel drug money; racketeering; conspiracy; drug trafficking; and money laundering.

By this time, Laguna was also attracting attention. During a 1992 DEA sting operation, undercover agents picked up cash for Londono in various cities around the country. When $1.2 million was seized in Chicago, the undercover agents were contacted by a cartel representative who’d come to the States to investigate the bust. He ordered them to speak with Laguna. Questioning the undercover agents whom he believed to be laundrymen, Laguna allegedly demanded, "Why don't you tell me what you know? We're trying to find out what is happening here." Some months later, a federal indictment charged 21 people with money laundering, and Laguna as an unindicted co-conspirator.

Also under investigation was Joel Rosenthal. So were three other Florida attorneys linked to Ackerman and Orejuela. William Moran William Moran, a former federal prosecutors in Miami, was a partner in Moran and Gold, and first dealt with Orejuela in 1985. He was hired to represent members of the gang who’d been arrested in Florida. Ackerman was introduced to him in 1990 by a mutual friend, who supposedly identified Ackerman as the person to call if and when any gang member got arrested. Donald Ferguson, had also been an assistant US Attorney in Miami and now worked for himself. He was recruited by Abbell in 1990 to help with the civil forfeiture suit in New York and since then represent arrested members of the Orejuela gang. Robert Moore was the attorney hired by the cartel to defend Ackerman.

Moran was indicted on a multiple of charges, including for arranging bail for gang members whom he knew would jump bail; aiding and abetting the flight of gang members whom he knew to be criminals; preparing, presenting and arranging knowingly false affidavits; and arranging for and forwarding monthly subsistence payments from Orejuela to the families of arrested gang members to ensure that they would not cooperate with the government. Ferguson was similarly indicted on a multiple of charges and included the delivering of drug money to be used for legal fees, bail and subsistence expenses.

The 163-page indictment that named Abbell, Ferguson and Moran also charged 56 other people at all levels of the cartel, among them the Orejuela brothers and Londono. Laguna, Rosenthal and Moore were not named as they had already pleaded guilty to reduced charges. In fact, Ferguson cut a deal with the government, pleading guilty to conspiracy to obstruct justice and money laundering and, in exchange for a minimum sentence, an agreement to testify against the remaining two.

That left Abbell and Moran to tough it out, facing possible life imprisonment for their part in a massive drug trafficking and money laundering scheme.

*****

To make their case against the lawyers, the government needed to get inside their offices. But where an attorney’s involvement is suspected in a crime, the normal rules don’t apply. Very specific steps must be taken, not to protect the lawyers, but to protect their clients.

Because a search warrant allows access to an attorney’s computers and other files, before they can get that warrant the FBI needs to obtain the approval of senior officials at the Justice Department who conclude that there is sufficient evidence to justify what is seen as a drastic step. Once the Justice Department agrees, corroborating approval must come from a federal magistrate who, separately and independently, reaches the same conclusion.

The reason everyone treads so lightly is because information exchanged between an attorney and his client is considered confidential. It is not for the government to see except in the rarest of circumstances. Attorney client privilege is one of the foundations on which we’ve built our legal system. It is also why lawyers make the perfect laundrymen.

Confess a crime to your clergyman and in certain jurisdictions he can be called to testify against you. On the odd chance that a court were to subpoena him, it’s almost certain that a clergyman would refuse to violate the sanctity of your confession. But clerical privilege is not ironclad.

Nor is medical privilege. Certain states oblige a physician treating a bullet wound to report the name of his patient to the police. Certain states oblige a psychiatrist to report to the authorities a patient under his care for child molestation who admits that he is going to commit the crime again. As rare as it might be to find a doctor testifying against his patient, there are times when a court can demand testimony or hold the doctor in contempt.

Privilege is even less obvious for journalists. Some states acknowledge the importance confidential news sources. Others don’t. Serious journalists will almost always automatically invoke their right to keep such secrets, even where that right doesn’t exist in law. But they do so knowing that they can be shipped off to jail.

Attorney-client privilege is, however, set in stone. Lawyers are not supposed to lie on your behalf, or countenance your own perjury. But if you are charged with a crime, tell your lawyer that you committed it and still want to plead not-guilty, he is bound by professional ethics to enter that plea on your behalf and never to betray the trust you’ve placed in him by repeating to anyone your admission of guilt. In other words, conversations you have with your attorney are private. So is whatever business he conducts on your behalf.

When an attorney holds money in trust for someone else, it is customary for that money to be put in the attorney’s client account, a segregated trust which is deemed to be protected. Because it is often a direct reflection of the business done by him for his client, it is logically considered just as confidential as the conversation which instructed the lawyer in the use of those funds. It means that, if a banker wants to know the source of funds being held by an attorney, the lawyer can tell the banker that it is privileged information. If the banker calls the cops, the lawyer can tell them the same thing.

Banking with your lawyer is, therefore, as close to secret banking as anyone can get in a country where banking secrecy doesn’t exist. The charges against those six attorneys indicted in Miami outline some 59 transactions totaling $6,911,497. Many of them involved cash. Most of them passed through one client account or another. It goes without saying that given enough time and determination, the courts can get inside an attorney’s client account. And in this case they did. But it’s a long, involved process and one which legislators seem reluctant to make any easier. But then, most legislators are by profession, lawyers.

Although attorney-client privilege is generally thought to derive from the Sixth Amendment of the Constitution, and privilege is usually argued as a Sixth Amendment issue, it not specifically spelled out there. All that amendment says about attorneys is that anyone accused of a crime has the right to "the assistance of Counsel for his defense."

Privilege actually evolved from the courts having decided that a just defense is only possible when an accused is free to speak to Counsel without fear of Counsel being an agent for the prosecution. And that is a privilege vigorously defended.

In 1989, the Internal Revenue Service took aim at lawyers, their client’s accounts and cash-paying clients --- notably drug traffickers, who are known to pay for most things, including legal services, with cash --- stipulating that they must fill out CTRs for any cash received in excess of $10,000. It was, the IRS said, exactly the same condition that had been imposed on banks and other trades. And as it is with banks and other trades, an attorney’s failure to file reports is a felony offense.

Significantly, the first group of lawyers to protest to the IRS ruling were the criminal defense attorneys. They objected on the grounds that it unquestionably violated attorney-client privilege.

The problem is compounded by the fact that it happens to be against the law for anyone, including lawyers, knowingly to accept dirty money in payment of a fee. If the case can be proven, a lawyer who knowingly accepts drug money in payment of a fee can be subjected to various penalties, including fee forfeiture. But because the key word is "knowingly," many lawyers who defend cash-rich criminals either don’t ask where their fees are coming from and make certain that their cash-rich criminals don't offer explanations, or they allow their clients to supply just enough information that would lead them reasonably to believe the fee was being paid out of legally obtained funds. That way, everyone's virtue remains smugly in tact. At least, it does, in public. In private, there is plenty of cash running around, and it’s not only on offer to lawyers who defend dope dealers.

A well-known and highly respected international law firm was approached by a client, for whom they’d acted in the past, to purchase an ocean-going yacht. For the senior partners of the firm, it sounded like a terrific way to make some easy money. The gentleman instructed them to find something that would meet his requirements in the $10-$15 million range.

With a handsome fee in the offing, the lawyers contacted ships' agents in several pleasure ports, including the Mediterranean. It was only a matter of days before an agent in France faxed back to them the particulars of a $14 million yacht that sounded perfect. The lawyers forwarded the details to their client and he decided, almost on the spot, that it was exactly what he was looking for. He told them, buy it.

Negotiations were quickly concluded, the conveyancing went smoothly and the appropriate agreements were drawn up. Just before the time came to sign the final papers, the attorneys asked their client how he'd be paying for the purchase.

Under normal circumstances, money would be transferred from the gentleman's bank, somewhere in the world, to the law firm's client account. Once all the documents were exchanged, completing the sale, the law firm would wire the money from their client account to the client account of the attorneys acting for the seller. But evidently, this wasn't normal circumstances. The gentleman buying the yacht told his attorneys that he intended to pay for it with cash.

The lawyers were admittedly bewildered, as it's not every day they do $14 million cash deals. Obviously, there are people in the world who traditionally pay cash for everything. It’s common practice, for instance, in many Gulf states. But that wasn't the case here. And although the lawyers knew enough to worry, they were apprehensive for the wrong reason.

Their concern with $14 million in cash was that they might somehow be risking unforeseen tax liabilities. So they called for their in-house tax specialist who inspected every inch of the deal. As the deadline for closing drew near, he reported that while this might be highly out of the ordinary, there were no material tax risks to the law firm. His only recommendation was that arrangements should be made for guards to protect the money en route to the bank.

That money launderers often attempt to put cash into extravagant objects which can then be legitimately resold all over the world, presumably never dawned on any of the lawyers.

Once they were reassured about their tax position, they set a date for the signing. Only one minor detail remained --- how the cash would be transferred. The client explained that his money was in a bank's safe deposit box and that he wanted the attorneys to rent their own safe deposit box next to his. They would go into the bank vault together, he would open his safe deposit box, count out $14 million and hand it to them. They would put it in their safe deposit box and give him a receipt for it. At that point he'd walk away with the title and keys to his boat. Once he was gone, he said, the lawyers were free to do anything they wanted with the money.

The senior partners were instinctively nervous about exchanging so much money in such a bizarre manner, but they were looking at a handsome fee and that tended to quiet their anxieties. However, one of the partners was actually amused by such a cloak and dagger payoff and casually mentioned it to one of the junior partners.

He was the one who suddenly screamed, "Have you ever heard of money laundering?" And the deal was immediately killed.

In the United States today, the three trades reporting the largest amounts of cash income are car dealers, real estate agents and lawyers.

*****

Many lawyers argue that by grouping attorneys with all other businessmen and requiring them to put the name of a cash paying client on the IRS Form 8300, the government has found a way around attorney-client privilege.

John Zwerling, a partner in the Richmond Virginia firm of Moffitt, Zwerling and Kemler happens to be one of them. "Our system is founded on an individual’s right to seek counsel. So putting a client’s name on the IRS Form 8300 is perhaps not a problem for a person who’s willing to have the Government know that he's gone to see a lawyer. But, for someone who decides that he doesn’t want every IRS agent, every Assistant US Attorney, every bureaucratic cop in the federal system to know his business, in the end, he may choose not to seek counsel. By threatening attorney-client privilege you strike at the heart of the right to seek counsel."

An obvious argument is that in a criminal defense practice, people who come bearing cash to seek counsel are probably criminals who have obtained that money through criminal procedures. And they should not be permitted to use their ill-gotten gains to further their own defense. Despite the arguments of lawyers who claim that the Constitution guarantees representation by the Counsel of your choice, it says no such thing. And under our system, anyone who cannot afford Counsel, whether it be of his choice or not, is guaranteed Counsel by having one appointed to serve him.

Zwerling however does not quite see it that way. "There are a lot of people who have cash. Retailers have cash. Restaurateurs have cash. There are a lot of people in this country who don't use banks. Or, if they do, they only use banks minimally, so they can write checks to pay the rent. They keep the rest of their money under the mattress. It may be not very bright but they do it because they’re afraid of losing their savings in a bank. Why shouldn't they be able to pay in cash without inferring that they're criminals?"

A criminal defense lawyer’s first responsibility is, quite plainly, to provide competent, legal counsel: To stand up on his client’s behalf; to make sure that any evidence presented against his client has been lawfully obtained; to make certain that the Government’s proof is adequate; to assure that his client’s side of the story is presented in a meaningful way; and if his client is convicted, to see that the sentence is no greater than is required under the law. Zwerling argues that the government’s use of the IRS Form 8300 where it pertains to lawyers, is putting the entire system in jeopardy because it becomes a weapon with which the government can turn a lawyer against his client.

In May 1990, the FBI busted a 35-year old, northern Virginia auto mechanic named William Paul Covington for drug trafficking. In the course of the investigation, they obtained seizure warrants for a safe deposit box, several vehicles and Covington's residence. To defend himself, Covington hired a local law firm. But in July 1991, the FBI hit Covington with another series of search and seizure warrants, which got them into several of his bank accounts. At that point, Covington decided to seek new counsel. Claiming that the government had scared his lawyers out of the case, he approached Moffitt, Zwerling, Kemler.

When William Moffitt and John Zwerling met with Covington, he explained that as the target of a federal cocaine investigation, many of his assets had already been seized by the government based on probable cause. He admitted to them he’d dealt cocaine since 1985 but insisted it was always small quantities. He claimed that the government's allegations against him were drastically overstated.

During that initial meeting, which took place on Wednesday, August 21, 1991 and lasted nearly five hours, Moffitt and Zwerling asked extensive questions about Covington's background. He told them that since 1970 he had been steadily employed as a mechanic and had earned substantial sums of legitimate money. He said his father had always advised him to keep a nest egg of cash, something for a rainy day, so he’d hoarded cash all his life. He referred often to times pre-dating any drug trafficking when he had as much as $100,000 in his safe deposit box, all of it legitimately earned. That’s about when Covington asked if he could pay Moffitt and Zwerling in cash.

The lawyers responded that cash would only be acceptable under three conditions: First, the cash would be deposited in a bank so there would be a record of it. Second, they would comply with the law and file an IRS Form 8300 reporting the transaction. While they would not name Covington as the source of the cash, claiming attorney-client privilege, his identity might have to be disclosed if the government petitioned the court to know it. Third, they would not accept drug money.

The next day, Thursday, Moffitt and Zwerling informed Covington that their fee to defend him would be $100,000. He handed them a down payment of $17,000 in cash and returned Friday with a further $86,800 in cash. Myth has it that Covington delivered the cash stuffed in a Ritz cracker box. Zwerling recalls it was, instead, a shoe box. In any case, the lawyers deposited it in their bank on Monday, the 26th, and filed the required 8300 Form a week or so later. Keeping their word, they did not name the source of the cash.

Meeting with the prosecutors, Moffitt and Zwerling were able to establish several critical points: That Covington did indeed have access to large amounts of legitimate cash through his business; that he had always hoarded cash; that he’d been a nickel-dime dealer; and that the assets already seized from him more than covered the amount he most probably earned from drug dealing. They then set about trying to get their client a deal. But the government insisted that Covington admit to distributing l5-50 kilos of cocaine, which he refused to do, maintaining his position that the actual quantity was significantly lower. When the negotiations failed, a grand jury indicted him.

Two weeks into October, the government monitored a conversation with Covington's girlfriend where he discussed the cash payment to Moffitt and Zwerling. Immediately, the prosecutors dipped into an IRS database and found the law firm’s CTR. With just six weeks to go before the trial was scheduled to begin, the government served a subpoena on Moffitt and Zwerling, demanding to see the firm's fee records relating to its representation of Covington. They threatened felony tax prosecution against the lawyers for having withheld client-identifying information from the IRS Form 8300 and, unbeknownst to the lawyers, executed a search warrant for the firm’s bank records.

Immediately, Moffitt and Zwerling retained separate counsel for Covington, for the law form and for all three principals of the firm. They then filed motions to quash the subpoena and moved to order withdrawal of the threatening letter. In response, the prosecutors sought approval from the Department of Justice Asset Forfeiture Office to claim back the $103,800 fee Covington had paid Moffitt and Zwerling, claiming it was drug money. Approval was granted by that office, which is merely a formality, so they filed against the firm. Moffitt and Zwerling quickly filed a defense.

In the meantime, the subpoena was quashed and the threatening letter was withdrawn. But the damage had been done. The government had successfully set up a series of smoke screens, which not only prevented Moffitt and Zwerling from properly defending their client, it created a situation where Moffitt and Zwerling could be called as witnesses against to testify about cash against the very person who’d come to them for help. The government had used the IRS Form 8300 and the attorney-client privilege issue to drive the defense attorneys out of the case.

On July 16, 1992 the government asked the court to disqualify the law firm. Four weeks later, Moffitt and Zwerling were officially removed from the matter. Shortly thereafter, Covington pleaded guilty and was sentenced to 21 years. Moffitt and Zwerling were now in an even more dangerous situation.

Once a person is convicted under the sentencing guidelines, there's only one avenue for him to take to get the sentence reduced. It’s called, "substantial assistance to the Government." In other words, that person is invited to sit down with the prosecutors and say, "I will help you make a case against another human being, and in turn you will reduce my sentence." So go after their friends, their family, and sometimes, their attorney. And if cash has been involved in a criminal defense --- which the government can determine through the IRS Form 8300 --- especially drug related crimes, the convicted man’s lawyer has to worry that he’s going to be the next defendant because his former client was trying to get his sentence reduced.

Which is exactly what the government did in this case. They offered Covington a chance to reduce his sentence by convincing him to help them in their fee forfeiture case against Moffitt and Zwerling. The courts have proven reluctant to order the entire fee forfeited, the government has scored points in every round. Moffitt and Zwerling continue to appeal and promise to do so up to the US Supreme Court.

Several questions lie at the heart of the matter. Can a drug dealer use illicitly obtained funds to pay for the counsel of his choice? Apparently not. Is it a breach of attorney-client privilege if the attorney is forced to divulge the nature and/or source of his fees. There are those who argue it is. Would the government have been able to split Covington away from his lawyers had he paid for their legal services with a check? Clearly not. Has the government violated any of Covington’s rights by using the IRS Form 8300 to get around attorney-client privilege? The American Civil Liberties Union seems to think even if they didn’t, at the very least, they’ve taken a very dangerous step in that direction.

In a brief submitted as a friend of the court, the ACLU held, "If the government can unilaterally inject fee forfeiture into a criminal case in a manner that leads to defense attorney disqualification, the government can improperly deny an accused the constitutional right to counsel of choice in cases the government selects."

Adds Zwerling, "We don’t believe that the Department of Justice has the ability, in and of itself, to void the language that’s on every dollar bill in the United States where it says, this is legal tender for all debts, public and private."

In fact, the law does permit exemptions for lawyers under "special circumstances" from naming a cash paying client on the IRS Form 8300. But the law does not spell out what those special circumstances should be. Although there have been some dissenting opinions among attorneys, the profession as a whole continues to voice concern over the matter. The American Bar Association, along with the National Association of Criminal Defense Lawyers, has met on several occasions with the Department of Justice and the IRS, asking them to stop this. But so far, the government has refused to budge. Some lawyers hope that, eventually, the law requiring a cash paying client’s name will be struck down as unconstitutional. But so far, the Supreme Court has declined to take an IRS Form 8300 case. Although, the Justices often watches how an issue is treated in the lower courts before they look at it.

At the end of 1995, the government brought out a revised IRS Form 8300, making it shorter and slightly easier for banks to use. But it did not make any sort of gesture towards attorneys. And therein lies another contradiction. Generally, it is the honest lawyer who fills out the form and then refuses to disclose the identity of his client. He’s the one reporting the information, telling the IRS about it, ethically trying to live up to the responsibility of keeping a client's confidence. It's the unethical lawyer who tells the Government what he knows about the client in direct conflict with attorney-client confidentiality, or the lawyer criminal who doesn't fill out the form.

Case in point: The number of IRS 8300 Forms filed for the cash transactions that the six indicted Miami lawyers made on behalf of the Cali cartel: none.

*****

Chapter Nine

BRINKS-MAT MELTDOWN

"Gold has no conscience."

--- Detective Chief Superintendent Brian Boyce, Scotland Yard

Shortly before dawn on Saturday morning, November 26, 1983, armed hoodlums broke into the heavily fortressed Brinks-Mat warehouse at Unit 7 of the International Trading Estate, less than a mile from the main runway at London’s Heathrow Airport.

With great expertise, they neutralized the guards, handcuffing them, hooding them and binding their feet with masking tape. Then, with gruesome brutality, they terrorized the guards, pistol whipping them, pouring petrol over them and holding lit matches close enough to make them believe they were going to be torched. The gang threatened carnage unless the guards barked out the numbers they'd memorized for the locks that would open the underground vaults.

One hour and forty-five minutes later, the gang was gone. With them went 6400 gold bars, which is three and a half tons worth.

The price of gold on the London market had closed the night before at around $357 an ounce, valuing the booty at just under $40 million. The following morning, when the size of the haul got out, gold jumped $18, giving the thieves an additional paper profit of $2 million.

Although Scotland Yard never established whether there were six or eight men in the gang, within two weeks four of them were in custody. A year later, three of those four were in jail.

One was Mickey McAvoy, a 38-year-old professional thug known in the milieu as "The Bully." Another was 41-year-old Brian Robinson, a professional criminal whose organizational abilities had earned him the nickname "The Colonel." As the reputed masterminds, and for the depth of their barbarity, they were both sent away for 25 years.

The only thing they had to look forward to was the gold.

A year after the largest heist in British history, the police hadn't found a single ounce.

*****

Brian Perry ran a mini-cab agency in east London. Although he'd associated with villains for most of his adult life, he'd never run seriously foul of the law. John Lloyd also dwelt on the periphery of the crime world. He was even living with an archetypal gangster's moll, a woman named Jeannie Savage, whose first husband had been sent down for 22 years for armed robbery. They were the ones McAvoy trusted to make sure that his share would be waiting for him when he got out. To help, Perry and Lloyd brought in a crony of theirs called Kenneth Noye.

Stocky, 36 years old, with a boxer's build and a broken nose, Noye pretended to be a self-made success with interests in haulage and building. But most of the time he dealt in watches and jewelry and, unlike Perry and Lloyd, he had a record for receiving stolen goods, shoplifting, assaulting a police officer and gun licensing violations.

One of his pals was John Palmer, a 34-year-old jeweler who, some years before, had set up a gold bullion dealership in Bristol called Scadlynn Ltd. Noye brought Palmer in to use Scadlynn.

However, before he could ship any gold to Bristol, he needed to distance it from the robbery by making the serial numbers disappear. As Palmer had a tiny smelter at home, Noye convinced him to recast each bar. The gold would then be melted again at Scadlynn, mixed with copper and silver coins, and made to look like scrap. From there, it would be forwarded to the Assay Office where each bar would be weighed, taxed and legitimized. Scadlynn would then be free to sell it to licensed bullion dealers who would melt the impurities out and market it.

As an extra precaution, on Tuesday, May 22, 1984, Noye flew to Jersey, in the Channel Islands, to purchase 11 one-kilo gold bars from the Charterhouse Japhet Bank on Bath Street in St. Helier. He did not explain to anyone there that he’d settled on 11 kilos, just over 24 pounds, because he could comfortably carry that much in an attaché case. However, he said he would not accept any gold with certificates that included serial numbers. Once the bankers assured him that serial numbers were not recorded on the certificates, he left a $75,000 cash down payment and promised to forward the difference from London.

Eight days later, with the balance paid, Noye returned to St. Helier, picked up his gold, walked five minutes down the block to the New Street branch of the Trustee Savings Bank, rented a safe deposit box and stored all 11 bars there. He came home to England that afternoon with the non-serial-numbered certificates.

Now he began transporting McAvoy’s gold to Scadlynn, taking exactly 11 re-smelted bars per journey, bringing the Jersey paperwork along as insurance, in case the police ever stopped him and asked where he got this gold. Without realizing it, though, he'd been clumsy in his caution. His preoccupation with serial numbers aroused suspicions at Charterhouse Japhet and a banker there notified the local police. On Noye's second visit he was followed. And the Jersey police told their British counterparts about the gold in the safe deposit box.

Scadlynn sold the re-melted gold at the going scrap rate plus Value Added Tax, which stood at 15 percent. For their trouble, they would keep the undeclared VAT. The money from the scrap was deposited at a local branch of Barclays Bank, then withdrawn as cash, stuffed into black garbage bags and trucked to London.

Over the next five months, Scadlynn paid Noye, Perry and Lloyd in excess of $15 million.

Using a false passport in the name of Sydney Harris, Noye deposited his share at a Bank of Ireland office in south London, where it was wired immediately to a Dublin branch. McAvoy's girlfriend, Kathy Meacock, did the same thing on alternate days. So did Jeannie Savage.

If anyone at Barclays or the Bank of Ireland was in the least suspicious, they weren't troubled enough to tell the police about it.

*****

Brian Perry also had a mate named Gordon John Parry, a thick-set ex-convict who was trying to make a living in the property business. So Perry brought in Parry, and Parry brought in Michael Relton, a crooked lawyer who'd unsuccessfully defended him on a drug trafficking charge. Parry wound up doing three years.

With Relton's help, Parry deposited $1,190,250 from Scadlynn into a Bank of Ireland branch in southwest London. The money was then wired offshore to the bank's office in Douglas, on the Isle of Man. Next, Parry convinced his wife's cousin to help and she used the bank to send $750,000 to the Isle of Man. Other deposits followed, bring the total washed through that branch to $2.25 million.

To confuse anyone who might attempt to follow the paper trail, Parry brought some of the money back from the Isle of Man, re-deposited it and sent it offshore to yet another bank.

And all this time, Noye continued to deliver gold to Scadlynn, 11 bars per journey. And all this time Scadlynn kept melting it down, selling it as scrap and sending the cash to London.

In early August 1984, Relton helped Parry opened an account at the Hongkong and Shanghai Bank in Zurich where they deposited $1.26 million. A week later, an unidentified man showed up at that bank's headquarters in the City of London with $750,000 jammed into a sports bag and instructed the bank to forward it to Zurich.

Two weeks after that, over a three-day period from Wednesday through Friday, August 29-31, Perry, Parry, Relton, a jeweler named John Elcombe who was Parry's friend, plus Elcombe's wife Ann, all found themselves in Zurich. Although they later claimed it was nothing more than coincidence, each of them opened accounts at the same branch of the Hongkong and Shanghai bank. A total of $735,000 was deposited between them, bringing their Zurich holdings to just under $1.5 million.

And the coincidences continued. On Thursday, August 30, Perry and Parry went to nearby Vaduz, Liechtenstein, where they each opened an account with $67,500 cash at The Bank of Liechtenstein. They even co-signed for each other's account. But instead of numbers, the accounts were given names. Parry called his "Glad," after his mother, Gladys. Perry called his "Como," an homage to his favorite singer.

Parry now purchased an off-the-shelf company in Jersey called Selective Estates and opened an account for the company at Barclays in Guernsey, wire transferring money there from the Isle of Man. Selective Estates sent it on to the Hongkong and Shanghai in Zurich, where Parry opened a second account, this one called "Burton," his tribute to Richard Burton who'd just passed away.

The following month, Elcombe deposited $97,500 in a Zurich account, for which Parry was a co-signatory. The same day, Parry walked into The Bank of Liechtenstein with a case he believed to contain $600,000. When it was counted, he was surprised to find the amount was $750,000. On September 24, Elcombe put $652,500 into his account, topping it up on December 4 with an additional $960,000. Scadlynn was proving to be a cash cow beyond anyone's wildest imagination. It got to the point where they were moving so much money that Barclays had to bring in extra tellers just to deal with Scadlynn's business.

If this was Mickey McAvoy's money, you couldn't prove it by the way everyone else was living on it.

*****

Tipped off by the Jersey police, Scotland Yard put Noye under surveillance. After observing him in the frequent company of Brian Reader, a wanted criminal whom they’d believed had been hiding in Spain, they brought in C-11, a specialist unit used exclusively for top secret, close-target reconnaissance.

Early on a cold and dark Saturday evening, January 26, 1985, two officers scaled the perimeter wall of Noye's house and positioned themselves to spend the night in the grounds. One of those officers was John Fordham, a nine-year veteran of C-11. But sometime around 6:25 pm, one of Noye’s rottweilers discovered Fordham. Two more dogs joined the commotion. That's when Noye arrived, possibly with Reader. And Noye was carrying a four inch knife.

Fordham's body was recovered with 11 stab wounds, mostly in his back. Noye was immediately arrested, Reader was picked up a few miles away. And the two were charged with murder. Noye pleaded self-defense. Reader claimed he wasn't involved at all. And to the utter astonishment of the police, 10 months later, a jury acquitted both of them.

However, a small cache of gold bars was found at Noye's house, which was enough to link them with the Brinks-Mat gold. Noye and Reader were charged with conspiracy to handle stolen goods. Within three days, the police also arrested Palmer and Chappell and moved in on Scadlynn.

*****

John Elcombe knew nothing about Fordham's killing. He and his wife had left London for Switzerland that Saturday, driving Parry's Mercedes with $1,065,000 hidden in the trunk. They'd already made one trip to Zurich that year to deposit $679,500.

Crossing into Germany from Holland, a guard on the Aachen side asked if they had anything to declare. The Elcombes admitted to carrying $67,500 in cash, claiming to be taking their life's savings to Switzerland. The guard studied their passports, lingered over the vehicle registration papers, then announced he wanted to search the car. He opened the trunk, pulled up the carpeting on the floor and found the cash. The Elcombes were officially detained for questioning.

The money was piled on top of a desk inside the shack at the border crossing, and counted. For some reason, the guard took it upon himself to write down the serial numbers of random bank notes. Then he notified his headquarters in Wiesbaden, asking what they wanted him to do. They notified the German Interpol office who telexed British Interpol: Are you looking for either John or Ann Elcombe? Have large amounts of currency recently been stolen? And, is the Mercedes being held at the Aachen border on the stolen car register?

British Interpol passed the questions to the duty officer at Scotland Yard who made a fast check. The answer to all three questions came back, no. So Scotland Yard informed British Interpol, who informed German Interpol, who passed the information along to German Customs, who finally rang the border guard near Aachen. The money was loaded back into the Mercedes and the Elcombes were allowed to drive away.

That might have been the end of that, had an officer on the Scotland Yard duty desk not noticed that Elcombe's car was registered to Gordon John Parry. That name rang a bell. But it was much later before he realized it was associated with the Brinks-Mat inquiry. He phoned the Brinks-Mat situation room and when the officers there heard what had happened, they begged British Interpol to ask German Interpol to arrest the Elcombes. But by now, the couple was long gone.

Clearly shaken by the close call at the border, the Elcombes took their time getting to Zurich. It wasn't until the following Friday, February 1, that John Elcombe deposited $150,000 into his account and $912,000 into a new account, this one known by the number 720.3. The $3000 difference between what they took out of England and what they deposited in Switzerland was for expenses, including one night to settle their nerves in the royal suite of the Dolder Grand Hotel.

Three days later, on Monday February 4, someone deposited $740,955 into Parry's "Glad" account. One week after that, Elcombe transferred $2.4 million from his account into 720.3. Then, Parry closed his "Glad" account and moved that money into 720.3, bringing the total there to $3.9 million.

*****

Michael Relton was just as busy as everyone else. On Friday April 26, he arrived in Liechtenstein to create a "Red Cross" account.

Nestled between Switzerland and Austria, the principality is 62 square miles of lush valleys, skiable mountains and high tech factories that produce precision instruments, false teeth and postage stamps. On National Day, the ruling prince invites the whole country up to his castle for drinks.

The capital, Vaduz, is a cluster of hotels and souvenir shops. Any tourist who wants to have his passport stamped, as a keepsake of his visit, has to do it at the post office because there’s no one to do it at the border. There is no railroad station, only one supermarket and a single traffic light. There are, however, dozens of banks.

In fact, banking, and the resident company formation agents who introduce clients to those banks, generates enough revenue to assure that taxes are low, that the national budget is balanced and that the 30,000 natives enjoy one of the highest living standards in Europe. And the reason is simple: Banks in Liechtenstein are just as secret as they are in Switzerland, and in some cases, even more so.

The local specialty, formally referred to as a "foundation account" appears to be controlled by an organization, often with the name of a charity, hence the "Red Cross" reference, suggesting that the money on deposit is destined for some good cause. Administered by a local attorney to insure a double level of secrecy, a charity may be the named beneficiary but the beneficiary is not necessarily the beneficial owner of the account. Such is the iron-clad nature of a Red Cross account, that anyone lying about their beneficial ownership will get away with it every time because it is impossible to prove otherwise.

Lawyer Relton knew the ins-and-outs of Red Cross accounts and named his the Moet Foundation, referring to his favorite champagne. However, someone must have misunderstood because the bank spelled it Moyet. In any case, Relton and Parry put $4,751,113 there.

Unfortunately for them, Parry had just bought a farm outside London, paying Credit Suisse with monies drawn on the 720.3 account. In his haste to move funds to Moyet, he hadn't bothered to find out if the check had already cleared, which it hadn't. So when Credit Suisse presented the check to The Bank of Liechtenstein, it bounced. But because a manager at The Bank knew where the money was, he took it upon himself to transfer the necessary funds back from the Moyet.

Had Parry not bounced that check, the police would never have been able to penetrate the secrecy of a Liechtenstein Red Cross account and associate the Brinks-Mat hoodlums with that money.

*****

In the 15 months that separated the robbery and the killing of John Fordham, the gang controlling the gold had gotten through almost $32 million. What none of the gang members knew was that the Metropolitan Police had, by this point, assigned 200 officers to the Brinks-Mat inquiry. The largest heist in British criminal history was being matched by one of the largest manhunts in British police history.

Unaware of just how close the police were getting to them, Parry and Relton began thinking about their old age, and embarked on a series of hefty real estate investments. They formed a subsidiary of Selective Estates, called Blackheath Ltd, and bought a residential development in Gloucestershire for $525,000. To finance it, Relton ordered the Hongkong and Shanghai Bank in Zurich to send $300,000 to the Southeast Bank in Sarasota, Florida, where he maintained an account. Southeast then wired $200,000 to his personal account at Midland Bank in London. From there, he sent $156,000 to the British Bank of the Middle East --- a subsidiary of the Hongkong and Shanghai --- which in turn wired the money to the lawyers acting for the sellers. Finally, Blackheath "borrowed" $375,000 from the British Bank of the Middle East, the loan being guaranteed with money in the "Burton" account.

Because that deal worked so smoothly, Parry and Relton kept doing it, investing another $3.3 million in residential property, now adding Jersey, Guernsey and the Isle of Man to the washing cycle.

Spinning money around six countries, Relton believed that even if the police somehow stumbled onto them, they’d need to identify a dozen secret bank accounts. Then, they’d spend years trying to obtain court orders in six different jurisdictions to open those accounts. And even if the cops got their cases heard, there was no guarantee that their requests would be granted. Relton was so utterly convinced they were beyond the reach of the law that he and Parry now took aim at London’s Docklands, at the time one of the hottest commercial developments in Europe. They bought New Caledonian Wharf, Upper Globe Wharf, Globe Wharf, Cyclops Wharf and Lower Kings and Queens Wharf, and in every case, their laundry cycle was basically the same. They borrowed money from one bank, secured it with money in other accounts, then moved that money through several banks, bringing it out to look like a legitimate loan secured by the property they were buying. In all, they spent just over $7.9 million in Docklands. After selling most of it at the height of the property boom, they more than doubled their money.

Intellectually equipped to play such lucrative games, Relton and Parry now formed a Panamanian company, Melchester Holdings, and sold a nightclub that Parry already owned, back to himself. They took $450,000 out of the "Burton" account and gave it to a solicitor acting for Melchester. He put it in his client account. When the paperwork was ready, the solicitor sent the money to Relton, for his client account. When the papers were signed, Relton passed the money along to Parry to complete the sale.

As if they hadn't already made enough on the deal, Melchester then sold the club to a friend of Parry's for $150,000, which wound up back in the "Burton" account.

*****

On Tuesday February 7, 1984, a man whose identity was unknown to the police, walked into a small merchant bank in the City of London with $456,000. His instructions were to send the money to the Mercantile Overseas Bank in Douglas, Isle of Man. Confirmation of the transfer was put onto Mercantile's books the following day. But, according to the bank, as no one there knew anything about this, the money was stored in a settlement account, which is a temporary home for monies that are waiting to be claimed. In this case, Mercantile Overseas named it Mangrove Settlement Account #691,343.

On March 2, a man calling himself Patrick Clarke purchased a $450,000 draft for cash at a Bank of Ireland branch in east London, made it out to John Lloyd. That same day, a Mercantile Overseas Bank officer in London received a phone call from an unidentified man, asking him to fetch the check at a hotel near the Tower of London. The bank officer later told police that he walked into the lobby where a total stranger handed him an envelope, said it was to be forwarded to Douglas, then walked away. Although there was nothing to suggest that the two deposits were in anyway related, it was held for safe keeping as Mangrove #691,343-B.

Twelve days later, on Wednesday March 14, Kenneth Noye sent $450,000 to Mercantile where it was called Belleplaine Settlement Account #690,227. On Monday, April 30, some 47 days after his first deposit, Noye sent another $450,000. By coincidence, it went into Belleplaine #690,227-B. A further $300,000 from Noye wound up as Belleplaine #690,227-C.

The bank later maintained it didn't know who any of this money belonged to.

That's when an even more curious thing happened. On Wednesday July 4, apparently at the bank's own initiative, $156,549 was moved out of Belleplaine and into Mangrove #691-343-C. On that Friday, the bank took a further $300,000 from Belleplaine and put it into Mangrove #691,343-D. Seventeen days later, an interbank transfer for $157,500 found its way into Mangrove #691,343-C2.

The following day, Tuesday July 24, Noye handed $300,000 in cash to the Royal Bank of Canada in London, which was acting as agents for Mercantile Overseas and not otherwise involved with this matter. He wanted it sent to Douglas. Mercantile automatically stored those funds in Belleplaine #690,227.

On Friday August 10, a man unknown to the police put another $300,000 through the Royal Bank of Canada and that became Mangrove #691,343-E. The last transfer, also from a man unknown to the police, was for $168,334 and became Mangrove #691,343-F.

When the police finally managed to unravel these transfers at the end of 1986 and got their hands on most of the money, they decided it belonged to Noye. But $1,462,500 was missing. The bank's explanation was that one day, in November 1986, a man calling himself Captain Schultz walked into the Douglas branch and demanded his money. Bank officials insisted they didn't know what he was talking about until he detailed the dates of his supposed deposits, the sums involved and the bank transfers he'd arranged. Because he was able to satisfy the bank that the money sitting in the various Mangrove Settlement Accounts was his, they followed his instructions and wired the money to Germany.

By that time, the police had arrested Relton, Parry and Noye, had frozen accounts in four countries in addition to the Channel Islands and the Isle of Man, had found $2.75 million stashed in Noye's Dublin account, but had somehow missed the $3.75 million Jeannie Savage had hidden there too. Her money stayed dormant for five years, accruing interest, cozily turning into $6.15 million, which is when the police found it. They also seized accounts for Brian Perry, Gordon John Parry, the Elcombes and John Lloyd, among others.

Assets totaling more than $33 million were recovered.

*****

Everything changed the night John Fordham was killed. A cop was dead so the Brinks-Mat investigation clicked into a higher gear.

One of the men suspected of having taken part in the burglary was a professional criminal named John Fleming who was on the lam in Spain. He’d been kept under surveillance and his phone was tapped, but in those days there was no extradition treaty between Spain and the UK. Fleming could have stayed right where he was, safe in the knowledge that he was untouchable. Except that his passport expired.

Because there was an arrest warrant waiting for him in London, renewing his passport at the local British consulate was out of the question. And, without a valid passport, Fleming couldn’t stay in Spain. He fled the country, heading for the Caribbean, with British detectives in tow, found no country willing to take him and tried Latin America. When that failed, he made the mistake of going to the States. Arrested on his arrival, Fleming sat in a Florida jail for several months, fighting extradition. Within hours of the judgment against him, he was handcuffed and bundled onto a plane for London.

Scotland Yard now believe that, had Fleming stayed in Spain, they would have had time to build a solid case against him. Unfortunately, they had to take him when the Americans deported him and at that point, they didn’t have enough to convince a jury that he’d taken part in the Brinks-Mat robbery. So the jury let John Fleming walk.

However, while eavesdropping on his phone calls in Spain, the police learned that Fleming had a business relationship with Patrick Bernard Arthur Diamond, a man who ran an Isle of Man company formation service called Comprehensive Company Management (Manx). On several occasions, the police heard Fleming ask Diamond to wire money to Spain. So now Scotland Yard turned their attention to Diamond and, with the cooperation of the Manx police, tapped his phone too.

None of the other people involved in the inquiry appeared to have ties with Diamond, although the police were able to establish that Diamond's sense of humor had a certain black tone to it. He'd recently formed companies, which were ultimately tied to the Brinks-Mat money, with names such as "G. Reedy Holdings" and "Inventive Inventories, Inc" They also discovered that he liked to party and came to London almost every weekend. Now, when he landed in London, officers tracked him. Most evenings, they followed him to nightclubs frequented by the underworld. Each of his contacts was carefully noted.

On one particular Friday night, Diamond checked into the Westbury Hotel on Conduit Street in London's West End, and met with a young American who'd registered there under the name of Stephen Marzovilla. When a check with the FBI failed to turn up any information about anyone with that name, officers moved into the hotel and tapped his phone too.

That Saturday night, when Diamond and Marzovilla left for the evening, one surveillance team followed them while a second went into Marzovilla's room. Two interesting items were found: a family tree, showing Marzovilla's occupation as a plumber and listing information about his wife and children, including their dates of birth; and, inside a secret compartment of his toilet kit, a pair of switchblade knives.

For the police, a family tree is a dead giveaway that a suspect is learning a new identity. They could therefore reasonably assume that Marzovilla wasn't his real name. As for the switchblade knives, the police decided they might come in handy later.

On that Monday, just before Diamond left for home, the police recorded a call to Fleming in which Diamond spoke about a visit later in the week from "The Pizza Man," a clear reference to Marzovilla.

Over the next five days, shadowing Marzovilla, the police located an apartment he kept in Chelsea and several safe deposit boxes he’d spread around London. When it was obvious he was going to leave for Spain, the decision was made to arrest him. But that had to be done with extreme caution. They didn't want to alert him to their interest in Diamond, Fleming or the safe deposit boxes. Nor did they want to admit that they suspected Marzovilla was not his real name. So they settled on a scenario that proved to be as unusual as their interest in him.

He left the hotel on Friday and took a taxi to Heathrow. He was allowed to check in for his flight to Spain and proceed to security. There, the police waited until his carry-on luggage went through the X-ray machine before pulling him aside. They explained something had shown up on the screen that didn't look right. He said he didn't know what they were talking about. They hand-searched his carry-on, got to his toilet bag and uncovered the switchblades.

While he was detained at the airport for attempting to carry dangerous weapons on board a plane, the police got a warrant to open his safe deposit boxes. Among the things, they found $100,000 in cash plus a US passport and driver's license in the name of Craig Jacobs.

That name was wired to the FBI and the response came back that Craig Jacobs was a known alias of Scott Nicholas Errico, a man who'd been convicted on two counts of drug smuggling but had jumped bail awaiting sentencing. A federal warrant was outstanding. Even more menacingly, Errico was also wanted by the FBI on three counts of murder.

Still not tipping their hand, the police charged him with possession of offensive weapons at an airport, strapped him in chains and provided a huge armed escort to move their prisoner from Heathrow back to Central London. In fact, there was so much fire power visible, even Marzovilla couldn’t help but remark that it was an awful lot for one guy with two small knives.

By the time they got to Cannon Row police station, he suspected that they were on to him. When they took him to be fingerprinted, he refused to cooperate. And over the next two days, he resolutely stuck to his story: I'm a plumber named Marzovilla.

He put the police in a minor quandary. They needed to prove what they already knew, that Marzovilla was Errico. The best way to make their case was through fingerprints, but they couldn't force him to cooperate without tainting the evidence. That's when one officer suggested a gag so simple-minded that the others on the case thought he was totally out of his mind. It a stunt cops pull in bad movies, and even then it doesn't usually work.

Yet the officer insisted he wanted to give it a try. So after a particularly long interrogation session, the officer asked Marzovilla if he wanted a cup of coffee. Marzovilla said yes. But a few seconds later the officer reappeared to apologize that the kettle wasn't working. I'm sorry, he said, how about a glass of water instead? Marzovilla said thanks, took the glass, drank from it and put it down on the table.

The instant he did, the officer grabbed it. Just as quickly, Marzovilla knew he’d been had.

Forensics lifted a perfect set of prints off the glass and the FBI now confirmed Stephen Marzovilla, alias Craig Jacobs, was in reality a fugitive contract killer named Scott Nicholas Errico.

Although he fought extradition for more than 18 months, claiming that the murders he'd been accused of had taken place on a boat outside US territorial waters, the courts didn't see it Errico’s way. He was shipped back to the States, found guilty of murder and sentenced to life in prison.

By unraveling Errico's business dealings, he and Diamond owned a company together called Castlewood Investments, the police were able to open all of Diamond’s books. That uncovered Diamond’s dealings with a Miami attorney named Michael Levine. Evidence that Levine was tied into Colombian traffickers was quickly passed on to the DEA. And once the DEA was able to get inside Levine’s bank accounts, they found records to show that Diamond was Levine’s laundryman.

Diamond’s method was classically simple. He would fly to Miami carrying a bearer check, drawn on one of his many companies for the sum of $250,000. As US Customs requires anyone coming into the country with cash or bearer instruments worth more than $10,000 to report it, he would fill in the proper forms to declare the check. Once he had a stamped copy of the form to prove that he'd brought money into the country, he'd destroy the check. Levine would then give him $250,000 in cash to carry out of the country. On the odd chance that Customs might stop him, Diamond had the proper paperwork to back it up.

Over the course of several years, Diamond washed Levine’s cash through 90 companies. He also spent some of it for Levine, purchasing Strangers Key, a small Bahamian Island. Although, when Levine discovered it wasn’t large enough for an airstrip, making it too small to be used for smuggling drugs, he sold it. Diamond was arrested in March 1986 and admitted his involvement with Fleming. He also admitted laundering $19 million for Levine. Facing life in prison, Diamond testified against his former pals. For his role in the Brinks-Mat affair, Diamond was sued by the US Government under the RICO statutes which allow for treble damages. Because the Brinks-Mat gold was worth $40 million, the judgment against him came in at $120 million.

In all, a dozen separate cases fell under the auspices of the Brinks-Mat investigation, which resulted in 29 arrests. The trials were, however, marred by jury tampering and death threats. In one case, four separate juries needed to be convened, and each time, the jury had to be protected.

Most of the gang went to jail. Noye got 14 years, Parry got ten, Perry got nine, Relton got 12, Jeannie Savage got five. They were all eventually released. Noye, who only served seven, was subsequently convicted of a murder unrelated to Brinks Mat and is now serving a life term. Mickey McAvoy and Brian Robinson were both released in 2000, after serving their 25 years. Both claimed that they never received any of the money they'd entrusted to others. By coincidence, four of the men investigated for their part in the laundering of the gold, have been executed, gangland style, including Perry, who was supposed to look after McAvoy's share and clearly didn't.

*****

There is a very odd postscript to this story.

During the American off-shoot of the Brinks-Mat investigation, the DEA seized $380 million. To say thank you to the Metropolitan Police, the US government made out a check for half of that. It's called asset sharing, and it’s done to encourage international cooperation. However, there’s string attached. Although the recipient is welcome to spent the money on anything --- equipment, weapons, training, ongoing operations --- it must, in some way, contribute to the war against drugs. The idea is to use drug traffickers’ assets to beat drug traffickers. But the British balked.

As one senior official put it, "The Metropolitan Police mustn't be seen to be bounty hunters." So instead of going to the police, a ruling came down from somewhere in Whitehall that the money had to be deposited with Treasury.

No, the Americans said, that's not the way the deal works. It goes to the police and they have to spend on the war against drugs.

Frantic meetings were held at the Home Office.

Come on, the Americans urged, you're free to interpret the criteria we’ve set down in lots of different ways. You can do whatever you want with the money, as long as it satisfies the single objective of the asset sharing program, to put the criminals own assets to use against them.

After months of bandying about, the British decided they could not accept the gift unless it was given unconditionally.

So the Americans said, sorry, and went home with their $190 million.

*****

Chapter Ten

THE ADVENTURERS

"Laundering methods keep changing to stay ahead of the authorities and the good guys are overwhelmed by the size of the problem."

--- US News and World Report

The poor bastard used to have a real name, but in November 1986, after he showed up at the DEA office in Seattle, Washington, with a story to tell, they christened him CI-#1. And, once the DEA awards you Confidential Informant status, you are forever known by your number.

CI-#1's story began: over the three-day period --- from Monday August 25, 1986 through Wednesday the 27th --- two brothers from Los Angeles were running a gang that smuggled 23 tons of high-quality Thai marijuana into the United States.

CI-#1 said: two local fishing vessels, escorted by a surveillance plane loaded with radar equipment to protect them from intervention by US Customs, rendezvoused with the mother ship several hundred miles off southwestern Alaska, and brought the product ashore in Anacortes, a commercial salmon port 60 miles north of Seattle. The shipment was so large it filled two tractor-trailers and the same brothers were now planning a much bigger haul for summer 1987.

CI-#1's story ended: I didn't get paid what they promised me and I'm looking to get even.

So Special Agent Gary Annunziata gave him his chance. He wired CI-#1 for sound and sent him back into the smuggling business.

*****

Bill and Chris Shaffer were in search of adventure.

As kids, they'd lived in London because their old man worked for the US Navy, but after high school, in 1963, Bill went back to America, got himself a degree from Penn State and a job teaching school in New Jersey. Chris stayed in Europe for a while, running around with a girlfriend. When they were able to put some money together, they bought a sail boat and headed for Australia. There they worked charters until they could buy an 80 foot sloop. Slowly but surely, their charter business turned into amateur smuggling. They made a few runs, brought in some dope and picked up some fast money. It worked well the first few times so they kept doing it, fetching bigger loads each time. In the meantime, Bill gave up his teaching job, dealt a little cocaine in Florida and wound up in Los Angeles. He continued dealing drugs because it was fast money with very little risk, an easy way to get through life while trying to maneuver his way past the periphery of the film world. By the time Chris came back to the States in 1983 and joined up with big brother in LA, they both knew a lot about the drug business.

The Shaffers told people they were treasure hunters, marine salvage experts who went in search of sunken galleons. Chris even set up a company in Britain, China Pacific Films, to fund their salvage work. In reality, all it did was finance a ship for smuggling. By January 1985 the Shaffers had raised enough money to pay $1 million for a fishing vessel out of Hawaii called the Six Pac. Along with the boat came its captain, a former British merchant mariner named Terry Restall.

It was a fortuitous encounter. Restall had been smuggling hashish for years and was savvy to the ways of the drug world.

Within two months, the Shaffers sent Restall into the Gulf of Thailand, where he was met by two Vietnamese fishing boats and took on board seven tons of marijuana. Restall brought the product to a rendezvous point 600 miles off the coast of San Diego, California, where it was transferred to a fishing vessel called the Pacific Rose and eventually brought ashore near Santa Cruz.

On his next trip, Restall returned with eight tons.

Early in 1986, the Shaffers invested in a shipment that they weren't transporting, five tons of product, which was seized by US Customs near Hawaii. It shook the brothers into realizing just how vulnerable they were.

Suddenly worried that the authorities might be watching them, Bill and Chris went looking for a vessel that had never before been used in any American smuggling operation. They found the Niki Maru, a 110 foot oil supply ship, sitting in Japan. They bought it, then spent $300,000 converting it to look like a Japanese fishing boat.

It was the Niki Maru that brought in the 23 ton shipment.

*****

In February 1987, thanks to CI-#1, Annunziata learned that the Shaffers had purchased a big fishing boat in Seward, Alaska, the Stormbird, which they’d brought to Seattle to be converted for smuggling. For the next seven months, the DEA patiently gathered evidence on the Shaffers, until September when the refitted Stormbird slipped out of port heading for Alaska. That’s when the DEA decided it was time to arrest the entire gang.

But Bill Shaffer had developed a sixth sense, acute paranoia, and something told him he was being watched. He hastily acquired a new boat, the Blue Fin, then he put out the word that the load was coming ashore in Mexico.

Gullibly, CI-#1 relayed that story to Annunziata.

A Shaffer boat called the Manuia delivered the product to the Six Pac south of Hawaii, the Six Pac brought it to the Stormbird in the northern Pacific and the Blue Fin met the Stormbird south of Alaska. By the time the Stormbird arrived back in Anacortes on September 21, empty, the Blue Fin had already docked at Bellingham, 25 miles north, and unloaded 42 tons of marijuana.

And all the time, the DEA were looking towards Mexico.

*****

Because the drug business functions through its subculture, successful dealers move through the underworld, finding the people they need to know. People with access to product. People with access to boats. People with access to distributors. And specialists. People with expertise in buying, off-loading and money laundering.

The Shaffers worked their way inside this subculture. While Bill was clearly man in charge, he gave the orders and managed the financial side, Chris was the one who dealt with logistics and transportation. But they couldn't do everything themselves and over the years an organization grew up around them. It started out with friends and soon included friends of friends. The problem was, the larger the group, the more vulnerable they became.

Buying product in Southeast Asia put them in business with two of the world's largest dealers.

One of them was Brian Peter Daniels, an ex-pat American, from whom the Shaffers purchased their 1987 shipment. The same age as Bill, with the same taste for adventure and the same appetite for flashy women, Daniels lived in Thailand and for a time was a serious contender for the title of the world's most important marijuana supplier. In the four years between 1984 and 1988, Daniels is known to have smuggled several hundred tons of marijuana into the US.

Each bale of Daniels' product was tightly wrapped in heavy, dark blue nylon canvas, and bore the Eagle Brand sticker --- a white tag, with a crudely drawn blue eagle and the bold red words "Passed Inspection." Whether he was warning rivals, "This belongs to Brian Daniels," or he was just being pompous, the Justice Department isn't sure. There is some evidence to suggest that the Eagle Brand was never exclusive to him. What the Justice Department does know for certain is that Daniels couldn't possibly have operated on the scale he did without a lot of help.

The man whose title he was challenging was known in the States as Tony the Thai but referred to at home as "The Duck." Then in his mid-30s, although he looked older, he spoke good English and fronted his illicit trade with a small but successful empire in real estate, hotels and night clubs mainly in the northeastern province of Nakhon Phanom.

He was heavyweight champ, the man to know if you wanted to buy high-grade Thai marijuana.

He was also secretly indicted by a federal grand jury in San Francisco in November 1991 on charges of smuggling 45 tons of marijuana into the US, conspiracy and operating a continuing criminal enterprise over a 14 year period, between 1973 and 1987. That indictment remained sealed for three years, without his true identity being revealed, while the Feds looked for ways to lure him to the States where they could arrest him. When he failed to take the bait, they ripped a page out of the 1989 textbook kidnapping of Manuel Noriega --- which brought the Panamanian dictator back to Florida to stand drug trafficking charges --- and several plots were bandied about. The idea was to lure Tony out of Thailand and into a friendly place, such as Hong Kong, where US agents could bang him on the head and bundle him onto a waiting plane. But three years after the indictment, a newspaper in Bangkok broke the story that Thanong Siriprechapong, a member of Parliament, had been formally incriminated in the States. So the decision was made to unseal the order, publicly acknowledge that Tony was Thanong, and seize whatever assets he had in the States. Those holdings included a $1 million Beverly Hills home and a 1987 Mercedes-Benz.

Of course, Thanong protested his innocence. But the evidence against him was overwhelming enough that Washington demanded his extradition. It now appears that Thanong was not the only Thai politician moonlighting in drugs. The deputy leader of the Chart Thai party and the Deputy Finance Minster have also been named as suspects in drug cases by Washington. Like Tony, the other two also deny the charges.

The charges against Thanong were minutely detailed by members of the Shaffer gang. According to Restall, Thanong invited him to meet in Bangkok so that he could show the Shaffers what they were buying. When Restall arrived, Thanong personally took him into the jungle, north towards Chiang Mai. When they arrived at the Laotian border, no one asked who they were or what they were doing there. Now in Laos, they were met by a senior, uniformed police officer who escorted them to a heavily guarded warehouse where Tony had stashed 200 tons of high-quality dope.

The story came as now surprise to the agents who interviewed Restall, even though marijuana is not the main cash crop in this region, otherwise known as the "Golden Triangle." This is heroin country. About half the heroin sold on American streets originates in the opium fields of Laos, Burma (Myanmar) and Thailand. The triangle extends south through Bangkok and to the Malaysian border, with the Andaman and South China seas used as the gateways to regional markets. What’s more, because Thailand is a traditional cash economy, billions of dollars are easily laundered through banks, stocks and property.

There is sufficient evidence to maintain the claim that authorities in Thailand, Laos and most recently Vietnam have regularly turned a blind eye to the traffickers because they’ve paid handsome amounts of much-needed hard currency for the service. In some instances, men like Daniels, and certainly, Tony the Thai, have gotten into bed with those government officials. They are partners, having apportioned shares in the action to command their allegiance, along with the loyalty of local warlords, police chiefs and provincial governors. Marijuana coming out of Thailand and Laos, crossing Vietnam and shipped from Da Nang gets waved through every checkpoint as long as it bears the right label.

At the US Department of Justice, they read "Passed Inspection" to mean, everyone will get a slice.

The military is in on it, too. One shipment to the Shaffers was guarded by a uniformed Vietnamese Army detail during the off-loading in the Gulf of Tonkin.

*****

The money rolled in and the brothers set themselves up in several places around LA. They hung out in Malibu but rented houses all over town. Two of Bill's pals from his New Jersey days were Ed and Eileen Brown. She produced porn films and called herself Summer. At Bill's request, the Browns rented a big house in the North Helena section of fashionable Brentwood so that the Shaffers had a place to count their money. The Browns also rented a second house in the Hollywood hills, far enough away from the counting house, so that the Shaffers had a place to hide their money.

As wholesalers, Bill and Chris limited their dealings to two distribution groups, one in California, the other in New York. The LA distributors were an odd couple who came to be known as Greater and Lesser. Greater was a husky, ex-football player named Kenneth Tarlow. Lesser was his more diminutive pal named Dennis Specht. In New York, their client was known simply as Sonny. At the time, no one knew anything more about him than that.

The was Bill Shaffer saw it, doing business with Greater, Lesser and Sonny was no reason to trust them. So, whenever a payment was due, he sent his own people to pick it up, and mapped out for them deliberately complicated routes for the trip back to Brentwood with the money. Counted and boxed there, it was driven on another tortuous itinerary to the safe house in the hills. When enough boxes were piled high, the Shaffers would ask friends like the Browns to take the money to Switzerland.

Characteristically, Bill planned and compartmentalized everything down to the most minute details. People who worked for him knew only what they had to know to get their job done.

On October 20, 1986, he personally packed a motor home with 40 cartons from the safe house, containing $20 million in cash, and drove it to Salt Lake City, Utah where he was met by a small group of friends, including the Browns, in a chartered Gulfstream II jet.

He'd already gone to the trouble of forming a shell company called Bi-Continental Computers and printing business cards, complete with official titles, for each of those friends. He also handed out tiny lapel pins, which looked like company logos, so that no one could show up at the last minute and claim they'd been invited along.

Each of the 40 cartons was labeled "Computer Related Equipment," and the pilot's manifest reflected that. The next morning, when Shaffer's friends landed in Zurich, the pilot passed his manifest along to Swiss Customs. The boxes were taken off the plane and one of them was randomly opened.

To the utter horror of the Swiss authorities, instead of computer related equipment, they found neatly tied stacks of $20 and $50 bills. The officer in charge went wild, summoned the pilot and screamed, "You've declared computer equipment and we've find that your cargo is banknotes. Why did you make a false declaration?"

The pilot had no answer, so the officer in charge turned to the passengers and accused them of filing a false declaration. There was little the Browns could do but admit that they'd lied.

At which point the Customs officer explained, "We don't have any problem with bank notes but we do have a problem with computer equipment. Never, ever, ever file a false declaration again."

In a state of shock, the Browns and the others promised never to do it again.

Satisfied that they wouldn’t, the officer in charge allowed them to pile the cartons into a van and leave with it, as planned, for Liechtenstein.

*****

The DEA was looking the wrong way. When the Shaffers didn’t land their dope in Mexico, the case against them ground to a halt. Anyway, Annunziata had plenty of other bad guys to deal with, in particular, Brian Daniels.

It was two years later, during the Daniels investigation, when Annunziata discovered that the Shaffers had beaten the DEA with an end run. That 42 tons of marijuana had been off-loaded in Bellingham. In spite of the fact that the dope had since left the Bellingham area, and so had most of the suspects, an incensed Annunziata went to Assistant US Attorney Mark Bartlett, determined to reopen the case.

Then in his early 30s, the 5 foot 10 inch, dark haired, weight-lifting Bartlett was not what cops call "an ivory tower lawyer." He didn't hide in his plush office. He went on busts. He got his hands dirty. When Annunziata told him how much he wanted the Shaffers, Bartlett said okay and assigned it OCDEF status, creating an Organized Crime Drug Enforcement task force. To run it, Bartlett brought in Fran Dyer.

At 48, Dyer had already been in law enforcement 25 years. Boston born, with blond hair, about the same height as Bartlett but slimmer, he'd served with the US Air Force in counter-intelligence during Vietnam. He then spent five years as a Seattle detective before joining the Internal Revenue Service, Criminal Investigation Division.

Because they didn't have any of the smuggled goods to use as evidence, Bartlett and Dyer, and Gary Annunziata until he was transferred to Malaysia, needed to put together what the textbooks call "a no-dope conspiracy" case. To secure convictions, they'd have to build everything on testimony and support it with documents.

In textbooks, it's easy.

In the real world, it took more than three years.

*****

For the Shaffers, this adventure was turning out to be a very good one. Their 1987 operation netted them in excess of $35 million. In all, they'd earned somewhere around $60 million. And they'd managed to get most of it out of the country.

After the Zurich episode in October 1986, Bill arranged the flights to Switzerland in a different manner. The one constant being that neither Bill nor Chris ever flew with the money.

He’d met a fellow named Alex Major who ran a small chartered jet operation, and used Major to make the runs to Europe. On November 9, 1987, Major took one of his own planes with $11 million to Zurich. On December 8, he flew another of his own planes to Switzerland, this time with $8 million. Changing the routine, on January 24, 1988, Major leased a Canadair 600 jet to ferry $6 million to Zurich on a seven-day charter. Five friends accepted Bill's offer to eat, drink and be merry on the $130,000 jaunt. Just their in-flight food bill for caviar, smoked salmon and champagne came to $18,000. Major's fourth trip to Switzerland, on February 27, was to transport $6 million more.

The Shaffers had used brokers to set up shell companies in Liechtenstein and Switzerland, so whenever money arrived it was delivered to those brokers. The brokers made the actual deposits because Bill had decreed that neither he nor Chris should ever go to the banks themselves. Through those brokers, the brothers operated at least 17 different shell companies in Liechtenstein alone, with accounts in seven different banks. Other accounts were eventually located in England, France, Germany, Switzerland, Ireland and Austria.

Once the money was bedded down inside those companies, the brokers took instructions from the Shaffers to pay for stocks and shares and a mansion that Bill bought in Santa Barbara, California. The brokers paid for their art and their jewelry and the sports cars that they started racing around Europe. The brokers paid for the property they owned in England and to cover the walls inside those homes with Picassos and Warhols. Bill also bought himself an ocean-going yacht, for $1.2 million, through a shell company set up in the Isle of Man.

Spending the money was the greatest adventure of all.

Ironically, the boat was named for a pirate, the Henry Morgan.

*****

With the Shaffers living high on the hog in Europe, Dyer, Annunziata and Bartlett got together for the first time, 8000 miles away in Seattle, in November 1989.

After sorting through the mound of information that the DEA had already compiled, Dyer and Annunziata decided to begin at the bottom. They started rolling over the little guys, going after the boat crews, slowly but surely working their way up the ladder. It was six months before they felt they had enough on the Shaffers that Bartlett could take the fledgling case to a grand jury.

In April 1990, an indictment came back, charging Bill and Chris Shaffer, plus 27 others, including Terry Restall and the Browns, with conspiracy to import marijuana, the importation of marijuana and conspiracy to distribute marijuana. Bartlett also resurrected an earlier indictment in northern California that implicated Chris in a 1983 marijuana shipment. The Shaffers were now officially fugitives from justice.

Within a couple of months, Bartlett returned to the grand jury, adding more names to the list. By the end of 1990, he'd indicted a total of 47 people. At that point, he received a phone call from lawyers in Boston indicating that they were under instructions from two Shaffer associates, one of them being Restall, to strike a deal.

At this point, Dyer and Bartlett were convinced that they had a highly prosecutable case against the Shaffers, but getting Restall to testify would be a major bonus. So the negotiations began. Restall surrendered to Fran Dyer in January 1991 and, on the strength of the testimony that he was willing to provide, Bartlett agreed to ask the courts for a minimum of five but not more than ten years. Restall took the deal, knowing that, without it, he was facing 25 years.

Dyer and Bartlett now closed in on the others.

Passionate about cars, Dennis "Lesser" Specht drove a very special turbo-charged Ferrari Testarosa. One of only three ever made, it appeared on the cover of Road and Track Magazine. When it did, a source recognized it and Dyer was able to trace him through the magazine. Once he'd found Specht, it was easy to get Kenneth "Greater" Tarlow.

Dyer then learned that Sonny, a man in his mid-to-late 50s, once confessed to a Shaffer messenger that he’d always wanted to be in the movies. He said he never could make it in Hollywood, but had come close because a girlfriend who worked for an ad agency had gotten him a job acting in a television commercial. Dyer found out what the product was, contacted the company and discovered that Sonny's real name was Irwin Kletter. A warrant for his arrest was issued immediately.

The Shaffers didn't know it yet, but their days were definitely numbered.

*****

When CBS News went to Geneva in April 1987 to cover the Sotheby’s sale of the Duchess of Windsor's jewels, they interviewed some of the people present. At one point they turned their cameras on a blond guy in an expensive suit, drinking champagne with a gorgeous woman. When they asked his name, he seemed startled, and replied, "Bill Ryan." When they asked him if he was going to buy something, he told them "There are times when you just have to go for it."

Bill Ryan, of course, was Bill Shaffer.

And it turned out that both Bill and Chris were going for it in London. Now carrying several different passports, one of their British passports was in the name of an individual who'd passed away. Another was stolen. A third, this one German, was purchased by Bill, in broad daylight, for $50,000 cash, over lunch at the Serpentine Restaurant in the middle of Hyde Park from a self-proclaimed CIA operative.

*****

The instant he had reason to believe that there might be a UK connection, Fran Dyer turned for help to Scotland Yard.

Working through the Justice Department Attache at the US Embassy in Grosvenor Square, Dyer was put in touch with the Metropolitan Police International and Organized Crimes Branch in April 1990. Within a matter of hours, Detective Sergeants Rick Reynolds and Graham Saltmarsh were on the case. And for much of the next three years, the London-Seattle phone connection was in use for several hours every day.

It was Reynolds and Saltmarsh who tracked down and seized Terry Restall's assets, among them, an English country estate in Hampshire. It was Reynolds and Saltmarsh who went to see Bill Shaffer at his house in Alexander Square in South Kensington, only to find it empty. It was Reynolds and Saltmarsh who came within hours of arresting Shaffer less than half a mile from Scotland Yard.

In March 1991, Shaffer checked into a suite at Dukes Hotel, in the heart of Mayfair, using the name Alan Abill. Typically, playing the big spender, he was flashing a lot of money. Foolishly, for a fugitive on the run, his money was attracting attention. One afternoon, he asked the concierge to put $800 worth of roses in his suite. The concierge accommodated him. That night, Shaffer returned to the hotel with a fairly well-known British actress on his arm.

Suspicious that their client might not be who he said he was, someone in hotel security decided to make a discreet phone call to a friend at Scotland Yard. But the officer was on a stake-out and didn't return the call for two days. By that time, Shaffer had checked out.

By now, Reynolds and Saltmarsh had proof that false passports were involved. To help identify the names in those false passports, they turned to a BBC television program called "Crimewatch". Until then, the show had concentrated almost exclusively on British bad guys. But on Thursday evening, September 12, 1991, the Crimewatch presenters asked a huge viewing public for help in locating a pair of American bad guys and showed the country photos of the Shaffers. More than 70 people rang with varying degrees of information.

Ten of the calls made some sense. Two of the ten came from the continent. One of those two placed Bill Shaffer in Germany.

Although Bill now claims that life as a fugitive was a terrible experience, the search for him lasted another four months. It ended on January 15, 1992, in the bar of the Sheraton Hotel near Frankfurt Airport, where he was arrested by the Bavarian state police. When they grabbed him, he shrugged, "Congratulations. Today is your lucky day. You've won the big one."

Dyer and Bartlett hoped that they could bring him back to Seattle within a week. Except that Shaffer had other plans. He hired a local lawyer to fight his extradition, or at least somehow to delay extradition long enough to strike a deal. But neither Bartlett nor Dyer were in the mood to haggle. Shaffer held out as long as he could and wound up spending the next nine months under maximum security in a filthy, outmoded German prison. He was confined to his cell 23 hours a day. The single hour out was for recreation in a garbage-filled courtyard. The window to his cell was barred and there was no glass, which allowed in both the weather and odors from the courtyard. A single, 25-watt lightbulb burned continuously day and night.

When his appeals ran out, the Germans bundled Bill onto a plane, accompanied by US marshals. On the evening of September 16, 1992, the plane set down at Seattle's Sea-Tac International Airport. Dyer met him and tucked him safely away in tatty red coveralls at the Kent Corrections Facility, near Seattle.

He and Bartlett had indicted more than 45 people and had already obtained more than 40 convictions, most of them on guilty pleas. Now, they went after Chris.

Scotland Yard had tracked him to Ireland. The Garda were asked to arrest him but by the time they got to the house where he was believed to be staying, he’d fled to France. That’s about the time Dyer learned that that the Browns were in Paris, living just off the Luxembourg Gardens. Convinced they were in touch with Chris, he asked the French police to arrest them.

At 9 o'clock one morning, a police officer dressed as a workman knocked on the Brown's front door. Summer couldn't figure out what he wanted, so she turned to her husband. At that very moment Ed was on the phone with Chris. Ed said to Summer, "Let me get it," told Chris, "I'll call you right back," hung up and went to the door. As soon as he opened it, the workman stepped in, followed by several armed officers. The Browns were handcuffed and the police began a thorough search of the apartment.

Hiding in a small hotel five blocks away, Chris grew impatient waiting for Ed to call him back, so he dialed the flat. Aware that Bill was in custody, Chris later admitted, that he lived in a constant state of panic, changing his address every few days, forever looking over his shoulder. For whatever reason, the police chose not to answer the phone, which totally unnerved Chris. Immediately, he checked out of his hotel.

Stressed beyond breaking point, Chris soon got in touch with an attorney in the States and asked him to negotiate a surrender. Dyer and Bartlett agreed in principle to work out a plea bargain with him. And on December 16, 1992, almost three months to the day after his older brother was taken into custody, Chris made his way to Amsterdam and then on to Seattle where he too surrendered to Dyer.

Under the agreement, both brothers pleaded guilty to all charges. They also agreed to make a full and honest accounting of all the currency and assets they possessed or controlled, which would then be forfeited. In exchange, Bartlett promised to ask for a sentence of no more than 15 years for Bill and no more than 13 years for Chris.

But there were still matters that need to be cleaned up. To everyone's enormous chagrin, despite four years of work, 550 interviews, 15,000 man hours and the cooperation of law enforcement agencies in eight countries, the task force confiscated only around $12 million of the Shaffers' assets.

The Shaffers insisted there was no more. Dyer has warned them that if there was more, he would find it. And Bartlett has warned them that if more was ever found, the deal was off. That’s the way it would be, even after they get out. That could have wound up serving 25-30 years. But no one found any more, and they only served around seven.

Forever philosophical, when they pleaded guilty, Bill and Chris both claimed that they would still be young enough when they got out to lead fruitful lives.

Equally philosophical, Dyer couldn’t help but feel that if money was hidden away, if they washed it so clean that no one could find it, and if the money was still there when they got out, then they might well reckon the adventure was not over, just unavoidably postponed.

Since then, Dyer retired and the brothers moved to Malibu. They reportedly sold the film rights to their story and even though there is no sign that the movie ever happened, nevertheless, they are allegedly living off the big payment they are said to have received for those film rights.

*****

Chapter Eleven

SORTING OUT THE SINKS

"It's not our business to inquire into our client's morals."

--- Banker in Hong Kong

Ready-made companies, registered in places that many people have never heard of, can be bought from formation agents, who sell them the same way that A&P sells baked beans.

A stock is always available for purchase "off-the-shelf." Ownership is shifted in the time it takes to fill out a form. And for the convenience of their customers, just like A&P, most company formation agents these days happily accept credit cards.

Legally speaking, a company is a separate entity recognized by statute for the purpose of carrying out certain objectives which are often, but not exclusively, the running of a business. Other objectives might include owning assets, entering into contracts and incurring liabilities. A limited company is one where those liabilities are assumed by the company and not passed along to the management, shareholders or beneficial owners. Although every company must have a registered office, that is not necessarily the place where the company trades. Instead, it is the required address for the service of writs, notices and other legal communications.

Every company must also list the names of its directors. But directors do not have to be shareholders. In many cases, they are merely residents of the offshore jurisdiction, who are paid a fee for putting a brass plaque with the company name on their door and for filing the company's annual report. Directors do not necessarily know who beneficially owns the company. As shares in companies can, at times, be issued in "bearer" form, it's the person who holds the share certificates who therefore owns the company.

When forming a company, authorized capital is declared. That's the nominal value of the shares, multiplied by the number of the shares the company is permitted to issue, in keeping with its own Memorandum of Association. In other words, a company can authorize itself to issue one million shares at a nominal value of $10 each, and thereby claim that the authorized share capital of the company is $10 million. It looks impressive on the bottom of the company letterhead but is otherwise meaningless. A company boasting $10 million of authorized capital might have issued only a couple of shares for a total amount of $2.

Off-the-shelf companies can come with names that are totally innocuous, like Acme Trading and Ajax Holdings. Or they might have an ever-so-slightly familiar ring: T-Warner Trading is not necessarily associated in anyway with Time-Warner; Belltelecom does not necessarily have anything to do with Bell Telephone; Hilton Properties is not necessarily associated with the hotel chain of the same name. The New York-London Financial Exchange SA, registered in the British Virgin Islands, does not necessarily have anything to do with a financial market operating between New York and London. Palm Beach Properties Ltd.(Panama) does not necessarily have anything to do with real estate in Florida. A "trading company" need not trade, a "finance company" need not be in finance, a "holding company" need not be holding anything. The letters "RE" on the end of an offshore company name do not automatically mean it is in the reinsurance business; the words "fund management" do not automatically mean the company is a fund manager; nor do the words "trust company" mean the company is a bank.

Ready-mades are often inexorably linked to tax havens. Scattered around the world, there are about 50 firmly established jurisdictions where, to varying degrees, you can successfully hide your business activities and the money those activities generates --- from Liechtenstein, Luxembourg and Monaco in Europe, through the Caribbean which is teeming with the, then half way around the globe to Nauru and Vanuatu, lost in the middle of the Pacific Ocean.

For many Europeans, offshore havens are as easily accessible as the Channel Islands of Jersey and Guernsey, and the Isle of Man in the Irish Sea. Dependencies of the Crown, the territories are locally governed according to their own constitutions. The authorities are proud to say that money laundering laws have been tightened over the past few years and that, even if they were once famous for providing laundrymen with sinks, no washing is done there anymore. What they really mean is, anyone arriving with a suitcase filled with used $20 bills will have to satisfy his banker that the money isn't of suspicious origins.

Banks are domestically regulated, off-the-shelf companies are cheap and nominee directors are readily available. Buying a Channel Islands company is no more difficult than dialing an 800 number to place the order through a company formation agent who takes credit cards. Because a nominee director doesn’t necessarily know the source of any money controlled by the company he represents, it might be fair to suggest that when he wires funds in and out of offshore banks, deliberately layering them on the instructions of someone he has never met, he could be aiding and abetting a laundryman. Legally, it matters only to a judge whether or not someone does it wittingly. But there is sufficient evidence to say that plenty of laundered money comes through these jurisdictions.

Once upon a time, some of it belonged to Jean-Claude "Baby Doc" Duvalier.

In September 1986, eight months after Haiti's President for Life was forced into exile on the French Riviera, attorneys acting for him put $41.8 million in Canadian Treasury Bills in their client account at a Toronto branch of the Royal Bank of Montreal. Within a matter of days, the T-bills were moved to a Jersey account held at the Hongkong and Shanghai Bank in Montreal. Duvalier's representatives then separated the ownership records from the money, a common ruse to complicate the paper trail, sending the records for safe keeping to a bank in London while taking the T-bills to yet another bank in Montreal.

Two months later those T-Bills were moved to an account of the Royal Trust Bank of Jersey, which is a subsidiary of Canada's Royal Trust Company. Complicating matters even further, that particular account was part of a larger one held by Manufacturers Hanover Bank of Canada at an office in Toronto used by the Royal Bank of Montreal. Shortly thereafter, the money was wired into a pair of accounts at the Royal Trust Bank in Jersey owned by a locally registered shell company called Boncardo Ltd.

As the virtually invisible owner of Boncardo Ltd, Duvalier was issued with bearer checks on Boncardo's accounts. The scheme worked for more than a year, until February 1988 when French police, acting on embezzlement charges lodged by the Haitian government, raided Duvalier's villa and confiscated private papers that led to the discovery of the two Jersey company accounts.

Duvalier's agents promptly hustled the money out of Jersey, nesting it in the Swiss accounts of two Panamanian shell companies, Minoka Investments and Modinest Investments. A week or so later, $30.8 million was wired from Credit Suisse in Geneva to the Royal Bank of Montreal. Canadian Treasury bills were purchased and a Duvalier agent took possession of them. For anyone hoping to trace the funds, the trail ended right there. The T-bills were left at two nearby banks, but not for long. As the case in France intensified against Duvalier, it was felt his money would be safer elsewhere and it was subsequently wired to Luxembourg. That's when fate stepped in to save Duvalier's bacon. The government that succeeded him had located assets and frozen them, but that government was overthrown in a September 1988 coup by General Prosper Avril, a Duvalier compatriot. Avril allowed the case against Baby Doc to disintegrate, along with all traces of what remains of that original $41.8 million.

Back in Jersey, the island's authorities shrug and wonder, has anyone actually broken any laws? Money laundering statutes at the time applied only to drug or terrorist money. Besides that, there are no current laws that they're aware of which prohibit the movement of money from one jurisdiction to another, even if the sole motive for moving that money is to keep it out of the hands of a third party. They're keen to emphasize that they don't want laundrymen as clients, but in the end they admit there's no sure way of telling who's laundering what for whom.

You get a similar response in next door Guernsey. They even wince at the term "offshore." It seems they're trying to clean up their image with the shinier designation, "finance centre." Yet, over 14,000 companies are registered there, which is more than ten times the per capita equivalent of Britain. The only information Guernsey will supply about a company is the names of directors and shareholders. They do not furnish annual accounts. Nor do they release the names of the beneficial owners. Clearly they must be doing something right, as banks on an island once famous for nothing more than a breed of cows currently sit on assets of £27 billion. But then, one man's sink is another man's full-service financial institution.

*****

Towards the end of February 1993, police in Colombia announced that they'd seized $5.9 million and arrested 250 people during a 15-month crackdown on drug trafficking and money laundering. The money turned out to be a drop in the bucket and the arrests, while perhaps significant in number, didn't touch any of the major players in either of the major cartels. However, by getting inside 900 accounts at the nation's five largest banks, the authorities were able to trace drug money through fictitious import/export companies and exchange houses in 16 countries. Significant among them were Yugoslavia, Pakistan, Russia, Czechoslovakia, Hungary and Bulgaria.

Private banking still operates in what used to be Yugoslavia, offering incredibly high interest rates. At times, during the height of the war it reached 10-15 percent per month, figures way out of line with the rest of Europe. One of those banks, Jugoskandic, was estimated to be holding $2 billion in hard currency. Paying that kind of interest on that kind of money is an expensive proposition. While this is not to suggest that Jugoskandic was involved with anything illegal, there have been private banks in the region that were known to be using hard currency deposits to finance drug deals --- half of Bosnia is said to be covered with fields of cannabis and ethnic Albanians have establish a firm reign over the heroin market --- which in turn financed weapons.

It worked through a typical triangular trade route. An Austrian shell company, whose beneficial owners are unknown, bought arms from Bulgaria for delivery to Albanians arming the underground for an anti-Serb revolt. The Bulgarians used the money to pay for raw opium in the Middle East which it sold to the Albanians. In turn, the Albanians refined the opium into heroin and spent their profits buying arms from the Austrian shell. Disguised as a legal business deal and protected by strict banking secrecy, no one caught them breaking UN sanctions.

Nor were the proprietors of the Austrian shell company the only ones who saw opportunity in that part of the world. Arms traffickers operating out of the Czech Republic tried to furnish the Bosnians with $21 million worth of weapons, including 26,800 machine guns, 128,000 magazines, 5000 pistols and 17 million bullets. They used Panama as the third side of their triangle. In this case the weapons never got shipped, but the route through which the money was being washed carbon copied a whole series of deals that the same Czech group is known to have successfully concluded.

In Pakistan, banks happily accept large cash deposits. When foreign exchange controls were removed in 1991, permitting banks to offer accounts in foreign currencies, a presidential decree guaranteed banking secrecy on an unprecedented scale. The central bank actually instructed Pakistan's bankers not to ask any questions about the origin of foreign cash deposits. Since then, literally billions of dollars have flooded into that country.

The situation is further exasperated by the fact that Pakistan is the most fecund part of the "Golden Crescent", the opium poppy region that stretches from Pakistan, through Afghanistan and into Iran. Nearly 70 percent of the world's highest-grade heroin moves into Europe from Pakistan. Opium poppy has been the main crop of the Mahaban Mountains along the North-West Frontier Province since the 19th century, when British colonials planted it because they could legally export the drug. An ideally suited location, with thin soil, steep slopes and optimum rainfall, the locals around the village of Pushton place great value on land ownership, especially since there are very few opportunities for non-agricultural incomes. Drug traffickers in the nearby village of Gandaf, Pakistan's version of Cali, have little trouble encouraging the peasants to devote their tiny plots to opium poppy as it nets those farmers more than ten times per acre what they could otherwise expect with tobacco or fruit. By growing the raw materials, providing the laboratories to refine them and offering banking facilities for the traffickers, Pakistan is on the verge of becoming the most dangerous power in an already unstable part of the world.

But it has been the breakdown of draconian control, coupled with food shortages, hyper-inflation and the resulting general despair that has led to a massive increase in all kinds of law breaking in the former Communist bloc.

Hard currency is seen by the people as the only antidote for their understandably pessimistic view of the future. It's not simply the passport to the black markets, it's the key to the world's free markets. And here is one instance when Gresham's Law proves wrong. In this case, good money has driven out bad. Throughout the former Communist world, local currencies are almost worthless. No one wants roubles, korunas, forints, lev or zlotys when they can have dollars. So Eastern Europe has turned itself into one giant sink.

Publicly, the Poles are trying to turn themselves into the Spain of Eastern Europe, offering western manufacturers a large, inexpensive work force with an economic infrastructure relying on manufacturing and farming. Privately, the Poles are desperate for hard currency. The economy’s thriving "gray sector," those sums earned without telling the tax man, produces a mountain of cash which needs to be laundered. And as state-owned companies are privatized, opportunities abound up for laundrymen representing international crime syndicates. For the past few years, Poland’s Central Bank has been encouraging the financial industry to report suspicious transactions. Although money laundering is now a punishable crime, the law only applies to funds derived from a small range of criminal activity. Businessmen walk around carrying suitcases filled with cash. Credit cards and checks are still rare. While Poland enjoys a relatively stable political environment, the national currency is convertible and an infrastructure exists for transferring money abroad, it remains a nation shackled by an obsolete financial system. It is estimated that as much as one-third of all business is conducted through the alternate economy. Bankers are inexperienced and naive and financial law enforcement is impotent.

In short, Poland today is a laundryman's wish come true.

Many of Poland's most important financial institutions happily open their doors to laundrymen because they lack capital, are unable to collect on bad debts and find this the surest route to solvency. The banks have welcomed the Colombian drug cartels, reportedly to the tune of $3 billion. They've welcomed the Turkish drug barons. And they've welcomed the Palestine Liberation Organization. A few years ago, $75 million of PLO funds were deposited in the Bank of Warsaw and have not been seen since.

Under Lech Walesa, the government tried to put a stop to it, and in 1992 passed a law requiring banks to register the identity of all customers depositing more than $12,500. Chides one Warsaw banker, "They might as well have asked the entire population to whistle Paderewski." Hungary is just as bad, if not worse, because it has been at it longer. Bank secrecy is iron-clad, without any way for anyone to obtain any information, under any condition whatsoever.

There are laws against money laundering in the Czech Republic. But there are 50 Cambios within a five minute walk of Wenceslaus Square and not all of the employees there, many of whom are not Czech, bother to remind customers about the law. Organized crime is also a thriving sector of the local economy, thanks almost entirely to Russians who were stationed there as an occupying power in the good old days of Communism and stayed because capitalism turned out to be even more fun.

Just across the border, in the other half of what used to be Czechoslovakia and is now just Slovakia, capitalism hasn’t reaped the same fruits and they’re even more desperate for hard currency. One local attraction is that from the capital Bratislava there’s a good road across a lax border for the 40 minute drive to secret banking in Austria.

And then there is Bulgaria.

The UN embargo in the former-Yugoslavia turned Bulgaria’s organized gangs into the nation’s most successful entrepreneurs. Sanction busting was rife and with it came money laundering. According to the Ministry of the Interior, Bulgaria is today in the throes of its worst crime epidemic this century.

When the government in Sofia announced that it would sell off 1600 previously state owned industries, it explained that, unlike similar sales in other former Communist countries, they would not be accepting scrip or vouchers, they would be selling everything for cash. Informed by European and American advisers that such a sell-off would be a field day for money launderers, the Bulgarians said they would prevent anyone from doing that by asking all investors to declare the origin of their funds, as if a Colombian drug dealer would admit that he was buying Balkan Airlines with $50 million worth of crack receipts!

For the record, the Bulgarians were one of the first Eastern bloc countries to comprehend the advantages of money laundering. Under 35 year regime of Todor Zhivkov, from 1954 to 1989, the government dealt drugs, washed the profits through shell companies that had access to Swiss banks, and then used that money to finance a major international illicit arms business.

Zhivkov's trading outlet was the state-owned import-export company, Kintex. Set up in 1968, it was operated exclusively by the KDS, the Bulgarian Security Service. It sold heroin and morphine base to Turkish drug traffickers and with that money was able to build up its gun running. Kintex became so adept at converting drugs into weapons that it furnished the Nigerians with guns to put down the Biafra civil war in the 1960s; it furnished various Christian militias with guns to escalate the civil war in Lebanon in 1975; it furnished South Africa with guns in direct violation of various embargoes; and, for more than 20 years, it was the primary outfitter of guns to the PLO. For their efforts, the Bulgarians reputedly earned up to $2 billion a year in much-needed hard currency.

The extent of Kintex's connections with organized crime in the West came to light only in the early 1980s. Italian police raided a Mafia drug refinery in Trapani Province, on the western tip of Sicily, and uncovered a laboratory that, to their surprise, was stocked with Bulgarian machinery and Bulgarian-supplied morphine base. This one lab alone was capable of producing a staggering 4.5 tons of refined heroin per year. At wholesale prices, in those days, that represented $1.125 billion. Over the next few years, no fewer than 15 refineries were uncovered in Sicily and on the Italian mainland, most of them with Bulgarian supplies.

By this time, the CIA had plenty of evidence to prove Kintex's role in international drug trafficking. When the Reagan administration formally protested, Zhivkov cracked down on every amateur drug dealer in the country. Largely to placate Washington, tons of marijuana were seized and assurances were given that the business had been ended. But Kintex continued to trade. Five years later, as a result of continued American protests, Kintex finally became too much of an embarrassment. So, for all intents and purposes, Zhivkov put Kintex out of business. In its place he installed son-of-Kintex, a state-owned import-export company called Globus. But the KDS was still in charge and its primary mission was still drug trafficking, arms dealing and money laundering. In effect, the only change was the company stationery.

*****

The Principality of Monaco came under a great deal of criticism for allowing money launders to use the local banking system. A French parliamentary report concluded that the Mafia's presence in France was steadily growing and singled out Monaco as a major European sink. They said that it's proximity to Italy --- only 20 minutes from the border which since January 1993 is wide open --- together with its secret banking system and the presence of casino gambling had combined to give the Mafia a unique opportunity to launder funds through real estate, golf courses and gambling.

A French newspaper then accused the casino at Monte Carlo of being a prime launderette for Italian crime gangs. The Societe des Bains de Mer, the company who runs the casino, instantly denied the charges. But Prince Rainier III openly admitted that an inquiry into SBM was already underway.

Having very little patience for such charges the Prince, who has always taken a strict no nonsense approach to crime in his country, insisted that measures be taken to crack down on money laundering. He moved to tighten legislation which obliged banks, insurance companies and stockbrokers to report suspicious transactions, and to disclose the identity of those involved. In line with French law, he required the casino’s management to report payments for chips that were suspected to come from drug trafficking or organized crime and set stiff prison sentences for anyone using illegal gains to buy property. He agreed that the Principality would work with the French police where drug money laundering was involved, but drew the line on how much information could be passed along by explicitly forbidding any financial information being handed on to French tax authorities. It gets back to not killing the goose. There are, reportedly, in excess of $13 billion on deposit in 40 banks in Monaco, a country with a population of just 30,000.

As Monaco tightened it’s rules, real estate began to boom in the tiny Republic of San Marino, hidden inside Italy, where banking is completely secret, almost exactly the way Switzerland was years ago.

*****

In 1989, the US State Department went public with its wrath, damning three of the world's banking centers for having sold out. Under the heading of the "International Narcotics Control Strategy Report," the Bush administration named the Bahamas as the major transit country for cocaine and marijuana entering the United States, and condemned it for having allowed itself to become such an important money laundering center. It named Hong Kong as the money laundering heart of the Pacific Rim, and condemned it for having become the major transit center of Southeast Asian heroin. And it named Panama for continuing to be the principal money laundering haven for the South American cocaine trade.

That report made the papers.

A more revealing document, which didn't make the papers, was circulated around the US Drug Enforcement Agency. Specifically not for public release, this greatly widened the picture, singling out 18 "major conduits and repositories" for illicit drug funds. The list of the world's greatest sinks consisted of Hong Kong, Liechtenstein, Luxembourg, the Channel Islands, Andorra, Switzerland, Singapore, the United Arab Emirates, the Cayman Islands, Mexico and Panama. Four American cities were also named: New York, Los Angeles, Miami and Houston. And then the DEA pointed an accusing finger north to Montreal, Toronto and Vancouver.

Hong Kong is an obvious nominee. Ever since the mainland territory and offshore islands that are Hong Kong were ceded to Britain as retribution after the Opium War of 1842, the Crown Colony has been one of the world's major trading and smuggling ports. Today, it is a designer money center, born out of jet travel, electronic communications and the mystique of the East. It's a gold market and a diamond market and a stock market that looks more like Las Vegas than Wall Street. It's a Portobello Road for shell companies, a formation agents' paradise where nominee directors forsake wallpaper for brass plaques. Arms smugglers, black marketeers and organized gangs have always used Hong Kong to wash their funds. So have the Chinese, since Mao's Great March. But Hong Kong had never seen anything like the kind of action the heroin traffickers brought to town. Just as banking secrecy laws tightened and Hong Kong's regulatory infrastructure loosened, the drug trade exploded, creating an unprecedented level of prosperity. From 1978 to 1981, real estate prices quadrupled. Banks were awash in liquidity.

It was Disneyland with dim sum!

The bubble might easily have burst the day the British agreed to return Hong Kong to the Chinese. And some people contend that it did. The money men in Hong Kong took fright. No one knew what the world would look like 15 years down the line. 1997 seemed uncomfortably close. Capital headed west, in haste, most of it finding its way into US and Canadian real estate. Over the next few years the situation worsened. People with money bought their way out. People without money tried selling what they had to raise a ransom. Prices hit rock bottom.

That's when the law of supply and demand changed gears. Having moved into the Colony to cater to people wishing to get their money out, western banks had inadvertently established the infrastructure that would now give birth to a second coming. With prices way down and black money still readily available, business opportunities reappeared. Beijing made enough of the right noises to encourage western bankers that business under the Communists would be as glorious as it was under the capitalists. So those western bankers revised their view of 1997. They suddenly decided they were in the right place at the right time, and that it was indeed time to gamble on a prosperous future. Now, as native money poured out, foreign money poured in. Especially drug money.

When Law Kin-man, one of the world’s most successful laundrymen, pleaded guilty in the US in 1994 to a host of federal charges, he confessed to using 362 bogus bank accounts in Hong Kong to wash an estimated $93 million of Golden Triangle drugs through the Crown Colony. A further eight in the States were private brokerage accounts so that he wash funds through the Hong Kong stock market.

The phoenix that rose from the ashes of the 1982 crash is today the world's third financial center, after New York and London. Shell companies generally cost less in Hong Kong than they do in Europe or the Caribbean. Bankers are supposed to ask questions, but tend not to bother. Why should they? The Colony is crammed with more than 400 banks. It's clear that this is a buyer's market, so much so that the volume of small-denomination American bank notes circulating around Hong Kong today far exceeds the total volume of all currency transactions within any single European country.

Just across the Pearl River delta is Hong Kong's little bad brother, Macao. This is what Las Vegas would have looked like had Genghis Khan beaten Chris Columbus to the New World.

Nearly 80 percent of Macao's annual revenue comes from the $1 billion a year, Hong Kong controlled, gambling monopoly, through which hundreds of millions of dollars are washed every year. Not only do the Chinese gangs have a marked presence in Macao, but the government of North Korea maintains a consular office there brazenly taking advantage of the colony's easy, and highly secretive, westernized banking system.

Now under Chinese rule, nothing seems to have cooled down. Banks in Macao must identify people involved with "significant transactions," and that "involuntary involvement with money laundering or with any criminal activity must be carefully avoided." But that's as far as they go.

As most of the money laundered through Hong Kong and Macao is foreign, it's clearly in China's interest to keep the coffers full. That's why, when they took over, they were smart enough not to do to the West what Fidel Castro did to Meyer Lansky and his comrades in 1959.

*****

Chapter Twelve

ISLANDS IN THE SUN

"We have no natural resources and we have to survive."

--- Aruba's prime minister, Nelson Oduber

The fact that there is no Meyer Lansky Street running through the middle of downtown Nassau, Grand Bahamas, or for that matter, through the heart of any capital on any other island in the Caribbean, has got to be one of the most arrogant oversights in history. Lansky not only built the financial skeleton for postwar organized crime, he opened Caribbean eyes, wallets, safe deposit boxes and secret bank accounts to the delights of tax havens. He helped show the island nations how to become the world's biggest collection of sinks. Whether or not they'd ever openly admit to it, a huge debt of gratitude is outstanding.

The Caribbean is home to 31 million people, nearly two-thirds of whom natively speak Spanish. Another 20 percent are French or Creole speaking. Separated by water, culture, history and politics, the region is anything but homogeneous. It is easier to reach Barbados from New York than it is from Curacao. The most convenient schedule from Kingston, Jamaica, to Santo Domingo in the Dominican Republic is through Miami. One of the few characteristics most of the islands share is that they are generally considered to be in America's backyard. At the end of World War II, sugar was the region's main crop and the United States was the region's primary market. Since then, sugar exports to the US have steadily declined and so have earnings for oil and bauxite. But the islands are still America's backyard. The US remains the primary market. Except now the main product is narcotics.

It's no coincidence that a powerful Sicilian family, the Caruana-Cuntrera clan, who control organized crime in Venezuela bought sizable tracts of real estate in the Caribbean. When Pasquale, Paolo and Gaspare Cuntrera were arrested at home in Caracas in September 1992 on heroin trafficking charges that dated back ten years, they were deported to Italy. Known to have commanded a major international money laundering ring and believed to have been behind the 1992 assassinations of a Sicilian judge and prosecutor, they left behind an organization that is said to own two-thirds of all the land and two-thirds of all the businesses on Aruba, a resort island 45 miles west of Curacao, just off the coast of Venezuela.

Aruba is also home to the La Costa cocaine cartel who came to prominence when 16 of their ilk were charged in Miami with racketeering, drug conspiracy and money laundering. They'd reputedly brought 80 tons of cocaine and 250,000 pounds of marijuana into the United States since 1980, generating an estimated $800 million in profits until 1993 and the indictment against their chieftain, Randolph Habibe. He was been charged with a failed attempt to free a fellow cartel member Jose Rafael "El Mono" Abello, currently serving a 30-year sentence for drug smuggling in Oklahoma. To emphasize the amount of money available to these groups, the escape plot as engineered by Habibe was budgeted at $20 million.

One reason places like Aruba are vulnerable to organized gangs like Caruana-Cuntreras and La Costa, is because small governments, local citizens going up against international crime syndicates, are ill equipped for the fight. Their tourist-based economies are largely cash intensive, almost as if they were consciously designed for people wanting to hide money. The Caruana-Cuntreras family had no trouble taking over a large chunk of the island through their control of casinos and hotels. And what the Caruana-Cuntreras and La Costa have done in Aruba, others have managed in Bonaire, Curacao and St. Maarten.

The larger, more important islands, which include Haiti, the Dominican Republic and Jamaica, have been turned into "aircraft carriers," staging points for US-bound cocaine.

Although coca doesn't grow in the Caribbean, the ships and planes that bring it from Central America pass through there. So does the money generated by those drugs. Haiti, in particular, has been singled out by a confidential 1993 US Senate report, which named Port-au-Prince Police Chief, Lt. Col. Michel Francois, the second most powerful military man in the country, as personally handling in excess of $100 million in annual drug trafficking bribes. The three-page document, which was compiled from CIA files and witness accounts, notes that more than 1000 Colombians are "stationed" in Haiti, many of them under the direct authority of Fernando Burgos Martinez, a Colombian trafficker who's lived there openly since 1984. He's described as the resident manager and bag man who oversees transshipment of a ton or more of Colombian cartel cocaine each month. One estimate puts his annual turnover at $200 million. Another has it as high as $500 million. His payments to government officials are to guarantee access to the Port-au-Prince airport. And the report quotes a man who once worked for Burgos Martinez as testifying, "Haiti was our parking lot."

In more touristed nations, like Jamaica, the authorities strongly object to being tarred by the same brush. Fearing the effect that could have on tourism, they insist that anyone saying the Caribbean is awash with drug money is wrong. Ironically, Jamaica is the only island with a substantial marijuana crop.

Until Castro came along, the Cubans were the entrepreneurs of the Caribbean. In many ways, they still are, although now they run business in the Dominican Republic, Puerto Rico and Miami, a city that is 40 percent Cuban. Having lost a huge chunk of his foreign income to ideology, Castro has tried to make up for it by operating a freeport for drug shipments coming through the Gulf of Mexico on the way to the United States. Reports of Cuban involvement in drug trafficking first came to American attention in 1960, but those reports were largely unsubstantiated. Ten years later, as tales of conspiracies grew, there was still no solid evidence to authenticate the claims. But in 1982, a US District Court indicted four Cuban officials on charges of conspiring to smuggle drugs into the US, firmly documenting the fact that Castro has sold safe haven to the Colombian cartels for hard currency. The Wall Street Journal reported in 1984 that the Colombians were paying Castro as much as half a million dollars per shipment for the privilege of using Cuban territorial waters to avoid interdiction by the US Coast Guard and US Customs.

To contend with Cuban trans-shipment, the United States put the burden on the shipping companies, which are often the innocent victims of the drug traffickers. When the Americans found marijuana on board an Evergreen Line freighter, they fined the German company $29 million. As a result, Evergreen stopped bringing goods from Jamaica to the States.

The possibility that Castro might be linked to trafficking hit the headlines again over the summer of 1989 when Cuban General Arnaldo Ochoa Sanchez, the third-ranking military man in the country, after Fidel and his brother Raoul, was convicted on drugs' charges. He was put into the dock in a televised show trial, together with 13 senior officers and civil servants, accused of drug dealing. They'd all made money in Angola dealing in gold, diamonds and ivory while serving with Cuba's African Expeditionary Force. The prosecution claimed this money had then been invested in narcotics. Never stated, was the fact that six of them, led by Sanchez, had also invested in a failed plot to overthrow the Castro brothers. Those six were sentenced to death and summarily executed by a firing squad at the end of the trial.

American agents renewed their undercover contacts in Cuba. And it took the better part of two years before they hit pay dirt.

The man they eventually coerced into providing them with proof positive was Cuban Army Major Luis Galeana. In October 1991, while his plane bound for Moscow was making a refueling stop in Madrid, Galeana defected into the arms of DEA agents who were waiting for him just outside the Barajas Airport transit lounge. Within two days he was being heavily guarded in a Washington DC area safe house.

Assigned to Cuba's Interior Ministry, Galeana brought with him information, supported by half a dozen reels of microfilm, that documented two years' worth of Castro-sponsored cocaine shipments from Cuba to Texas and Louisiana. Those were the same cargoes that Castro had tried to pin on Sanchez. With the ending of Russian subsidies, Castro needed foreign trade to keep the Cuban economy from disintegrating. But his options were severely limited. So he turned to drugs, an obvious choice for its high markup, his Central and South American contacts and Cuba's proximity to the United States. At the same time, he'd been bartering what few nuclear secrets his Russian allies allowed him to know. Castro not only backed Saddam Hussein in the Gulf War but offered to aid Iran in its development of nuclear technology. He's also approached the Chinese and the North Koreans, proposing to help them develop their nuclear capacity in exchange for oil.

Advising Castro was the fugitive, Robert Vesco. Indicted for fraud, the large-boned, mustached Vesco had absconded from the United States in 1972 with whatever remained of the $224 million he’d stolen from investors in Bernie Cornfeld’s International Overseas Services. He went first to Costa Rica, protected by Presidents Jose Figueres and Daniel Oduber, living the good life in San Jose while he invested $13 million in radio and television stations, a newspaper and a hotel. In 1976, a federal grand jury in New York indicted him for the theft of that $224 million. Two years later, when Rodrigo Carazo was elected President, the welcome mat was withdrawn. So Vesco moved to the Bahamas, where he followed Meyer Lansky’s lead and supported Lynden Pindling. His most noteworthy contribution to mankind while he was holed up there was to negotiate shipments of cocaine from Colombia to the United States. When that contact turned sour, he returned to Costa Rica. But his welcome there was short-lived. Next, he headed for Nicaragua. In 1983, he went to Cuba, taken in by Castro as a favor to Figueres.

Following a DEA investigation into Colombian drug trafficker Carlos Lehder, combined with allegations levied against him by US Customs, Vesco was charged in 1989 by a federal grand jury in Jacksonville, Florida with conspiring to smuggle cocaine into the United States.

Myth has it that Vesco paid Castro $1 billion to avoid extradition to the US. People who know say the figure is highly exaggerated as Vesco never had that kind of money. Still, he was given a villa in the most exclusive district of Havana, La Coronela, and permitted to stock it with champagne and lobster. This at a time when ordinary Cubans had little more than beans and rice. A detachment of security guards was assigned, as much to protect him as to keep him leashed in. He was allowed to mingle with the diplomatic set at the country’s most fashionable golf club, to send his children to the International School, to throw lavish parties, to invest in sugar and tobacco, to build a series of beach front homes, to deal in coffee futures, and to run up a huge money-laundering operation out of Cayo Largo in southern Cuba.

Much to the surprise of the US Justice Department, and probably equally shocking to Vesco himself, he was arrested on June 1, 1995 and charged by Castro with being an "agent provocateur" for unnamed foreign governments. American diplomats in Havana were put on notice that Cuba might be prepared to turn him over. Around Washington, where it was rumored that Vesco's fortune had finally evaporated, the hope was that Castro had come to understand that by giving sanctuary to criminals he was hindering any chance for reconciliation with the US.

Since 1993, Cuba has cooperated to some extent with the DEA, leading some people to think Castro was finally trying to shed Cuba’s image as a refuge for drug traffickers. Yet according to FBI records, Cuba continues to shelter at least 91 fugitives from justice.

Bernie Cornfeld once predicted that the day would come when Vesco would simply outlive his usefulness. The day that happened, he anticipated, Castro would quite unceremoniously turn his back on him. So it appeared as if Vesco had, indeed, become a liability, as if Cornfeld was having a posthumous last laugh. But then, all went quiet. Nothing happened. For 13 years, Castro allowed the man to sing for his supper. Having taught Castro how to get around the American embargo and how to run an international drug trafficking conglomerate, it was as if Fidel had a sudden attack of uncharacteristic loyalty. More likely, he saw how badly the Americans want Vesco and realized that Vesco was one of the few aces he actually held. It was a card he never got to play because Vesco died in 2007.

According to Galeana's debriefings in the United States, Castro was petrified by the indictment that the US authorities levied against General Noriega. Furthermore, he was furious that Carlos Lehder Rivas had been willing to testify against his former chums. Until Galeana's defection, Castro could fall back on General Sanchez's confession that he and the others masterminded drug runs into the US, "for our own personal gain and without the knowledge or approval of our superiors in the Cuban government." If anyone believed that confession, and there couldn't have been many who did, Galeana's evidence changed their minds. He detailed the extensive use of Cuban territorial limits, at sea and in the air, military refueling and repair facilities, military radar cover and a prevalent reliance on military communications networks. He also outlined how the Cuban navy and air force played substantial roles. Such a ploy would be categorically unthinkable in a dictatorship like Cuba without the express knowledge of either Fidel or brother Raoul or both.

Based on what Galeana revealed to his American handlers, a plan had been drawn up inside Cuba to hasten Fidel's overthrow. Several high-ranking officers in Castro's army, living in fear of their own lives since the Sanchez firing squad, concluded there was little to lose by trying to force Castro into exile. It was even suggested at high levels of the Bush administration that Washington might help by indicting Castro on drug trafficking and money laundering charges, exactly as they'd done against Noriega. The indictment would then be broadcast to Cuba to spark a coup. Furthermore, Spain had already secretly agreed to take Castro, and he’d been made aware of that. But for reasons never stated, the plan was rejected by the White House.

*****

It is the rule rather than the exception throughout the Caribbean, to hear politicians say that the drug problem is not one of supply, it is one of demand. And the biggest demand comes from the United States. Their concern is, therefore, that Caribbean economies are being destabilized by drug dependency in America, over which they have no control. In other words, their largest, most important neighbor, which has always been seen as the patron of Caribbean security, has now become the greatest threat to it. But their argument falls flat when those same politicians show that they are not willing to risk total isolation by dropping back to a safer position. They've replaced sugar with off-the-shelf bearer share companies. They even sweeten the pot by providing an abundant supply of nominee directors; banking and commercial secrecy; a free flow of currency; a modicum of political stability; and easy access to modern telephone systems, fax machines and airports with regular services to North America and Europe. From their point of view, survival is at stake.

Many years ago, the Bahamian Ministry of Finance set up the Financial Services Secretariat "to identify and to encourage all types of investment and financial service opportunities." Put another way, the Bahamians were willing, for a fee, to provide the kinds of financial services required by people who want to hide money. Supporting those objectives in 1990, the legislature passed the International Business Companies Act, which soon became known as "the instant registration package." In under 24 hours, and for only $100, you can own a Bahamian company --- including one with a legitimate-sounding European name, such as Chicago Mercantile Financial Asset Management Holdings --- whose assets might be nothing more than the bearer-shares of some other off-the-shelf company, which in turn can control bank accounts anywhere in the world, through which money can pass like water down a funnel.

To prove the point, a phone call to a company agent in the Bahamas went, word for word, like this:

"I need to buy a company and would be grateful if this could be arranged as quickly and as discreetly as possible."

"That is no problem, sir."

"I've seen your list of names, you know, of available companies, but none of them suit my purposes."

"These things are easily arranged. Once you buy a company, we can file to change the name of it to anything you want, as long as there is nothing currently registered with that name."

"I was thinking of something along the lines of a commercial banking corporation."

"That is not a problem."

"Perhaps something like Manhattan County First Fiduciary Trust?"

"We will be delighted to look into that name, or any other you choose, and secure one for you that will suit your purposes."

"Will you also be able to provide an introduction to a friendly banker who will accommodate whatever needs I have, including cash transactions?"

"Yes, of course."

The response is hardly surprising, considering how the Caribbean is famously overpopulated with bankers who do not ask questions when large sums of cash are deposited. Of course, they're supposed to. But what people are supposed to do and what some are willing to do in order to make a living are often two very different things.

That has never been more evident than a few years ago when a branch office of an international bank opened its doors at the end of a runway on the Island of Anguilla. It has since been closed, but only because it was a little too blatant, even for the Caribbean. However, the shack, with the bank's name painted boldly on the front, did unabated business for several years, servicing private pilots who arrived on the island to make cash deposits before flying off again. It was drive-in banking Caribbean style.

No one even had to shut down his engines.

*****

The bad guys no longer rob banks, they buy them.

St. Kitts and Nevis are a pair of tiny English-speaking islands in the Leewards, about 1200 miles southeast of Miami. A popular stop on the cruise line circuit, the local economy has always thrived on tourism, sugar cane, cotton and pineapple. But the 44,000 residents of the two islands have in recent years come to understand that there is big money to be made by selling banks.

One of these ready-made financial institutions, as advertised by a Canadian firm in British Columbia, is an entity called The Keystone Bank Ltd. According to the prospectus, it is chartered in the "Tax free ecclesiastical sovereignty of the Dominion of Melchizedek." Precisely where that is, the brochure doesn't say. Frankly, you'd think someone could have come up with a less suspect-sounding place. However, along with ownership of Keystone Bank Ltd. comes the Keystone Trust Company, which seems to be the main asset.

For just $15,000, paid to the Canadian company, you can become the proud owner of a stack of official documents, suitable for framing, plus one brass plaque on the wall of a company formation agent somewhere in St. Kitts. As the bank is chartered in Nevis, no annual financial returns are required of the trust company. Directors, shareholders and principals may be of any nationality and may live anywhere. The value of the stock may be quoted in any company and bearer shares are permitted. A corporation may serve as a director and no shareholder meetings are necessarily required. The trust company can be merged with other corporations and administer the Keystone Bank Ltd.

In short, for $15,000, plus annual fees of around $700 payable to the local government, you can run your own bank and put as much cash through the tills as you want.

This is not simply a laundryman's fantasy, it's a recurring vision.

There are loads of formation agents hawking banks throughout the Caribbean. One of them, Jerome Schneider of WFI Corporation in California, touted banks at seminars across the United States for years. His sales pitch hung on the undeniable fact that investors "wield power and influence" with their own private offshore bank. For under $10,000, he provided clients with, "a fully chartered private international bank in the Caribbean, plus a management subsidiary corporation in the Bahamas, plus connection with a professional Bahamas Management service."

Schneider roamed the Caribbean, looking for island authorities who would sell him banking charters in bulk. In 17 years, it's estimated that he bought and sold nearly 1000 of them. Once he sold a bank to a client, that was the end of his involvement. WFI did not manage assets or perform any administrative services for the companies it sold. So when it turned out that a woman in Houston, Texas, named Daisy Johnson Butler bought a company called European Overseas Bank Ltd. from Schneider, chartered in Grenada and used to defraud 60 investors of $1 million, Schneider could quite innocently raise his arms and say, this has nothing to do with me. In fact, he even claimed that when he heard about Butler's misuse of the bank he acted promptly to get the authorities on Grenada to revoke the bank's registration.

A short hop from St. Kitts is the tiny British dependency of Montserrat. When the locals heard about the booming market for banking licenses, they jumped on the bandwagon and were soon invaded by an army of laundrymen with money to wash. At one point, the island which has a population of 10,000, boasted 350 chartered banks. Some of the companies had slightly familiar names: Prudential Bank and Trust, Deutsche Bank (Suisse), Chase Overseas, Fidelity Development and Manufacturers Overseas. There was even one called World Bank Ltd. They were never anything more than a brass plaque in a registered office, although that was not necessarily the case with the Zurich Overseas Bank. According to an indictment by the Justice Department against several Detroit loan brokers who bought Zurich Overseas from WFI, this one actually had an office --- a table at the Chez Nous bar in Plymouth.

Montserrat banking was good enough for Panamanian laundrymen who bought banks there to wash funds for the drug cartels and their former President, Manuel Noriega. It was good enough for Israeli Mossad agents who used their bank there to launder money in a weapons deal with Colombian drug barons in the mid-1980s. It was also, presumably, good enough for Robert Graven, alias Brother Eduardo of the Circles of Light Church. Working out of Montserrat, with the stated mission of feeding starving children around the world, he convinced 30,000 Americans to send a total of $3 million to the island's First American Bank. The FBI, working alongside British police, eventually established that Brother Eduardo's mission on Montserrat was Graven's own bank and he has since been convicted of fraud in Philadelphia.

Such is the demand for these banks that it created a cottage industry of Montserrat bank wholesalers. Recently, the situation got so out of control, Britain was forced into the unprecedented step of amending Montserrat's constitution. Responsibility for the financial industry was taken away from local politicians and placed under the authority of Her Majesty's appointed governor. And the first thing he did was to revoke 311 banking licenses.

The laundrymen were forced to move on. But they never have to go very far. The Caribbean isn’t that big.

*****

The British Virgin Islands are 36 dots of land, with names like Tortola, Virgin Gorda, Anegada and Jost Van Dyke, poking out of blue waters northeast of Puerto Rico and west of the Leewards. The year-round population of just 12,000 is culturally linked to Great Britain but constitutionally independent. More importantly, it is very interdependent on its neighbor to the south, the US Virgin Islands. So much so, that US dollars are the official currency.

The weather is perfect and English is spoken. So when a young Irish accountant named Shaun Murphy heard about BVI, and realized that paradise offered untold possibilities for a struggling laundryman, he opened a small practice there.

A gentle man with a soft accent, he started by forming companies for his clients in the BVI, using that company to open an account at a UK bank on the Isle of Man and depositing cash there. He'd then form a second company, open an account for it at a Swiss bank in Panama and wire transfer the money out of Man. Next stop would be a third company, with an account at a UK bank back in BVI. From there, he could easily wire on to his client anywhere in the world.

It was as good a method as any. Except, after a while, Murphy started thinking it wasn't complicated enough. He reckoned he could provide his clients with a better service, with as many cut-off points as possible to make their money virtually untraceable. So he hung a huge map of the world on the wall behind his desk, and sat in his swivel chair for hours, staring at it, picking out all sorts of strange places to open accounts. For one client, he formed 40 different companies and opened 90 different bank accounts in 40 different places around the world. That was the same client who once dropped a Samsonite suitcase to him from a passing airplane, with $2.3 million stuffed inside. It took a local bank two days just to count it.

The more complicated Murphy could make these transactions, the better it suited him. Even his own company, Offshore Formation, wasn't too obviously his. It was owned by two other companies: Romulus, which he secretly owned, and Remus, which was secretly owned by his friend Cyril Romney, who happened to be the prime minister of the BVI.

Growing ever more sophisticated as a laundrymen and better connected in the underworld, it didn't take long before Murphy had clients like Ben Kramer, who, together with his father Jack, was a high-profile powerboat builder in North Miami. Ben Kramer was also a heavy-duty drug dealer.

An habitué of the Miami to Bimini powerboat race, Kramer had worked out a near-foolproof gimmick to bring drugs into the US. He'd enter three boats in the race, one of which would invariably break down. Kramer's boat would sit dead in the water while the rest of the race disappeared over the horizon. At which time a mother ship would come alongside and load the stricken boat with drugs. When that was done, Ben's rescue boat would show up and tow the racer back to Miami. Finely tuned powerboats were breaking down all the time, so no one thought twice when one of Kramer's was winched out of the water, loaded onto a trailer and driven away. Over a five-year period, Ben Kramer smuggled $200 million worth of cocaine into the US with his boats.

Murphy set up two shell companies for the Kramers, both of which had an air of legitimacy about them so that Kramer could use the companies as official sponsors for his powerboat racing team. One was supposed to be a clothing firm. It had a London address on Savile Row but otherwise didn't exist. The second, chartered in the Netherlands Antilles, was called Lamborghini. It was not a motor car company, although Murphy and Kramer never said that it wasn’t, especially if someone thought it was. Drug money went into the companies, which financed the boats, which financed the drug running, which financed the companies. Somewhere along the line, Murphy also bought Kramer a car hire franchise in Florida and some real estate in Los Angeles.

At the same time, Murphy established a company for Kramer in Liechtenstein called Cortrust. Kramer quickly filled Cortrust's accounts with drug money, which just as quickly came back to Kramer, filtered through several other shell companies, in the form of loans to build a brand-new marina and to finance bigger boats.

Quite apart from any dealings Murphy had with them, the Kramers got mixed up in the investigation of the murder of Don Aranow. He was the man who built the famous Cigarette and Blue Thunder power boats. And that was the beginning of the end of the story for the Kramers.

Murphy's walls came tumbling down in the totally unrelated money laundering end of the Brinks-Mat case. When the British police found him, he sang. They immediately realized he had serious clients in the United States and, after hearing what he had to say about Brinks-Mat, they passed him on to the Americans. Murphy not only told the DEA everything he knew about the Kramers, but helped them get 70 separate indictments against other drug dealers and money launderers. The DEA came to like him so much, they spent three years debriefing him. For his help, they paid him $200,000, gave him a brand-new identity and sent him off to live somewhere in the Mediterranean.

*****

The Caymans are a small string of islands northwest of Jamaica, a relaxed 90 minute luncheon flight from Miami. Once the hideout for Edward Teach, Blackbeard the Pirate, they have come to be known over the past 20 years as one of the world's preferred financial hideouts. Sometimes called "The Geneva of the Caribbean," the islands --- made up of Grand Cayman, Cayman Brac and Little Cayman --- are long on sand, sun and confidentiality while decidedly short on regulation and taxes.

Georgetown, the capital on Grand Cayman, boasts 550 banks, one for every 50 residents, with assets in excess of $400 billion. Most of the banks are brass plaques, simply booking centers where loans and deposits are recorded but where nothing more than paperwork changes hands. There are no tellers, no vaults, no free bathroom scales for opening a holiday saving's account. Fewer than 15 percent of the banks registered and operating in the Caymans ever see any cash.

Originally a dependency of Jamaica, the Caymans elected to take on British Crown Colony status in 1962 when Jamaica declared independence from Britain. Like Hong Kong, the Caymans run their own affairs. There is a British governor in residence but in reality he does little more than cut ribbons at supermarket openings. The Bank of England has no say, nor any control, over banks in the Caymans.

In 1976, the legislature passed the Confidential Relationships Preservation Law which, similar to Switzerland, made it a criminal act for anyone to reveal information about someone's banking or financial associations. Not surprisingly, most of the major American banks have offices there. It turns out that a large percentage of the 25,000 Cayman companies and trusts registered on the island are beneficially owned by Americans. Whether or not these companies and the accounts they control ever get reported to the IRS, as required by US law, is another matter. Almost certainly, most of them do not. After all, if a wealthy man wanted to pay taxes on his income, he wouldn't buy a shell company and hide his money in the Caymans. That's why Oliver North set up a dummy company there. That's also why Agha Hasan Abedi opened a BCCI office there, channeling money through the Caymans to buy his way illegally into First American.

Bilateral agreements exist between the United States and some island governments, the Caymans and the Bahamas included, which are supposed to allow American investigators a glimpse behind the curtains of financial stealth. The Mutual Legal Assistance Treaty, ratified in 1988, says that if the US authorities request information on specific drug cases and fraud, the Royal Cayman Islands Police will cooperate.

Two years later, under pressure from the Americans, bankers in the Caymans drafted a code of conduct, stipulating that they would refuse any suspicious cash deposits in excess of $10,000. The idea was to put an end to the stream of men in shiny suits with gold chains and attaché cases filled with cash. But "suspicious cash deposits in excess of $10,000" doesn't necessarily exclude suspicious cash deposits under $10,000, or non-suspicious cash deposits of any amount. So the men with the shiny suits and gold chains changed clothes.

On paper, all of this is fine. In practice, it falls pitifully short of the mark. One obvious reason is that it's left to the Cayman police to decide whether or not the Americans should be granted cooperation. And, in cases of tax fraud, the answer is always no because tax fraud is not a crime in the Caymans.

Equally obvious, the good guys are up against a simple, undeniable fact: Allowing the bad guys to hide their assets is big business. Any offshore haven which opted to put an end to it would be committing economic suicide. It wouldn’t solve the drug problem. It would simply drive the laundrymen to other offshore jurisdictions where the politicians are less holy.

Islands such as St. Maartens in the Netherlands Antilles. There, the importation of large amounts of cash is easy, customs controls are for all intents and purposes non-existent and bankers can't be bothered to ask questions. One estimate has it that shell companies in the Netherlands Antilles control nearly 40 percent of all foreign-owned farmland in the United States.

Because of the direct link to Holland, it's a smooth wire transfer from St. Maartens to the Rotterdam account of a Panamanian-registered shipping company in Malta. They send the funds to Singapore, for deposit into the account of a Liechtenstein-registered insurance company on the Isle of Man, which transfers the money on to a Hong Kong-registered real estate company, working out of Monaco, with an account in Los Angeles. Timed right, the whole thing can be managed in under an hour.

To get use of the money, the laundryman borrows it from himself. It's known in the trade as "the Dutch sandwich" or loan-back. He walks into a legitimately licensed financial institution and negotiates a mortgage, using the Hong Kong company as guarantor, which secures the transaction with the laundered funds in LA.

A practical variation on that theme involves a pair of property development companies operating with total impunity today in the United States. One is in the Washington DC area. The other is in south Florida. The offices are staffed by Americans who act as agents for a group of foreign companies in apparently legitimate business centers such as Liechtenstein or Luxembourg. They specialize in property loans to developers who might be having trouble getting large loans through more obvious sources. There is no reason to believe that the people working in DC or Florida have any idea that the source of the funds they're lending are drugs related.

Their clients come to them with a speculative idea, such as the development of a shopping mall. They're looking for, say, a seven-year, $7 million loan. These outfits then arrange a $10 million loan, to be repaid in seven years. With the extra $3 million, the developers are required to buy a zero-coupon US Treasury bond, which they immediately sign over to the property company. They are then directed to a bank where they secure a letter of credit for a sum equivalent to the total interest payment on the $7 million, using the shopping mall as collateral. That letter of credit is also signed over to the property company. The developers get the money they need to build their shopping center, while the property company gets a $3 million bond, guaranteed payments of interest and the deeds to the mall if the developers somehow default. At the end of seven years, the developers pay off the principle and own a mall, while the laundrymen have $10 million, plus interest, in sparkling clean money.

*****

Chapter Thirteen

DOWN AND OUT IN SWITZERLAND

"The Swiss wash whiter."

--- Souvenir T-shirt in Zurich

Lugano is an Italian town permanently trapped inside the Swiss canton of Ticino, much like a two-headed mouse fixed in a jar of formaldehyde.

Sheltering on the banks of the large, quiet lake that bears its name, at first glance Lugano appears to be little more than an overgrown depot on the main line of the St. Gotthard railway. There are a few decent hotels. There are some good restaurants. But this is not Lausanne, a sophisticated watering hole. This is not Geneva or Zurich, a crossroads for international business. Nor does anyone ever mistake this place for Gstaad or St. Moritz, the beautiful people don't come here to play. The locals like to think of Lugano as the Rio de Janeiro of Switzerland and lumber on about how a nearby mountain peak looks exactly like --- well, okay, sort of like --- Corcovado. But the beach below is hardly Copacabana. And anyway, the Swiss do not samba.

In the past, the main reason for stopping here was because Lugano was a terrific place to hide money. All that supposedly changed a few years ago when the Swiss introduced new banking regulations to combat fraud, tax evasion and, specifically, money laundering. Since then, Lugano is still a terrific place to hide money.

There's a thriving casino across the lake, on the Italian side, with frequent ferry service back and forth. Especially during the summer months, it's not uncommon to find well-dressed men and women stepping off the morning's first boat at the Debarcadero Centrale, to take their croissant and espresso breakfast at one of the cafes on the Piazza Manzoni, or further along the Riva Giocondo Albertolli, near the lush Parco Civico on the lake's shore. It's hardly a coincidence that many of the cafe tables empty at about the same time the banks open.

According to London's Financial Times, 40 percent of all private assets worldwide are managed in Switzerland, a staggering amount of money. But then, in 1994, there were 108 banks in Lugano, and three times that many throughout Ticino. As it happened, there were more banks there than in the more populated, more accessible Canton of Geneva. In fact, Lugano still boasts one of the highest banks-per-capita ratios in the world, more than twice that of Switzerland's acknowledged banking capital, Zurich.

While every bank in Lugano is regulated by Swiss banking laws, governed every bit as fastidiously as all banks in the country, the easy approach from Italy and the proximity of a well-established casino make banks here especially attractive for anyone seeking an especially "discreet" relationship. And because discretion is such a salient commodity, one learns quickly that you can't just walk into any bank and announce that hiding money is what you intend to do.

"I'd like to open a secret bank account," came the request in a forthright tone. "Un compte secret."

A woman at the first bank didn't disguise her annoyance with such obvious clumsiness. "We're not interested in any new business of that kind," she said.

The aspiration was repeated, in a slightly less hearty voice, at the second bank. "I'd like to open a secret bank account. Un compte secret."

A woman there was hardly more congenial. "Do you mean, a compte anonyme? May I suggest another bank which might be more receptive."

She did. It wasn't.

"We are not taking on any new private banking business," a man at the third place explained to an increasingly unobtrusive inquirer. "Perhaps you might try somewhere else."

An official at the fourth stop, directly across the street, was even less affable, despite the ever diminishing decibels. "There is no such thing here as a secret bank account. I'm terribly sorry to disappoint you. Secret Swiss bank accounts are only for the movies."

However, at the fifth bank, a properly hushed desire to discuss, "various benefits of private banking," was met a businesslike nod by the Special Affairs teller who directed her prospective client to a carpeted suite of offices behind a locked door. There, an impeccably tailored Gentleman introduced himself, wondering if Signor would care to speak French, Italian, English or German. Signor suggested English. So, with a perfectly practiced British accent, the Gentleman offered Signor, "A coffee? Perhaps some tea?" After two pitch-black espressos arrived on a silver tray carried by a suitably tuxedoed waiter, the Gentleman closed his office door and asked how he might be of assistance.

Signor said he was interested in, "A discrete private banking relationship. Perhaps something along the lines of un compte anonyme."

"I must caution you," the Gentleman began, "that this kind of facility has been much romanticized over the years. The so-called secret Swiss bank account, the sort you might have read about in James Bond, is strictly for pulp fiction and the cinema."

"Now where do you suppose they got such a notion?"

He speculated, "Perhaps they've misinterpreted the banking rules in this country as they actually exist. What we do have to offer is a code that protects all bank accounts. Everything from your conventional current account to your child's savings account. By law, it's a crime in Switzerland for anyone working in a bank, or anyone who has ever worked in a bank, to reveal any information whatsoever about an account. It is against the law even to say that a specific account exists."

"You mean you'd be breaking the law if you told me your wife kept her checking account in this branch?"

"That's correct."

But that's only half the story.

Swiss silence is by design, and in all but the rarest circumstances, not merely 24 carat gold, it's inlaid with diamonds, rubies and sapphires. Every account is protected, at times to the extreme. Take the case where someone dies and his heirs attempt to discover if he's been stashing money in an account they know nothing about. The only reply they will ever get out of any Swiss banker is a hollow stare and a slightly chilly reminder that banking codes prohibit disclosure of any information concerning any accounts. Although, in this case, there's more to it than a mere requirement to comply with the law. Banks zealously cloister their business behind the strict banking codes because they're permitted to reap the bounty of accounts that have lain dormant for 20 years. If you die and no one knows about your compte anonyme, the bank can claim your money. One estimate has it that, at any given time, there are tens of billions of dollars sitting unclaimed in Swiss banks.

So, technically, the Gentleman was right. What he hadn't endeavored to say was that, in Switzerland, not all accounts are protected equally, that some are considerably more equal than others.

Banks all over the world offer preferential facilities for customers willing to pay for the privilege. Private banking is standard product in today's financial services industry. Marketed as being extra-exclusive, and therefore appropriately priced, it's readily available in every major North American city where banking secrecy is scarcely iron clad. However, when you speak about private banking in Switzerland, the accent really must be on the word private.

"In certain very particular cases, an account might be handled in a particularly special way," the Gentleman conceded.

"Like in the movies!"

"I wouldn't go quite that far. I'm afraid that the use of encoded midnight phone calls to unlock a compte anonyme is nothing but romantic legend. Also, please keep in mind that bank accounts throughout the world are identified with numbers. The notion that someone might be given information by ringing up to ask in a hoarse whisper about account number 12345, is ludicrous. I dare say that information is never given out by any bank anywhere in the world just because someone knows a number."

"Fair enough," Signor said. "But how about, 'particular cases'? And, 'in a particularly special way'?"

"By that I mean, certain clients have certain banking needs which we will provide."

"Such as hiding money?"

"If that's what you're looking to do, you're probably in the wrong country. In Switzerland today there is a very precise code of conduct which requires us to exercise due diligence in knowing with whom we do business. These days we will only open accounts for people who are willing to disclose to us their identity and explain to our satisfaction the source of the funds they wish to deposit with us."

What he was trying to say, in essence, is that Swiss banking is not what it used to be.

Once upon a time, there were two distinctly different types of account, referred to by the printed form used to open it. Form A, the standard product, included the name of the beneficial owner. Form B, the really good one, did not involve names and could be opened by an attorney or an accountant acting as an agent. Although the agent was required to state on the form that he knew the name of his client, he was not obligated to disclose that information to the bank. The beauty of Form B was that, by using an attorney as your agent, you could create a two-story wall of privacy. Superimposing Switzerland's banking codes over the secrecy afforded client-attorney privilege meant that no one could ever attach your name to the money in the bank. For really good measure, a Form B account opened in the name of an offshore holding company which was then run by nominee directors, guaranteed that not even the Swiss attorney acting for you knew your name. And if that offshore holding company was owned by other offshore holding companies run by nominee directors, beneficial ownership was virtually untraceable. The only danger lay in the fact that, in those circumstances, you couldn't directly manage the account and would have to trust your holdings to various agents. That said, the sort of person who bothered to construct such a complicated maze in order to hide his identity usually had the means, specifically muscle, to ensure that anyone having signature authority over the account was well aware of the risks involved with mismanagement.

But Form B accounts were abolished by law in July 1992.

"Come on," Signor urged, "I'm sure the laws of physics also apply to banking. Voids get filled. How do you open an account today without names attached?"

The Gentleman was naturally cautious. "Look, even if we used a system based on numbers, you must understand that someone in the bank will always know the name attached to those numbers. It gets down to how many, or how few, will ever be able to link your name with your account."

"How few is a few?"

"Perhaps three? Perhaps four? Only the bank's top executives. But it's reasonable to expect that someone must know whose money it is. How else could you get it when you need it? How else could we make certain it doesn't go to a person not authorized to use those funds? We need to protect our clients and ourselves from all eventualities."

Protecting themselves from all eventualities is the unwritten first rule of the banking business everywhere. Protecting their clients from all eventualities is what the Swiss have been doing for centuries.

Bankers there began offering secrecy to aristocrats for a fee during the French revolution. Les comptes anonymes, as we know them today, were invented by the gnomes at the end of the 19th century, a marketing tool to attract fresh business from around the world. The idea was that if people wanted to hide money, regardless of the reason --- anything and everything from tax evasion and fraud to politically unstable environments --- the Swiss were willing to sell them that service. In 1934, secret banking was enshrined into Swiss law, basically because a large number of wealthy Germans were willing to pay to protect their assets against a background of increasing Nazi influence. Yet it was only when these cast-iron accounts were immortalized by a legion of thriller writers, Ian Fleming among them, that legend outgrew reality.

A serious crack in the mask first appeared in 1977. The manager of the Credit Suisse branch in Chiasso, along the border with Italy, had invested in excess of $500 million on behalf of a group of Italian clients. When the money disappeared with the investors, it was discovered that the local manager had been less than diligent. To repair the damage done to the national reputation, Swiss authorities called in the banks and together they wrote a code of conduct. The basis of the code is that responsibility must rest with the bank and its managers to know with whom they're dealing.

*****

Enter here, the Shakarchi Trading Company.

The founding father, Mamoud Shakarchi, was a highly successful Lebanese banker who, to save himself, his family and his business interests from the civil war in his homeland, moved to Switzerland and established Shakarco, an import-export company. Both his sons, Mohamed and Marwan, soon joined him in business. In 1980, Mamoud split the company in two. Marwan kept the name Shakarco, while Mohamed called his half the Shakarchi Trading Company.

According to several sources, until his death in 1985 Shakarchi Sr. was known in some circles as le blanchisseur --- the laundryman. He had in fact, been under investigation by various authorities, both US and European, who'd suspected him of washing Kintex/Globus funds from Turkey, including Sicilian drug money, through Switzerland and into Bulgaria. But Mamoud Shakarchi always denied any involvement.

Then an odd thing then occurred almost halfway around the globe. One evening in November 1986, a Turkish drug dealer named Dikran Altun checked in at Los Angeles International Airport for the Pan Am flight to Zurich. He had three pieces of luggage with him and the weight exceeded the normal baggage allowance. The woman at check-in said Altun would have to pay overweight. Altun got very annoyed and after a heated discussion, he canceled his reservation, took his bags and walked away. The woman at Pan Am watched as he went down the hall to the KLM counter and tried to book a seat for a flight to Amsterdam. She reported the incident to her security duty officer who in turn told the airport police. The baggage was intercepted at KLM and opened. Inside was more than $2 million in cash.

The FBI and the DEA were both called in and together they identified the money as part of a vast money laundering operation working out of Los Angeles. They’d been able to follow money trails around the States and on to Panama and Colombia, but this was the first they heard about any of it going to Zurich.

The investigation that followed led to the Syrian born Magharian brothers --- Barkev and Jean. Money changers with connections in the Lebanon and an office in Zurich’s Nova Park Hotel, they did a lot of business with Switzerland’s third-largest bank, Credit Suisse. Even more interesting, it turned out that one of their partners was the government of Bulgaria.

Known to have been laundering dirty money for more than two decades, the Bulgarians started with Turkish currency earned through smuggling cigarettes and watches and worked their way up to washing drug money. By the time old man Shakarchi died, it’s estimated that the Bulgarians were laundering over $2 billion a year. For their efforts, they were bringing in perhaps as much as $10 million in hard currency.

The source of that money was Turkish heroin. Istanbul was where traders linked the opium growers in Iran and Afghanistan to the addicts of Western Europe. The money began it’s washing cycle through the hawalah network running beneath jewelry shops in Istanbul's covered bazaars. Working its way to Bulgaria, it was then air freighted to Switzerland where no one would have thought twice. More than a ton and a half of foreign currency is flown into Zurich Airport every day. Traders like the Magharians therefore have little or no trouble depositing it in banks against forged receipts. The money was used to purchase gold which was then shipped through front companies such as Globus/Kintex to Bulgaria. From there, the Bulgarians sent it back into Istanbul’s covered bazaars.

So much money was going through the Magharians’ accounts that even Credit Suisse began to worry. Internal auditors warned the bank that the Magharians were likely involved in illegal capital flight from Bulgaria or Turkey. So to satisfy the auditors and also keep such good clients, the Mogharians’ bankers helped them establish a shell company in Beirut.

A few months later, the Swiss police seized 100 kilos of heroin and morphine in Ticino and were able to link the drugs to the Sicilian Mafia. They were also able to establish that the money for this heroin was coming into Switzerland from Bulgaria and being washed through the Shakarchi Trading Company. Just under $1 billion had apparently gone through 31 separate deposits into the Shakarchi Trading Company's account with Union Banque Suisse in Lugano.

The company was being run by Mamoud’s son Mohamed, so the Swiss and the American authorities combined notes to find out if Mohamed had simply taken over the family laundromat. Like father like son he too denied the allegations. But his was a difficult case to maintain. He continued to renounce any knowledge of the affair but as the pressure on him mounted, he finally got to the point where he acknowledged that the family had at times laundered money, but only for the CIA.

According to him, over the seven-year period from 1981 to 1988, a CIA front company called Argin Corporation had washed $25 million through the Shakarchi offices to buttress the Mujaheddin rebels in Afghanistan in their fight against the Soviets. Mohamed's boast was met with protracted denials by the CIA. That is, until 1989 when the American Ambassador in Switzerland issued a terse press release substantiating Shakarchi's relationship with the agency.

Then came the Kopp affair.

In 1985, Mohamed Shakarchi had invited a prominent Swiss businessman, Dr. Hans Kopp, to join him in a venture dealing in metals and precious stones. Four years later, when it was learned that the Magharians had washed funds through Shakarchi's gold bullion operation, Hans Kopp received a very private and very panicky phone call from the Swiss Minister of Justice, tipping him off to the investigation. The Magharians had allegedly washed as much as $2 billion through Shakarchi. He instantly severed his relationship with Shakarchi. The problem was that the Swiss Minister of Justice just happened to have been his wife, Elisabeth.

Scandal ensued, amplified in the press by the arrest and conviction of the Magharians on money laundering charges, leaving Mrs. Kopp in an untenable position. Although no evidence ever came to light suggesting that her husband was involved in any illegal activities that might have taken place at the Shakarchi Trading Company, Elisabeth Kopp was forced to resign as the first female member of the country's ruling Federal Council.

Although he has been the object of several lengthy investigations in the US and Switzerland, Shakarchi himself was never charged in either place. But then at that time in Switzerland, money laundering was not yet against the law.

*****

Because concealment is very good business, secrecy laws exist today, in one form or another, in more than 50 nations. That's around one-quarter of all the sovereign states on earth. But nowhere does it have the same cachet, the same claim to fame, as it does in Switzerland. Perhaps that's why it's no accident that money laundering is something Swiss bankers and their clients know a great deal about.

In January 1992, four Hungarians wishing to wash $1.3 million worth of German marks, had arranged an appointment at the main offices of Credit Suisse, on the Paradeplatz in Zurich. They were greeted in the huge, marbled lobby by two men who introduced themselves as officers of the bank. One of the two took the suitcase to another room to count the money while the other invited the Hungarians to have coffee. When the first man did not come right back, the second excused himself, saying that he wanted to see what the delay was. The four Hungarians are still staring into their coffee cups.

A week later, a Canadian businessman handed over the $2.5 million worth of Swiss francs that he was trying to wash for another cup of Credit Suisse hospitality.

How the fraudsters got into the bank and were able to use the banking hall greatly concerned Credit Suisse. It must be pointed out that the bank was not involved in any way. Still, their coffee is overpriced.

While the Swiss are fast to give lip service to the war against the laundrymen, they have been blatantly reluctant to kill the goose, preferring to say that they are doing all they can to end money laundering, while not actually doing much. Case in point: Two laws framed at the end of the 1980s aimed at putting an end to the influx of criminal funds into Swiss banks. The first made money laundering a crime and prescribed harsh penalties for related offenses such as insider dealing, market manipulation and tax fraud. Although it did not include tax evasion in a foreign country, the legislation did recognize as an offense the use of fraudulent documents to deny a foreign state its rightfully due taxes. The second eliminated all of the existing 32,000 Form B accounts. Under pressure from various foreign governments, including the United States, the Swiss decreed that agents and representatives must now disclose to the banks the beneficial owners of those accounts. An attorney must now sign a sworn statement to the effect that his client is not abusing the Swiss banking laws and that the monies involved have not been derived from criminal activities. The new laws also stripped away a powerful buffer by specifying that any lawyer acting for a client in the capacity of an asset manager could not refuse to divulge information on this aspect of their relationship. In other words, that part of their business is no longer automatically protected by attorney-client privilege. These days, any client wishing to open an account, enter into a fiduciary transaction, rent a safe-deposit box or make any type of cash transaction in excess of $6800 must be properly identified.

Furthermore, the Federal Banking Commission has provided banks with a set of ground rules. They want bankers to be suspicious of any sudden activity taking place in a long-dormant account; of cash being withdrawn immediately after it's deposited; of transactions that appear out of the ordinary for the specific client; and of customers who refuse to supply information. Bankers are also asked to be especially wary of any accounts opened with more than $17,000 in cash, while counter staff are supposed to question anyone converting large amounts of cash into other currencies.

Understandably, some banks are more vigilant than others. A few even carry it to distinctive excess, a trait peculiar to a people whose reputation, justifiably, derives from chocolate and not their sense of humor. When the Compagnie de Banque et D'Investissement, now the Union Bancaire Privee, built new offices in Geneva, it petitioned the city council to change the name of its street because, in their opinion, the old name created the wrong image. The city council agreed. It's now the Place Camoletti. It used to be Rue de la Buanderie, Wash House Street.

In Switzerland, today, unless you've got a false passport, you can no longer use a ludicrously obvious false name. Even with a counterfeit passport, it's easier, and less dangerous, to hop on the next train to Austria, where banks don't much care who you are because they'll open accounts in any name. It was only in 1994 when the Austrians finally bowed to foreign pressure and legislated against money laundering. Except, like so many other countries that reluctantly give in to international pressure, Austria only went halfway. They refused to put an end to the sparbuch, anonymous savings books of which there are more than 20 million in a country of fewer than eight million. The preferred method for tax evasion, the owner of the money in the account is whoever owns the sparbuch. The name attached to it is nothing more than a password, which means you can call yourself anything from Bill Clinton to Popeye the Sailor Man. While these accounts are limited to a maximum of 10 million Austrian schillings, roughly the equivalent of $900,000, you're welcome to one each in the name of Snow White and the Seven Dwarfs. Add in all your other favorite Disney characters and you're up to serious numbers. The burden of proof is on the bank, but you get around that by hiring a financial advisor to open the account for you. Manuel Noriega had a certain bias for Austrian banking, as did Imelda Marcos. The only problem is that anyone using these accounts cannot deposit foreign currency. It's strictly for schillings. So arriving in Vienna with sacks of used $20 bills won't work.

But it does in Switzerland. Despite the new legislation, depositing mountains of used $20 bills is not a crime. All you have to do is convince the bank that the money is not the proceeds of crime.

Where you might have a bit of worry is in the pronounced tendency of the Swiss, nowadays, to assist foreign states in certain, very specific, types of criminal investigations. Provided that a foreign government can substantiate, to the complete satisfaction of exceptionally skeptical Swiss judicial authorities, that funds in an account there are the object of a fraud, including tax fraud but excluding tax evasion, and that criminal proceedings have already been initiated in that foreign state against the beneficial owner of those funds, the Swiss are willing to seize assets.

Along similar lines, the Swiss were the first nation to sign a treaty with the United States to expose drug-related wealth. If the DEA is on a witch hunt, the Swiss won't cooperate. But if the US Justice Department can identify drug money held in a Swiss account and, again, can substantiate those claims in accordance with dreadfully strict guidelines, the Swiss will intervene.

A controversial matter, to say the least, cooperation with foreign governments has been vehemently opposed by most Swiss bankers, who emphasize that every breach of banking secrecy contributes to a lack of confidence in the Swiss banking system. As an example of what invariably happens, they point to the Marcos case. By forcing banks to reveal the existence of Ferdinand and Imelda's accounts, and by then freezing the money in them, the government gave the impression that banking secrecy would no longer be adequately safeguarded. The immediate result was a rush of funds out of Switzerland in favor of Luxembourg, Liechtenstein and the Caribbean.

No one has to remind Swiss lawmakers that if the people who were doing battle against the laundrymen had a magic wand, waved it and tomorrow there was no more secret banking in Switzerland, tens of billions of dollars would make a dash across the border to Vaduz. Or be on the next plane to Grand Cayman. It wouldn’t solve the money laundering problem, it would merely create unemployment in Switzerland. And in a country that has traditionally known very little unemployment, a country that takes its own prosperity seriously, opening bank accounts to closer scrutiny is not a platform on which any politician looking at reelection would dare hang his campaign.

On rare occasions, someone does however break ranks. In 1995 Lugano’s federal prosecutor, Carla Del Ponte, lashed out at the Swiss banking industry for doing so little to combat money laundering. "Experience shows that all important proceedings against money launderers in this country have depended on information from abroad."

She said the obligation imposed on Swiss banks to report suspicious customers was clearly not working because banks were afraid of scaring off potential customers. She admitted that huge sums of dirty money were coming into Switzerland from Russia and other eastern European countries. And then she told a harrowing tale of trying to help bust some Mafia heroin dealers.

In October 1994, she said, she received a formal request from the Italian authorities to ask banks in Ticino to reveal any accounts they might be holding for 60 named Italian heroin traffickers. She was certain the banks would cooperate. Instead, they filed 100 appeals against her in addition to making a formal complaint to the government.

The embarrassed banking industry took the hint and worked out a compromise with her that did, in fact, reveal substantial sums hidden in Switzerland by some of those named Italians.

So, when faced with bad publicity and/or when it doesn’t cost too much, the Swiss do make an effort to appear helpful. After Juergen Schneider, Germany's largest property developer filed for bankruptcy and was indicted on fraud charges, the Swiss agreed to block the $142 million he’d been saving at a bank in Geneva. On a request from the Haitians, the authorities in Bern identified and froze private accounts held by Baby-Doc Duvalier. When the Americans asked that they look into Manuel Noriega's affairs, the Swiss were accommodating enough to padlock his funds. It was the same story when the new Romanian government inquired about Nicolai Ceausescu's assets, when the Indonesian government sought help identifying funds stashed there by President Sukarno, and when the Americans came up with proof that a huge amount of money had been deposited in Switzerland by an Ecuadorian drug cartels.

The first time the Americans asked the Swiss to freeze the $2.2 million that the Russians purportedly paid former CIA agent Aldrich Ames, they declined. But when it became evident that the CIA wasn’t going to ask politely a second time, someone in Bern decided it might be prudent not to risk the CIA’s temper --- the agency knew too much about Swiss banking and could have created a great deal of embarrassment --- and so they reconsidered their stance and froze three accounts.

The Swiss also played ball with the DEA when they went after Jorge Hugo Reyes-Torres, head of a family drug cartel in Ecuador. He’d been producing cocaine since the early 1970s, most of it for distribution in the United States. Around 1990, some of his family settled in the Denver area, apparently planning to import a ton of cocaine a year. The results of the DEA’s two-year investigation were put before a federal grand jury in May 1992, resulting in drug violation charges against Reyes-Torres and other members of his family. The following month, police in Ecuador raided his home and arrested him. They also found documents identifying overseas bank accounts. The Justice Department sent them to Switzerland and asked that the accounts be frozen. Because this wasn’t a fishing expedition, and fully complied with the letter of the law, the Swiss said they were more than pleased to oblige. The US Attorney in Denver then obtained a civil forfeiture judgment against the $11.5 million sitting in Switzerland. The Swiss turned it over and the US handed back to the Swiss $3.8 million as a thank you for their help.

It’s probably just a coincidence that shortly after cashing the check, the Swiss came through yet again.

Beginning in the mid-1970s and for next 20 years, Julio Cesar Nasser David --- who liked to call himself King Nasser David --- operated one of the largest, most successful drug trafficking rings in America. Together with his wife Sheila Miriam Arana de Nasser, and members of both their families, the Colombian couple smuggled nearly 30 tons of cocaine and 1500 tons of marijuana into the United States.

The earliest records of their dealings date to 1976 when they opened an account at the Royal Trust Bank in Miami with $20,000. Over the next 15 months they made 20 cash deposits totaling $4.49 million. After establishing a financial base for themselves in Switzerland with a "Red Cross" company registered in Liechtenstein, the Solimar Foundation, they used cashier’s checks to transfer their money from Royal Trust to the Union Bank of Switzerland in Geneva. Next, they opened an account the Landmark First National Bank in Fort Lauderdale and moved millions through there to UBS. In one frantic two month burst of activity, April-May 1980, the Nassers conducted 117 separate transactions, sometimes as many as eight in one day. They deposited $3.69 million into Landmark and, using cashier’s checks made payable to scores of fictitious names, transferred $4.39 million out.

By 1985, the Nassers were washing money through accounts at two more banks in Florida, plus banks in Bogota, Beirut, Barcelona and Panama City. As cash transaction reporting was beginning to be enforced, they switched to negotiable instruments, opened a dealing account at Merrill Lynch in Miami and transferred $5 million from Solimar in Switzerland to UBS Panama. They put some money into a condominium in Coconut Grove, some into boats, both for pleasure and for smuggling drugs. They also opened new accounts at UBS --- one in Switzerland under the name of the Liechtenstein registered Proventina Foundation, another in Panama under the name of the Liechtenstein registered Mirasol Stiftung. Money was deposited into both from their Merrill Lynch account in Miami.

Over the course of 20 years, they’d laundered $755 million through 18 bank accounts in eight countries and hid behind 10 companies and nearly 100 fictitious names. But in early 1995, as a result of a ten month investigation, the US Attorney in Miami indicted the Nassers for the seventh time and in April, the Swiss arrested Sheila Nasser. They also froze $150 million of the Nasser’s money at UBS, representing the largest single cash seizure of narcotics proceeds to date. Immediately after Sheila’s arrest, UBS confirmed that one of its vice-directors had been suspended pending a trial.

Now with the prospect of netting a one-third share of $150 million, the Swiss signed a mutual assistance treaty with the US, opened a liaison office in Washington and stocked it with a senior police officer.

*****

"So," the Gentleman made his point, "you can plainly see how, and can appreciate why, we are not interested in harboring criminal funds."

"Most definitely," Signor nodded. "But that's not my case."

The Gentleman was too polite to disagree. "Of course not."

Signor put on his most reassuring expression, "Let's say, I'm looking to invest some capital quietly. You understand. Without wanting to involve myself in various... let's call them, international hassles."

For some odd reason, he immediately assumed that "international hassles" meant tax evasion. "If you don't pay your taxes in the United States, that's hardly a problem for the Swiss government to worry about. Although I'm certain that I don't need to remind you how some countries, the United States and Great Britain among them, have written laws which make undeclared bank accounts illegal. But it goes without saying, those laws are not binding in Switzerland."

Not wanting to worry him with minor details, such as how "international hassles" could also mean an arrest warrant issued by the FBI, Signor settled on, "Just how would someone go about opening such an account? How would you propose to fill the void left by the Form B?"

"For the sort of private facility you're alluding to, I think it would be fair to say that sufficiently large sums are required."

"What would you say to... " Signor picked a figure off the top of his head... "two point five?"

Taking for granted that there are five zeros at the end of the numbers two point five, he wondered, "Swiss francs?"

With enormous confidence Signor informed him, "Dollars."

"Hmmmm." He liked that. "Yes, it is definitely in the range of business we would be willing to consider."

Now, here came the not so subtle hint, "There may be a certain amount of cash involved."

"Ah." His eyebrows rose. "I see." Long pause. "Cash can present certain hurdles."

"Oh..." Signor reacted matter-of-factly. "But they're not necessarily insurmountable hurdles."

He thought about that for a moment. "We are required to exercise due diligence. Now, I don't take that to mean that we must insult dozens of new clients simply to identify a villain who will, when we refuse his business here, merely take his business somewhere else. But cash is, I'm sorry to say, often inconvenient. And large amounts of cash are, frankly, not very desirable."

"I understand." Signor leaned forward. "Yet Switzerland is one of the world's largest bank-note trading centers. I read somewhere that a ton and a half of foreign currency arrives every day at the airport in Zurich. Surely a few extra bank notes aren't going to cause anyone a problem."

With two and a half million dollars being dangled as an opening deposit, and the prospect of more to come, he didn’t want to see his prospective client walk across the street. "If we could be completely satisfied..."

"You mean, if the cash was coming from say, various business ventures in the Middle East? Or, a rather lucky evening at the gaming tables across the lake?" Signor hid his grin. "Would that make things more... convenient?"

Possibly reminding himself that there were 107 other banks in town and almost certainly assuring himself that other bankers would gladly take Signor's deposit --- although, little did he know that four had already shown Signor to the door --- he proposed, "If we could somehow satisfy ourselves as to where the cash came from, I'm certain that we can come to an arrangement."

"And this can be done verbally?"

He gazed at Signor for a very long time. "We might require some written evidence, depending on the nature of the verbal statement. Invoices, perhaps. Or contracts. Letters of agreement. Paperwork is good. And it might happen that discreet inquiries will then be made. But please allow me to assure you, whatever is discussed between us remains in the strictest confidence. We may ask questions. However, once we're satisfied with the origin of the money and the integrity of our client, we never repeat any of the answers."

How comforting, Signor thought, that with little more than a passport, well prepared answers to the obvious questions, a handful of faxes for backup and a hefty pile of dough, almost anyone can avail themselves of the most famous laundromat in the world, despite the fact that some Swiss would have you believe such facilities no longer exist.

"The money in question..." Signor looked him straight in the eyes... "is perfectly clean. It’s not drug money."

The Gentleman stared back and finally, smiled warmly, "Then it will be a pleasure to do business with you."

*****

Chapter Fourteen

ELI PINKAS - A MYSTERY STORY

col·lec·tor (ke-lek’-ter) n. A person employed to collect taxes,

duties, or other payments.

--- The American Heritage Dictionary of the English Language

Just after dawn on Tuesday morning, June 10, 1980, the Lausanne police received an emergency call from an hysterical maid at the Villa Gentilhomiere, the luxury estate of a local businessman named Eli Pinkas. She kept babbling on about a dog being murdered and intruders. Several cars were dispatched. Arriving at the large gates that guarded the villa, the police found them unlocked, so they hurried inside the grounds. There was a Jaguar coupe in the garage and when one of the officers routinely touched the hood, he noticed that it was hot. Not simply warm, he later wrote in his report, but hot. The car had obviously been driven for a long time during the night.

The villa seemed otherwise quiet.

As soon as the officers rang the front bell, the maid threw open the door, insisted the dog had been murdered by intruders and brought the officers inside. They found a German shepherd dead in the hallway at the bottom of the stairs. Later, the police were able to determine that the cause of death had been cyanide.

Fanning out through the house to search for intruders, one officer went upstairs. In the master bedroom he found Pinkas’s body. On the nightstand next to the bed there was a handwritten note. In it, Pinkas asked that his friends forgive him. Later, the police were able to determine that the cause of death had been cyanide.

No intruders were found. There were no signs of a break-in. As far as the police were concerned, it was obvious that Pinkas had killed the dog then taken his own life.

Normally, an autopsy confirmation of suicide would have closed the case. Except, sometime that very same morning --- but definitely before the Lausanne police went to La Gentilhomiere --- an anonymous phone call to the police in Cannes, France summoned them to a penthouse apartment at the Grand Hotel.

The front door to the apartment had a whole series of locks but when the police got there, none of them were bolted. Nothing in the apartment led them to believe there had been intruders. But in the master bedroom they found a woman’s body. Later they were able to determine that the cause of death had been cyanide.

On the floor at the foot of the bed they found a note ripped into small pieces. "Flo, m'amour, I give you some last advice because I love you. Open these two packages and swallow these four capsules which operate very quickly so that you can join me." It went on to warn that if she stayed alive she would suffer great difficulties and dishonor. "I've tried for years to reestablish my financial situation but without success." It was signed, "I love you always and until the last breath of my life, your Eli."

At first glance, the matching suicides of two lovers, 208 miles apart, had a Romeo and Juliet quality about it.

But first glances are often deceptive.

*****

Eli Pinkas was a cultured man who spoke French, English, German, Italian and Bulgarian. Of average build but with heavy features --- he had extremely large hands and a very large forehead --- he always dressed in a traditional, conservative manner. His thinning dark hair was just on the verge of turning white.

Born in 1920, his family had settled in Lausanne in 1941, war refugees from Bulgaria. He earned a degree in chemistry from the local university and over the next 39 years enjoyed the trappings of a successful and respected businessman. His home was aptly named, translating to mean "The Gentleman's Manor" and he spent a great deal of time there, much of it in his garden tending to his roses. He was a private person, although some people preferred to think of him as aloof and slightly distant. His personal annual income would have been in the range of $1.5 million, yet he showed very little outward sign of extravagance, except perhaps for his love of Jaguars. He had several.

His business life was a multi-layered series of interests almost all revolving around his background as a chemist. Being a serious man, other serious businessmen invited him to serve on their corporate boards and one of the boards he sat on was the very conservative Banque Vaudoise de Credit.

The company he ran was called Socsil and his factory in Lausanne was a large, heavily-guarded, fully mechanized plant operating in three distinct fields: the manufacturing of mechanical pumps, a process that Pinkas had patented; the chemical testing of raw materials being used to make a certain soft drink, the name of which was kept secret. Although Pinkas once confided in close friends that it was Coca Cola and that he was the only person outside the United States to possess the secret Coke formula; and finally, the most important and by far biggest share of his business, the production and sale of the highly explosive gas, nitrous oxide, popularly known as laughing gas.

Many years before, Pinkas had invented a chemical process that rendered the gas inert. Understanding the potential of non-explosive nitrous oxide, he designed a medical kit for use in battlefield hospitals. Accordingly, he sold these kits to dozens of militaries around the world. Among his clients were the NATO armies and the armed forces of several Arab nations. A lucrative enterprise, it brought him into contact with people in the Middle East. Because a military build-up somewhere in the world was clearly reflected in increased orders for his battlefield kit, Pinkas was privy, albeit as an incidental party, to certain military intelligence and information that might otherwise be considered classified.

Not that classified information was something he was unaccustomed to. He saw a lot of it because in his spare time he was a major in the Swiss Army Reserve. Or maybe he wasn't.

In Switzerland, just about every male citizen has a commitment to the military for a good part of his life. That's why it was hardly surprising when friends spotted Eli Pinkas walking through the streets of Lausanne wearing his reserve officer's uniform. Nor did any of those friends ever doubt him when he admitted to being the Swiss Army’s Reserve Chief of Gas Warfare. After all, he was a chemist with a thorough knowledge of gases. And the Swiss, who are not a nuclear force, have historically depended on gas warfare as a last line of defense. When attacked, their battle plan is to retreat into the mountains and fill the valleys with gas. They believe it makes the country just about impregnable, at least to an army advancing on foot.

So Major Eli Pinkas, Reserve Chief of Gas Warfare for the Swiss Army seemed totally plausible. What’s more, Lausanne is a small a town where everyone knows everyone else and if Pinkas wasn’t who he said he was, word would have gotten around very quickly.

However, the Swiss Ministry of Defense insisted that Pinkas never had anything to do with the Army Gas Warfare Department. In fact, they claimed he wasn’t even a reserve officer.

*****

In addition to the three main parts of Socsil, Pinkas had his fingers in a few other pies. In the mid-1960s he bought a 283 acre tract of land outside Lausanne with the intention of developing it into a resort area. He had intended to enlist the help of an American consortium but Swiss laws discourage foreign ownership of property and as a result, the Americans shied away. Instead, he used the land as collateral with the banks when he wanted to swing other deals.

Then, he also seemed to be in the scrap steel business. While selling nitrous oxide to the US Army --- at least this is what he told friends --- he stumbled across the curious fact that where the Americans were concerned, there was a difference between gas bottles that were "full" and gas bottles that were "almost full." When he shipped the bottles to them, they were checked and certified full. But as the valves on those huge steel cylinders often leaked, not all of them were 100 percent full by the time the US Army got around to using them. Through some eccentric accounting regulation, bottles that were not 100 percent full, Pinkas explained, were written off by the Americans as unusable and discarded as scrap steel. Discovering this, he immediately started buying the scrapped bottles, repainting them, topping them up with gas --- he said there was usually no more than 15-20 percent missing --- and selling them back to the Americans for the full price.

He used to brag to friends that it was a truly wonderful business, and even let some of them in on it. Every now and then, he’d invite a few pals to invest. He’d even show them their gas cylinders whenever they visited the factory. And he did send them regular dividend checks. Because those friends were making money with him, none of them bothered looking any deeper into it. Although an official report later claimed Socsil was only doing $4.2 million a year worldwide in nitrous oxide sales, Pinkas flaunted records which showed he was doing $27 million a year just with the Sanitary Division of the United States Army.

As a contractor to the United States Government, Pinkas was in a position to discount US paper. It’s a standard procedure. When a company invoices the government for say, a million dollars, and the government acknowledges the debt, promising to pay in 60-90 days, a businessman can take the invoice to a bank and get $1 million right away, minus whatever commission he’s negotiated with a bank for taking over the debt. It goes without saying that Uncle Sam's signature on US Army invoices meant that any bank in the world would welcome Pinkas and his US paper.

Except, Pinkas didn’t actually discount the paper. Instead he borrowed against it. He put the invoices down as security for loans. It was a slightly quirky thing to do, but most of the bankers he dealt with figured he was just trying to save a little money. So they went along with it. They couldn’t know that Pinkas never intended to give a bank the opportunity to collect on this paper.

When a bank wanted to see balance sheets for Socsil, Pinkas showed them balance sheets. When they wanted to see his personal accounts, he showed them his personal accounts. Everyone who asked for paperwork got paperwork. And in every case, the bank looking at his accounts was listed in those reports as Pinkas’s only creditor.

Pinkas’s borrowing against US government paper has now been traced as far back as 1948.

So banks gave him money against that paper as collateral. By backing it up with his balance sheets and, wherever necessary, his personal guarantee, the bankers with whom he dealt conveniently forgot the most basic lesson of the lending business: Always check with the originator of a collateral note.

Astonishingly, not one bank --- not even American banks --- ever bothered checking with the United States Army Sanitary Division.

*****

Enter now the former Mrs. Pinkas. Her name was Florence, she was two years older than Pinkas and a hopeless alcoholic. Before she and Eli were married in 1943, she appeared on the scene as a dark-haired lady from Argentina who spoke beautiful Spanish and French with a heavy accent. After they were divorced in 1964 she left Lausanne, preferring to live in the south of France and only rarely came to Switzerland. They never had children, which some people felt accounted for the touch of melancholy that often surrounded her. Or maybe she loved him and just didn't want to live apart. They divorced in 1964, although their affair continued on a regular weekend basis. He would openly tell anyone who asked that he was totally devoted to her. And the proof of it was that every Thursday night he flew to Nice, telling anyone who asked that he always spent the weekend with her.

Oddly, it now turns out that she was not from Argentina. Instead she was born near Lausanne --- she still has family there --- and met Pinkas when she was working as a barmaid in a local hangout. Why the masquerade about being from Argentina, no one seems to understand. The important thing is that everyone either believed it or was at least willing to play along with it.

*****

The first week of June 1980 is one which, in the scheme of world history, probably doesn’t mean much. It’s wasn’t as remarkable as the first week of June 1900 when the Boxer Rebellion engulfed the southern provinces of China. Or the first week of June 1920 when the Treaty of Trianon redrew the map of Europe. Or even the first week of June 1960 when President Eisenhower sent 120 USAF planes to Southeast Asia, marking America’s toe testing of the waters that would become the war in Vietnam. Although Henry Miller died during that first week of June 1980. And it was the final week of Eli and Florence Pinkas’s lives.

It was also the week that a clerk in the Banque de Paris et des Pays-Bas in Geneva was auditing the lending portfolio and noticed that ink had rubbed off his hands. Curious, he sorted back through the stack of paperwork on his desk until he found some smudged letterheads from the United States Army Sanitary Division.

How bizarre, he thought, imagining that the Americans ought to have better printing facilities. He’d never seen anything like that. So he studied the letters more closely, then reminded himself that ink on US government forms wasn't supposed to rub off, then sent a memo to his superior to report the matter. The only thing his superior could think to do was wire the bank's office in Washington DC and have them inform the Sanitary Division of the United States Army that there was a minor problem with their letterhead. Accordingly, someone in the bank’s office in Washington phoned the Pentagon and asked to speak with the US Army’s Sanitary Division.

The operator on the other end wanted to know, "What’s a Sanitary Division?"

For the price of better ink, the world was about to cave in on Eli Pinkas.

A telex went back from Washington to Geneva. The smudged paperwork was sent to a senior officer at the bank who inspected it, then studied the rest of the file. He was inclined to phone Pinkas, to ask him what this was all about, but just to be prudent, he decided first to show the entire dossier to his lawyers. They demanded he call the police.

Being so well connected, Pinkas must have learned what was happening because by the middle of that week he began paying back a number of small loans that were then outstanding. A few thousand dollars here. A few-thousand francs there. And in every case, he paid cash. He also wrote letters to at least six people asking that they forgive him, although he never spelled out what for.

On Friday, June 6, the public prosecutor in Lausanne saw for the first time a document charging Eli Pinkas with fraud. And he was absolutely stunned. The thought of someone as reputable as Pinkas being involved in such a crime was so worrying that he rang Pinkas to say, "I must see you."

Pinkas laughed, then agreed to meet with the man later the following week. Hanging up with the public prosecutor, Pinkas now called two friends in the hierarchy of a local bank, asking them to meet him at his factory first thing Monday.

Almost as soon as they stepped into his office that morning, he informed them, "I’m being indicted."

They too were stunned.

Without going into detail, he admitted to "a few wrong-doings." He assured them, "It's very little. But it's so embarrassing."

Back at the bank, they decided they both liked Pinkas enough to want to do something for him. So while one checked the bank's records to establish the extent of Pinkas's borrowings there, the other approached the public prosecutor to see if their personal intervention might help Pinkas save face.

By Monday afternoon, everyone concerned was quickly coming to the conclusion that "a few wrong doings" and "very little" was hardly the case.

Before dawn on Tuesday, Eli Pinkas was dead at La Gentilhomiere and Florence Pinkas was dead in Cannes.

*****

The Swiss press announced the Pinkas affair with headlines labeling him a "Fraudster Bulgarian Jew."

But he wasn’t a Bulgarian. He’d taken Swiss citizenship and carried a Swiss passport for nearly 40 years.

Nor was he still a Jew. He’d become a Protestant in the 1950s. Whether he did that for business reasons, or because he particularly believed, no one knows. The point is, he did not openly acknowledge Judaism for at least the last 25 years of his life.

That he was a fraudster, however, is another matter.

When the police went to the Socsil offices after his death, they found that a large number of documents had been destroyed. They merely assumed that Pinkas had gotten to them first. Yet from what remained, they were able to determine that he’d used United States Army Sanitary Division invoices, plus similar invoices from the German army, plus a guarantee for $30 million from the Swiss bank UBS as collateral for loans that totaled a staggering $300 million.

When the police established that the bogus invoices were printed in Cannes, the French were called in. The printer who did the work for Pinkas later claimed that he didn't know what he was printing. He said he didn’t speak English and besides, it wasn’t any of his business what a client wanted printed on a form. All he’d say was that Pinkas paid for his work on time and in cash. In the end, the printer was the only person to go to jail in connection with the affair, doing two years for not declaring that cash to the French tax authorities.

As investigators got deeper into his affairs, it became obvious that Pinkas had somehow managed to convince American banks to make wire transfers to Switzerland by order of the US Army Sanitary Division. He needed to do that in order to make everything look absolutely official. He needed to have payments coming in to Switzerland from the US Government. After all, if he was supposed to be doing business with the Army, he couldn't deposit money in Switzerland and simply ask his bankers to believe that it was from the Army. But they were never able to, figure out exactly how he managed that.

Over the course of the next two years, the Swiss tried to trace the money Pinkas brought into the system. Believing at first that the sums involved were perhaps "as much as" $300 million, they located hundreds of companies around the world that Pinkas was using to launder money and were forced to revise their estimate. "As much as" $300 million was changed to "perhaps as high as" $800 million.

Yet the grand total of liquid assets attributable to Eli Pinkas once every book was examined came to only $1.5 million.

At that point, bizarrely, the case was officially closed. It was as if the Swiss suddenly didn’t want anyone to know exactly how much was missing or where it might have gone.

Six week’s after Pinkas’s death, the Washington Post reported that Pinkas had effectively stolen $140 million. Just over $112 million of it came from 18 banks around the world: eight in Switzerland, four in France, one in Britain, one in Israel, and four in the US, including Citibank and First National of Minneapolis. The rest of whatever money Pinkas had, at least according to the Washington Post, came from his friends and business associates.

Other newspapers have since suggested that, on top of the $140 million, there might be as much as $20 million more that’s been written off by creditors who, for legal or personal reasons, cannot publicly admit to having been involved.

Within two months of Pinkas' death, the Wall Street Journal quoted someone inside the Swiss banking authority as saying that the $140 million originally estimated was being revised down to $108.7 million. What’s more, the Federal Banking Commission seemed content to write off the scandal as a bit of temporary craziness. They said that because Pinkas was so heavily in debt, he had to keep borrowing just to pay the interest. That created more debt which in turn created the need for more borrowing. In other words, it was a Ponzi scheme. They noted that Pinkas was all right as long as interest rates were low. But when he had to borrow at 19 percent to pay off loans that had been made at 12 per cent, that strangled him.

Except that temporary craziness does not answer the question, where did the money go?

Finding someone in authority these days who’ll speak about Pinkas isn’t easy. Their first reaction is, it was a long time ago. They suggest you just forget it. If you persist, they tell you in a whisper --- as if they’re doing you a favor and finally letting you in on a genuine secret --- the money went to pay for his lifestyle. They tell you, he lost it gambling. They insist, there’s nothing else to say.

The only problem is that Pinkas clearly lived within his own income and he was not a gambler.

He was, however, an extraordinarily talented laundrymen.

The mechanics of his sink revolved around three companies. First there was Socsil. Next there was an investment company he’d founded in 1970 called Vilro. And finally there was a land development company, Villas La Roche, which owned that property outside Lausanne he’d once hoped to develop with American partners. Like spokes on a wheel, they branched out to those hundreds of companies he’d scattered around the world. To create cash flow he over-subscribed the three main holdings, selling each share three and four times. Because every share is numbered, he needed to keep his creditors from comparing notes, so he skillfully used the "He’s got a big mouth" technique.

It worked like this: Pinkas would strike up a relationship with Monsieur A. They would be discussing a business possibility when, by chance, Monsieur B's name came up. Immediately Pinkas would say to Monsieur A, "Listen, B is a great guy and I really like him, but this deal has got to be just between us. You see, the problem is that B has a big mouth. He talks too much. If you mention our business to him it will be all over Lausanne in an hour," Naturally, Monsieur A would then make a point of shying away from Monsieur B. However, when Pinkas brought Monsieur B into his confidence, which he invariably would, and offered him a piece of the deal, he’d tell Monsieur B the same story about Monsieur A. "He’s got a big mouth."

As simple as it was, it played on a common human trait, that most people don’t want other people to know the details of their business. And it wasn't until long after his death that all sorts of people who otherwise knew each other's business, or at least thought they did, started comparing notes and realized that Pinkas had successfully kept them apart.

They also started to understand Pinkas’s apparent aloofness. Some of his friends noted that he was a man with extraordinary control, a man who didn’t seem to have a temper, who never seemed to get into an argument with anyone. They once thought it was just his nature. Now, they admit, considering the glass house where his finances lived it's obvious why he never threw stones.

Spinning money through the three main companies, sending it out to the others, then bringing more in when he needed to, made the three main assets seem that much more liquid. And as capital built up from his borrowing schemes, he moved that money out.

But where to?

All those companies on the outside rim of the wheel were empty shells.

*****

Sometime around 1975 there was a terrible accident at the Socsil factory. At six in the morning, while doing some sort of experiment with a gas that couldn't explode, it did explode and the laboratory's chief engineer was killed. There was an official investigation and the coroner’s report settled on misadventure. No one thought again about that conclusion until Pinkas died. Some people began to wonder if perhaps the chief engineer had stumbled onto something odd at the factory, and for whatever reason, had been eliminated.

Although some dark conspiracy remains nothing more than conjecture, with hindsight, it’s plausible. Consider this: Some months before his death, Pinkas had added a clause to his will specifically to provide for his own funeral. He wanted a Valkyrie-like affair where his ashes would be sprinkled across Lake Geneva. Perhaps it was just a coincidence that he wrote the provision when he did. Or perhaps it wasn’t. And what about the woman he loved so much that he asked to die with him? Could he possibly have forgotten to provide for her? He was by anyone's accounting a wealthy man. The apartment in Cannes was filled with antiques, paintings and Oriental carpets. Florence had jewels. She also had 470 pairs of shoes in her closet. Yet she was buried in a commoner's grave because there wasn't enough money to pay for a funeral.

Did Florence actually take her own life? When the police got to Pinkas’s home on the morning of his death, his car was hot. Could he have driven to Cannes the night before and killed her, trying to make it look like a suicide? Could he have murdered her then raced back to Lausanne and taken his own life.

Or maybe he drove somewhere else to meet someone else. Or maybe he didn’t take his own life. The note next to Florence's body looked as if it had been written by Pinkas, but it was never officially checked by experts. Why was it ripped up? Perhaps he failed to provide for her funeral because he didn’t knew she needed one. The door of Florence's apartment had so many locks that friends who visited there joked that it looked like a fortress. Pinkas had keys to her apartment. So why, when the police arrived, were all of those bolts unlocked. Could she have let someone in who didn't have any keys to lock up on the way out?

Pinkas was a very proud man, someone who would have been incapable of suffering the torture of a public trial or coping with a jail sentence. For those people who knew him well, suicide seems logical, a fast and simple way out of the problem. Negotiating a discrete settlement seems equally logical, at least it does if he still had any of the money. There’s nothing a jilted banker wants more than to see his money returned. Especially in Switzerland, bankers genetically avoid the sort of adverse publicity that would have certainly followed the arrest and trial of a man like Eli Pinkas. And he would have understood that.

The most logical reason that he didn’t try to return the money is because he didn't have it. If the money didn't go to any visible private causes, is it possible then that it went to a public cause? Could there have been a circuit somewhere in Pinkas's brain labeled, fanatic.

Consider this: Having had access to certain military information, it was not surprising that the Swiss authorities found some classified military documents stored in his factory office safe. There was the Cold War with the super powers, the Gulf war with Iran and Iraq, heightened tensions throughout the Middle East and brush fire wars throughout the rest of the world. Perhaps there were also people on one side of the fence or the other --- or someone sitting in the middle of that fence --- who wanted to know whatever he knew.

The most obvious contact he might have had was Bulgaria. After all, he was 21 when he came to Switzerland and there were all sorts of people he would have befriended while growing up there. The possibility exists that he was selling them information. If nothing else, it would be a source of cash to help in times of financial difficulties. But that would have brought money in, not made $300-$800 million disappear. Unless he was buying something from the Bulgarians. But they didn’t have much to sell, except perhaps drugs and Pinkas wasn’t a drug trafficker. Although, they did have access to Russian weaponry. They might also have access to certain Russian nuclear secrets.

If he was dealing with the Bulgarians, whatever he was buying wasn’t coming back to Switzerland.

Now the plot thickens.

Every Thursday evening, Eli Pinkas drove to Geneva Airport for

the short flight to Nice, France. He returned to Switzerland on Monday morning. He always said he was going to Cannes to spend the weekend with Florence.

Except he didn’t.

The reason he flew to Nice on Thursday nights, instead of say Friday evening like so many people who regularly spent weekends in the south of France, was because he could change flights there on Thursday and not on Friday. El Al doesn't fly on Fridays after sundown.

The inconvenience of spending a few hours waiting in the tiny airport at Nice for the late night flight to Tel Aviv was outweighed by the benefit that no one in Switzerland knew where he was going and no one in France cared. On those very limited occasions when he bumped into someone he knew in Nice airport, Pinkas quietly confessed that he kept an apartment in Israel and had installed a lady friend. It seemed plausible enough.

Israeli law required that foreigners owning a property, even if it was only a weekend residence, register it. Since Pinkas’s death, the Israelis have categorically denied knowing anything about him, claim to have no record of his supposed apartment or any information about his supposed lady friend. Nor does Israeli immigration admit to his frequent visits.

Now consider this: It is known that the Israelis were only able to fully develop and maintain their nuclear capability with help from several sources. The United States was one. But Washington didn’t foot the entire bill and couldn’t be depended on for unhindered support. So the Israelis raised some money on their own, selling high-tech military equipment to low-tech nations, such as Iran, South Africa and Chile. They raised the rest with "Collectors."

Since independence in 1948, they have actively courted prominent people scattered around the world who address themselves to selected sources of wealth in order to make those sources available when a need arises. This is nothing like an organized appeal by conscientious Jewish organizations who throw massive dinners, or doorstep charities that plant trees.

This is done very quietly and very discretely.

For example, in 1960 the Israelis put together their so-called "Group of 30" --- an ad hoc brotherhood of two and a half dozen American millionaires quietly united by a common cause. The $40 million they collected helped to pay for Israel’s first nuclear reactor and the neighboring plutonium separation plant.

But Eli Pinkas never spoke about Israel. He wasn’t even a Jew any more. Yet he kept a residence there. Except, the Israelis insist he didn’t exist. But he was a man who knew how to launder money, how to make the paper trail disappear to obscure it’s source or, even better how to obscure it’s destination. The Israelis built their bomb with other people’s money. Did they spend any of it inside the Iron Curtain, perhaps buying secrets or expertise or designs or perhaps weapons grade plutonium that the Bulgarians might have stolen from the Russians?

The Israelis don’t talk about their nuclear weapons program any more than they talk about their Collectors.

But then, $300-$800 million later, why should they?

*****

Chapter Fifteen

THE COKE CONNECTION

"Drug money freely mingles with the life force of the world economy,

like a virus in the bloodstream."

--- Time Magazine

The link between money and drugs is absolute and indisputable.

The bulk of dirty money spinning around the world comes from the illicit drugs trade and the whopping success of international drug traffickers is a direct consequence of their ability to launder their profits. As in any business, a certain percentage of turnover must be recycled into the costs of production and distribution. But where drugs are concerned it's a small percentage because the wholesale markup is anywhere from 500-1000 percent.

Drug traffickers don’t count their money, they weigh it.

Washed, invested in legitimate businesses, then reinvested in criminal activity, drug money moves with a momentum and force of a cyclone. The local economies of small, dusty towns like Atoka, Oklahoma, and Roma, Texas, literally had their backs broken when cash-bearing Mexicans arrived to buy property. In countries like Bolivia, Peru, Ecuador and Colombia, drugs and money laundering have bred violence and corruption, and become such a cancer that they have subverted both the political and the judicial systems.

With its horrifying power, the narco-economy has made drug traffickers the most influential special-interest group in the world.

The money generated and controlled by traffickers has reached such monstrous totals that dozens of Third World countries could not possibly underwrite their own existence if it were not for the input of drug money. It has become an unofficial form of US foreign aid. Without an income from drug trafficking, the only way Colombia, Bolivia, Ecuador and Peru could remain afloat would be to continue the massive importation of hard currencies, now in the form of outright charity from the west. Not even an oil-producing nation like Venezuela could necessarily survive without it.

Following the Cartagena Summit in early 1990, the US government offered to pay $1.5 billion over a five-year period to a group of countries to pay for crop substitution programs. Colombia, Bolivia and Peru all rejected the gift as inadequate. The Bolivian government said it alone would need half that to make such a scheme work. The Peruvians stated they if they got the entire $1.5 billion they still couldn't guarantee success. And yet, even if America paid it and even if Bolivia and Peru did destroy all the coca and did wipe out all of the trafficking that takes place inside their borders, the impact on the world market would be negligible. The demand would be met instantly by any of a dozen producing nations.

The sums involved are way beyond anything that is easily comprehensible. A few years ago, the late Colombian cocaine cartel boss Pablo Escobar had to write off $40 million in cash because it rotted in a California basement. He couldn't get it into the washing cycle fast enough. He was already laundering so much that the machinery overheated and the system blew a fuse.

When he was caught the first time and word spread that he might be extradited to the United States, Escobar offered to barter for his freedom by personally paying off Colombia's national debt.

*****

The most massive effort ever mounted against drugs coming into America was secretly launched in mid-1992. For 12 months and at a cost of $1.1 billion, Customs and the Coast Guard joined forces to fortify an electronic net rigged from the southern tip Florida to the south-eastern tip of Texas. They were backed up by the Navy who kept fully armed guided missile cruisers on constant patrol in the Gulf of Mexico and the Caribbean to provide early warning detection. Anything and everything that moved across that invisible barrier was identified. In the air or in the water, if it was deemed to be suspicious, it was stopped. If it was stopped, it was inspected. The US Government was adamantly slamming shut the door through which the bulk of drugs was entering the country.

One year and $1.1 billion later, a classified National Security Council document proclaimed that there had not been any detectable difference, whatsoever, in the amount of drugs coming into the United States.

Attorney General Janet Reno was forced to admit that interdiction simply doesn’t work. "I've not seen anything since I've been in office which would indicate to me that it's been a cost-effective effort."

With more drugs on the streets than ever before, and more money inexorably linked to them, it's little wonder that so many policemen feel they're fighting a losing battle. How do you convince a 14-year-old kid in Harlem that if he comes to school he'll learn a trade and someday earn $10 an hour when for the past two years he’s been selling crack cocaine and pulling down $1500 a day?

Dependency lies is at the heart of the problem. Not only the physical dependency that creates demand --- it’s true that if people didn’t want to get stoned, or need to get stoned, there wouldn’t be a market for drugs --- but the economic dependency that comes from supplying that demand. Blaming drug addicts for the problem ignores the realities of Third World economics: To survive you must export; to export you must produce; and, there is more money to be made producing opium poppies and the coca bush than there is in producing oranges, cotton, bananas or coffee.

Take the example of sugar cane. It is harvested, refined, packaged, shipped, marketed and finally retailed in supermarkets for say, 60-cents a pound. Then look at heroin. It goes through much the same process of harvesting, refining, packaging, shipping, marketing and finally retailing, except there's no supermarket overhead calculated into the price. And heroin can sell for $20,000 a pound. Given a choice, why would anyone in their right mind want to be in the sugar cane business?

What's more, narco-dollars are exogenous and offer a quick fix to the local standard of living. The colossal amounts of money generated through the sale of drugs in North America and Europe come back into the local economy as construction projects or through the importation of luxury goods. Standards of living rise sharply and in a very brief period of time. Of course, prices eventually catch up and drug money destabilizes the economy, creating inflation and making non-drug exports implausibly expensive. Nevertheless, a lot of people in the Third World can't see how putting an end to drug trafficking is in their interest. They’ve never had it better.

Trying to convince them otherwise is pointless. Yet, the industrial west is filled with well-meaning souls who try, even though they don't have the slightest clue of what life is like on the rest of the planet. Some years ago, do-gooders hoped to promote a crop substitution plan along the Afghan borders where opium poppy is the main cash crop. They wanted to pay local farmers to grow orchids. Not only were the Afghans against the plan for fundamental economic reasons but the western missionaries never fathomed that orchids couldn't grow there anyway.

And even if orchids could grow on the moon, a peasant doesn't need a degree from the Harvard School of Business to know that if he reaps opium poppy to satisfy a booming market he'll feed his family and if he plants sorghum or sugar or tobacco leaf or orchids, they'll starve.

Legitimate commodity prices have plummeted in the past 20 years while Third World debt has skyrocketed. There might once have been a sensible argument for programs designed to replace Third World drug crops with maize, alfalfa or tomatoes, that is as long as there was a flourishing world market for maize, alfalfa and tomatoes. But those days are over. Preaching to some Bolivian, or his compatriot in Colombia or his cousin in Peru on the joys of the simple life in the beetroot trade is an exercise in futility, as illogical as selling that New York City street kid on the commercial benefits of plumbing school.

Locked deep inside economic dependency are the vestiges of all that aggressive lending by American and European banks to the developing economies during the 1970s and 1980s. Defaults on those loans almost derailed the western banking system. As the cocaine industry is the major employer in Bolivia, Colombia and Peru, it's hardly surprising that the proceeds of drug trafficking are showing up in the west as loan repayments from Latin America. Those funds, now washed, are the same funds that have buoyed up the liquidity of western banks. How ironic that drug money should now stretch from the valleys of Peru, through several Latin American finance ministries, directly back to hushed boardrooms with views of the East River.

As coca production in countries like Peru has increased seven and eight fold over the past five years, assets from the drug trade, at least those finding their way into nations belonging to the Bank for International Settlements, have grown from $350 billion to $500 billion. Something approximating one half of that is said to belong to the major drug cartels. A report to the leaders of the seven largest industrial nations laid bare the fact that 50-70 percent of the proceeds from drug trafficking around the world gets laundered through the western banking system. Drug traffickers operating only in America and Europe are estimated to be washing well in excess of $100 billion a year, a figure that exceeds the gross national product of 90 percent of all the countries currently represented in the United Nations.

Officially proclaimed sums must always be taken with a grain of salt because it's standard operating procedure for government agencies throughout the world to exaggerate a threat in order to keep a straight face when asking for an exaggerated budget increase. But, as global assets from the drug trade continue to rise, two facts undeniably stand out:

First, random forensic testing in the United States revealed that practically every bill in circulation bears microscopic traces of cocaine. In other words, practically every bill in circulation has at some point been used in a drug deal.

Second and perhaps most shockingly of all, more money is spent worldwide on illicit drugs than on food.

*****

The Medellin and Cali drug cartels used to be referred to as the region's only successful multinational enterprises. But then, they were in a business where the production-profit ratio is staggeringly high. Not quite 20 percent of the wholesale price goes towards cultivation, bribes, smuggling, handling and write-offs for drugs that are confiscated or stolen along the way. The rest is pure profit.

If you accept that as much as $300-$400 billion worth of narcotics is coming into the United States alone, roughly equivalent to one-third of all US imports, then the lion's share of $240-320 billion filters back to the drug barons, putting them at the top of the list of the world's wealthiest people. Throughout much of the 1980s, at least three Colombians were purported to be among the five richest men in the world, surpassed only by the Sultan of Brunei and King Fahd of Saudi Arabia. Even the cartels’ lieutenants were worth more than the Queen of England.

Only around 10 percent of the world's cocaine is actually grown in Colombia. The cartels purchase most of their product from Peru and Bolivia. They then buy their processing chemicals in Germany, Brazil and, surprisingly, the United States. With approximately 10 percent of Colombia's work force somehow tied to the narcotics trade, Pablo Escobar Gaviria, founder of the Medellin drug cartel, was the nation's largest and most important employer. He personally controlled about 80 percent of the cocaine coming into the United States.

The city of Medellin, capital of Antioquia Province in west central Colombia, is 155 miles from Bogota. Dating back to 1675, it sits in a mountain valley 5000 feet above sea level, is the country's second largest city with a population of 1.6 million, and is its principal industrial center. Local manufacturers produce steel, textiles, rubber, electrical goods and tobacco.

It used to be the most dangerous city in the western hemisphere. Many crimes in Medellin did not get investigated because the police were so severely intimidated. Even the DEA, which once had an office there, left town because they wanted to keep their operatives alive.

Escobar was plump, stood five feet six, had curly black hair and occasionally sported a black mustache. Hardly menacing in appearance --- "He doesn't look so dangerous," a reporter once commented, only to be told by an Escobar associate, "You never saw him smile!" --- he was an entirely ruthless, cold-blooded murderer who'd spent years building a Robin Hood image.

Although he told people that he grew up in abject poverty, he was born in 1949 in a working-class suburb of Medellin. His mother was a schoolteacher. His father was a mildly successful farmer. Beginning his own career as a teenaged petty crook, Escobar's first job was as an apprentice to a minor smuggler, dealing in small electronic goods stolen from warehouses along the Panama Canal. He worked his way into heavier crimes but didn't make any real money until the early 1970s when he orchestrated the kidnapping of a local industrialist. From there, he drifted into the drug business.

Arrested and convicted in September 1974 for trafficking 90 pounds of cocaine, he bribed enough people to be released after three months and have the charges against him dropped. Over the next five years he continued to be arrested for drug dealing and he continued to be let off. At first, it was the evidence that disappeared. Then it was the witnesses, the arresting officers and the judges. When Carlos Mauro Hoyos, Colombia's Attorney General, advocated extraditing drug traffickers to the US, he was machine gunned in the center of Medellin by three car loads of Escobar's soldiers. In 1989, Escobar blew up an Avianca airliner, taking 107 lives. He was implicated in the assassination of four Colombian presidential candidates, a Supreme Court judge and two dozen lower court judges. He also orchestrated a 1992 bombing campaign against government officials and rival gangs, setting off 300 devices which killed as many people. At the beginning of 1993, his men went on a rampage and murdered 178 local policemen. Yet his conquest of the world of major league drug dealing began slowly, with one old friend and one new cohort.

Jorge Luis Ochoa Vasquez was Escobar's childhood companion. Along with brothers Juan and Fabio, Ochoa had pioneered a smuggling route into the US while managing an import-export company called Sea-8 Trading in Miami. Sent there to take charge of a cocaine ring set up by his uncle, by 1978 Ochoa was independently bringing 225 pounds of drugs into Florida every week. The DEA got wise to him and sprung a trap, but he escaped, literally within inches of his life, and hurried home to Colombia. His younger brother Fabio took over the Miami interests.

Back in Medellin, Jorge manifested his own ambitions. He ordered the murder of his uncle and stepped in as head of the family business. For Escobar, an association with Ochoa was a natural way to expand, although both were small-time operators until they befriended Carlos Enrique Lehder Rivas.

Born in Quinido Province, 180 miles south of Medellin and the same age as Escobar and Ochoa, Lehder had moved with his mother to the United States when he was 15. Ten years later, he was sitting in a federal penitentiary for trafficking marijuana. His cell mate was a convicted dealer from Massachusetts named George Jung, and it was Jung who taught him the finer points of the drug business. Released in 1976, Lehder was deported, settled in Medellin, opened a car dealership and contacted Jung, who was already out. As Jung's parole conditions denied him a passport, he sent his partner Frank Shea to Medellin. The result was a deal whereby Lehder agreed to supply cocaine to Jung and Shea who then distributed it through Jung's old marijuana network. To get product, Lehder turned to Escobar and Ochoa.

And the Medellin cartel was open for business.

Understanding that a small proportion of their shipments would be seized, Escobar and Ochoa set about conquering the lucrative North American and European markets by bombarding them non-stop with drugs. Escobar’s ego being what it was, he took a big chunk of that larger proportion, then reinvested some of it to concoct an image. He courted the press and posed for photos. When one of his 40 homes was bombed --- a seven-story apartment famous for having two indoor swimming pools --- Escobar rebuilt it exactly as it had been. He constructed an aviary at another house and filled it with 100 cages of mynas, peacocks, toucans and cockatoos.

He also turned his $63 million 7000-acre ranch Hacienda Napoles into a private theme park. Some 80 miles east of Medellin in Puerto Triunfo along the Magdalena River, he ordered 20 man-made lakes to be dug, furnished the library with hundreds of books on Colombian birds and stocked the grounds with giraffes, rhinos, hippos, camels and a kangaroo. After adding replicas of dinosaurs to the front lawn, parking Al Capone’s Packard in the drive-way and mounting a light airplane on top of the front gates --- he bragged it was the one he used to smuggle his first shipment of coke into the US --- he opened "Pablo’s Zoo" to the public and drew nearly 60,000 visitors a year.

To further enhance his reputation he embarked on a mission of benevolence, straddling drug trafficking with right-wing populist politics. For every plane-load of merchandise he sold, Escobar offered a two kilo kickback to feed, clothe and house Medellin's poor. He supported local football teams and built hundreds of homes. In 1982, the people of Medellin elected him an Alternate Member of Colombia's House of Representatives.

*****

After being accused of murdering the Minister of Justice in June 1984, Ochoa fled to Madrid where he lived with his family on a false passport in a huge suburban villa. He bought a fleet of cars, invested in land for development and paid for his luxurious lifestyle with money he’d laundered in Europe. But within five months the Spanish police found him. Along with Ochoa, they also arrested the man who would one day steal Escobar’s mantle, Gilberto Rodriguez Orejeula.

Warrants had already been issued against both of them in the US on narcotics charges so a formal request was made for extradition. To fight it, the two men hired Madrid’s best lawyers and resisted for 20 months. At one point, when it seemed as if the legal maneuvering could drag on forever, the DEA offered Ochoa a secret deal. If he would testify that Nicaragua's Sandinista government countenanced drug trafficking, the extradition request would be rejected by the Spanish foreign office. Ochoa's response was that he didn't know anything about that particular connection. Of course, he was lying and the Americans knew it because there was plenty of evidence Ochoa had personally negotiated with a high-level Sandinista official to build a cocaine processing lab in Nicaragua. So Washington renewed its call for Ochoa's deportation. But the Spanish courts learned of the DEA's offer and, incensed that the American’s only interest in him seemed to be to discredit the Sandinistas, they denied the request. Ochoa and Orejuela were sent back to Colombia in July 1986.

Knowing the fate that awaited Colombian traffickers in the States, Ochoa’s friends threatened to eliminate political leaders one by one if he was handed over to the Americans. The government refused to bow to threats and pledged to prosecute Ochoa. Instead, he was "mistakenly" released. On the run for the next five years, Ochoa was captured again in 1991. By this time, he’d had enough. While awaiting trial, he negotiated a nine-year jail sentence, agreed to surrender some of his property and paid a $9500 fine, probably less than a day's interest on his laundered wealth.

Carlos Lehder fared considerably less well. The man who described cocaine as, "The Third World's atomic bomb," was captured in a shoot-out with Colombian troops at his jungle mansion in 1987 and was extradited. His trial in Florida was billed as one of the most important in the history of American law enforcement. The broadsheet press dubbed him the embodiment of a narco-terrorist. The tabloids called him el loquito, the crazy one. Together they detailed every facet of his life from sex and politics --- he’d founded his own political party, the anti-Semitic, neo-Nazi Latin National Movement which had some minor successes in local Colombian elections --- to drugs and charity. Like Escobar, Lehder had also endowed low-cost housing for slum dwellers.

The prosecution claimed that in 1978 Lehder purchased the tiny island of Norman's Cay in the Bahamas, rebuilt the airstrip there and used it to transship cocaine from Colombia to America. His former pilot testified that they'd fly drugs into Ft. Lauderdale's Executive Airport, off-load them without any interference from US Customs, take on suitcases filled with cash --- again, no one asked questions --- and head straight back to Norman's Cay for the next load. Another witness described how Fidel Castro introduced Lehder to Robert Vesco and how Vesco taught Lehder the business of money laundering.

Lehder's defense hoped to make the jury believe that the 39-year-old coke addict --- who owned a yacht and 19 cars, who bragged about his endless supply of women and who kept a naked, helmeted statue of John Lennon in his private discotheque --- was an otherwise innocent businessman who wanted to build a resort on Norman's Cay but backed off when he found it overpopulated with drug traffickers. He was convicted and sentenced to life imprisonment plus 135 years.

Next came Escobar's surrender.

The Colombian government wanted him so badly that it was willing to take him any way he'd agree to be taken. Early in the summer of 1991, he said he'd submit himself to protective custody while waiting to stand trial for murder and drug trafficking, but only on two conditions: Bogota had to guarantee that he wouldn't be extradited to the United States; and he had to be held in a prison designed expressly for him.

The government accepted his terms, denied America’s request for him and built the Envigado jail to his specifications. Hacienda style in the hills overlooking Medellin, it came complete with a swimming pool, a tennis court, a sauna, telephones and fax machines. Complying with his every wish, he was even permitted to bring his own plastic surgeon into the compound and have his face lifted. Ensconced along with 50 of his own armed guards at a cost to the government of half a million dollars a year, the price did not include an Escobar approved security system that not only kept him in but kept possible assassins out.

A year later, with his trial slated to open, he was informed that he would be transferred to an ordinary cell. He refused. Negotiators came to see him and a hostage situation developed. The army arrived and in the confusion, Escobar escaped. A dramatic military and police manhunt searched 15,000 homes to no avail. The US State Department considered Escobar so dangerous that it put $2 million on his head. Coupled with the $1.4 million the Colombian government had already tagged on him, Escobar became the world's most wanted man.

After 17 months in hiding, he died as violently as he'd lived for the past 20 years. On December 2, 1993, the day after his 44th birthday, the Bloque de Bosqueda, the elite CIA-trained and DEA-funded "search unit" of the Colombian security police, located him in a residential neighborhood on the edges of Medellin. He was talking on the phone to his 16-year-old son. They burst in on him and, showing no mercy, with a hail of bullets promptly and efficiently gunned him down.

His ego was such that he might have liked to be remembered as a businessman who’d once cornered America’s cocaine market. He’d crowed when he’d found himself on both the Forbes and Fortune lists of the world's richest men. His personal wealth was put at over $3 billion, prompting William Bennett, "Drug Czar" to the Bush administration, to remark, "He was richer than Ross Perot and more powerful than Genghis Khan. They said he was invincible." Escobar thought so, too. Except he wasn't any more invincible than he was Robin Hood.

Wanted internationally for drug trafficking, kidnapping and murder, his legacy is of a man who ridiculed the Colombian justice system, assassinated his enemies, slaughtered innocent people, threw his country into a long and horribly debilitating political crisis and wreaked havoc throughout the rest of the world, destroying untold numbers of lives with the drugs he sold. But when they killed him, very little changed.

*****

Cali is the heart of Colombia's agricultural region.

A city that pre-dates Medellin by a century, although slightly smaller with 1.4 million people, it lies in the western part of the country in the heart of the Cauca Valley on the Cali River not far from where the river runs into the Pacific Ocean. It is a major distribution point for coffee, livestock, minerals, textiles, chemicals, tobacco and paper products.

Where Pablo Escobar and his cronies might have been the most famous traffickers in Colombia, the Cali bunch were without doubt the most dangerous. For a time, their record for gratuitous violence surpassed Escobar's. But when they got smart and started spending their money on bribes, US officials quietly dubbed them the most sophisticated criminal organization in the world.

Despite being known as the Cali Cartel, they were never a cartel in the same sense that Escobar’s group was. Run more along the lines of a franchise with a main holding company doling out small parcels to a network of independently owned outlets, the federation was the brain child of Gilberto Rodriguez Orejuela who himself once owned the Chrysler Motors franchise for Colombia. Born in 1939, he got his first job in a Cali drugstore at the age of 15. Five years later, he was the manager. Five years after that he opened his own drugstore and from there, at least according to him, he built his considerable fortune. Known to his friends as "The Chess Player," he is the father of seven children, one of whom has an engineering degree from the University of Tulsa.

When he and Ochoa were sent back from Spain, Orejuela was put on trial and very quickly found not guilty. He just as quickly consolidated his position as chairman of the Cali cartel and used his laundered money to create an aura of legitimate affluence. He built Drogas La Rebaja into a national chain of drug stores, owned a bank in Colombia and another in Panama plus a consortium that ran 30 radio stations.

His partner was his attorney brother, Miguel. Five years younger, four times married with eight children, he is an obsessive soccer fan who bought Cali’s America team and poured so much money into it, paying outrageous salaries to the best players in Latin America, that he inadvertently capsized the entire league because none of the other teams could compete. Sometimes called "Patricio", sometimes called "Manolo," but mostly called, "El Senor," he ran the day to day affairs and managed the various groups they did business with around the world.

The number three man was the very violent Jose Santacruz Londono. A year older than Miguel and nicknamed "Don Chepe," he preferred the more macho handle, "07." Before joining up with the Orejuelas, he’d earned a reputation in the business shipping cocaine from Guatemala to Miami hidden in crates of frozen vegetables. It was his expertise in smuggling that completed the inner circle.

An engineer by trade, Londono had been on the DEA's most wanted list since 1980. One of the aliases he’d used was Victor Crespo but in 1981 the DEA hadn’t yet associated the two. On a tip that Crespo was coming to New York, agents stopped a fellow who’d gotten off a flight from Latin America. They checked his passport and because the name in it wasn’t Crespo, they allowed the man who was called Jose Londono to go about his business.

In 1990, two of his laundrymen were arrested in Luxembourg. One of them, Jose Franklin Jurado Rodriguez, was a professional money manager with a degree from Harvard. He and his partner, Edgar Alberto Garcia Montilla spent four years in jail in Luxembourg fighting extradition, but lost and were sent to the US to stand trial. According to them, Londono’s money laundering cycle began in Panama, where cash was deposited in the bank owned by Gilberto. From there, it was wired around the world to banks in Britain, France, Holland, Italy, Germany, Monaco, Hungary, Finland and Luxembourg before being sent back to Colombian companies owned by Londono, his family and his friends.

At times considered the most dangerous man in Latin America, Londono was also thought to be the wealthiest of the Cali bunch. Legend has it that in the 1980s, he was refused admittance to the Club Colombia, an exclusive address for local industrialists, so he built an exact replica of it. Among his assets are thousands of apartments in Colombia. Along with the extradition of Jurado and Garcia, $30 million belonging to Londono were frozen in banks around the world. There could be anywhere from three to fifteen times as much still hiding in European banks.

Besides drug trafficking and money laundering, Londono ordered the 1992 murder in New York of Cuban-born journalist Manuel de Dios Unanue who’d been writing about him. Constantly fearing for his own life, carrying a $600,000 price on his head, Londono lived in bedrooms with bulletproof windows.

Gilberto started by moving cocaine into New York in the early 1907s, then expanding to LA and Miami. He and Miguel first came to prominence in November 1975 when police at Cali’s airport discovered 1400 pounds of powder hidden in a small plane that had just landed. The pilot and co-pilot were arrested. That weekend, 40 people were murdered. Some few years later, Escobar was told that Ochoa's near-arrest in Miami had come as the result of a tip-off from the Cali cartel. A wave of murders followed. The Orejuelas and their camp immediately sought revenge. Escobar and his cronies might have been the most famous traffickers in Colombia but the Cali bunch were without doubt the most dangerous. Their taste for gratuitous violence even surpassed Escobar's and for a while, Colombia's cartel cities averaged 10-15 murders a day.

Eventually Orejuela got smart and started spending more money on bribes than bullets. That’s when US officials quietly dubbed the Cali cartel the most sophisticated criminal organization in the world. That’s also when Gilberto funded the vigilante group PEPES, People Persecuted by Pablo Escobar. Although the group killed more than 60 of Escobar’s relatives and associates, they vindictively helped the authorities hunt him down. In return, Colombian prosecutors took a more live-and-let-live attitude towards the Cali faction, rationalizing their stance by saying that the Orejuelas were not terrorists, they way Escobar was. In fact, it was the Orejuelas who supplied critical information on Escobar’s whereabouts that led the Bloque de Bosqueda to him. They’d already taken away a giant share of his business, now seeing him dead merely handed them the rest of it.

In those days, the Cali cartel’s annual profits were estimated at around $7 billion, more than three times as much as General Motors.

At one point, they were moving $50 million monthly out of New York. Computer logs impounded after a 19-month covert operation led to the arrest of their top guy there, Ramiro Herrera, whose brother Pacho worked for the Orejuelas back home. In addition to apprehending 37 other cartel soldiers stationed in the States, the police grabbed 1.3 tons of cocaine and confiscated $16 million in cash. But it turned out to be little more than a hiccup on the cartel’s ledgers.

By 1990, the Chess Player, El Senor and Don Chepe were the world's dominant cocaine traffickers.

Long before they’d plundered Escobar’s market share, they’d already begun to distance themselves from the retail side of the drug business. They’d lost interest in smuggling. They’d recognized that their future was in wholesale.

Because anybody with collateral in Colombia can become a drug dealer, the Orejuelas offered to subcontract to the mini-cartels. All an aspiring trafficker had to fill out a very detailed form which listed all his relatives so that the Orejuela brothers knew who to kill if someone tried to betray them, then come up with enough cash or collateral to pay for the shipment up front. The brothers continued to buy directly from the producers but they sold on to these smaller groups, letting other people worry about the transport, marketing, sales and money laundering. If cargoes were intercepted, it wasn’t the Orejuelas' product. If cash was confiscated, it wasn’t the Orejuelas' money. The deck was stacked in their favor, structured to guarantee that they couldn’t lose. And yet as many as 300 mini-cartels rushed into business with them.

Further diversifying, they nurtured a Mexican connection and franchised-out some of their US markets, unsuspectingly designating their own heir apparent.

Suddenly the Feds were faced with a new problem. They would seize a ton of cocaine knowing that the drugs originated with the Orejuelas, but the seizure did no damage to them because there was a broker in the middle. The one or two or three guys making up a mini-cartel might have had to give up ranches and other property to pay for the lost drugs, but the Orejuelas were still alive and well in Cali.

As wealthy as Escobar ever was, the Orejuelas proved themselves more resourceful. For example, just to keep the CIA from intercepting their phone and fax communications, Gilberto almost got away with buying his own satellite. They were also better educated and spent a fortune on pragmatic matters, such as friends in high places.

One of their friends was Gustavo Enrique Pastrana Gomez, an attaché at the Colombian Embassy in Uruguay. Arrested at the end of 1993 as the result of DEA sting operation in Miami, he’d been washing Orejuelas' money through the purchase of polo ponies and automatic car washes in Argentina. The cousin of a nationally prominent Colombian politician, he bragged to an American undercover agent that he could launder $2 million a week through his network of banking contacts in Montevideo.

The Orejuela brothers spent money successfully to lobby for a constitutional ban on extraditing traffickers to the United States. They spent money successfully to lobby for a law which allows traffickers to turn themselves in, to exchange guilty pleas for light sentence, to demand the outright dismissal of more serious charges and to be sent prisons where they had whatever they needed to continue doing business. They spent money building police stations in poor neighborhoods to help reduce street crime and spent money paying off the judiciary.

One of their judges in Bogota released three Cali laundrymen, saying there were no charges to answer because the prosecutor never showed up. He’d been told to appear in one courtroom after the cartel's lawyers had moved the case. Another judge, this one in Cali, ordered the release of a trafficker who’d been caught red handed. It created such an outrage that an appeal was rushed into the Supreme Court which promptly overthrew the acquittal. But no one ever bothered re-arresting the man. A third judge even smuggled drugs for them. Esperanza Rodriguez-Arevalo was arrested in Miami when she flew in with a couple of pounds of uncut heroin in her luggage. The Orejuelas had convinced her she could net upwards of $250,000 wholesaling the drugs, which was more than she could expect to earn on the bench in her entire lifetime.

*****

The Colombian government halfheartedly moved against both cartels in 1992 by levying a 10 percent tax on any cash imported into the country and deposited locally. It also permitted banks to increase their fees by about one-third for handling cash. In response, both cartels took a leisurely side-step and turned Venezuela into their newest amusement park. Within eighteen months, 75 percent of all Colombian cocaine was being exported through Venezuela and banks there held $14 billion for the drug dealers. More money was now being washed through Venezuela than the country earned in oil revenues. Nearly half a billion dollars arrived in the past three years, most of it from the US, as cash cashiers’ checks and bank transfers.

The long and rugged border that Colombia shares with Venezuela is a smuggler's utopia. From mountains in the north to flatlands and jungles in the south, the boundary is just about impossible to patrol. Cash and drugs move freely. What’s more, Venezuela and Colombia are active trading partners and banks from one country have branches in the other. Communications between the two are also good, making wire transfers easy. With relatively sophisticated financial markets, currency brokers have boomed. So has the Caracas stock exchange, which quickly found itself transformed by narco-economics into an oversized sink. Likewise, banks have done a flourishing business in short-term treasury bills. Until recently, there were no prescribed penalties in either country for failing to report large cash transactions, even if banks and brokers had good reason to suspect the money was derived from drug trafficking.

The laws in Venezuela have since been amended. But the laissez faire attitude that continues to characterize sections of its financial community remains prevalent throughout Latin America.

Argentina, is another example of a country ready and willing to pick up any slack. 0nce thought of as too far off the beaten path, drug traffickers have started using the country's newly won economic stability to wash money. Access in and out, for both product and funds, is easy. The border with Bolivia presents little difficulties for smugglers. And the markets of Buenos Aires present almost-unlimited opportunities for turning cash into investments. Under the old regime, wealthy Argentines kept their money hidden overseas. They're now bringing much of it back. That influx, coupled with foreign investments, sparked off by the privatization of state-owned enterprises, means that whatever drug money gets shuffled into the deck is virtually-impossible to spot. Furthermore, Argentina's cultural ties to Europe, notably Spain because of its shared language and Italy because nearly half of all Argentines are of Italian extraction, makes for near-unencumbered access to European markets, money and criminal expertise.

Brazil has become a staging post for drugs on their way to Europe and the economies of Recife and Sao Paulo, plus the drug problems of Rio, are testimony to that. While Paraguay is buoyant with foreign exchange. $66 billion moved through the markets in 1994, eight times the country’s gross domestic product. It has also become an alternative smuggling route, used as an end run to get drugs from Colombia the long way around into the US.

Peru is the world's largest producer of coca, and a working agreement that binds drug barons to local Maoist guerrillas has made the cocaine trade there bigger than ever. It's estimated that 10 percent of the entire population, more than two million people, are regular coca chewers. The most important producing region is the Upper Huallaga Valley, where today there are there are just as many banks doing business in dollars as there are in many small American cities. On any given day along Ocona Street, the heart of Lima's informal foreign exchange market, $3-$5 million in cash changes hands.

Across the border in Bolivia, the market in coca and coca paste makes up more than three-quarters of that nation's source of dollars. And, for many years, Bolivian drug baron Jorge Roca Suarez was Pablo Escobar's primary source of cocaine paste.

Roca directed his worldwide operations from a 19-room mansion in San Marino, California. Escobar converted his paste into powder, smuggled it into the United States, sold it and used part of the revenue to pay Roca. For supplying more than a ton of paste a week over the course of a couple of years, Roca earned $50 million. In the beginning he shipped the money back to Bolivia with couriers. Later, his sister and his housekeeper found that they could get cash to Bolivia by hiding it inside appliances, stuffing as much as $200,000 in a stereo speaker, $400,000 in a vacuum cleaner and $2 million in a freezer. Arrested and convicted of conspiracy to manufacture cocaine, conspiracy to export currency, conspiracy to evade taxes, tax evasion and money laundering, Roca was sentenced to 35 years. But Roca is not the problem, he’s a symptom of it.

Under Bolivian law, it is perfectly legal to grow coca. The Bolivians chew it, smoke it and use it in cooking. And they've done so since before the Inca culture took hold. Although coca derivatives are forbidden, to keep the tradition alive the government has designated that coca may be grown in the Yunga region of La Paz. To keep the tradition under control, it has set about trying to destroy coca bushes everywhere else in the country. However, herbicide spraying renders large areas of the country barren and it's years before other crops can take hold. The CIA has been provided satellite intelligence to help locate farms, but there are limitations. Coca bushes show up when they're covering very large areas. Small plantations can't always be spotted. So, for every big farm put out of business, half a dozen smaller ones take its place. The Bolivians have also set about trying to locate and destroy the thousands of chemical labs scattered around the country where the leaf is converted into cocaine.

Needles in haystacks are easier to find.

*****

Colombian President Ernesto Samper came into office in August 1994 riding on a law and order platform. However his election was met with appropriate skepticism in Washington. Narco-dollars had already undermined much of the legal infrastructure, heavily influencing the Colombian Congress, politicians, prosecutors, jurists and penal-code reform. For instance, a 1993 act stipulated that a trafficker who turns himself in can have his sentence reduced by as much as two-thirds and any additional pending charges will be dismissed. Under that law, the Orejuela brothers had been trying to negotiate their surrender in exchange for a 3-4 year term. It’s believed that the deal would have gone through under Samper had Washington not strenuously objected.

He was long on rhetoric but dogged by persistent rumors that the Cali cartel had contributed money to his campaign. The day after his election, a weekly news magazine revealed that the Orejuela brothers had contributed $3.7 million. Although he strenuously denied those rumors, Samper didn’t allay American suspicions when he transferred General Rosso Serrano, head of the national police’s anti-narcotics division and a relentless enemy of the cartels, to Washington as a military attaché. He was also quick to emphasize that Colombia would not extradite drug traffickers to the US.

Samper followed that with a call to the Orejuela family. A Colombian army unit had received a tip-off that Miguel Orejuela planned to attend his daughter’s communion party at a Cali hotel, so they raided it. When they came up empty handed, Samper personally apologized to the Orejuelas for having disrupted the celebrations and ordered Colombia's defense minister to stop "arbitrary operations."

Understandably concerned, the Clinton administration worried about the growing acreage of coca plantations in Colombia and the sentence reductions granted to confessed drug traffickers. A secret memorandum was sent from the State Department to Colombia’s Foreign Minister. Because it was so highly critical, the Foreign Minister took the unprecedented step of publicly rebuking the State Department for the communiqué, although the details of the letter were not released.

Fighting back with sound bites, Samper vowed to prevent the United States to turn Colombia into "a kind of Vietnam in the fight against drugs." He added, "It is unacceptable that some consumer countries come here and wage a war that they haven't been able to win inside their own borders."

It’s true that the Colombians had seized two Boeing 727s that were being used by the cartel for transporting drugs. But one estimate put their aviation fleet at 40 long-range passenger jets, some of which could carry nearly $2 billion worth of cocaine. Two planes out of 40 wasn’t a very good percentage. So Clinton indicated that if Samper didn’t act more decisively, Colombia risked losing a portion of its $40 million aid program unrelated to counter-narcotics efforts, as well as certain trade benefits plus future membership in the North American Free Trade Agreement. A pair of Republican Senators on the Foreign Relations Committee --- Jesse Helms of North Carolina and Connie Mack of Florida --- upped the stakes by threatening to shut down relations with Colombia within a year unless Samper implemented a series of very ambitious anti-narcotics programs.

Although the committee softened the measure, making the provisions discretionary rather than mandatory, by January 1995 Serrano was brought back to Bogota to be chief of the Colombian national police. Fearing that certain units had been infiltrated, he fired 3000 policemen, including 500 in Cali. He also ordered that the offensive against the cartel be commanded from Bogota and that it be kept so highly secret the police in Cali would never know when a raid was coming down.

Next, Samper appointed Alfonso Valdivieso, a tough talking prosecutor who would refuse to negotiate with the traffickers, to be attorney general. He also permitted the CIA and the DEA to bolster their intelligence operations in-country and move into Cali.

To support Serrano, the CIA bugged the traffickers’ cellular phones and flew surveillance flights to track their movements. They also helped to decipher nearly 600 computer floppy-disks that the Colombian police had seized in various raids. The DEA handled the shoe-leather part of the operation, gathering on-the-ground intelligence, helping to plant operatives in offices, staking out safe houses and following suspects.

Still under pressure from Washington, Samper offered cash rewards on national television for information leading to the capture and arrest of named traffickers. That triggered a purge. Fearing for their own lives, lesser cartel members went on a killing spree to eliminate other cartel members whom they believed could not be trusted. In turn, some of those lesser cartel members started coming forward. The walls that had protected the Cali bunch, were starting to crumble.

In mid-1995, around the same time that the Colombians finally got around to outlawing money laundering, they caught up with Gilberto. Serrano’s men, with help from the DEA, had been monitoring the offices of the Orejuelas’ lawyers. Contacts there helped to narrow the search for both brothers. On June 9, the police raided a house in Cali, arrested four people and discovered Orejuela hiding behind a false wall.

The likelihood that Gilberto would now try to barter a lighter sentence plainly worried some of his cronies. Within ten days, Henry "The Scorpion" Loaiza Ceballos, the cartel's military leader turned himself in at an army base in Bogota. One of the most hard-line members, he is known to have ordered violent revenge attacks and now stands accused of the chain saw slaughter of 107 peasants in southwestern Colombia who’d refused to cooperate with the cartel. On June 24, Victor "The Chemist" Patino Fomeque, a former policeman and head of the cartel's naval smuggling operation came out of hiding. He’d once commanded a mini-fleet of ships, including three submarines, which the cartel had used to smuggle drugs into the US.

Others followed. Julio Fabio Urdinola and Jonier Ospina Montoya, men whose names were not widely known outside Colombia but who were already the object of international arrest warrants, negotiated surrenders.

Then, on July 4, the police scored another major victory by capturing Londono. The search for him had intensified around Cali. Instead, a man fitting his general description was spotted by an off-duty cop dining at a restaurant in Bogota. It was known that Londono had a skin condition and because of that never wore socks. But it wasn’t until the suspect stood up that the policeman noticed he wasn’t wearing socks. Serrano was called and without any fanfare Londono was taken into custody. One newspaper later reported that before he left with the police, he insisted on paying for his dinner.

Shortly there after, Londono escaped and went on the run, only to be cornered by the police and killed in a shoot-out.

Four days after Londono's original arrest, Phanor Arizabaleta Arzayuz surrendered. A former cattle rancher, the 67 year old was responsible for purchasing the chemicals the cartel used to process cocaine. A warrant had been issued against him for the murder of a police chief.

Still on the run were Helmer "Pacho" Herrera Buitrago, a 43 year old smuggler from a long family of smugglers who headed up the cartel’s military wing, and Miguel Orejuela. But their days were numbered.

Miguel was known to sleep during the day and work at night. So Serrano began looking for apartments in some of Cali’s more luxurious neighborhoods where lights were on all night. After watching one for several nights, at four o’clock on the afternoon of August 6, Serrano and his men broke through the door.

Startled out of a sound sleep, Miguel dashed for the safety of a secret closet. They arrested him in his underpants.

While all this was going on, Santiago Medina, President Samper’s campaign treasurer, was also arrested. And Medina swore that it was Samper’s campaign manager who knew all about the Cali cartel’s $3.7 million gift, having laundered most of the money in American banks.

There must have been ironic sneers on the faces of jailed cartel bosses when they heard that Samper’s campaign manager had been arrested. He was Serrano’s boss, Defense Minister Fernando Botero.

Faced with a fight for political survival, Samper fired 51 senior police officials in Cali after their names were discovered on a cartel payroll. He suspended eight senators from his own party who’d been accused of having ties to the cartels, then froze bank accounts owned by three Orejuela family businesses.

To remind Samper that America took this seriously, President Clinton ordered all US-based assets belonging to 33 companies thought to be owned by the Cali cartel to be frozen and forbade American companies to do business with them. He also froze the assets of 47 US citizens identified as shareholders in those companies, and the Botero bank accounts in the States.

Coinciding with that, US Customs announced an investigation into 105 American companies that had accepted money from the Cali cartel for electronics, auto parts and other goods shipped to Colombia. A separate inquiry was launched into small costume jewelry exporters in midtown Manhattan who were suspected of accepting drug cash.

Next, the Samper administration identified some of the mini-cartel bosses, naming cousins Raul and Luis Grajales as the most powerful of the new leaders in the Cali region. Other stars waiting in the wings are Archangel Henao, Diego Montoya and Luis Gomez. And while Samper seemed willing to bet that the mini-cartels haven’t yet secured the international contacts or the political clout that could put them into the big leagues, they key word becomes "yet."

Of course, if the Mexican drug traffickers have their way, they’ll soon do to Colombia’s mini-cartels what the Orejuela brothers did to Pablo Escobar.

*****

The game is not over.

Nor is it likely to end soon.

It’s like putting out brush fires. You get one and two more start. Then again, just because the Orejuelas and their pals might be spending the rest of the their lives in jail, it doesn’t mean they’re necessarily out of business. There are people in America who run some pretty significant criminal organizations from jail and it’s fair to assume that if it’s possible in the States, it’s probable in Colombia. Yet, even if they have grown to old for any more of this and have finally decided to hang up their spikes, there’s a long list of people who have been waiting for their turn at the plate. Many of them are just as good as the Orejuelas, know the business just as well, and are smart enough to have learned from the Orejuelas' mistakes.

In 1990 opium poppies were planted in the Andes mountains. Within five years, Colombia became the world's fourth biggest producer of heroin.

*****

Chapter Sixteen

THE STINGS

"Eventually you get to the point where you have to ask yourself,

are you part of the solution or are you now a part of the problem?"

--- Former head of the DEA’s Miami office, agent Tom Cash

March 1986.

They knew they could trust him.

He was an Argentinean living in Uruguay, a precious metals dealer who did business with the jewelry trade in Los Angeles, respectable enough on the surface, in his early 40s, with a good reputation and all the proper contacts. And he was greedy. So the Colombians approached Raul Vivas with a straightforward deal. They wanted him to become their laundryman. They offered him a flat five percent off the top of everything he washed and because they were throwing around figures like $500 million a year, Vivas didn't have to think about it for very long. Five percent of $500 million was more money than he'd ever dreamed of. He said, okay, cut me in. And they did.

Believing that the simplest way is often the best, he created a pair of front companies in Montevideo. Letra SA would deal in gold. Cambio Italia SA was to be a currency exchange business. Once they were in place, Vivas flew to Los Angeles where he opened an office in the West Coast Jewelry Center, 610 South Broadway overlooking Pershing Square, in the heart of the city's diamond district.

Whatever money the Colombians collected from coke and crack deals around the US was to be funneled through a front company in New York's jewelry district, transported by courier to Los Angeles and delivered to 610 South Broadway. There it would be counted and bundled. Vivas would then use that money to buy gold in all its various forms --- scrap, bars and shot --- paying over the odds to dealers who were willing to handle substantial cash purchases.

Once he had the gold he’d melt it down and mix it with silver to give it the look, feel and weight of South American gold, which is traditionally of a lower quality than American gold. Letra in Montevideo would ship lead-plated bars to California, invoicing the consignment as South American gold. When they arrived, the lead-plated bars would be destroyed, while Raul's gold --- complete with this apparently authentic documentation --- would be sent to New York to be sold on the open market. The money from those sales would be wired to Cambio Italia. That company would pay Letra and Letra would pay the Colombians.

For a while, it worked like a charm.

*****

October 1987.

Eduardo Martinez Romero was a sleazebag.

But he was a very rich sleazebag who lived on a huge, heavily fortified ranch outside Medellin. Like all of his very rich, very sleazy friends, protection was one of Eduardo's biggest expenses.

Now in his mid-30s, sturdily built, with a round boyish face, dark hair, dark eyebrows and a kid’s mustache, he didn't usually tell people much about himself. But when he did, when he felt like he wanted to or felt as if he had to, he'd say that he was an international economist, one of those globe-trotting businessmen who make money with money. Sometimes he even bragged about having an advanced degree in marketing. Not that he handed out business cards. But if he had been one of those glad-handing guys you sometimes get stuck next to on a plane --- the ones who say, call me next time you're in town and we'll do lunch --- then his business card would have read, Chief Financial Consultant to the Medellin Cocaine Cartel.

Which is why a small time Colombian drug trafficker came to see him. The two men sat down, face to face, and Small Time made his pitch. He said he represented some guys in the States who had a laundry and they were looking for customers. Eduardo shrugged, we don't have any wash to be done. Small Time insisted, there's always wash to be done. Eduardo told him, you're too late and bragged that he was already using the most efficient sink in America. Eduardo said it was so good that he moved $12 million through there in just the past 30 days. He said it was like owning a gold mine. In Spanish the word for mine is La Mina.

Undeterred, Small Time argued that it was unwise for the cartel to put all their eggs in one basket. That must have hit a nerve with Eduardo, because Small Time was taken into another room where he was introduced to Pablo Escobar.

He went through his spiel again. Escobar listened. Small Time figured he had a sale. But then one of Escobar's people jumped up and screamed that he smelled a rat. He accused Small Time of being an undercover agent for the Americans. Instantly, the mood in the room turned sour. Facing death, Small Time bravely stuck to his story. The cartel members argued among themselves, debating Small Time’s fate. And when the verdict came, Escobar let him live.

So Small Time and the guys he represented in the States went into business with the Medellin cartel. By January 1988 their joint venture had washed $12 million. But all wasn’t well. The laundry wasn’t living up to Small Time’s promises. The washing cycle was taking too long. The guys in Colombia weren’t known for their patience. Eduardo started complaining that La Mina did it faster. Small Time kept making excuses.

Then came a near fatal hiccup.

A courier with just over $1 million in the trunk of his car was stopped for speeding by a Los Angeles policeman. The cops seized the money. And Eduardo was furious. He demanded that Small Time come up with a suitable explanation. When it wasn’t forthcoming, Eduardo demanded a meeting with Small Time’s boss.

The man who was running the laundromat called himself Jimmy Brown. A stocky, middle-aged New Yorker transplanted to Atlanta, he was an accountant turned businessman, a guy who claimed to have all the right Mafia connections. Except Jimmy didn’t live in Atlanta any more. In real life he was John Featherly and he’d been group supervisor of the DEA office there. But between the time he helped to set up the laundry, when the name Jimmy Brown name was bandied around, and the time of the proposed meeting with Eduardo, he’d been transferred to Washington. He couldn’t get away to make the meeting, so in his place went the man who was to be Jimmy Brown’s assistant. A good looking, 30 year old Cuban-born, Miami-raised hustler, he called himself Alex Carrera.

The deal was that Martinez and Carrera had to meet in neutral territory. Martinez wasn’t stupid enough to come to the States and going to Colombia was out of the question for Carrera because he couldn’t afford to bump into someone who might recognize him as DEA Special Agent Cesar Diaz. It was also easier for other agents to cover him in Panama. So the compromise became the Marriott Caesar Park Hotel in Panama City.

On Sunday night, January 17, 1988, Carrera and Martinez met face to face. The Colombian told his laundryman that he wasn’t pleased with the way things were going, that the operation was too slow, that La Mina was much faster. Carrera answered that they were doing the best they could. Keeping the mood amicable, they had a few drinks downstairs in the bar and agreed to meet the next day at the main offices of the Banco de Occidente.

When Martinez walked in to the bank the following day it was as if he owned it. He strutted around playing the star, flaunting his power and crowing with enjoyment as the employees showed their reverence. But this time when he and Carrera sat down to talk, Martinez took a very direct line. He demanded an explanation for the lost million dollars and said, point blank, that it had to be paid back. Carrera suggested the cartel had already written it off. Martinez objected, "That’s not how we do business." Then he asked Carrera to tell him how the Atlanta laundromat worked.

Carrera did his best to sidestep the question. In the vaguest of terms he explained that Jimmy Brown had set up a series of front companies through which he deposited money because the companies had exemptions from the cash transaction reporting rules. Martinez pressed for more information, forcing Carrera to confess that he didn’t know much more about Brown’s operation.

Martinez then embarked on a long explanation about La Mina. He said that they had gold shops set up all over the States and that it only took two to three days from the time La Mina got the money before it was wired back to Panama. He emphasized to Carrera, "Two to three days when you take two to three weeks."

There wasn’t much Carrera could say.

The meeting ended when Martinez announced that until he had some answers, until he met with Jimmy Brown, he wouldn’t be putting any more money into their system.

*****

January 1988.

Raul Vivas had a serious problem.

There was so much cash being fed into the system that the gold brokers he'd been using couldn't handle it all. He needed to expand. So he brought a few more people into the game. One of them was a 47-year-old Syrian named Wanis Koyomejian --- Joe to his friends --- who'd moved to the States in 1980. He owned a company called Ropex and worked out of a pair of fancy suites on the ninth floor of the International Jewelry Center. Raul also brought in the Andonian brothers --- Nazareth and Vahe --- who ran a brokerage nearby, on the third floor of one of the building at 220 West 5th Street. Beirut born, they’d moved to the US at about the same time as Koyomejian.

These three, Raul figured, would be able to take up the slack on the additional cash. But then he needed someone to handle all the extra gold now pouring into the LA office. So he farmed out some of that work to a couple of friends who'd set up in Miami. Before long, Raul needed to expand again. Now he brought in friends in New York and Houston. And he still couldn't catch up.

To say the least, La Mina was flourishing.

Around the same time, a middle aged woman in California started her new job, working in the investigation’s department of the Wells Fargo Banking Corporation. Her first assignment was the less-than-glamorous task of monitoring currency deposits. She sat in her office, robot-like, going through page after page of computer print-outs. It seemed like a never-ending stream of page after page, each one looking like the previous page.

Fifteen miles away, a loan officer at the bank’s Monterey Park branch picked up the phone and dialed that woman’s office. The two didn’t know each other, but after the loan officer introduced himself and asked if he had the proper department and she confirmed that he did, he told her about a Los Angeles gold broker called Andonian Brothers who had in under three months deposited nearly $25 million in cash.

The woman duly gathered all the documentation the bank had on the Andonian’s accounts and put together a dossier of print-outs which clearly showed cash deposits of almost $1 million a day. It struck her as being highly suspect. Even businesses that generated huge amounts of cash also usually a check or two mixed into the receipts. But this one didn’t show any checks at all. Nor could she understand why the company banked so far away when it would have been more convenient, and considerably safer, to deposit cash at a closer branch. So she did what she was supposed to do and took her concerns to her superiors. But it was as if none of them wanted to believe that this was anything but a legitimate business.

Persistently, she went off in search of someone who would agree that the Andonian’s accounts were suspicious. And right up the ladder all she seemed to get were excuses. So they deal in cash, so what? She wound up making one last pitch to a senior manager who, almost as a concession, told her, okay, if you are truly convinced something is wrong then go ahead and call the cops. She wondered, the FBI, the IRS or the DEA? He said, try all three, because he didn’t think any of them would take her case.

*****

March 1988.

Eduardo Martinez met Jimmy Brown for the first time and Alex Carrera for the second time on Tuesday the 8th in Aruba at the Golden Tulip Hotel in a $500 a night suite that was bugged for sound and video tape.

Martinez wanted his million dollars returned. Brown kept promising Martinez that he would do his best to recover the money. Martinez kept boasting about La Mina's success. He said that since meeting Carrera in Panama City, he’d washed $28 million through La Mina. Brown kept pitching his own laundromat, saying that things had improved, that he could give Martinez the service he wanted.

But Martinez was driving a hard bargain and the later the hour got, the better he decided La Mina was working. Brown knew he was losing a sale. Martinez suggested that if Brown and Carrera really wanted to see any more money coming in from him, they’d have to wash it in two days and also take a one percent cut in commission, from seven to six. Of course Brown objected. But Martinez made him understand that these conditions weren’t negotiable. Brown promised to see what he could do.

Martinez didn’t know he was being set up.

Featherly and Diaz didn’t know that Martinez had no intention of sending them any more money.

*****

September 1988.

A shipping clerk from the Loomis Armored Car Company in Los Angeles was checking a cargo that had just come in on a United Parcel Service plane from New York. It was a routine job, matching cartons and boxes and packages against the manifest, checking waybill numbers, making certain everything that should be there was there. Then he noticed that one box had accidentally ripped open.

According to the waybill, the shipment was supposed to contain scrap gold sent by a jeweler in New York to a gold dealer called Ropex. The stated content didn't impress him because Loomis dealt with high-value shipments all the time. What bothered him was that for such a valuable cargo this stuff has been pretty badly packed. He bent down to inspect the damage. And that’s when he noticed what was inside --- piles of cash all neatly bundled together.

Because the bill of lading said it was supposed to be gold, he reported it to his boss. That same day, a Loomis manager phoned Ropex to ask why the paperwork accompanying the shipment said one thing when the shipment contained something else. Joe Koyomejian answered that there had been a mix-up. He assured the man at Loomis that it was not a problem. He said, a guy I know in New York, a jeweler I do business with, is sending it to me because I can find better short-term interest rates in LA.

The fellow at Loomis agreed that mix-ups happen and delivered the shipment to Ropex, as he was obliged to do. But Koyomejian’s excuse made no sense to him, so he took it upon himself to call the FBI.

*****

December 1988.

The Feds installed hidden video cameras in buildings all over the Los Angeles jewelry district and at very specific locations in New York. They put wire taps on phones. They shadowed people in LA, New York, Florida and Houston. They draped the neighborhood around Pershing Square with undercover agents disguised as maintenance men, garbage collectors, delivery boys, gold brokers, jewelers and even homeless people living on the streets. They recorded hundreds of hours of audio and video and dug thousands of documents out of office garbage cans. They collected invoices that revealed names and addresses of contacts in Canada and Mexico, and some as far afield as Great Britain. They found paperwork naming friendly bullion dealers. They gathered documents outlining all sorts of transactions. They got canceled checks and from those they were able to identify bank accounts.

They code named their La Mina investigation, Polar Cap. And Polar Cap soon became the biggest surveillance operation in the history of American law enforcement.

*****

February 1989.

The task force assigned to shut down La Mina consisted of agents from the FBI, Customs, DEA, IRS, the Bureau of Alcohol, Tobacco and Firearms, plus the US Immigration and Naturalization Service. It was placed under the direct supervision of a senior, experienced Assistant US Attorney. Once he was convinced he'd seen enough --- which included evidence of 1,035 accounts in 179 different banks in Central, South and North America and throughout most of Europe --- he ordered the task force to swoop down and arrest everyone.

Less than 24 hours after La Mina was shutdown, Eduardo Martinez was on the phone with Alex Carrera. It had been nearly 13 months since the Atlanta laundromat had seen any of Martinez’s money. Now, without explaining why, he said he wanted to go back into business with Jimmy Brown.

They welcomed him with open arms. So Martinez sent $4.3 million. It went into the washing cycle but didn’t come out. A week later, Martinez was on the phone asking about his money. It was the same week that a US federal grand jury returned a sealed indictment against him on charges of drug trafficking and money laundering. Carrera made some excuses, reassured Martinez that the money was safe, then promised to deliver $5 million to him. A meeting was hastily arranged at the Marriott in Panama City.

To enforce a US warrant there, the DEA needed one issued by the Panamanian Defense Forces, Noriega’s police department. There was no getting around that. Nor was there anyway around the fact that the PDF couldn’t be trusted. The contact was PDF Captain Luis Quiel, who was himself later arrested, extradited to Florida and pleaded guilty in a drug money laundering case. The DEA agent in charge in Panama City met with Quiel at 8 o’clock on Wednesday morning, March 29, 1989. Carrera’s meeting with Martinez was set for 9. Typically inefficient, Quiel took too long and when Carrera finally got to the hotel he was fifteen minutes late.

He was carrying a briefcase that was obviously too small to contain $5 million. And also too light. If it had been stuffed with $100 bills it would have weighed over 100 pounds. Had Martinez seen it he might have realized what was happening. But Martinez wasn’t at the hotel. Instead, there was a message waiting for Carrera with a number to phone. When Carrera got Martinez on the line, he was told to bring the money to the Banco Ganadero. Having seen Martinez’s performance at the Banco de Occidente, Carrera worried that someone there might spot the PDF’s presence nearby and tip off Martinez. But if the DEA was going to get Martinez, Carrera didn’t seem to have much choice, so he carried the briefcase there and waited.

By 11 o’clock, Martinez still hadn’t appeared.

Now the DEA had another problem. Attorney General Dick Thornburg, together with FBI Director William Sessions, DEA Administrator Jack Lawn and Assistant Secretary of the Treasury Sal Martoche were doing a press conference, carried live on CNN, to announce the success of Operation Polar Cap. Broadcast around the world, Thornburg revealed that 3000 pounds of cocaine had been seized along with $45 million in cash and other assets. But most importantly, he said, there had been 127 indictments and almost as many arrests with the remainder of the arrests immediately pending. Then he explained how Jimmy Brown’s laundry worked.

When Lawn made his statement he actually quoted some of the things Martinez had told Featherly and Diaz, albeit without mentioning names. But then he didn’t have to. Martinez would know instantly whom Lawn was talking about. It meant that, if Martinez was watching television, Carrera’s life was in very serious danger.

The decision was made to get Diaz out of Panama right away and leave the search for Martinez to the PDF.

So Diaz came home and Martinez disappeared.

Polar Cap was a major success, raising the stakes for the cartels, forcing them to find new ways to wash their money and pay more for the service. The agents who’d failed to bring Martinez to justice consoled themselves in the knowledge that actually getting him to the States had never been anything more than a long shot.

Then in August, almost out of the blue, the Colombians announced that they’d found Martinez hiding in a small coastal town and had arrested him. Extradition papers were drawn up in the States even though the Colombians didn’t easily extradite their own citizens.

But they were willing to consider selling him down the river.

That summer, the then president Virgilio Barco got on his high horse about how Colombia needed American help to fight the drug barons. The Bush administration threw together a $65 million aid package. And purely by coincidence, three weeks after Martinez was captured, Barco handed him over to the DEA. It was no coincidence, however, that one of the agents who went to Colombia to fetch him was Cesar Diaz.

Eduardo Martinez was sentenced to six and a half years in prison. In 1992, he agreed to testify against Manuel Noriega and became part of the US federal witness protection program. After serving just over four years, Martinez was released in November 1993 on five years probation. But he quickly fled the country, violating his parole, and returned to Colombia where he lives today as a free man.

*****

It took a while after landing Martinez before life returned to normal for DEA Special Agent Albert "Skip" Latson and Assistant US Attorney Wilmer "Buddy" Parker III. Both of them had been at the heart of the case since the beginning. Neither of them had ever grabbed such a prize before. But then, no one else in the business had either.

Originally from Georgia, Latson grew up in Houston and spent four years with Customs in Texas before transferring to the DEA in 1974. Parker, whose office is just down the hall from Latson’s, is a six foot-two inch college football player from Alabama, the kind of AUSA that action guys like Latson know they can count on.

Because stings are manpower intensive and spread over a long period of time, Latson, Parker and the rest of group making up what is now called the Southeast Region Organized Crime Drug Enforcement Task Force have only done three or four, including Polar Cap. But that’s more than many task forces. Atlanta also turns out to be a good place to run stings because they don’t have as much street drug activity as the nation’s largest cities. In New York for instance, where a huge immigrant Colombian population in Queens offers a lot of potential places for traffickers to hide, they’re too busy putting out their own fires to worry about Philadelphia, Minneapolis or Portland.

Now, high on the Martinez capture, Latson, Parker and the others set up again, this time to target the Cali cartel. The original idea was to run something simple. They’d turned a financial expert in Colombia into a Confidential Informant and through him put out the word that there were some guys in the States who could wash money. Gradually the Colombians bought in. So Latson and Parker organized cash pickups in New York, Houston, Miami and Los Angeles, got the money into the banking system, wire transferred it out and through that were able to identify some dealers, some laundrymen and a few of their contacts. That information was passed along to DEA offices in the specific cities where independent investigations were started and arrests were made.

Atlanta’s brief was to launder as little as possible for the biggest return. Yet the more they did it the more the traffickers wanted to put into the washing cycle. Latson and Parker began to think that if they could get inside a complex laundry cycle, they could identify source accounts and would know where the traffickers assets were when it came time for the DEA to seize them. And the best way to do that was to go into the banking business.

The idea was to buy a private Class B bank outside the United States, preferably in an English speaking territory. This would not be a bank that serves the public. There would no tellers. There would no cash machines. There might not even be any customers. It would be a few pieces of paper which says the owner of the paperwork can conduct banking business.

Not only had this never been done before, but when they started looking into it, they didn’t know if they could do it.

Step one was authorization. Only the Attorney General could give federal agents permission essentially to violate all sorts of US statutes and run a major sink for international drug traffickers. They got over that hurdle in late 1992 when William Barr approved the sting.

They then let the British in on their plan for two reasons: First, because the likeliest place to run it would be a British dependent island in the Caribbean which would require approval from London; and second, because the British had a long expertise in Caribbean banking and if the guys in Atlanta were going to own one, they’d have to know how it worked.

Next, they needed to buy a bank.

The DEA put out feelers to a contact in the British West Indies. He warned that Class B banks weren’t necessarily as easy to come by as they’d once been and if they tried to purchase one off the shelf there was a two year waiting list. Latson and Parker didn’t want to sit around that long. They also realized that if they pulled strings to jump the line, they’d raise suspicions. The next best thing was to buy a bank that was already licensed. That same contact introduced them to a man in California who’d bought a bank and hadn’t yet gotten around to using it. The official version of the story goes that he was a legitimate businessman who, when Latson and Parker approached him, was more than happy to help. Unofficially, he was anything but legitimate, so Latson and Parker put together a file on him and made him an offer he couldn’t refuse.

The bank was in Anguilla. One of the Leeward Islands discovered by Christopher Columbus in 1493, it is today a self-governing British crown colony where 35 square miles of sand are covered with hotels, restaurants and banks. For security reasons, the only person on the island allowed into the DEA’s secret was the British Governor General.

This initial phase took a year. Once the DEA paid the activation fees for the bank, they were technically in business. But it took another year to set up everything so that it looked like a legitimate bank. They needed an office. They needed properly trained personnel. They needed brochures. They needed stationery. The Colombians have a problem dealing with any US entity because they get paranoid about American law enforcement, so the bank had to be appropriately packaged. Right from the beginning it had to act like a Caribbean bank. That meant paying attention to very minor details. For example, a legitimate bank operating in a British territory would use A4 size paper which is 8" x 11 1/2" and not US size stationery which is 8 1/2" x 11". A little mistake like that could bring down the entire operation.

The DEA also had to build identities for their agents who would play the bankers. That was vitally important and took a lot of time. The cartel employed lawyers and private detectives to do background checks on everyone they did business with. Knowing that, the DEA gave their men false names, false families, false home addresses --- in one case they actually moved someone into a house that was put in his new name --- and more than enough references to pass muster.

The bank itself was never anything nothing more than some desks, a computer, a fax machine and a call forwarding system to an office in Puerto Rico so that the Anguilla set up didn’t have to be manned all the time. It was, however, backed up by a dozen front companies and more than 50 corporate accounts in other banks, so that it could provide clients with foreign exchange facilities, cashier's checks and wire transfers. From experience, Latson and Parker and the others knew that once a trafficker decided he was dealing with real people, as opposed to cops, he would ask three questions: How fast can you wash my money? How can I be certain you will deliver it to me? What it will cost? If they could answer those questions his satisfaction, he’d sign on. So they took as much time as they needed to get those answers right.

Code named "Operation Dinero" the bank opened its doors in July 1994 and shut them six months later. It only had seven customers and none of them were legitimate: Alex Moussa Harold Azcarate, Mike Perez and Cristobal Tobon were cartel money brokers. Luis Eduardo Velez-Arias washed funds for his uncle, a senior cartel member named Humberto Arias. Marta Torres was a Colombian architect who occasionally used her studio to launder drug profits for friends like Pacho Herrera, the smuggler who ran the Cali cartel’s military wing and the last of the main board members to be captured.

Although business for the bank started slowly, ten weeks into the scam they’d already washed $8 million. Then things started jumping. During the first two weeks of December 1994, Perez used the bank to launder eight cash deposits totaling $2,895,468. Most of it came from drug sales in Chicago. In addition to cash, the seven clients washed checks through the bank, all of them drawn on banks in Mexico. On September 15, for example, Moussa delivered 30 Mexican checks to the bank totaling $1,484,160. Eleven days later he was back with 44 Mexican checks, this time totaling $1,872,488. At that point he told his new bankers that he had $28 million in the States that he needed to wash. In fact, he and the others seemed so pleased with their bankers that they said they hoped to wash as much as $500 million through Anguilla. They also wanted to know if the bank could issue loans backed by deposits so they could purchase ships.

With each deposit and with each wire transfer, the Atlanta task force collected names of players and evidence against them, then farmed out specific investigations to DEA offices in the field. The only proviso was that the field office had to build a wall between their enforcement activity and the undercover operation. In other words, any spin off from the Anguilla sting needed to be developed with independent probable cause so as not to tip off the Colombians about that the evidence came from the bank. At one point, the investigation uncovered two major Italian connections Pasquale Locatelli and Roberto Severa.

Locatelli, a fugitive who’d escaped by helicopter from a French prison where he was serving 20 years for drug distribution, had operations throughout Europe and in Canada. He specialized in transporting cocaine from Colombia to France, Romania, Croatia, Spain, Greece and Canada. As a direct result of Operation Dinero, one of his ships was intercepted by NATO trying to evade the UN arms embargo of Croatia and found to be carrying containers with small arms and ammunition.

Severa, a crime boss trafficking drugs in Rome, was found to be washing money through supermarkets and parking lots. His network extended to New York, Canada and Columbia.

Expenses for the scam were taken out of the profits earned by the bank. They were, after all, charging their seven clients handsome fees. So the whole operation paid for itself. It even turned a profit.

It also uncovered a few unusual assets. On Wednesday December 14, Marta Torres arrived from Cali, Colombia at Miami International Airport carrying three paintings: Pablo Picasso’s "Head of a Beggar," Peter Paul Reubens’ "St. Paul" and a Joshua Reynolds’ portrait of a man. They were valued collectively at around $20 million. Except they were fakes. She was met at the airport by one of her bankers and a woman whom Torres believed to be the art dealer who’d arranged to sell the paintings. A private jet was waiting to take them to the man who was supposed to be buying the paintings. During the flight, Torres explained that the money from the sale of the Reubens and the Reynolds was to go into Tobon’s account, while the Picasso money was to be deposited into Moussa’s account. She also said that Moussa had $3 million in drug money waiting to be laundered and 1100 pounds of cocaine in the Atlanta area, hidden in three trucks.

As soon as she landed in Atlanta, Torres was arrested by Latson and the paintings were seized.

After six months, word came to shut down Operation Dinero. They’d washed $52 million --- through 92 cash transactions and 291 non-cash transactions --- and certainly could have washed ten times as much had the powers-that-be not decided the bank had become part of the problem. Anyway, the object of the exercise was not to perform a service but to send people to jail. They made 29 arrests in Miami, 16 in Los Angeles and 13 in Houston. Thirty more arrests took place simultaneously in France, Italy, Spain and Canada. In addition to the paintings, they seized $4.3 million in cash and a large quantity of cocaine in Los Angeles, New York and Canada.

These days, neither Latson nor Parker cares to say if the Operation Dinero bank is a one-off. It marked the first time that the government bought a financial institution for the sole purpose of targeting the laundrymen. The hint is, it won’t be the last. They know it’s tough to fool the traffickers with the same scam twice. But at least for a while, the laundrymen will have to ask themselves whether they’re dealing with a crooked bank or the Feds.

*****

Chapter Seventeen

THE OLD THREAT

"If you fight the Mafia alone, you will lose."

--- Assassinated anti-Mafia crusader fighter Giovanni Falcone

The Yakuza, Japan's equivalent of the Italian Mafia, is said to consist of at least 165,000 members and has an annual turnover that is approaching $70 billion.

A centuries-old tradition made up of thousands of smaller warrior-clans whose members identify themselves with multi-colored tattoos, one of their more effective tactics has been company extortion. They approach publicly held corporations and threaten that, unless the company comes up with protection money, they'll disrupt the shareholders' next annual general meeting. This type of harassment had become so widespread that a few years ago 2000 Japanese corporations conspired among themselves to nullify the menace by holding their AGMs on the same day and at the same time.

Like other groups around the world, they also deal drugs. Unlike other groups around the world, they cornered the "ice" market in Hawaii, crystal methamphetamine is a staple of drug users in the islands, where cultural make their dealing easy. At least 50 major properties in Hawaii are said to be owned by Japanese criminals.

Having established their own battleground, the FBI scored a big win there in 1992 when they lured Mitsuo Yoshimura out of Tokyo and into a Honolulu resort hotel. He thought he was there to finalize a $5 million "ice" deal. Arrested on US soil, the 43 year old boss of the Kyokushin-kai faction became the first, and to date only, Yakuza leader to be convicted in the United States. But then according to a former Yakuza member who testified before a Senate investigations panel, Hawaii is not their only American interest. Hundreds of millions of dollars of Yakuza money has been poured into hotels and golf courses around the US. Many of the private Japanese gambling clubs that dot midtown Manhattan are also believed to be backed by Yakuza groups.

In the beginning, they relied almost entirely on banks to launder their money. But in the early 1970s, the Yakuza discovered stockbroking. With the help of Malaysian Chinese gangs, they opened brokerages in Malaysia and Singapore. As their business grew, they moved quickly into Hong Kong, Australia, New Zealand, Indonesia and the Philippines. It is alleged that they've now opened shop in the United States. Cash is funneled in one end, shares in legitimate companies that pay legitimate dividends come out the other. When one Yakuza stock market ring was shut down by the authorities in Malaysia, without charges ever being lodged against anyone, the gang showed up in tact in London.

They have also been known to wash hundreds of millions of dollars through Tokyo real estate, buying and selling the same buildings to themselves. They artificially run up prices, then back loans on those buildings with US Treasury bonds bought in Hong Kong.

Occasionally, they display real flair and venture into something new. In mid-1985, having generated enormous amounts of cash through their drug dealing networks, one Yakuza syndicate turned its attention to the thriving trade in French designer luxury goods.

The first hurdle was getting their cash to Paris. Some of it was wired in, using Asian banks that routed it via Luxembourg, Switzerland and the Channel Islands. The rest was smuggled in, using well-dressed Japanese businessmen as couriers, unlikely suspects to have their attaché cases searched and seized by French Customs.

Next, ring leaders rented an apartment near the Madeleine, in central Paris, took out classified ads in Asian-language newspapers and recruited some 300 Chinese, Vietnamese and Japanese "customers." Every morning, each customer reported to the apartment, was given a bankroll of 500 franc notes and directed to shops --- primarily Vuitton and Hermes but also Chanel and Lancel --- where they bought handbags and scarves by the dozen. Every afternoon, the purchases were deposited at the flat and packed for shipment. Having successfully bribed a French Customs official, the goods were exported with forged documents back to Japan where they were wholesaled by a Yakuza shell company.

It wasn't until the operation had been in business for six years that anyone became even slightly suspicious of it. And then, it was down to employees at Vuitton to wonder about the increasing number of shabbily dressed Asian clients all of whom paid for expensive purchases with brand-new, crisp, 500 franc notes. The management at Vuitton tipped off the police, who soon discovered that, although these goods were being shipped out of France and were therefore normally exempt from value added tax, no one had ever bothered to apply for a VAT rebate. Subsequently, the police began noticing long queues of shabbily dressed Asians waiting to get into an apartment near the Madeleine. And all of them were carrying shopping bags filled with French designer goods.

The authorities started making arrests in spring 1992 and quickly pulled in nearly 100 people. The stores themselves were not implicated. When the French police raided the apartment, they found $450,000 in cash and nearly $1.3 million in goods, including 2500 Vuitton and Hermes products waiting for shipment to Japan. They also found bank statements detailing $2.7 million in local accounts.

No one can say for sure how much the syndicate had laundered since 1985, but French Customs were able to determine that, in 1991 alone, the gang managed to wash around $73 million.

*****

The Triads are the most notorious of the Chinese mobs, a blood brotherhood dating back to the 17th century and the overthrow of the Ching Dynasty. When their rebellion ultimately failed two centuries later, many members fled to Hong Kong, Indochina and North America.

Independent units linked through an oath of fraternity, the gangs deal in everything from drug trafficking and money laundering to business extortion and burglary. They are the primary force behind Southeast Asia's "Golden Triangle." Spanning the mountains and valleys that cut across the borders of Laos, Thailand and Myanmar, which used to be called Burma, the region produces 60-120 tons of heroin annually. A kilo of this Triad-distributed drug wholesales at $400,000-$600,000. Cut to six percent purity, the per-kilo street value can top $6-$10 million.

Unquestionably, the most influential power in the world's heroin trade, Triad predominance in the marketplace has grown and thrived since Hong Kong was returned to China. Police there have reportedly identified 57 active Triad organizations with offshoots operating in Taiwan, the Philippines, Vietnam and Australia.

But their future lies in North America. In late 1992, the Toronto Globe and Mail reported that 17 senior Triad leaders applied to emigrate to Canada. All of them were barred, as were the 14 who applied in the first months of 1993. The seriousness of the problem is documented by a classified report of the Royal Canadian Mounted Police, which describes the Triads as "heavily involved" in drugs, gambling, extortion, smuggling, counterfeiting, armed robbery and money laundering.

Similarly, a top-secret evaluation by a combined task force of Australian law enforcement agencies, including the National Crime Authority, the Federal Police, Customs and various state police forces, divulged that 85-90 percent of all the heroin coming into the country was owned by Chinese groups directly linked to organized crime in Hong Kong and China. These gangs were additionally associated with groups operating out of Vietnam, the Lebanon, Italy, Turkey, Romania and New Zealand and with a network of motorcycle gangs in Australia, which they use as the backbone of their marketing operation.

The report, which was never intended for publication, identified hundreds of Chinese criminals operating in the country, many of them otherwise known as influential members of their local community. It warned that these people, along with their associates, had built an underground Chinese banking system to launder drug money and abet widespread extortion rackets. The report concluded that Australia was ill prepared to deal with this threat, having totally failed to understand the nature of Chinese organized crime.

Today, Chinese gangs are securely established in San Francisco, Los Angeles, New York, Toronto and Vancouver. The have long had a presence in London but are showing up in places where the Chinese don't have traditional ties, such as Germany. When police there raided 90 Chinese restaurants, they questioned 653 people, arrested 102, seized 24 false passports, more than $1 million in cash, large amounts of cocaine and heroin, and several weapons. They also uncovered evidence of what the police described as "Mafia-type" money laundering schemes.

In certain respects, organized crime throughout the world is similar. When the end of the Cold War left terrorists without any source of income, they turned to drug trafficking and money laundering. Today drugs are the principal means of financing terrorism. And except for their claim to be waging political wars, groups such as the Irish Republican Army, the Basques' ETA and the PLO are just as skilled at law-breaking as the Yakuza and the Triads.

Despite peace in Northern Ireland, the IRA still rides shotgun on shipments for international traffickers, runs protection rackets, deals drugs and robs banks and post offices on mainland Britain. They were once believed to be responsible for 800-2500 armed heists a year. Cash rich, they wash money through pubs and drinking clubs, taxi companies, construction firms and private security services. They've also been known to invest laundered money on the London Stock Exchange. During the early 1980s, the IRA bought shares in a quoted British company worth £200 million, then used offshore brokers to take it over. They permitted most of the company to be legitimately run but kept a corner of it to wash £30 million over an eight-year period.

Perhaps as much as $5 million a year is sent to the IRA from the US through NORAID. Considering the large Irish population in Massachusetts, it's hardly surprising that the Bank of Boston had been used as a sink for a cell of the Provisional IRA. As far back as the early 1970s, an ad hoc coalition formed between active members of that cell and local Mafia dons. Organized crime wanted marijuana, the Provo sympathizers became the importers. The middleman, Joe Murray, was a large ill-tempered man who ran a towing company in Charlestown. Dedicated to the British defeat in Ulster and trusted by his Italian benefactors, Murray smuggled tons of drugs into the Boston area on fishing boats. The cash he received for his efforts, laundered through the Bank of Boston, was spent on arms which those same Murray’s boats then transported to Northern Ireland.

That terrorists should align themselves with organized criminals is hardly surprising because the terrorists wind up being sent to the same jails as organized criminals. They bide time comparing notes. Then, when they get out, they join forces.

*****

The South American cartels are a one-product industry. By comparison, the Mafia is a multinational conglomerate with a wide array of commercial interests, ranging from extortion and prostitution to arms dealing, protection, gambling, money laundering and drugs --- both heroin and cocaine. What’s more, they bring to their businesses a great deal of expertise. Organized crime in Italy is said to control as much as 20 percent of all commercial activity, with interests ranging from drugs and murder to jeans and real estate. One study credited them with controlling half of the financial holding companies in the country, 20 percent of the construction industry and about a quarter of the food distribution business. Despite crackdowns, they reach into every aspect of national life, wielding influence in every town throughout the country. In the major cities like Rome, Milan and Naples, at least half the shops, bars and restaurants pay protection money to them. In Sicily, especially in the capital city of Palermo, all of them do.

Like any soundly run multi-national looking for opportunity, they have now teamed up with Russian organized crime gangs for joint ventures in Eastern Europe and the former Soviet Union. In the past they’d also teamed up with the Colombian cartels.

They helped their new found friends in Latin America find an ingenious way to smuggle drugs by turning cocaine into cardboard. A Mafia chemist discovered that he could mix unrefined cocaine paste with cellulose to produce boxes. A legitimate business was set up, using an Italian front company to sell the cardboard to a Colombian front company. Ordinary goods were then packed in them and shipped back from Columbia to Naples, where the cardboard was dissolved in acid, producing unrefined cocaine paste.

They also taught the Colombians a thing or two about money laundering. The cartel opened Universe Gold Enterprise and Symar Joyeros Mayoristas in Panama while the Mafia formed Aurea International Trading and Eurocatene in Italy. Cocaine cash was smuggled out of the States, washed through banks in Switzerland, Spain and Mexico, then sent to Italy where Aurea and Eurocatene used it to buy gold bars. They shipped the gold to Universe and Symar, who sold it on with false invoices to front companies in Cali. The gold was then sold on the open market and the now laundered proceeds were deposited against sales receipts.

Apparently, the DEA suspected something like this might be going on as long ago at the early 1980s, but their investigation into Symar’s operations was halted. General Noriega personally put a stop to it. When a lead to Symar was picked up again in 1994, the Italian police put the ring under surveillance. They spent three months watching Aurea and Eurocatene move a ton of gold a month to Panama, before shutting them down and arresting eight people --- five Italians, two Panamanians and Gustavo Upegui Del Gado, a man described as the Cali cartel’s gold expert. However, during 1994 the Mafia-Cali link moved over 15 tons, which is such a hyperbolic amount, that for a while they accidentally depressed the world market price of gold.

The Mafia also dabbles in government. Until recently, it was the single most consistent political force in Italy since 1945. Known inside the country as "La Piovra," the octopus, today’s Mafia is made up of three tightly entwined groups. There is the traditional bunch out of Sicily, there is the Camorra in Naples and there is the Ndrangheta from Calabria. Although, all three have had their problems.

Giovanni Falcone was a magistrate determined to put an end the Mafia’s 35 year post-war reign of terror. Around 1990, he discovered the Cassa Rurale e Artigiana di Monreale, a bank based in a small town near Palermo that laundered Mafia money for 20 years. Given time, he'd get into the bank and pry loose its secrets. But that was too close to home for Salvatore "Toto" Riina, the so-called boss of bosses. Known as "the beast," Riina had been in hiding since the mid-1970s, living with his wife and children in the hills around the village of Corleone, a name synonymous with the Mafia thanks to Mario Puzo’s novel, "The Godfather." It's obvious that he could have been found if the authorities looked hard enough. After all, when they needed to find him, they did. Toto worried that Falcone was smart enough to understand how that bank was the start of a money trail that lead to politicians and judges in Riina’s pocket. Falcone had to be stopped. And in May 1992, Falcone, his wife and three bodyguards were killed when their cars were blown up.

Stepping in to take Falcone’s place was his colleague Paolo Borsellino. Riina had him killed, too.

But Toto had seriously misjudged the nation’s patience with his gratuitous violence. Politicians on his payroll were unable to contain the national rage. Police raids across the country captured more than 4000 people and charged them with criminal activities. Soldiers were sent into Palermo to patrol the streets. The sledgehammer approach had knocked the Sicilians so far off course, that nearly 500 mobsters were suddenly willing to denounce their once cherished code of silence and exchange information for leniency.

A charmer named Mario Santo "Half Nose" Di Matteo turned on Riina and named him as Falcone’s killer. Special airborne units sought him out and in 1993 they arrested him, at home where he’d lived for 20 years.

At the same time, the magistrate who succeeded Falcone and Borsellino now went after the Cassa Rurale e Artigiana di Monreale, bringing to justice a leading Sicilian businessman and three bank executives. Just as Riina had feared, the money trail lead to certain politicians, including the former Premier Giulio Andreotti.

As the influence of the Sicilians was crumbling, the Camorra were faring only slightly better. A huge money laundering racket was smashed in Naples, leading to 19 arrests and contacts in Angola, Austria, Belgium, Britain, France, Iraq, Kuwait, Luxembourg, the Netherlands, Niger, South Africa, Switzerland and Zambia. Among those arrested was 72 year old Roger D'Onofrio, an American who the Italian authorities believe is a former CIA agent. Born in Italy, D’Onofrio lived most of his life in the States, returning home in 1993. During his years at the CIA, the Italians believe, he was a laundryman who set up and maintained secret bank accounts around the world --- but notably in Switzerland --- which the agency used to pay operatives.

That was followed by the arrest of 100 Mafia suspects in a joint Italian-Spanish operation. And the two operations were linked when the Spanish asked the Italians for permission to question D’Onofrio about his links to the Vatican Bank and money supposedly laundered by the Archbishop of Barcelona, Cardinal Ricard Maria Carles. He is alleged to have overseen the washing of $65 million through the Institute of Religious Work, reminiscent of the charges made against the now retired American Cardinal Paul Marcinkus.

Rushing in to fill what vacuum left by the Sicilians and the Camorra was the Ndrangheta, a collection of some 160 rural clans tied together by secret rituals that derived from a clandestine organization in rural Calabria at the end of the 19th century.

Bandits by profession, after World War II many of the members drifted into extortion, kidnapping and eventually drug trafficking. Thanks almost entirely to the attention the Italian police has paid to the Sicilians and the Camorra, the Ndrangheta can now boast a near monopoly on European heroin trafficking. Years ago they emigrated to other countries, in particular, Australia, where today they are estimated to number as many as 15,000. More recently they have infiltrated parts of Germany, Belgium and Austria and have an especially strong presence in the south of France.

It was the Sicilian branch, however, that set up the first American subsidiaries. They arrived in the United States steerage class, in the first quarter of the century, along with great waves of other Italian immigrants looking to escape war and famine. Banded together by family, village and a common dialect, the Sicilians worked their way through prohibition and into racketeering, gambling and infiltration of the labor unions. Their children went into the family business but they had enough money to see that the third generation, Don Corleone's grandchildren, got a good education. Pushed to be better than their parents they became lawyers who could protect the family interests. Or they got themselves MBAs from respectable business schools and taught the elders how to transform cash into legitimate, tax-paying concerns.

Referred to as La Cosa Nostra, it was back in the 1950s and the 1960s, at the height of their influence, when policing methods were much less effective than they are today, that they numbered around 7000. Now more dispersed and considerably smaller, there are still well-entrenched pockets of influence. The families who run New York have been, for at least 40 years, the single largest commercial landlords in the city.

Also major heroin dealers, from 1979 to 1984, a Mafia clique franchised distribution through a network of pizzerias that stretched across the industrial northeast and into the midwest. The original idea was to use the restaurants to launder money by mixing narcotics receipts with pizza sales. But heroin soon became the main item on the menu and there was simply too much money to put into the tills. They needed to find other ways to wash their profits.

One fellow who had a solution was fish broker Sal Amendolito. Years before he'd been involved with a financial consultancy in Milan that illegally moved currency to Switzerland for wealthy Italians. When that dried up, he imported fish into Italy. After a while, he moved to the States to export fish to Europe. Around 1980, he was contacted by his former associate in Milan, Sal Miniati, who said he was representing a Sicilian construction firm. Miniati's story was that they were building a large resort with American investors all of whom happened to run pizzerias. He explained, they had a lot of cash that needed to get to Switzerland, to pay for the shares in the investment, without attracting any attention. At the time, Miniati revealed, $9 million was waiting to be moved. For his services, Miniati offered his old friend $90,000.

Amendolito agreed and the first installment of $100,000 was delivered to him that July. To keep deposits under the $10,000 reporting limit, he opened accounts in a dozen banks. A few days later he bought cashier's checks for the amount on deposit, subtracted his one percent commission, then consolidated the stash in new accounts which he opened in four different banks. From there the money was wired to Switzerland where Miniati took over.

The scheme was rudimentary, leaving a money trail broad enough for a child to follow. But Amendolito decided it would work as long as the payments stayed relatively small, like $100,000. But at the end of July, Amendolito was handed $550,000 in small bills. And now he had a problem. It was too much money for his established banking network.

Through a contact at the Swiss investment house Finagest, he was told that Conti Commodity Services in the World Trade Center could accommodate him. However, when he arrived at Conti's offices carrying four small suitcases packed with cash, they said they didn't have the facilities for that much and referred him to the Chase Manhattan Bank downstairs. An officer there repeated Conti's excuse and suggested Amendolita find a bigger branch. He wound up leaving the money at Chase headquarters a few blocks away where it was credited to a Finagest account held at Credit Suisse in Lugano.

Deciding that had all been too haphazard, he went in search of a better way to wash large quantities of cash and settled on smuggling it out of the country to be deposited in the Bahamas. Before long, as the amounts increased with each transaction, Amendolito had worked out a deal with Miniati that some of the money would be taken by couriers directly from New York to Switzerland.

Miniati now mentioned that some people in Sicily were interested in using his services. Amendolito demanded on a larger percentage and settled at four percent. To handle their business, he opened an office on Madison Avenue, installed a cash-counting machine and added a bank in Bermuda to his list for cash deposits. But Amendolito had the nasty little habit of sticking his fingers into the cookie jar. When one of his new friends in Sicily discovered he was helping himself to a few extra pennies on each deal, the man wasn’t especially pleased, and politely suggested it might be healthier if Amendolito paid him back. Instead, Amendolito vanished.

The mob replaced Amendolito with an Italian banker, Antonio Cavalleri, who managed a Credit Suisse office in the alpine village of Bellinzona. He was instrumental in creating a company called Traex, which supposedly dealt in property and raw materials. In reality it didn't do anything except wash pizza connection money. With the help of a Swissair employee, $10 million was flown out of New York for deposit into the Traex account at Cavalleri's branch. As far as the mob knew, no one was yet on to them.

However, early in 1979, just as the pizza connection was really getting started, Italian Customs stumbled across a suitcase at Palermo Airport containing $497,000. Their investigation led to the discovery of five working heroin laboratories in Sicily. The FBI heard about it and wanted to know more. Thanks to information that the Italians were willing to share, the FBI identified Amendolito, followed some of his transactions and located his office on Madison Avenue. From there, it was easy to get phone records. From that, their interest broadened to a wider group of players.

Ironically, it was the as-yet-unsuspected Swissair employee who first started getting cold feet about all this smuggling. The mob replaced him with Franco Della Torre, a laundryman who'd worked for them in Switzerland. He came to New York as a certified representative of Traex, opened an account with stockbrokers Merrill Lynch and during the first four months of 1982 washed $5 million there. Towards the end of April, he opened a Traex account with brokers EF Hutton and, in 11 cash deposits in under ten weeks, washed $7.4 million.

Worrying that such an enterprise could attract attention, he opened a second EF Hutton account, this one in the name of Acacias Development Company. Over the following ten weeks, he laundered a further $8.2 million through Hutton. But his concerns were well founded. Like Amendolito, he too was leaving a broad paper trail. Merrill Lynch and Hutton both kept records of all these transactions.

In 1983 Amendolito resurfaced and was arrested for fraud in New Orleans. By this time, the FBI were already onto Della Torre. So a joint task force was formed to work out of the office of Rudolph Guiliani, then a brash young US Attorney for the Southern District of New York. He attacked from two sides, going after the drug dealers and separately, going after the laundrymen. Because none of his targets had yet developed strong money laundering skills, the second trail proved easier to follow.

Agents from the FBI, Customs, the DEA, the IRS and the Bureau of Alcohol, Tobacco and Firearms put a case together that brought grand jury indictments against 39 members of the ring for their participation in drug trafficking and money laundering. Sal Amendolito became a government witness, testified against the others and was never charged.

Because some of the culprits were hiding in Italy, including Della Torre, only 22 actually stood trial in New York. After 17 months of hearings, 55,000 FBI wire taps --- most of them in Italian --- plus the murder of one suspect, 21 defendants were found guilty. The judge sentenced the five Mafia ring leaders to terms of 20-45 years. He also ordered four defendants to pay $2.5 million to help fund treatments for heroin addicts.

The group had smuggled 750 kilos of heroin into the States, with an estimated street value of $1.6 billion. In taking them to task, some major financial institutions had also been embarrassed, namely Merrill Lynch, EF Hutton and Chemical Bank in New York, Handelsbank in Zurich and, especially, Credit Suisse in Bellinzona. One of the accounts at Credit Suisse was secretly called "Wall Street 651." The owner was Oliviero Tognoli, an well-known industrialist to whom the Mafia chieftains secretly turned for financial advice. Nearly $20 million had passed through his account. Some powerful men were locked away for a long time and the case was widely publicized as a major victory for the good guys.

With hindsight, it was something more. The bad guys had washed over $50 million. But this time, for the very first time in a major drugs case, the Feds had been able to follow the money. Both sides now realized that the rules of engagement had been changed forever.

*****

Italian mobsters have had a physical presence in Latin America for many years, notably through the maritally linked Cuntrera and Caruana clans, which have overseen their heroin empire from a once-secure base in Venezuela. Little by little, though, the authorities have been able to chip away at their sovereignty. In 1985, British and Canadian police seized a $300 million shipment of heroin sent from London to Montreal and convicted one of the Caruanas for it. Two years later they put a dent in the families' budgets by grabbing a monstrous hashish cargo in Newfoundland and another relative went down for that one. The following year the Venezuelans arrested more kinfolk for conspiring to traffic cocaine. That particular bust was significant because, until then, the authorities suspected, but could never prove, that the two families had ties to the Colombians. Now they understood that there was no way they could operate next door to the cartels without permission.

A major break came that same year when John Galatolo, a south Florida businessman, was convicted of smuggling cocaine. He told the DEA he'd personally brokered a recent deal for the Mafia to buy 600 kilos of coke from the Cali cartel. According to Galatolo, that deal firmly established the Mafia's cocaine franchise for Italy.

Originally, the Colombians had restricted the Mafia to their home base, hoping to distribute their own powder throughout the rest of Europe. But Europe is a long way from Latin America and although the Cali mob could function easily in Spain --- after all, they spoke the language and often hid out there --- northern Europe proved to be a more difficult market. Transactions started going wrong and shipments were seized. It finally came to a head in February 1990 when the Dutch police found three tons of cocaine hidden inside a consignment of fruit juice.

Pragmatists that they are, the Colombians acknowledged defeat. They needed the Mafia's established distribution networks throughout Europe and turned to the experts. Together they set up front companies to handle the drugs and bank accounts to wash the money.

Stopping them would take the kind of international cooperation that was, until this point, unprecedented.

The first hint that such an exploit might be possible came in April 1992 when the FBI arrested 14 people in Florida for trafficking and money laundering. In and of itself, the bust was just one of several that month. What made it unique was that the evidence found linked these people to the cartels in Colombia and a Calabrian Mafia cell in Toronto.

Five months later, on September 28, police from eight nations --- America, Great Britain, Canada, Colombia, Costa Rica, Spain, Holland and the Cayman Islands --- launched what can only be described as an all-out nuclear attack against the Mafia-cartel connection. It was code-named Green Ice and it represented the first time that an operational international task force had been formed specifically to take on the launderymen.

Undercover agents posed as money launderers, starting first in San Diego in 1989, then slowly building up contacts in Texas, Florida, Illinois and New York. They ran a chain of leather goods stores, subsidiaries of Trans Americas Ventures Associates, a DEA front company that imported merchandise from Colombia. Each ton of imported leather was listed as 20 tons, creating enough false invoices to wash drug profits back to the cartel's banks in Colombia and Panama.

Before long, the Cali bunch was so happy with the way Trans Americas ran their sink that they asked them to expand overseas, first into Canada and the Caribbean, then into Europe. The agents working the scam were only too pleased, as were the various foreign law enforcement agencies that were brought into the operation as the money laundering sting expanded.

After nearly three years of ground work, in one momentous, simultaneous swoop on three continents, more than 200 people were arrested worldwide. They included 112 in the States, three in Britain, four in Spain and 34 in Italy. Among the people nabbed were seven primary targets, then believed to be the top-ranking financial managers of the Cali cartel. They got Rodrigo Carlos Polania, a former inspector of Colombia's national bank, and they got Jose "Tony the Pope" Duran, described by the Italian police as the world's most important cocaine distributor. A subsequent request by Interpol for fingerprint files on him revealed dossiers in 20 different countries where he’d used 20 different names. He’d introduced Pedro Felipe Villaquiran, his chief European representative, to Mafia bosses in Rome and had met with Bettein Martens, a major Dutch money launderer. They too were arrested.

When the trap was snapped shut, 15 money laundering front companies were raided and $54 million in cash was seized, alongside three-quarters of a ton cocaine. Besides a pan-European animal protection society and a Sicilian wine exporter, the companies included one in Mantua, Italy run by an 80-year-old woman with no business experience who laundered tens of millions of dollars for her nephew.

Thousands of files were confiscated on both sides of the Atlantic. One truly outstanding prize was a wealth of computerized records found in an office belonging to the Orejuela brothers, which detailed the cartel's worldwide money laundering. Other documents pointed to several Mafia-cartel joint ventures, including drug trafficking along the French Riviera and money laundering in Germany.

Since Green Ice, and largely as a result of it, the Central Operational Service of the Italian police and the Internal Security Service of the Interior Ministry arrested Giuseppe Madonia, the Mafia's number two man in Sicily; Carmine Alfieri, a capo in the Camorra; three Sicilian brothers who'd come to be called the Mafia's private bankers; Antonio Sarnataro, who was the Camorra's chief laundryman; and, in May 1993, Michele "The Crazy One" Zaza, the alleged overall leader of the gang. Ten more Camorra members were arrested with Zaza on the French Riviera, where a Camorra money laundering network had invested $1.3 billion in hotels, stores and small industry. Another 40 suspects, all tied to Alfieri, Sarnataro and Zaza, were taken into custody in Italy, Belgium and Germany.

When the initial success of Green Ice was reported in the press, the then US Deputy Attorney General, George Terwilliger, declared the operation, "A stake through the heart of the illegal drug business."

At the time, a senior Cali cartel member in Colombia realistically labeled it, "A disruption."

*****

Chapter Eighteen

THE NEW THREAT

"Today's criminals make the Capone crowd

and the old Mafia look like small time crooks."

--- Former US Secretary of State George Shultz

For anyone confident enough to trust his cash to the evolving nations of Africa, the dark continent offers a legion of possibilities. Hard currency is king. And unlike many other fragile economies, for example those in Eastern Europe, the Africans have known the potency of cash for decades.

The Kenyan government determined in late 1994 that anyone could export up to US $500,000 without official approval. As a result, shell companies run from overseas now wash money in Nairobi before wiring it on to India and Switzerland. Despite pleas from the central bank for vigilance, many banks in Kenya are reporting bumper profits.

Post-apartheid South Africa has also been invaded by traffickers and laundrymen who use the country as a staging area to transship drugs into Europe and North America. The Nigerians were the first to take advantage of the smuggling infrastructure developed by arms dealers and ivory poachers after the United States banned direct flights from Nigeria. They bring cocaine and heroin into the country uninspected at small chaotic ports, then ship the drugs to New York on commercial flights out of Johannesburg and Cape Town --- a considerably less risky run than sending those drugs direct from Colombia or Thailand.

Since Nelson Mandela's election in April 1994, South Africa has made a concerted effort to lure foreign investment. The well developed, modern financial services industry is not only a way for legitimate businesses to invest in Africa, it is equally accessible to laundrymen. A massive amount of cash flows through the banking system where controls are clearly inadequate. With as many as 70 known drug syndicates operating internationally out of South Africa, it has become the most violent country on earth with a reported 50 murders a day.

Then there is Francophone Africa. According to a confidential report out of the French Ministry of Foreign Affairs, tremendous sums of drug money are washed through hotels in Senegal and the Ivory Coast, casinos in Gabon and Cameroon, fisheries in Guinea and the vanilla trade in Madagascar. The French police have also found drug links to African horse-racing and state run lotteries. Heroin from south-east Asia is routed through Africa on its way to the United States.

But no where in Africa has money laundering and drug trafficking become such an enthusiastic national affair as Nigeria.

Once awash with oil, Nigeria is at the center of the continent's drug trade. A 25 ounce unit of heroin imported from Southeast Asia for $6000 can be resold to distributors in Lagos for $120,000. Organized crime is so blatant that Nigeria was the first African country "decertified" by the US, marking Washington’s absolute dissatisfaction with the then military ruler, General Sani Abacha. Yet the depth of Nigerian involvement in drug trafficking was only revealed when American undercover agents working in Brazil uncovered an organization managed by Russians that relied entirely on Nigerians to move Colombian cocaine through West Africa before smuggling it into the United States.

The State Department accused Nigeria of harboring some of the most sophisticated and finely-tuned transshipment, money-moving and document forging organizations in the world. Furthermore, they calculated that as much as 40 percent of the heroin coming into the States is brought in by Nigerians. These are not random mules or freelancers, but professional gangs who enjoy the protection of government officials. It’s no coincidence that thousands of Nigerian drugs couriers are in prisons around the world, making up the largest single national grouping. But the drug barons operating out of Lagos are virtually never caught.

The Nigerians voraciously deny that the problem is that grim, blaming such allegations on "wicked reporting." They even bragged when they arrested a Nigerian man at Lagos airport trying to leave the country with $800 million in cash.

But it takes a lot of wicked reporting to match eight tons of $100 bills! And in a country where international fraud is an expedient source of foreign income, organized criminals understand the sex appeal of dirty money so well that they've built highly lucrative scams round it.

An official-looking letter, or, more often these days, an email, is sent randomly by the tens of thousands, promising a huge commission for your help. It's signed by someone pretending to be an attorney or with some vague title, such as a Nigerian royal, who says he is affiliated with a company sounding oddly familiar like "Shell BP."

He writes that he is acting as an agent for an official entity --- Nigeria's national oil company is a favorite --- because a particular problem has arisen with blocked funds. A large sum due the company is being held in a Swiss account and, as the result of some muddled legal complication, the money cannot be released directly to the company.

The letter goes on, "We are anxiously looking forward to securing a foreign partner who can offer us the benefit of having some money remitted into any company's or personal buoyant account. This money runs in millions of US dollars."

If you will allow the money to pass through your bank account, in other words to launder it, you will be paid handsomely for the service. The deal is that the third party will wire the money due, for example $10 million, into your account without you assuming any liability. All you have to do is wait for the money to clear, then forward $7 million to the agent. You are welcome to the $3 million difference as you share.

Reassuring you that you are not being asked to do anything illegal, simply to step into the middle of a legitimate commercial transaction, the agent offers to show you references and the background paperwork. However, as there is always some sort of fast-approaching deadline when this money must be paid, the agent suggests that to save time you should furnish your banking details, plus your personal authorization for the transfer. Needless to say, once you supply him with the information, that's the last you ever see of the deal. Your letterhead, signature and banking details are used by Nigeria forgers to create a second letter, this one ordering your bank to wire out the balance of your account.

The scam is known as "419 Fraud," named after the Nigerian law that makes it illegal.

On the back of this scam, Nigerian conmen have created all sorts of "advance fee fraud" variations. In one, they bait you with letters and contracts from companies and banks explaining why and how the money must be paid into the account of a disinterested person. Tempted by a huge commission, you agree to get involved. But this time, at the very last minute, there's an awkward hold up. You are then bombarded with emails and phone calls from very embarrassed bankers and very embarrassed lawyers, explaining that the party due those funds is insisting the money must be simultaneously transferred. So a conference call is hastily arranged to ensure that, as you authorize your bank to wire out $7 million, lawyers representing the party paying the money authorize their bank to transfer in $10 million. By sheer coincidence, as soon as you instruct your bank, the conference call goes dead.

*****

The Nigerians honed their criminal skills in the heady days of oil affluence when greed reigned supreme. The Russians developed theirs in the bleak days of Communist oppression, when crime was franchised by the state and synonymous with survival.

The Soviet Union’s forced economy never really worked but the black market always did. So when the Kremlin’s walls came tumbling down, organized gangs --- who once ran the parallel economy --- moved swiftly to replace illusions of capitalism with the realities of drugs, prostitution, fraud, murder, extortion, loan sharking, smuggling, the sale of nuclear materials and money laundering.

Today, crime is the most exportable sector of the former Soviet Union.

As reported crimes increase at 30-50 percent a year, Mafia-style groups murder bankers who refuse to cooperate. They run protection rackets, extracting money from westerners who think they can waltz into the former Soviet Union and make a killing. And they contract to have new and late-model cars stolen in Germany, tens of thousands of them annually, which are driven back to Russia and sold for hard currency. Through Cold War contacts developed around Eastern Europe, Russian gangs have had no trouble infiltrating Poland, Hungary and the Czech Republic. But it was East Germany that turned out to be their gold mine. With unification came their foothold in the West and there are now more than 300 variously organized Russian crime gangs operating in Germany. These are professional criminals who deal in anything and everything, including nuclear materials which they flog to the highest bidders in the Third World.

Taking advantage of Europe’s crumbling borders, they used their German base to establish a presence in Britain. And that presence has become so worrying that British police now revise their threat assessment every three months. In addition to using the City of London to launder their money, current thinking is that Russian crime syndicates will become the UK’s major supplier of drugs and illegal weapons before the end of this decade.

The French have also seen Russians coming into the country. In Paris and along the Riviera, shops selling luxury goods display signs in Russian, reminiscent of the 1970s when the petrodollar-rich Saudis were the invading force and the signs were in Arabic. But the money the French are seeing is not roubles from Moscow, these are dollars from New York. Like everyone else, the Russians grasped the concept that jurisdiction stops at the border and the more borders they can put between the source of their cash and the place where they spend it, the harder it is for anyone to detect it.

Not that everyone bothers. When a group of Russians recently arrived in Luxembourg with bundles of cash, suspicious bankers explained to their prospective clients that due to international pressures they could not take dirty money. So the Russians produced sworn affidavits from someone in the Ministry of Finance to swear that this money was clean. Forged papers were all the bankers needed to protect themselves, and they accepted the cash.

Until recently, it was thought that Russian mobs were operating independently of the more established international syndicates. But that view has begun to change. A gang of Russian émigrés were indicted in New Jersey along with seven members of the Gambino crime family in May 1993, after police broke up a fuel tax racket.

The scam they ran is known as a daisy chain.

False invoices were moved through front companies to create the appearance of fuel being sold to various wholesalers. One of the shells, known as the "burn" company, showed the purchase of tax free heating oil and the sale of tax-paid heating oil to the next shell on the chain. The burn company would have been liable to the government for the tax which, of course, was never paid. But when the government came looking for its money, the burn company became impossible to find.

It’s a standard pattern. Paper trails are made too complex to follow and companies disappear. And even if some extra-savvy IRS inspector is able to wind his way through purchase orders, provisional invoices, final invoices, brokerage letters, wire payment instructions, third-party payment letters, tax exempt certificates and 28 different shell, all he’s going to find at the end of the chain is the burn company which turns out to be nothing more than a post office box.

New Jersey based Russians laundered more than $66 million through banks in Aruba, the British Virgin Islands, Zurich and Greece. Including in the 101 count indictment against them were charges of racketeering, extortion, mail and wire fraud, plus state and federal tax evasion and, of course, money laundering. But the most interesting aspect of the case centered on $6.7 million that these Russians paid to the Gambino family who allowed them to operate. This "mob tax" was the first indications that working agreements now exist between Russians and the Mafia.

Although the Justice Department couldn't link these Russians directly to organized crime groups in Moscow, they have since made a connection in Brooklyn’s Russian immigrant community. It happened when a ton of cocaine was confiscated near St. Petersburg. The biggest drug bust to date in Russia, a ton of white powder was hidden in cans marked meat and potatoes and trucked in from Finland. With information supplied by the Russian Interior Ministry police, the FBI was able to establish that the cocaine had been owned by the Colombians who were using Russia as a back door to get product into Europe. By then following the money trail, they were able to ascertain that the middlemen who’d brokered the deal were living in New York.

Finding that much cocaine in St. Petersburg was a shock because the Russian market was still in its infancy, although no one in American law enforcement ever doubted that Russian gangs would one day spot enormous possibilities in the drug trade. But it was no less surprising to learn that Russians who’d emigrated to the States in the late 1980s had, by the early 1990s, already made contact with the cartels.

Even before anyone understood the significance of Colombian laundryman Franklin Jurado’s arrest in 1991 while on his way to Moscow, it was difficult for western authorities to come to terms with the breakdown in law and order in the former Soviet republics. No one in the States could even guess that Jurado had been introduced to the Russians by émigrés in America. Instead, the Justice Department was focused on the easy availability of raw materials that were putting the Russians into the narcotics trade; with their need for hard currency; with the large pool of well trained chemists have found themselves out of work as the economy transitioned from controlled to market related; and with the opening of Russia's borders.

No one in the States had yet imagined that Russia was destined to become a jungle in the snow, that it would perhaps be impossible to stop Russia from becoming another Colombia.

Like Colombia, the level of contempt for the law and the random violence that one finds there today are immense. Like Colombia, their prime target is the world’s most important consumer market. Like Colombia, the Russians have well established émigré communities in several major cities.

According to Alexei Belov, deputy head of Russian Interior Ministry's criminal investigation department, there are now two dozen Russian organized crime groups operating in the States. Specializing in drugs and money laundering, they are found in Boston, Philadelphia, San Francisco, Los Angeles, Miami and Chicago but mostly they are in New York --- especially Brooklyn’s Brighton Beach, the heart of a 200,000-strong Russian community.

There have always been Russian shops and Russian cafes and Russian restaurants and Russian newspapers in the boardwalk neighborhood east of Coney Island, but in the past ten years there have been 15 gangland style murders there, none of which has been solved because no one in the community will come forward to tell the police what they know.

Until the late-1980s, Brighton Beach was just another ethnic neighborhood, similar in some ways to Little Italy lower Manhattan. There were blood ties that stretched back to the old country, and because of Russian emigration to Israel, there was that connection too. There was crime but the mobs in Brooklyn were second string.

It all began to change with the fall of Communism.

The exodus from Russia went from a trickle to a flood. They headed to Europe, and to Israel and in large measure to the States. They settled where Russians had traditionally settled, which meant neighborhoods like Brighton Beach. But as all immigrants had come to realize once they got to America, the streets were only paved with gold for a few. The rest of them had to fight to earn a living, and many of them, uprooted from their culture, deprived of their language and confused by their environment, could barely scrape by. Scientists drove taxis. Physicians waited on tables. Engineers carried baggage in hotels. Desperately seeking the American dream, many Russians were willing to do whatever they had to.

Nearly 8000 miles away, sometime towards the end of 1991, 30 Russian major league gangsters met in a country house outside Moscow to divide up the world. They sensed the lawlessness that would prevail throughout the Russian Republics and saw opportunity. They too wanted a slice of the American dream, especially dollars, and the center of their world became Brighton Beach. That was where they intended to run their 17 city American drug network.

The old infrastructure was too feeble for their use, but at least there was something to build on. They had cultural ties, and blood ties and young Russians willing to do their bidding. They also understood how to reinforce their will through horrendous violence.

At that meeting outside Moscow, they plotted to sell their drugs in America, launder their money in Israel, reinvest their capital in criminal activities in Europe --- especially Germany in Belgium --- and use those profits to put more drugs onto American streets. In their spare time, having become world class experts at cheating government under the Communists, they reckoned to run their usual array of extortion, fraud and fuel tax scams.

The following year, Russian gangsters started arriving in Brooklyn, setting up business. Much of the Brighton Beach community was repelled by this new threat. But their life in Russia had instilled in them a healthy mistrust of authority and they did not trust the police to protect them. The only people who stood in the way of this new wave was the old guard mobsters, and although they resisted as best they could, they never stood a chance. Anyway, others in the community welcomed the arrival of men like Vyacheslav Ivankov.

Under the old regime he should have been in prison. Dubbed by the Communist press "the father of Soviet extortion" and considered by the KGB to be one of the most dangerous men in the country, he was thrown into a Siberian jail in 1982 for 14 years. But in 1991 someone let him out and he somehow got a visa to emigrate to New York. He listed his occupation on the application as a film director.

His reputation having preceded him, Ivankov had little trouble winning respect. He paid for some and used muscle to extract the rest. He’d been sent by his partners in Moscow to organize America and he was determined to do just that.

For three years he ran Brighton Beach, rebuilding the criminal infrastructure there, establishing a new Russian authority in Brooklyn, and from Brooklyn exporting it to the rest of the country. The FBI finally caught up with him in mid-1995 and put him out of business. But they couldn’t tear apart the base he’d built. And they hadn’t yet figured out how to infiltrate this new enemy.

Ivankov might have been a professional gangster but he’d probably seen too many movies. The FBI was even more concerned with Ivankov’s old enemy who were now his new friends, former KGB agents. No longer in the spying business, the remnants of the state police network turned out to be model partners for organized criminals. Professionally trained, highly qualified ex-spooks have become Russia’s most capable drug traffickers and laundrymen. They too are moving into Brooklyn. But they’re bringing with them skills Ivankov never dreamed of and a more global view of crime.

Here’s where the Russians could make the Colombians look like amateurs. The southern republics of the Commonwealth of Independent States are covered with gargantuan fields of wild marijuana. So are huge tracts of Russian Siberia where the weed blankets several million acres, roughly the size of Connecticut. Those fields are just waiting to be harvested. Opium poppy also grows throughout the ex-Soviet republics. So far, it’s being converted only into inexpensive opium-based compounds. It is not yet being refined into heroin. But it is surely only a matter of time before heroin is produced on a grand scale throughout the region. The potential is especially frightening when you consider that around 40 percent of the arable land in the former Soviet Union is ideally suited for the heroin poppy.

Russian gangs teamed up with former KGB operatives are learning how to grow it, refine it and ship it. They already know how to protect it. And now they have a base in Brooklyn from which they can distribute it. The Mafia won't like it and neither will the Latin Americans. But this time they’re not up against a few cowboys from Moscow, they’re trying to stare down guys in black leather coats whose reputation for ruthlessness was well earned. There's little they'll be able to do about the Russians, except perhaps decide they can't beat them so they might as well join them.

The FBI learned through Italian police intelligence that two summits had been held. One was in Warsaw in March 1991. The another was in Prague in October 1992. Both were hosted by Russian organized crime bosses. The guests of honor were representatives of Sicilian, Neapolitan and Calabrian crime organizations. The main topics of discussion were narcotics, the sale of nuclear material and money laundering.

Since then, links between the Russians and the Italians became more evident. Sicilians were discovered operating refineries which supplied Russians with product. High-tech printing presses in Naples were furnishing Russians with quality counterfeit American money. Italian gangsters were heavily investing in Russia’s privatized companies. While Russian gangs laundered some of their money in high-yield Italian government tax exempt bearer bonds.

Rightfully concerned, the FBI opened a liaison office in Moscow. And just in case anyone thinks that the rest of the world wasn’t worried, the Danes were so scared that they invited the FBI to open an office in Copenhagen just to monitor Russian organized crime coming into Scandinavia.

No less alarming is that since the fall of the Soviet Union, when the state was the country’s only bank, no fewer than 2000 banks sprang up. And 95 percent of them are believed to be owned or controlled by Russian organized criminal groups. Because of that, Russia may boast one of the lowest bank robbery rates in the world. By contrast, the contract killing rate soared with more than 500 a year aimed at bankers and prominent businessmen as organized crime tries to muscle in on legitimate money.

To put the size of the threat into perspective, Swiss authorities admitted that in the years 1992-1995, at least $54 billion came into Swiss banks from Russia. And, Belov insists, he’s not bragging when he says, "The Italian Mafia is like a kindergarten compared to our Russians."

*****

It is understandable that criminal organizations in the great melting pot have traditionally relied on the sanctuary that comes from operating in tight-knit ethnic communities. In that respect, North America’s Asian increasingly influential gangs have been compared to the Italians during the infancy of the Cosa Nostra. Better organized than the Russians, they are today considered by the FBI to be the major new threat. What’s more, the Asian gangs seem to have learned some lessons from the early days of the Mafia in America. The Italians eventually opened their doors to non-Italians. The Asians are remaining steadfastly xenophobic, becoming immediately suspicious of any non-Asians trying to permeate their ranks.

Since the war in Vietnam, the Southeast Asian community in southern California has dynamically cut out a niche for itself in what had once been a minor Chinese and major Mexican stronghold. They deal in drugs, stolen cars, stolen computer chips, extortion, fraud and money laundering.

San Diego, with the best weather in America and probably more golf courses per capita than anywhere else in the country, has become their major trading center. San Diego has become the Vietnamese version of Brighton Beach.

A joint task force of federal and state authorities tried to take them apart in 1993. Planting a Vietnamese American undercover agent took months. Once he was inside, it took several more months before he could get another non-Vietnamese American agent involved in the sting.

The feds’ were after Dung Cong Ta, a 43 year old methamphetamine dealer who sported a pony tail and a little mustache, who called himself "Don Mexico" and who had his fingers in several pies, including cars, computer chips and money laundering. The man they sent to stalk him was Quan Pham, a young agent who worked for the State's Department of Motor Vehicles. He was given the identity of a drug dealer named Sonny.

Hanging out in the neighborhood, getting to know people, Sonny was introduced to Dung Ta through a mutual friend at a restaurant in April 1993. Surprisingly, Dung Ta turned out to be too trusting because, as soon as he and Sonny sat down to talk, Dung Ta agreed to sell him some meth. Within a few weeks, Dung Ta was happy enough to meet Sonny’s boss, the owner of a marijuana plantation in Hawaii who called himself Kimo Pomeroy. In real life Kimo was Spencer Ellis, an undercover agent with the California Bureau of Narcotics Enforcement.

Throughout that spring and into the summer, Dung Ta and Kimo did drug deals. In parallel to the undercover operation, police started busting gang members dealing in cars and computer chips. By July, Kimo felt confident enough to up the stakes by asking Dung Ta for advice on laundering money. Dung Ta responded by introducing him to a local attorney named Phillip Schuman.

Five years younger than Dung Ta, Schuman was tall, with curly dark hair and a receding hair line. He’d once been a cop on the Skokie Illinois Police Department. But he left police work to spend a few years as a broker in the Chicago area before moving to California where he got two masters degrees and then his law degree.

A man who always seemed to have a wild look in his eyes, Schuman opened three offices in and around San Diego. And while many lawyers work out of more than one office, a sole practitioner working out of three was odd. How successful he was has never been made clear. But his presence in the Vietnamese community, and some of the information the police were able to glean through wire taps, led them to believe that one of his specialties was false insurance claims.

Dung Ta praised Schuman’s abilities as a great laundrymen, telling Kimo that Schuman hid money in the California State Bar Trust Fund --- his client’s account. But Schuman wasn’t the only money laundering contact Dung Ta had. He also introduced Kimo to Nilo Fernandez, a Filipino who suggested that Kimo set up a US corporation with overseas operations. Cash from marijuana sales could be taken to the Philippines where Fernandez would wash it, sending it back to San Diego, first as capitalization for Kimo’s company, then as profits. It was a basic scheme, for which Fernandez was charging 16 percent. Still, Kimo agreed to go for the deal and asked Schuman to set up the company.

In September, Kimo gave Fernandez $50,000 in cash as a test run to see how the laundry would function. Someone working for Fernandez smuggled the money out of the US and into the Philippines. Shortly thereafter, $42,000 was wired back to the San Diego bank account of the newly incorporated Quasi Star International. Over the course of four months, Kimo gave Fernandez a total of $335,000 to be washed through the Philippines. $222,000 of it came back to Quasi with all the appropriate paperwork disguised as venture capital from an investor Fernandez decided to call "Aquino."

During that time, Schuman let Kimo know that Fernandez was overcharging for his laundry facilities. He said that he and Dung Ta would be willing to handle Kimo’s account for half as much. Kimo was interested. Schuman suggested that instead of the Philippines, there were plenty of other ways to wash money, for instance through gambling facilities. Or, Schuman said, he could set up a law office in Hawaii supposedly to collect on insurance fraud claims and put money through his client’s account. Or, he could wash Kimo’s money through shell companies banking in the Caymans, the Cooks and the Channel Islands.

Kimo settled on the last idea and gave Schuman $20,000 to fly to the Channel Islands to set up an. At end of January 1994, Kimo handed Dung Ta $108,000 in cash to be deposited on the island of Jersey.

On January 25, 1994 Dung Ta and his wife left San Diego for Minneapolis, where they were scheduled to change planes for London. Before boarding in San Diego, Dung Ta tried to check a gray Samsonite suitcase through to the Channel Island of Jersey, but was told it couldn’t be done and that he would have to clear customs in London.

Without his knowledge, the suitcase was seized by US Customs agents in Minneapolis, who then stopped Dung Ta and his wife. They were asked if they were carrying more than $10,000 in cash. Neither had filled out a Customs declaration to say they were. And both lied that they weren’t. A search produced $3300 on his person, $8600 on hers and $90,000 in the suitcase.

Dung Ta maintained the money was paid to one of his businesses for damage done by the Los Angeles earthquake. His wife claimed her $8600 was as a gift from a friend whose name she couldn’t remember and her sister, whose address she didn’t know.

As soon as Dung Ta was in custody, Schuman was arrested. Because an attorney was involved, extra caution was taken during the search of his offices. A Customs agent who had not worked on the case was brought in to go through Schuman’s computer files. Under strict instructions not to have any conversations with other agents involved in the case and not to copy or seize any documents that did not pertain to this particular case, he first introduced a special program into each computer to assure that nothing would be erased and that no additional writing could be added to any file. Next, he searched the hard drives for specific words --- Dung Ta, Quasi, Kimo, Sonny, etc. Similar precautions were taken with computer equipment found at Schuman’s home.

Charges were filed against 21 people including Schuman, Dung Ta and Fernandez. A market in stolen computer chips was shut down, as was a stolen car ring, the money laundering route through the Philippines and a thriving methamphetamine dealership. But at the heart of America’s closed ethnic communities is survival. And San Diego’s Vietnamese, having learned how to win in southeast Asia, are becoming equally skillful at doing just that in southern California.

*****

Chapter Nineteen

FACTORIES SOUTH - MAYTAG NORTH

"The most efficient means of battling organized crime

is to act against money laundering."

--- Louis J. Freeh, as Director of the FBI.

The Mexicans picked up where the Colombians left off. Today, 50-70 percent of all the cocaine smuggled into the United States comes through Mexico. The country is also the primary source for opium gum, which is the base product that gets refined into the kind of heroin used in the US. At the same time, Mexico is America's largest supplier of marijuana.

With a 2000 mile common border that is at best badly patrolled, at worst unpatrollable, it's easy to understand how Mexico has become the front door to the world's most important drug market.

Mexican police forces are inefficient, bribery is rampant, a large part of the judiciary is totally crooked --- literally thousands of Justice Ministry officials and federal judicial police have been fired for conspiring with drugs traffickers --- and the government has proved to be otherwise helpless. These days around Washington, especially at the DEA, the feeling is that the Mexicans are the worst.

In tandem with their new found trafficking successes has come the problem of washing all this money. At first they settled for the obvious ways. Where the Colombians favored cashier’s checks, the Mexicans showed a preference for travelers checks because Mexico does not require records be kept for them. Laundrymen used to brag of buying them in $1000 units, stuffing 500 in their left pocket, 500 in their right pocket and crossing the border with $1 million. The money would then be wired from a cambio to banks in the Caribbean before being brought back to the States as a real estate deal, the way it was done by Ricardo Aguirre Villagomez through the American Express Bank International.

On at least one occasion, Mexican laundrymen seized an opportunity to spend it all in Mexico. Following a 40 percent devaluation of the peso, they simply went on a buying spree, turning dirty dollars into pesos to buy cars, vacation homes and yachts which they then marketed through shell companies to Americans for apparently clean dollars.

Still, they weren’t prepared at first to handle such vast amounts of cash. The Colombians were a lot more savvy about wiring things around. They’d taken the time to develop the proper contacts. When the Mexicans moved in on the remains of the Cali cartel they took the core business but didn’t secure the logistical support. So, for the most part, they still bulk their money out of the country. They run around southern California and Texas with truck loads of cash and often get their money taken away.

Once they got their cash out of the States and safely into Mexico, at least until a couple of years ago, they didn’t have much difficulty putting it into banks. That’s changing because of the volume involved and the pressure Washington is bringing to bear on Mexico City. But they’re still susceptible to anyone with a good way of handling cash.

Back at the end of the 1980s, a three year sting operation run by the DEA and known as Green Ice baited the Colombians with a phony leather goods company through which they could conceal international money transfers. It led 192 arrests in the United States, Italy, Canada, England, Spain and Costa Rica, seized more than $50 million and revealed well developed links between Colombian and Italian crime gangs.

The sequel known as Green Ice II was run out of San Diego. It was aimed at the currency exchange houses that litter the US border with Mexico. By setting up a cambio in Coronado, California, the DEA managed to lure some Cali cartel representatives to wash their money there. When it came time to pull the plug, 50 people were arrested in five states, Colombia and Canada. Seven tons of cocaine, 16 pounds of heroin, various weapons and $12.8 million were seized. An additional 30 people were named in the indictments and sought. Among those caught in the net were Mexican nationals living in the United States, confirming the link between Mexican dealers and the Colombian cartels.

Evidence then surfaced of joint other ventures between Colombian and Mexican traffickers. Together they bought cement companies, construction firms and factories specifically to launder money in Mexico. Further evidence suggests that drug traffickers are the largest single group of investors in the Mexican stock exchange.

Although the border with Mexico has for years been pockmarked with currency exchange houses, now that the Mexicans have so much cash it has turned into a plague. They are not required by Mexican law to keep thorough records or identify customers making large cash transactions. But then, neither are Mexican banks. There are no effective controls on cash being brought in or transferred out of the country. What's more, Mexico’s laws do not necessarily render illegal any profits from drug sales and the authorities cannot ordinarily confiscate drug derived property. If they catch a dealer flying drugs in his plane, they can claim the plane as a prize. But if that dealer uses his drug money to buy a fancy hotel in Puerto Vallarta, even if he's convicted of trafficking, he gets to keep the hotel. The situation has gotten so extreme that some people believe the US needed the North American Free Trade Agreement simply to repatriate the drug money heading south.

*****

Mexicans ship drugs across the border anyway they can. They have planes, they have boats, they have tractor-trailers, they have cars with hidden compartments, they have people sneaking through holes in chain fences. It comes in colossal waves. When the Colombians owned the game, at least in the beginning, drug seizures from Mexico were measured in pounds. Today they are measured in tons. The Mexican Attorney General's Office recently estimated that traffickers there are making roughly $30 billion a year. If that’s true, it’s four times more than the combined annual income of the Cali and Medellin cartels.

The "Colombianization" of Mexico is in full swing. It began with the demise of Escobar and the Orejuela brothers, and the rise of three Mexican groups.

The Tijuana cartel was run by seven brothers of the Arellano Felix family. Francisco Rafael Arellano Felix pretty much started it, until he was arrested the first time in 1980, then again in 1993. Control then fell to Ramon and Benjamin, both of whom became prime suspects in the murder of Cardinal Juan Jesus Posadas Ocampo. Ramon was killed in a gunfight in 2002. Benjamin was captured a few weeks later. So control fell to a fourth brother, Eduardo, who was only arrested in 2008.

The Juarez cartel was divided into two factions. It had been founded by Rafael Aguilar Guajardo. But he died in 1993, and the man running part of the cartel tried to take over all of it. He was 39 year old Amado Carrillo Fuentes. Wanted for drug related crimes in the US, he operated with immunity from his ranch across the border from El Paso. Nicknamed "Lord of the Skies" he was famous in drug circles for buying Boeing 727s to fly his cocaine into the States. He died in 1997 due to complications while having plastic surgery to change his appearance. The doctor who botched the operation was also found dead. Amado was succeeded by his brother Vincent, who remains at large.

The third group was, by far. the most dangerous. It was run by Juan Garcia Abrego, heir apparent to the Cali cartel. Based in Tamaulipas, he and members of his family controlled Mexico’s Gulf coast region. Standing six feet tall and weighing 200 pounds, Abrego was born in La Paloma, Texas. He got into the drug business by floating bales of marijuana across the Rio Grande. He soon graduated with honors, becoming the first international drug dealer to make it onto the FBI's "Ten Most Wanted" list.

Additions to the roster were usually announced by the FBI in a press release, but Attorney General Janet Reno showed her determination to put an end to Abrego’s reign by personally announcing his inclusion. Although, in an aside, she wondered why drug traffickers had not historically been considered worthy of the FBI's 10 Most Wanted.

Like Escobar and the Orejuelas, Abrego allowed the press to glamorize him. He was said to have fathered several children by different women --- in keeping with a macho Mexican image --- and was apparently so superstitious that he had witch doctors on permanent call to help protect him. Less glamorously, he was responsible for dozens of killings on both sides of the border. In fact, it was Abrego’s massacre of six rivals in 1984 that made him Mexico’s principal cocaine trafficker. Also like the Colombians he set up distribution units around America. The main ones were in San Antonio, Houston and New York. But others have flourished all along the border, across the Gulf in Florida and as far north as Milwaukee and Seattle.

Born in 1944 and nicknamed "La Muneca" --- the doll --- there was $1.3 million on his head. He was wanted in both the United States and Mexico for trafficking multi-ton quantities of cocaine and was indicted in Houston in 1993 for drug trafficking and money laundering. Two years later, he was captured, extradited to the United States and sentenced to 11 life terms in prison.

His brother Humberto was arrested in October 1995 for money laundering, as the result of a massive investigation into the 1994 assassination of Jose Francisco Ruiz Massieu, secretary-general of Mexico's ruling Institutional Revolutionary Party. The Ruiz murder and the Abrego family involvement in it shows the difficulty in putting the Mexicans out of business.

The three major cartels still operate, but the climate has changed and, for all intents and purposes, Mexico is undergoing a civil war. The three cartels, and various splinter groups, are fighting each other and the government, sometimes joined by corrupt factions of the police and army. While the government is fighting the cartels, and not coping very well because of all the corruption. In Mexico today, along with drug trafficking and money laundering, corruption is a fact of daily life.

Ruiz Massieu’s own brother, Mario Ruiz Massieu, once the nation’s chief drug prosecutor was accused of covering up the plot to kill his brother. Stopped at Newark Airport in 1995 on his way to Madrid for failing to declare the $40,000 in cash he was carrying, US Customs has since located $9 million in one of his Texas bank accounts. Officials now suggest that some of that money came from Abrego who kept the assistant attorney general on his payroll.

The plot thickened when you added in Raul Salinas de Gortari, brother of former president Carlos Salinas de Gortari, who was arrested for murdering Jose Francisco Ruiz Massieu. Then, in June 1995 it was announced that the former president himself was being investigated on suspicion that he knew his brother Raul had masterminded the Ruiz Massieu assassination. Shortly thereafter, Raul’s wife Paulina Castanon was arrested in Geneva withdrawing $84 million from Raul’s safe deposit box. When asked by the Swiss authorities why she didn’t just take a little bit at a time, she responded, "That's what I was doing."

Subsequently, the Swiss froze various bank accounts in six cantons that they believed to be owned by Raul using false names. The total exceeded $100 million. Mexican authorities then turned up an account apparently owned by Raul in London with $20 million. While all this was going on, Carlos Salinas was on an extended vacation. Rumored at various times to be in sunny Cuba, he wound up spending six months in snowy Canada.

*****

Described by US Customs officials as "The Maytag of the money laundering industry," it's amazing how precisely Canada fits the offshore gospel according to Lansky.

A firmly established democracy, Canada has a sound banking infrastructure, highly advanced communications and easy access to the world's most important drug market. The US-Canadian border, nearly 5000 miles worth, happens to be the longest undefended border in the world. Also mostly unpatrolled, where there are checkpoints traffic in both directions, at least for American and Canadian citizens, passes largely unhindered. The only thing that unequivocally stops at the border is US federal jurisdiction.

Every now and then, when luck is on their side, Canadian Customs do catch someone trying to smuggle something. A few years ago they nabbed some Mexican laundrymen crossing the border at Surrey, British Colombia. Because these two were such a long way from home and didn't look like your average tourists, they were asked to open the trunk of their car. When they did, an especially alert officer happened to notice that the spare tire did not fit the car. He ripped it open and found $800,000.

But that's the exception. A spare tire that does fit, in a well maintained car with New York State license plates and skis lashed to the roof, driven by a well dressed young American couple heading for northern Ontario late on a Friday afternoon might attract someone's attention in July, but never in a month of late Friday afternoons would anyone think twice about it during the winter.

Before 1989, when money laundering finally became a criminal offense in Canada, hardly anyone thought twice about cash at all. The Mulroney government attempted to change that by introducing currency transaction reporting. But it's not mandatory. Banks voluntarily agree to ask depositors about cash. And because no one will prosecute them if they don't, they sometimes "forget."

Combining the kind of laxity that is built into all voluntary systems with a modern, internationally networked financial services industry, it's no surprise to discover that Canadian banks have for years maintained a major commercial presence in tax havens such as the Caribbean.

Bruce "Peewee" Griffin, a convicted drug smuggler from Florida had a well-established relationship with one of Canada's largest financial institutions the Bank of Nova Scotia in the Bahamas. According to the FBI, from 1975 to 1981, he laundered more than $100 million through the Scotiabank branch in Nassau, almost a quarter of it during one hectic four-month stretch in 1979. He kept several accounts there in the names of Bahamas-registered shell companies. To consolidate his holdings, he wired money to Scotiabank Cayman Islands and into an account it held for a Cayman-registered shell, Cobalt Ltd. From there, the money traveled through Scotiabank New York before being dispersed into several US companies controlled by Griffin. When Griffin was finally indicted in 1983, along with 100 associates, his assets included racing cars, racing boats and a Texas ranch where he bred horses.

In those days, the Bank of Nova Scotia was famous for not asking questions about large cash deposits and also for ignoring normal banking practices. Among other things, it purposely kept minimal records to hide the identity of its depositors. What's more, some Scotiabank employees in the Caribbean actually received tips in the thousands of dollars from their clients for their help in washing drug money. In 1984, a US federal court in Miami fined Scotiabank $1.8 million for refusing to turn over to a federal grand jury records which they'd subpoenaed.

One of Griffin's associates was a Bahamian lawyer named Nigel Bowe. It was Bowe who introduced Griffin to Bahamian Prime Minister Lynden Oscar Pindling. Hardly a coincidence, the Bank of Nova Scotia was also where Mr. Pindling kept washed his money. Then under investigation for allegedly receiving $100,000 in monthly drug bribes, Pindling owed much of his success to his old friend and mentor, Meyer Lansky.

Having the right friends can yield dividends. If you can get a politician, a lawyer and a bank manager on your side, you can launder any amount with ease. But then, many laundrymen work wonders with only one of out three.

When a group of Canadians with lots of money to wash stumbled across the ever-affable Aldo Tucci at the City and District Savings Bank in Dollard des Ormeaux, Quebec, they couldn't believe their luck. He was so anxious for their business that he was willing to do just about anything. They invited him to administer six of their companies and in the first year alone they put $13 million through his branch. To keep such clients happy and encourage more of their business, Tucci took it upon himself to make special arrangements for the group to deliver their cash-laden tote bags at the bank's back door. In fact, the gang and Tucci got along so well that when he was transferred to another branch in Montreal, they moved their accounts to his new office.

This bunch got lucky again when they opened accounts at a rival bank. The manager there became so concerned with the amounts of cash they were bringing into his branch --- in just over a year they’d delivered to him $14 million stuffed in suitcases and paper bags --- that he asked them please to be kind enough to tie the money into $5000 bundles. Naturally, they obliged.

And then there was Gary Henden, a Canadian lawyer who became a legend in his laundryman's lifetime by having a 15-year-old boy on a bicycle deliver parcels of cash to banks around Ontario.

For some bizarre reason, a child carrying $250,000 in small bills eluded the bank managers' suspicions. The Royal Canadian Mounted Police later claimed the banks should have questioned the teenager's deposits. The banks maintained it was none of their business.

Employed by Canadian drug traffickers, Henden set up a company called Antillean Management and opened foreign bank accounts in that name. He then created one called Rosegarden Construction. When he found property to buy, money would be wired from the Netherlands Antilles company to the M&M Currency Exchange in Canada, yet another Henden shell. From there it would go into Cencan Investments Ltd., also a Henden invention, which would loan it to Rosegarden. Cencan would issue a check which would be deposited by Henden, as the attorney acting for Rosegarden, into his client account. Henden then paid for the purchase, but registered the mortgage in favor of "Gary Henden, Attorney at Law, In Trust." Needless to say, those mortgages were never repaid.

Henden eventually admitted to having washed $12 million over a three-year period for a drug trafficking syndicate. The police feel a more accurate figure might be five times as much. Still, had they not been able to establish a direct link between Henden's assets and drug trafficking, they could never have broken through the screen he'd erected around attorney-client privilege.

It was much the same for the Vancouver attorney working on a flat percentage when he deposited $7.4 million in cash between March 1985 and July 1987 into his client account at a local branch of the now infamous BCCI. In a single 18-month period, he also turned C$3.1 million into US dollars, walking into the bank with anywhere from $56,000 to $396,000 in his briefcase, pre-sorted into piles of $20 and $50 notes. When the bank manager asked about the money, the man explained that he was a lawyer acting for a client and refused to say anything more about it. The bank manager reassured the lawyer that he understood attorney-client privilege and that his business was welcome.

*****

The Canadian-Caribbean connection made the front pages in September 1988 when sprinter Ben Johnson won his Olympic gold medal. Accused of using steroids and later deprived of his medal, Johnson’s pusher turned out to be a doctor from St. Kitts with a license to practice medicine in Canada, named George Jamie Astaphan.

Politically well connected on the island, Astaphan became the object of a separate drugs and money laundering investigation in both the US and Canada. In late 1991 and early 1992, he delivered steroids to two men in Buffalo, New York who claimed to be running a chain of weightlifting clubs. Around the same time he conspired with undercover agents in Florida where he tried to purchase 100 pounds of cocaine.

But the investigation into Astaphan’s dealings go way beyond those two incidents. One source puts Astaphan in the middle of a St. Kitts money laundering ring which uses casinos throughout the Caribbean to wash money. It is then sent through a company in Montreal, before being reinvested in drugs. That investigation never got very far in St. Kitts but is apparently on going in Canada. Whether or not Astaphan himself is cooperating, no one will say. Although the answer is probably not. He has very little incentive to do so and his life wouldn’t be worth much if he did.

He boarded a BWIA flight in Antigua bound for Toronto on Saturday, January 8, 1994. The weather had supposedly closed in Toronto --- at least that’s what the airline still claims --- and the plane was forced to land at JFK in New York. Knowing that Astaphan was on board, FBI agents met the plane and arrested him.

It’s a mute point whether or not the FBI somehow managed to coerce BWIA into making a stop in New York. Had Astaphan made it to Toronto, the RCMP was waiting to arrest him there.

Arraigned in Buffalo and tried in Tampa, he was not prosecuted for money laundering. However, he was convicted of possession of steroids and possession of cocaine with intent to distribute both. He was sentenced two years.

*****

Instead of going after small fry like Astaphan, the Canadians take a more long term view. In 1990 the RCMP in Montreal set up an exchange counter at the International Money Center. They were working on information that Canadian drug traffickers had washed approximately $130 million in drug money through the Center.

So the RCMP opened a major laundromat and sat by as three specific groups emerged. The first was run by Joseph Lagana, an attorney whose client was Vito Rizzuto, the suspected head of the Canadian-Italian Mafia. The second was run by Dominic Tozzi who worked for a rival gang headed by Vincenzo di Maulo. The third was run by Samy Nicolucci, who not only shared an office with Tozzi but worked with several people in the Rizutto mob.

Interestingly enough, working alongside Lagana in this operation were a pair of attorneys from his office, Vincenzo Vecchio and Richard Judd. Two other men stand out. Norman Rosenblum who dealt with logistics for the first groups drugs and had the ill fortune of being present when half a ton of cocaine was delivered in the middle of the Caribbean to a ship manned by undercover RCMP and US Customs agents; and David Rouleau, whose job it was to collect money from the group’s primary drug distributors, a chapter of the Hell’s Angels motorcycle gang.

The groups brought bags of Canadian and US dollars to the Center and deposited it there with the RCMP undercover agents for wire transfer to Venezuela, Florida, New York, Liechtenstein, Panama and Switzerland.

As the investigation branched out, the RCMP called on help from America, Italy, Switzerland, France and Panama. They were able to follow money into the Italian-Panama gold connection. They were able to identify back to back loans made through Switzerland for the purchase of real estate in Canada. They were able to locate more property held by the suspects in the south of France and Florida.

After four years of laundering drug money for this group, moving $73 million through the Center, the RCMP arrested 41 people and froze over 200 accounts in 29 banking institutions. It was their biggest money laundering bust to date.

That's when, the United States, in its infinite wisdom, decided that border crossings north and south took too long. So they instituted a program called Line Release which reduced regular cargo inspections of trucks crossing into and out of the United States. Instead, they do spot checks. And pre-approved transport companies are granted free access.

The Mexican drug barons no longer need to invest in 727s and super-fast speed boats. All they have to do is hire approved transporters who will unknowingly allow them to mix narcotics with legitimate cargo and throw thousands of trucks at the border.

Forced to institute a policy that many inspectors know is gives the Mexicans a free hand, Customs came up with Hard Line, which was supposed to supplement spot checks at heavily trafficked border crossings with increased intelligence and sniffer dogs. But even then, pre-approved trucking companies still enjoyed priorities. One of them, Hipodromo de Agua Caliente was a race track owned horse van in Tijuana. They had approval to transport race horses across the border. Except the Aqua Caliente track was out of business. And the track owner was, apparently, investigated by US Customs on money laundering suspicions. That was all known when the truck was given Line Release approval.

In the name of progress, the factories in the south are now linked by road with the laundromat in the north. Call it the super-highway for smugglers. It’s an advantage the Colombians would have killed for.

*****

Chapter Twenty

HANGING OUT THE WASH

"Money laundering is the crime of the '90s."

--- Business Week

In the summer of 1969, Richard Nixon pledged to formulate a new national policy in the fight against drugs. He might even have elevated that fight to a full-blown war had it not been for America's on going "police action" in Southeast Asia.

Colombian cartel cocaine was just beginning to infiltrate American culture. Nixon, naively unaware of how complex the problem was, arrived at the conclusion that marijuana and cocaine were equally dangerous. Needing a culprit, he settled on Mexico. Accordingly, he stepped up surveillance of America's southern border and coerced the Mexican government into herbiciding marijuana fields. He succeeded in putting amateur smugglers, kids who dealt home-grown marijuana, out of business. But he left the field wide open for professionals, grown-ups flogging cocaine. Because coke is a powder, it's easier to smuggle than bales of marijuana and is therefore less risky. It is also a higher-profit product. So Nixon's new national policy did little more than to create a huge competitive advantage for the deadlier drug.

By the time Jimmy Carter moved into the White House, things were getting out of hand. Dozens of American cities were being transformed from wholesale marijuana markets to major cocaine trading centers. It was party time for street pushers, pimps, pilots, speedboat captains, and any federal agent who could be bought.

For the laundrymen, it was the Second Coming.

When the television program "60 Minutes" brought the depth of the problem into the nation's livingrooms, exposing how otherwise respectable businessmen were jumping on this profit bandwagon, Carter approved an inter-agency task force that called itself "Operation Greenback." Customs officers and IRS agents identified and approached individuals who'd banked large amounts of cash. Their question was, where did you get the money? If the suspect answered, it was US-generated income, then the IRS would mention the words, "tax evasion." If the suspect answered, it was imported, then Customs would define the word "smuggling." If he wouldn’t answer, or couldn’t answer without admitting it was drug money, then he was slapped with charges of drug trafficking, conspiracy and money laundering. The success of Operation Greenback --- 215 indictments, the seizure of $38.8 million in currency and $14.6 million in property plus $120 million in fines --- formed the model for other multi-agency joint ventures, including the creation in 1984 of Organized Crime Drug Enforcement Task Forces.

Ronald Reagan appointed Vice President George Bush to vanguard the nation's combat against drugs but he never displayed much of a stomach for severe financial prosecution. Within a year, he downgraded Operation Greenback from an inter-agency effort directed out of Washington to a small unit working out of the US Attorney's Office in Miami.

One gauge of Bush's failure to grasp the problem was reflected in the cash surplus figures, money that wouldn't be found in a particular area under normal banking conditions. After de-emphasizing Operation Greenback, surplus cash in Jacksonville and Miami shot up by $5.2 billion. Like Nixon targeting the Mexican border, the moment Washington concentrated its forces in south Florida the laundrymen headed for healthier climates. In this case they went to southern California where the cash surplus quickly topped $3 billion.

Despite of evidence to the contrary, the Reagan administration seemed convinced that money launderers didn't bother with cash any more. They even went on record saying that professional criminal financial managers did their banking electronically. As for the cash-filled garbage bags shown on the evening news with every drug bust, they shrugged, all entrepreneurs keep petty cash on hand.

While Reagan and Bush weren't looking, along came crack. A crystallized form of cocaine, cheaper than heroin or coke, it can be smoked like hashish. With the North American coke market saturated and prices falling, the cartels saw crack as a financial godsend. One ounce of cocaine could become 300-400 crack vials and their profits would soar. By the mid-80s, both of Colombia’s main cartels were shipping crack by the ton. Nickel and dime bags, $5 and $10 worth, widened the market by attracting middle class white consumers who gave it social status. Because this business didn't require more than a few dollars start-up money, it also brought a new category of seller onto the street, black teenagers.

There was a time when sports offered the main hope for any black kid who wanted to escape from the inner-city. If he could play baseball or football or, even better, if he could play great basketball, there were people who’d back him through high school and college. Only a tiny percentage of those kids ever got to the pros but at least sports held out hope. And, in some cases, hope was enough. Crack changed that.

When Bush 41 moved into the Oval Office, Customs and DEA officials tried to persuade him that a full-scale attempt to eradicate the production of illicit drugs around the world would be costly and futile. In some countries, government officials were openly cooperating with drug producers. A top-secret State Department document noted that the narcotics trade in Laos had become such an integral part of the local economy that supporting it was "de facto government policy."

The President was also advised of the direct involvement by Syria in the growing, refining and trafficking of drugs. The CIA repeatedly told Bush that Damascus was earning up to $1 billion a year, about 20 percent of its national income, by subsidizing the opium and hashish industry in the Bekka Valley of Lebanon. The main market was then, and is still, the United States. Named as the main culprits by the CIA were the Syrian President's brother, the Defense Minister and the commander of Syrian military intelligence. But Bush needed the Syrians during Operation Desert Storm and later to stay at the tables during the Middle Eastern peace talks. So, at least in the short term, it suited American foreign policy to turn a blind eye to international heroin trafficking.

Those officials who understood what the war on drugs was really all about urged Bush to put his resources into the battle on the financial front. The President's response was two-pronged: he planned to wipe out street dealers by discouraging demand through education; and to send US troops into the mountains of Colombia to make massive waves of arrests.

Education failed. And the massive wave was, at best, a brief high tide. Between 1989 and 1991, only 26 cartel members were captured and sent to the United States. The Colombians then made extradition unconstitutional and Saddam Hussein invaded Kuwait. Bush’s attention turned back to foreign policy. His Gulf War was still to be fought. His drug war had already been lost.

*****

Bill Clinton didn’t have to inhale to understand something his immediate predecessors did not. That 90 percent of all crime is financially motivated and therefore the most effective way to fight criminals is to go after their money. He put money laundering on the agenda at the celebrations for the 50th anniversary of the United Nations by warning drug traffickers, terrorists and the world’s organized criminals, "Your dirty laundry is no longer welcome."

Congress mandated a certification process which required the President to assess foreign cooperation in counter-narcotics efforts on a yearly basis. Consequently, the State Department named 11 nations that were seen to be aiding and abetting the laundrymen. However, six of them --- Bolivia, Colombia, Lebanon, Pakistan, Paraguay and Peru --- were considered vital enough to US national interests to justify continued support from Washington. The remaining five are Afghanistan, Burma, Iran, Nigeria and Syria. An additional State Department roster, not publicly released, added to the usual suspects Antigua, the Cayman Islands, Venezuela, Thailand, Austria and Cyprus.

The certification process was a report card where the grades were pass, fail and still thinking about it. Countries who cared about passing started doing something about money laundering whereas countries that couldn’t care less about failing had sufficient income from drug dealing that only the most severe economic sanctions could grab their attention. To make sanctions effective required a global effort and it was clear from the way embargoes were violated in Iraq and Bosnia that many offending countries couldn’t care less about the rest of the globe. It was equally clear that most of the globe didn’t care a hell of a lot about America’s drug problem.

If the list had been compiled under the same criteria by another country, the United States would be cited as the worlds biggest per capita user of illegal drugs, and therefore wouldn't pass. That brings the argument straight back to the Third World contention, before you tell us how to live, clean up your own streets.

Clinton plainly hoped to do just that by putting more policemen on the beat. But that negates the fact that once drugs reach the streets it’s probably too late. What’s more, arresting, convicting and imprisoning traffickers does not always prevent them from running their cartels. And then, for every trafficker taken out of circulation, a dozen more seem willing to take his place.

For the first time, the money laundering statutes were used to prosecute a trafficker for a drug deal conducted outside the United States. A Pakistani man, Asif Ali Khan, was indicted in 1995 in Louisiana after purportedly smuggling 10 tons of the hashish between Australia and Pakistan. The Justice Department claimed jurisdiction because $300,000 worth of the $67 million deal was washed through the Pioneer Bank and Trust Co. of Shreveport, Louisiana.

By concentrating on the laundrymen, following the money trail, the government could drive up the cost of doing business. Traffickers were suddenly paying anywhere between 5-25 percent to get money collected, washed and into his pocket. The downside was that added expenses were reflected in street prices, and there is a direct correlation between increased street prices and increased street crime.

From the middle of the 1980s to the middle of the 1990s, the war on drugs cost more than $100 billion. It's fair to ask, what did America get for its money? The answer is, probably not a lot. Doing nothing would have created anarchy but in that same ten year period drug related deaths have doubled and drug-related murders have tripled. $100 billion later, the problem has gotten so very drastic that perhaps only very drastic solutions can even attempt to solve it.

One idea might to recognize, officially, that there is a difference between the professional, international drug trafficker and people who deal in small amounts simply to support their own drug taking. When someone buys three grams of coke and sells two to make the money that one would have cost, technically that’s dealing. And in some states, a few ounces moved like that can put you away for a very long time. But when drug addiction is seen as an illness --- much the way alcoholism is generally recognized as a disease --- then this sort of "amateur dealing" could rightfully be considered a symptom of that illness. The idea is not to decriminalize drug dealing at any level, but to treat "amateur" dealing more humanely than many states currently do, while legislating that global trafficking must become a capital offense.

Establishing that difference could make a difference.

The thing that men like Escobar and the Orejuela brothers always feared the most was extradition to the United States. But simply indicting traffickers and demanding that they be handed over --- even with the possibility of the death penalty hanging over the heads --- probably wouldn’t put them all out of business. However, by placing severe economic sanctions on any country giving them harbor; by sending special CIA-DEA-FBI "commandos" into a country to kidnap traffickers and drag them back to the States; and by putting millions of dollars on their heads, wanted dead or alive, it’s a good bet that at least some of them would give up drug dealing in favor of full-time survival.

Hand in hand with that, anyone who has any professional dealings whatsoever with these indicted traffickers, would also be subject to charges of global trafficking.

After all, in order to deal drugs the way they do, the global traffickers have set up huge corporate structures, taken several pages out of the best management books, and constructed their multi-national organizations accordingly. They deliberately separate the marketing and financial sides of their business, keeping the two as far apart as possible, in order to create that all important situation where the drug dealers never know about money laundering and the laundrymen --- those white collar professionals whose business it is to handle money --- never see drugs.

By tossing street dealers, smugglers, marketing people, bankers, accountants, front-company people and lawyers into the same boat, the laundrymen would be forced to come face to face with the drugs and their "plausible denial" would fall on deaf ears. Their only way out would be the clause that American citizens would have one chance to work a plea-bargain. In exchange for all of the global traffickers assets, other accomplices and "other invaluable information," they could trade the electric chair for a term of life imprisonment. It is Draconian, to say the least. But while the capital crime of global trafficking might not put an end to America’s drug problems, it would brutally focus the attention of America’s laundrymen.

*****

Because the underground economy functions almost exclusively with dollars, the Reagan administration radically proposed a way to render the traffickers’ dollar mountains useless. They were going to change the color of money. In those days, the United States was the only country in the world whose currency was both the same size and the same color in all denominations. Reagan's idea was to announce on a Monday morning that within seven days green $20, $50 and $100 bills would no longer be considered legal tender. Instead the government would be issuing newly designed banknotes, perhaps bigger, perhaps smaller, perhaps yellow, red or blue. All anyone would have had to do was walk into a bank and exchange the old notes for the new notes. But any cash transaction over $1000 would be recorded and the information would be passed on to the IRS and the DEA. For the average person it wouldn’t have been anything more than a nuisance. Even if someone always carried a few thousand dollars in his pocket, making the switch would take only a few minutes. But it could cripple a drug dealer with several million in cash hidden under his mattress. Swapping thousands of old $20s, $50s and $100s for the new money in such a short period of time, even using an army of smurfs, would be out of the question. And once the week was up, his cash mountain would be worthless.

The DEA even suggested that government might print two types of currency. One would be legal tender exclusively inside the country, the other would be legal tender exclusively outside the country. The only place the two would be interchangeable would be at specially controlled financial institutions. At least in theory, that should put an end to dollar smuggling.

Going one better, there have since been calls to do away with all paper money, to turn the American economy into one that functions solely with checks and plastic. Although there might have to be some coins left in circulation, if for no other reason than to keep the vending machine industry happy, by relegating folding money to history the government would be delivering a fatal blow to drug dealers. It would also be a positive step towards putting loan-sharks, tax evaders, protection racketeers and kidnappers out of business.

There are new bills in circulation that are different from the old ones. But the idea of a sudden and total change never got very far. Legislators wrote it off as unrealistic. They claimed that such a stunt would be too disruptive and cause too much of an inconvenience for tens of millions of Americans. The truth is probably closer to the fact that tampering with the currency to knock out the laundrymen is too abstruse an issue to win re-election votes.

*****

In 1989, the heads of state of the seven leading industrial nations, known as the G-7, officially recognized for the first time that money laundering was a runaway global problem. Acting in unison, they formed the Financial Action Task Force (FATF) to coordinate a multinational approach to dealing with this crisis. Membership was promptly opened beyond the G-7 nations and now consists of all the OECD countries, plus Hong Kong, Singapore, the Gulf Cooperation Council and the European Commission. Every member has loudly endorsed a proposed blueprint consisting of 40 specific measures intended to deal a lethal blow to the laundrymen, but to date not one single member has incorporated the entire blueprint into law.

Since then, however, all sorts of special interest groups have put money laundering on the top of their annual general meeting agenda. Their intentions are good and most of the time the delegates’ hearts are in the right place. In one recent twelve month period: experts from 40 nations met in France to recommended measures to halt money laundering in Russia and Eastern Europe; representatives from 140 governments met in Italy to plot a strategy against the world's criminal organizations; delegates from 180 governments convened in Egypt to mount a global front against organized crime; American lawyers met in Washington to discuss their responsibilities vis-à-vis money laundering; ministers from 25 nations met in Argentina, committing their administrations to fight money laundering; and 600 international law enforcement professionals assembled in England to call for the easing of banking secrecy laws.

A fine idea on paper, most of those money laundering conferences are little more than an excuse for certain people to enjoy "working visits" to the Far East and Europe. Conclusions are published and generally disregarded. Although, it must be said that conferences do bring together people who might not have otherwise met and allow them to network. In between banquets and cocktail parties, experts from member states working in various fields --- customs, drug enforcement, banking and financial supervision --- can exchange phone numbers. The bad guys know the other bad guys, so if nothing else, now the good guys are getting to know the other good guys.

*****

Even if every member of FATF complied fully with the organizations 40 directives, they still wouldn't work.

Money is at the root of the problem and money is also at the root of the solution but wherever such huge sums are bandied about, common sense is often given a back seat ride.

Start with the genius who wrote the manual for administrative budgeting. Government accountants set annual budgets with two factors in mind: How much is needed next year; how much was spent this year. If an agency was handed $10 billion last year and only spent $9 billion this year, it risks getting only $9 billion next year. So bureaucrats rush around in the final month of the fiscal year to make certain that all of their allocated money is used up. Then, to justify an increase for their next budget, they naturally inflate the threat they're battling to defeat. They may know that $250 billion a year is being laundered but they find an expert to swear it’s $350 billion and warn that if they don't get increased funding they'll never be able to do their job. Given more than they previously got, they now have to spend it all or they'll lose it the following year. So waste is factored into the equation and annually re-creates itself. So are egos. Like the company chairman who brags that he heads a $10 billion organization, in government too there's a tendency to confuse real importance with allocated revenue.

No where is that more visible than in asset-sharing programs which offer law enforcement agencies a portion of the bounty they confiscate. Battle lines are drawn for the right to claim a goal and not just to be credited with an assist. Law enforcement agencies pull together but only up to a point. Then it’s a free-for-all to grab the prize. Customs, the DEA, the FBI and the IRS run operations together and often with great success, but each agency fights for control of the task force because being chief pays better than being just another Indian.

With cash dangled like an apple on a stick to motivate a mule, some agencies go after cases that produce big cash rewards instead of pursuing more difficult and often more important cases where the prize is nothing but a conviction.

Human temptation also gets in the way.

Four federal agents in south Florida, three from the FBI and one from Customs, were caught by undercover officers in a sting operation and charged with stealing a total of $200,000 from drug dealers. One of the four happened to have a girlfriend who managed a Great Western Savings Bank branch in suburban Miami and she washed their cash. No sooner had that case broken, when another Customs agent in Florida was arrested on charges of trafficking and money laundering in a separate case. This man was approached to help launder cash derived from the sale of counterfeit goods. The agent, who held down a second job at a financial investment firm, had no trouble laundering his money there in his spare time.

The headlines are never short of similar stories. Three sheriff's deputies in LA were convicted of stealing $750,000 in confiscated drug money and laundering it through a gun store. A Tampa police "Officer of the Year" pleaded guilty to five federal drug-related charges. And Rene De La Cova, the DEA agent who personally served Manuel Noriega with his arrest warrant, admitted stealing $700,000 while working on an unrelated money-laundering sting.

It's naive to expect that there won't always be rotten apples. Fortunately, the overwhelming majority of law enforcement officers involved with this sort of work do it because they sincerely believe it's a job that needs to be done. And the various sacrifices they're called upon to make in order to accomplish that mission are made unselfishly, honorably and with justifiable pride.

*****

It's taken a long time but money laundering is finally being seen as both a crime and a symptom of other crimes. Accepting that the best way to combat drug trafficking must be to include methods which deprive criminals of their profits, one logical conclusion is: The day the drug problem is defeated, the money laundering problem will also be defeated.

Alongside comes the argument: If you really want to conquer drug trafficking, you have to eradicate the demand for drugs.

Yet, if the Ayatollah Khomeini couldn't keep drugs out of Iran, and if Fidel Castro can't keep drugs out of Cuba, and if Saddam Hussein can't keep drugs out of Iraq, how in God's name can anyone seriously expect democratically elected leaders to keep drugs out of the west?

In reality, a drug-free America is a pipe dream.

One recent survey suggested that, even if law enforcement agencies throughout North America and Europe were able to increase their seizures by 40 percent, the availability of drugs on the streets of New York, Boston, Philadelphia, Miami, Houston, Chicago, Detroit, Los Angeles, San Francisco, Toronto, Vancouver and Montreal would be virtually unchanged.

Confiscation is viewed by the traffickers as little more than a tax imposed on them for the right to do business. Either they write off the cargo entirely, or in some places, especially around the Caribbean, simply buy their cargo back for a handful of cash.

What's more, there are literally dozens of nations in this world where the government's revenue is less than the profits made by the drug cartels. Wherever this occurs, the peril is that those nations are ripe for picking. The traffickers move in and the country becomes a laundryman's playground. Imagine trying to enforce justice and protect citizens in a country where organized crime is wealthier and better armed than the government. Speaking to Time Magazine several years before his capture, Cali cartel boss Gilberto Orejuela wondered out loud, "Why are countries such as Germany free to export materials used to refine cocaine? Why do countries like Switzerland, Panama and even the US protect money whose origin is dubious?"

The question clearly reflected his deep understanding of the narco-economy, that it could not possibly survive if otherwise honest men and otherwise legitimate businesses were not prepared to facilitate the laundrymen. He and others like him went on to prove that the devastation drug trafficking has wreaked throughout the world is monstrous. And the price is paid for nightly on the streets of North American cities.

How ironic that the very groups which could have the most immediate effect on the war against the laundrymen --- bankers, attorneys, company formation agents, politicians and countries where financial secrecy is a growth industry --- have the least incentive to take on the fight.

The game they play is one of plausible denial. As long as otherwise honest businessmen have half a thread on which to hang their belief that what they’re doing is legitimate, they will continue doing it. They will ask, am I supposed to be a policeman? They may acknowledge that drugs equals money equals drugs but never in the context of their own money. They will insist, if I had to ask where my clients’ money came from every time I got a new client, I wouldn’t have any new clients.

As long as otherwise honest men can plausibly deny that they are as guilty of drug trafficking as the dealers they are serving, it will be business as usual.

And that business is usually death.

The North Vietnamese and the Viet Cong effectively used drugs as a weapon in the guerrilla war against the United States. The Mujaheddin rebels in Afghanistan took a leaf out of their book and made heroin easily available to the invading Soviets. They hooked the Red Army so badly that many soldiers were turning over their weapons in exchange for drugs. Mikhail Gorbachev pulled the soldiers out, not because the Afghans had rocket launchers but because his army had been soundly defeated by hypodermic needles and white powder.

Legalization of drugs, or at the very least decriminalization of some of them, are widely touted solutions. There is no disputing that both would help to keep some kids out of jail. But there is no evidence whatsoever that either would keep drugs out of those kids.

In jurisdictions where they've tried to negate the obvious consequences of prohibition, the experiment has failed repeatedly. It has created massive health problems, spread drug consumption across wider sections of the population and fueled other crimes. In the Netherlands, for instance, decriminalized drugs are the predominant ingredient feeding a growing and terribly violent white slave trade.

Legitimizing drugs also means legitimizing the traffickers and the money launderers. Turning the Treasury into a pusher so that it can tax drugs won’t pay for the damage that drugs do, any more than it will put organized criminals out of business. So until someone can come up with a workable solution --- and there are some people who have arrived at the tragic conclusion that the problem has now become unsolvable --- the advantage remains clearly on the side of the laundrymen.

And modern technology is about to render the fight against them useless. Rechargeable cashcards will allow criminals to bypass the banking system altogether and launder profits via the Internet. Computer chips weigh the same if they are carrying $10 or $10 million and unlike credit cards, there’ll be no record of transactions.

In its simplest form digital cash already exists. Phone cards carry a certain amount of credit. Deductions are made from the chip with each call. The next step will be cards carrying say $100 worth of credit which you’ll use to buy gum, a ride on a subway, food in a restaurant or a new baseball mitt. Instead of handing the sales person a piece of plastic which sends the transaction to a central computer for billing later, or plastic which simultaneously debits your bank account and credits the sellers, you’ll put your card into a machine and the proper sum will be moved off your computer chip and onto the seller’s.

It will work the same way for drug deals.

Around the corner are smart cards embedded with enough memory to hold all sorts of data. Once encrypted software is developed to assure privacy, you’ll download money from the cards onto your home computer --- turning your hard disk into your virtual bank account --- access the Internet with your modem and move assets from one jurisdiction to another instantaneously and invisibly.

Mastercard and Visa are both developing smart card systems, although theirs will deliberately generate an audit trail because that’s the business their in. Other companies however, including many banks, are developing smart cards that won’t leave an audit trail because that’s where huge profits will be in digital currency technology.

There is no doubt that it will change the way we spend our money and therefore change the way we live. Eventually electronic money should replace cash. Consumer habits die hard and there is always great resistance to great change but once upon a time there were people who refused to believe that someday everyone would carry plastic.

Nor is there any doubt that cybercash risks undermining both the world’s banking system and the administration of justice. The problem is compounded by lawmakers who, like generals, are always fighting yesterday’s battles. By definition, cyberspace transcends governments and national boundaries. Unless Congress comes to grips with it in time, those people who stand to profit most from the future --- and the most obvious two are banks and organized criminals --- will have long ago worked out how to make the system Congress proof.

In the meantime, the bad guys can bide their time, find helpful banks and buy crooked lawyers. They only need to find one country or one bank willing to do their laundry and it doesn’t really matter if that country is half way around the world or that bank is just across the border. The legitimate financial system will always be the neck of a bottle through which dirty money flows and as long as one country or one bank is willing to cheat on behalf of the laundrymen, there is nothing the others can do.

The good guys are hampered by a lack of human resources, limited by financial constraints and denied the tools they need by legislatures that must balance judicial concerns with the free flow of honest business.

The good guys are seriously outgunned.

And since 9/11, the good guys are seriously misdirected. One of the major catastrophes of the George W. Bush years, was the restructuring of law enforcement and the creation of Department of Homeland Security.

A misguided effort to focus attention on terrorism, it basically took law enforcement's eyes off the drug money trail. US Customs, which had once been so forceful in the fight against the laundrymen, was no directed to watch the border. Drug trafficking and money laundering, they were told by Bush officials, would be the domain of the FBI and the DEA. Except the DEA was undermanned to do it, and the FBI was totally focused on terrorism, to the detriment of most other crimes. So, effectively, since 9/11, almost nothing has been done about drug money laundering --- at least nothing on the scale that US had once worked this territory.

It has gotten so bad that, US law enforcement officers now admit, because they don’t have the manpower to do both, when they're given the option of investigating something that might just somehow relate to terrorist activity or a sure-thing $50 million money laundering scheme, the dirty money case is put on the back burner.

As a result, thanks to George Bush's failure to understand this problem, illicit drugs and dirty money are moving more freely now than at any time in our nation's history.

*****

ACKNOWLEDGEMENTS

This book began with John Hurley, who was until the end of 1992, Customs Attaché at the US Embassy in London. First he fired my enthusiasm then he proceeded to open countless doors for me, doors that quite clearly would never have opened without him. I shamelessly dropped his name at every turn because the response always was, if you're a friend of John's, that's all right with me. I hope he and his wife Eileen know the extent of the esteem in which he is held by people who have worked with him, and the extent of the admiration in which they are both regarded by my wife and me.

I am also grateful to the many men and women who so kindly assisted me on this project: in the United States, at the Department of Justice, US Customs, the Federal Bureau of Investigation (FBI), the Drug Enforcement Administration (DEA), the Criminal Investigation Division of the Internal Revenue Service (IRS), the office of the District Attorney for New York County and the offices of the United States Attorneys in Boston, Newark, New York, Atlanta, Miami, Houston, San Diego, Los Angeles, San Francisco and Seattle; in Great Britain, at HM Customs, the National Criminal Intelligence Service (NCIS) and the Metropolitan Police; in Canada, at the Office of the Solicitor General, the Royal Canadian Mounted Police (RCMP) and the Canadian High Commission in London; in Australia, at the Office of the Attorney General and the National Crimes Authority (NCA); and throughout the rest of Europe, in various law enforcement and financial regulation authorities.

For their time, encouragement and support, I would particularly like to thank Peter Nunez, former Assistant Secretary of the Treasury - Enforcement; Roger Urbanski, Armando Ramirez and Bob Gerber of US Customs; Fran Dyer of the Criminal Investigation Division of the IRS; United States’ Attorneys Alan Bersin, Kendall Coffey, Faith Hochberg, Eric Holder, Gaynelle Griffin Jones, Donald Stern, Mary Jo White and Joe Whitley; Assistant United States’ Attorneys Mark Bartlett, Cyndi Bashant, Joseph Guerra III, Linda McNamara, Wilmer Parker III and Robert Stahl; and various staff members at the offices of the United States Attorneys, including Susan Snook in Miami and Marvin Smilon in the Southern District of New York; Brian Bruh and Anna Fotias of the Financial Crimes Enforcement Network (FINCEN); Special Agent Albert "Skip" Latson of the DEA; Tom Cash, formerly of the DEA and now with the Kroll Agency; Dianne Carr of the American Bar Association; attorneys Gerald Lefcourt and John Zwerling.

In Canada, SSgt. Yvon Gagnon and Sgt. Yvon Poirier, both of the RCMP. In Britain, Charles Hill, Graham Saltmarsh, Terry Burke and Tim Wren at NCIS; Billy Miller and Tony Curtis of the Metropolitan Police; Tony Brightwell of Bishops International; Dr. Barry A. K. Rider, Executive Director, Centre for International Documentation on Organized and Economic Crime, Jesus College, Cambridge; Rowan Bosworth-Davies of Richards Butler; Bob Denmark, Graham White and Trevor Taylor of the Royal Lancashire Constabulary; Lucy Lloyd and Henry Stewart Conference Studies for documentation on their money laundering conferences; Michael Hyland, head of Midland Group Security; John Drage of the Bank of England; Eric and Lynn Ellen of the International Maritime Bureau; plus Michael Ashe, attorney at law. In Switzerland, Ticino State Prosecutor Dick Marty and journalist Pascal Auschlain; In the Netherlands, Jan Van Doorn of the Dutch Centrale Recherche Informatiedienst (CRI); On the Isle of Man, Mark Solly; and in France, Rene Wack, chief of the Central Office For the Repression of Major Financial Crimes and attorney-at-law Ron Sokol in France. I also wish to thank the some 50 bankers around the world who gave me their time, many of them speaking frankly enough about specific practices and case studies to jeopardize their own positions. Those bankers are a perfect example of how research for a book like this is often done on the understanding that certain sources never be identified. It means that there are some I cannot thank openly. As matter of fact there are several, not including the aforementioned bankers, to whom I owe a very special debt. Spread out around the world, doing whatever it is they do, they were an invaluable reservoir of information. Needless to say, a few weren't necessarily pleased that I'd managed to locate them and agreed to speak with me only on the clear understanding that I would not help anyone else find them. Others, who might have been easier to come across, spoke with me only after I agreed that no one would ever know who they were or what they'd said. Without wishing to make this sound especially dramatic, it's an easy condition to accept when you understand that my divulging any information about these sources could quite easily turn out to be hazardous to their health. I wholly respect their wishes. But I do have a touch of regret that I cannot thank them individually by name. After all, I am not just indebted to them for their confidences, I genuinely respect their trust.

Finally, many thanks to my old pal Gerald Chappell, attorney at law, for his consistently sound advice; Nick Webb at Simon and Schuster in London, Tim Bent at Arcade in New York, and of course, La Benayoun.

JR/New York 1996

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Burdick, Thomas: Blue Thunder; Simon & Schuster, London, 1990.

Campbell, Duncan: That was Business, This is Personal; Secker & Warburg, London, 1990.

Charbonneau, Jean-Pierre: The Canadian Connection; Optimum, Ottawa, 1976.

Clark, T. and Tigue, J. J: Dirty Money; Millington Books, London, 1975.

Clifford, Clark: Counsel to the President; Random House, New York, 1991.

Clutterbuck, R: Terrorism, Drugs and Crime in Europe after 1992; Routledge & Kegan Paul, London, 1990.

Colodny, Len & Gettlin, Robert: Silent Coup - The Removal of Richard Nixon; Gollancz, London, 1991.

Cummings, John, & Volkman, Ernest: Goombata; Little Brown, Boston, 1990.

Dean, John: Blind Ambition; Simon & Schuster, New York, 1976.

De Grazia, Jessica: DEA - The War Against Drugs; BBC Books, London, 1991.

Di Fonzo, Luigi: St. Peter's Banker - Michele Sindona; Franklin Watts, New York, 1983.

Dinges, John: Our Man in Panama; Random House, New York, 1990.

Eddy, Paul: The Cocaine Wars; Century Hutchinson, London, 1988.

Ehrenfeld, Rachel: Evil Money; Harper Collins, New York, 1992.

Ehrenfeld, Rachel: Narco Terrorism; Basic Books, New York, 1990.

Eisenberg, Dennis with Dann, Uri & Landau, Eli: Meyer Lansky; Paddington, London, 1979.

Eppolito, Lou & Drury, Bob: Mafia Cop; Simon & Schuster, New York, 1992.

Faith, Nicholas: Safety in Numbers - The Mysterious World of Swiss Banking; Hamish Hamilton, London, 1984.

Frances, Diane: Contrepreneurs; Macmillan, Toronto, 1988.

Franklin, R: Profits of Deceit; Heinemann, London, 1990.

Franzese, Michael & Matera, Dary: Quitting the Mob; HarperCollins, New York, 1992.

Freemantle, Brian: The Fix; Michael Joseph, London, 1985.

Gardner, Paul: The Drug Smugglers; Robert Hale, London, 1989.

Garrison, Jim: A Heritage of Stone; Putnam's Sons, New York, 1970.

Garrison, Jim: On the Trail of the Assassins; Penguin, London, 1992.

Gugliotta, Guy & Leen, Jeff: Kings of Cocaine; Simon & Schuster, New York, 1989.

Gurwin, Larry: The Calvi Affair; Macmillan, London 1983.

Hess, Henner: Mafia and Mafiosi; Saxon Hall, New York, 1973.

Hogg, Andrew; McDougal, Jim & Morgan, Robin: Bullion; Penguin Books, London, 1988.

Ianni, Francis & Reuss-Ianni, Elizabeth: The Crime Society; New American Library, New York, 1976.

Intriago, Charles A: International Money Laundering; Eurostudy, London, 1991.

Jennings, Andrew; Lashmar, Paul & Simson, Vyv: Scotland Yard's Cocaine Connection; Cape, London, 1990.

Kaplan, David: Yakuza; Queen Anne, London 1987.

Karchmer, Cliff: Illegal Money Laundering - A Strategy & Resource Guide for Law Enforcement Agencies; Police Executive Resources, Washington DC, 1988.

Katcher, Leo: The Big Bankroll; Harper & Row, New York, 1959.

Kempe, Frederick: Divorcing the Dictator - America's Bungled Affair with Noriega; Putnam, New York, 1990.

Kobler, John: Capone; Michael Joseph, London, 1972.

Kochan, Nick with Whittington, Bob & Potts, Mark: Dirty Money - The Inside Story of the World's Sleaziest Bank; National Press Books, Washington DC, 1992.

Koster, R. M. and Borbon, G. S: In the Time of the Tyrants; Secker & Warburg, London, 1990.

Kwitney, Jonathan: The Crimes of Patriots; Touchstone, New York, 1987.

Kwitney, Jonathan: The Fountain Pen Conspiracy; Knopf, New York, 1973.

Lacy, Robert: Little Man; Little Brown, New York, 1991. Lance, Burt: The Truth of the Matter; Summit, New York, 1991.

Lane, Mark: Plausible Denial; Plexus, London, 1992.

Lernoux, Penny: In Banks We Trust; Anchor Press, New York, 1984.

Loftus, John & McIntyre, Emily: Valhallas Wake; Atlantic Monthly Press, New York, 1989.

McAlary, Mark: Crack War; Robinson Publishing, London, 1990.

McCarl, Henry N: Economic Impact of the Underground Economy - A Bibliography on Money Laundering and Other Aspects of Off-the-Record Economic Transactions; Vance Bibliographies, Monticello, Illinois, 1989.

Marchetti, Victor & Marks, John D: The CIA and the Cult of Intelligence; Dell, New York, 1980.

Milgate, Brian: The Cochin Connection; Chatto & Windus, London, 1987. Mills, James: The Underground Empire; Doubleday, Garden City, NY, 1986.

Mustain, Gene & Capeci, Jerry: Mob Star - The Story of John Gotti; Franklin Watts, New York, 1988.

Nash, Jay Robert: Encyclopedia of World Crime; Crime Books, New York, 1989. Nash, Jay Robert: Hustlers and Con Men; Evans, New York, 1976.

Naylor, R. T: Hot Money and the Politics of Debt; Unwin Hyman, London, 1987.

Naylor, R. T: Bankers, Bagmen and Bandits; Black Rose, New York, 1990.

Nicholl, Charles: The Fruit Palace; Heineman, London, 1985.

Nown, Graham: The English Godfather; Ward Lock, London, 1987.

O'Brien, Joseph: Boss of Bosses; Simon & Schuster, New York, 1991.

Perisco, Joseph: Casey; Penguin, New York, 1990.

Poppa, Terrence E: Drug Lord; Pharos Books, New York, 1990.

Posner, Gerald: Warlords of Crime; Queen Anne, London, 1989.

Possamai, Mario: Money on the Run; Penguin, Toronto, 1992.

Powers, Thomas: The Man Who Kept the Secrets - Richard Helms and the CIA; Pocket Books, New York, 1981.

Powis, Robert: The Money Launderers; Probus Publishing, Chicago, 1992.

Prados, John: Keepers of the Keys - A History of the National Security Council from Truman to Bush; Morrow, New York, 1991.

Prince, Carl & Keller, Mollie: The US Customs Service - A Bicentennial History; Department of the Treasury, Washington DC, 1989. Reader's Digest: The Greatest Cases of Interpol; Reader's Digest Books, New York, 1982.

Roark, Garland: The Coin of Contraband; Doubleday, Garden City, NY, 1984.

Robinson, Jeffrey: Minus Millionaires; Grafton, London, 1988.

Scheim, David: The Mafia Killed President Kennedy; WH Allen, London, 1988.

Shannon, Elaine: Desperadoes; Viking, New York, 1988. Short, Martin: Crime Inc; Thames Mandarin, London, 1991.

Short, Martin: Lundy; Grafton, London, 1992.

Sterling, Claire: The Mafia; Hamish Hamilton, London, 1990.

Stewart, James B: Den of Thieves; Simon & Schuster, London, 1992.

Tanzi, Vito, ed: The Underground Economy in the United States and Abroad; collected articles for the International Money Fund, Lexington Books, Lexington, Mass. 1982.

Truell, Peter & Gurwin, Larry: BCCI; Bloomsbury, London, 1992.

Tyler, Gus: Organized Crime in America; University of Michigan Press, Ann Arbor, Mi, 1962.

Villa, John K: Banking Crimes: Fraud, Money Laundering and Embezzlement; Clark Boardman, New York, 1987.

Walter, Ingo: Secret Money - The Shadowy World of Tax Evasion, Capital Flight and Fraud; Unwin Hyman, London, 1989.

Woodward, Bob: Veil - The Secret Wars of the CIA; Simon & Schuster, New York, 1987.

Woodward, Bob & Bernstein, Carl: All the President's Men; Secker & Warburg, London, 1974.

Woodward, Bob & Bernstein, Carl: The Final Days; Avon Books, New York, 1976.

- Periodicals -

ABA Banking Journal: August 1995: "Son of CRF: suspicious activity form proposed." May 1994: "Treasury gets direct banker input on Bank Secrecy Act." June 1993: "Dialup help for Bank Secrecy Act compliance." Feb 1993: "Money laundering law is (so far) mostly a blessing; new legislation could provide some significant relief to bankers, but the regs aren't written yet. July 1992: "When money laundering law meets environmental risks." January 1991: "Spotting and handling suspicious transactions." December 1990: "Treasury takes next step on wire transfers." March 1990: "From the money laundering front." March 1990: "Stop the smurfs." November 1989: "Bank secrecy revisited." July 1985: "What you should know about money laundering law."

Accounting Today: Jan 3, 1994: "Quick Tax chief charged with fraud." July 19, 1993: "SEC suspends Oregon CPA."

American Banker: Nov 22, 1995: "Money police face tough beat on Internet." August 3, 1995: "Tribal casinos face money-laundering regs." July 19, 1995: "Technology best bet for avoiding risks of anti-laundering rules." May 18, 1995: "Slimmer currency transaction report set." April 20, 1995: "U.S. will lean on banks, nonbanks in battle against money laundering." March 30, 1995: "Coming soon: 'know your customer' rules to fight money laundering." Feb 16, 1995: "Fed aide says one-shot criminal referral form will ease red tape." Jan 19, 1995: "Laundering rules seen as too little, too late." Dec 15, 1994: "Citibank helps U.S. prosecution and ends up with a PR nightmare." Dec 8, 1994: "American Express Bank paying $14M to settle fraud charges." Dec 5, 1994: "Treasury extends laundering rules to casinos." Dec 1, 1994: "Treasury's crime unit undergoing a face-lift." Nov 3, 1994: Treasury to step up war on money launderers." Oct 20, 1994: Treasury eases banks' burden in fight against laundering." Oct 6, 1994: U.S. denies a report it's probing brokerages for money laundering." Sept 21, 1994: Bill would hamper laundering while slashing banks' paperwork." Sept 8, 1994: "Program shows tricks of trade in laundering." Sept 1, 1994: Justice division on laundering to be dissolved." August 29, 1994: Crime act to be tough on card laundering, telemarketing fraud." July 25, 1994: Peter G. Djinis - Department of the Treasury Director of office of financial enforcement." June 21, 1994: "Treasury aide chosen to lead money laundering task force." June 30, 1994: "Laundering experts say banks shouldn't be afraid to close suspect accounts." May 5, 1994: "Money-laundering cop focuses on lawbreakers." April 8, 1994: "GAO - disclosure law scaring money launderers from banks." March 17, 1994: "Wipeout of laundering unit opposed." March 14, 1994: "Private sector advisory committee to study money-laundering laws." March 10, 1994: "IRS jumped gun in warnings about anti-laundering law." March 1, 1994: "House subcommittee to vote on laundering bill." Feb 25, 1994: "Ex-director convicted in con scheme is sought." Jan 12, 1994: "Top court makes prosecution of currency cases tougher." Jan 6, 1994: "FBI forms unit to fight money laundering." Dec 22, 1993: "Indictment: head of tax service bilked banks." Dec 21, 1993: A Swiss bank confesses to laundering drug money." Dec 8, 1993: Eased cash-reports rule seen slashing red tape." Nov 18, 1993: "For Treasury's point man on money laundering, new responsibilities recall an early triumph." Oct 21, 1993: "Old-fashioned weapon urged for the fight against money laundering - common sense." Oct 19, 1993: "U.S. hopes to lighten compliance burden of money laundering laws." Oct 8, 1993: "Gonzalez money laundering bill reduces bank currency reports." Sept 30, 1993: "Form for reporting crimes simplified." Sept 23, 1993: "Treasury planning changes in money-laundering rules." Sept 16, 1993: "Bankers vie for a say in war on money laundering." Sept 2, 1993: "Treasury Dept. unveils rules on wire transfers." August 26, 1993: "He's the ABA's point man on money laundering." August 19, 1993: "Money laundering goes on with ease, U.S. aide says." August 12, 1993: "Fed, Treasury seek to standardize wire-transfer record keeping." July 9, 1993: "Treasury Department to give Texas police access to cash transaction records." July 9, 1993: "How to avoid being stuck with a laundering bill." July 6, 1993: "Former thrift owner guilty of fraud." June 11, 1993: "Price software might help detect laundering." June 2, 1993: "Bankers wary of new rules on wire transfers." May 26, 1993: "Agencies moving to ease rules on currency transaction reports." April 29, 1993: "Banks get easy access to latest data on money laundering." Feb 17, 1993: "Cross-border banking faulted for laxness." Jan 22, 1993: "Norwest unit to pay $328,000 in money-laundering case." Jan 21, 1993: "Marine Midland says U.S. wrongfully seized cash." Jan 4, 1993: "Dallas developer indicted again on federal bank fraud charges." July 9, 1993: "How to avoid being stuck with a laundering bill." July 6, 1993: "Former thrift owner guilty of fraud." June 11, 1993: "Price software might help detect laundering." June 2, 1993: "Bankers wary of new rules on wire transfers." May 26, 1993: "Agencies moving to ease rules on currency transaction reports." April 29, 1993: "Banks get easy access to latest data on money laundering." Feb 17, 1993: "Cross-border banking faulted for laxness." Jan 22, 1993: "Norwest unit to pay $328,000 in money-laundering case." Jan 21, 1993: "Marine Midland says U.S. wrongfully seized cash." Jan 4, 1993: "Dallas developer indicted again on federal bank fraud charges."

American Metal Market: August 30, 1993: "Nigerians seek Mexican bank laundering." April 19, 1993: "Former PGP staffer admits $7.8M fraud."

American Spectator: June 1992: "The Great Ruble Scam." September 1988: "Losing the drug war."

Atlantic: January 1986: "Coping with cocaine."

Baltimore Business Journal: Feb 10, 1995: "Muller moves to stop money launderers." June 25, 1990: "Ruling links 1st National with CIA: suit names CIA as a codefendant."

Banker: August 1995: Banks in a spin - Money laundering. Nov 1994: The buck never stops. April 1990: "What's in the suitcase?"

Bank Management: April 1991: "Wire transfer proposal: Treasury considers banker concerns." March 1991: "Money laundering experts team up - on and off the job."

Banker's Magazine: March-April 1990: "Money laundering."

Banker's Monthly: June 1988: "Panama's banks take it on the chin."

Barron's: July 11, 1983: "Where hot money hides: havens spring up all over the globe."

Boston Business Journal: July 15, 1991: "Brockton Financial Services."

Boston College International and Comparative Law Review: Winter 1991: "Bankers, guns and money."

Boston Magazine: July 1990: "Bad influence - the trial of Joe Balliro."

Bottomline: March-April 1992: "The bank secrecy law demands delicate decision making."

Business: June 1988: "Underworld hijacks underground banking."

Business Horizons: September-October 1990: "The continuing expansion of RICO in business litigation."

Business Journal of New Jersey: November 1990: "A crazy scheme?"

Business Journal Serving Charlotte and the Metropolitan Area: April 13, 1992: "Lawyer's conviction chills legal community."

The Business Journal Serving Greater Sacramento: June 4, 1990: "Local money launderer prison bound."

Business Journal Serving Phoenix & the Valley of the Sun: March 11, 1991: "Agreement reached on legislation aimed at money laundering."

Business Week: March 1, 1993: "Cleaning up corruption is clobbering Italy Inc." April 13, 1992: "How did so many get away with so much for so long?" April 6, 1992: "Germany's Brash New Import - Dirt Money." December 16, 1991: "Zorro, Gorby and Howard the duck." October 7, 1991: "Could China become a least favored nation?" September 23, 1991: "Psst, wanna buy a bank? How about a few dozen?" August 26, 1991: "Can Noriega drag the CIA into the dock with him?" July 22, 1991: "The long and winding road to BCCI's dead end." May 20, 1991: "The days are numbered for secret accounts." August 27, 1990: "Insider Trading - The intricate case of Ellis AG." August 27, 1990: "Centrust, the Saudi and the Luxembourg bank." June 4, 1990: "Grabbing dirty money." February 19, 1990: "Gambling big to nail Noriega." January 22, 1990,: "The Noriega 'treasure chest.'" October 2, 1989: "The drug war European style." May 1, 1989: "He started at the top and worked his way down." April 17, 1989: "Getting banks to just say 'no'." October 24, 1988: "This bank may have been a laundry, too." May 23, 1988: "The Oklahoma town that drug money bought." April 18, 1988: "The Sicilian Mafia is still going strong." September 16, 1985: "Big brother wants to see your bank book." September 9, 1985: "The bank sting that's rocking Puerto Rico." March 25, 1985: "Money laundering: the defense gets a star witness." March 18, 1985: "Enlisting banks in the war on drugs;" "The long and growing list of hot money havens;" "In Colombia, dirty money passes through very clean hands." "Money laundering; who's involved, how it works and where it's spreading." March 11, 1985: "Two brokerages get tangled in the money laundering net." March 4, 1985: "Bank of Boston." February 25, 1985: "An all out attack on banks that launder money." December 24, 1984: "How Deak & Co. got caught in its own tangled web."

Business Wire: Oct 3, 1995: "Federal grand jury returned fifteen count Indictment." July 17, 1995: "President of nationwide tax preparation service sentenced in one of the largest ever electronic filing cases." May 1, 1995: "Yerardi pleads guilty to federal racketeering, loansharking and money-laundering."

Chain Drug Review: July 18, 1994: "Monus trial ends in hung jury; tampering charged." June 20, 1994: "Former Phar-Mor execs square off." Feb 15, 1993: "Monus faces 129-count indictment."

Columbia Journalism Review: March-April 1993: "Dead right - The assassination of journalist Manuel de Dios Unanue." September/October 1991: "Follow the drug money."

Commuter-Regional Airline News: May 25, 1992: "L'Express owner gets prison term for money laundering."

Contemporary Crises: March 1990: "The Chinese laundry."

Crain's Cleveland Business: June 13, 1994: "Fired Eaton workers indicted."

Criminal Law Forum: Spring 1991: "Money laundering, an investigatory perspective;" "Convention on laundering."

Dallas Business Journal: April 19, 1991: "Feds accused of misconduct in probe; defendants in money laundering case claim agents hired prostitute." September 28, 1990: "Reese deals probed as suits mount." May 7, 1990: "Law firms fight over allegations of misconduct."

Dealer Business: April 1993: "Crackdown on drugs; though most auto dealerships don't realize it, they face a threat potentially much greater than lagging sales or declining profits."

Dispatch: March 2, 1992: "Fact sheet: combating drug money-laundering."

Drug Store News: Feb 15, 1993: "Phar-Mor's Monus, Finn charged."

Economic Progress Report: June 1990: "Action on money laundering."

Economist: June 17, 1995: "One down, more to go." June 25, 1994: "Money launderers on the line." March 12, 1994: "Back to the future - Panama." June 25, 1994: "Money launderers on the line." August 1, 1992: "The Escobar escape." May 9, 1992: "Cash at any price." April 25, 1992: "Cleaning up the rupees." April 4, 1992: "Calling earth, calling earth - the Noriega trial." February 22, 1992: "Cleaning up whose act?" August 3, 1991: "The opening-up of BCCI; send for Richard Hannay; some of it will prove false but enough of the BCCI-spies story looks true to give the intelligence agencies some tough questions to answer." June 15, 1991: "Gilded cage - Pablo Escobar, head of Colombia's most important drug cartel, builds the prison where he will be held." March 16, 1991: "Oh, my brass plate in the sun." December 1, 1990: "Bombs and blackmail." October 27, 1990: "Closing down the launderette." July 7, 1990: "A clockwork future for Finanzplatz Schweiz?" June 9, 1990: "Crime cracker." June 2, 1990: "A president with guts, and a bullet-proof waistcoat." May 5, 1990: "The muzziest of wars." May 5, 1990: "Flushing funny money into the open." January 27, 1990: "How BCCI grew and grew." December 9, 1989: "Stormy weather - Banking licenses and politics of Montserrat." October 21, 1989: "Follow the money." October 21, 1989: "On the run." September 16, 1989: "Gun law - Colombia." September 9, 1989: "Real war - The Medellin cartel in Colombia." August 26, 1989: "Colombia's cocaine overdose." July 8, 1989: "Clive of Havana - General Arnaldo Ochoa Sanchez convicted of drug trafficking." June 24, 1989: "Limitless discretion - a survey of private banking; money talks, wealth whispers." March 11, 1989: "Dirty laundry." March 4, 1989: "Whitewash or crackdown?" December 17, 1988: "BCCI stands accused." December 17, 1988: "Love, honour, obey and resign." November 12, 1988: "Check your case, sir?" October 15, 1988: "Till drugs do us part." August 27, 1988: "Five tiny secrets of success." August 20, 1988: "Cleaning up dirty laundering." August 6, 1988: "Columbus's islands." February 28, 1987: "Taking crooks to the cleaners."

Editor & Publisher: March 19, 1994: "Maxwell's money laundry."

EFT Report: Oct 26, 1994: "Averting money laundering - and federal investigations."

Esquire: October 1983: "Cocaine, how you can bank on it."

EuroBusiness: Nov 1994: "Squeaky clean." Oct 1993: "Baby Doc's big haul." June 1990: "Cleaning up money launderers."

Euromoney: July 1989: "Can the UBS colonels win the overseas battle?" December 1988: "Sailing into the grand harbour." March 1987: "Laundering law leaps across borders."

Europe 2000: March 1990: "Commission declares war on money laundering."

European Journal of International Affairs: Winter 1989: "Drug money, hot money and debt."

Far Eastern Economic Review: March 15, 1990: "Japan - Dope dealers delight."

FBI Law Enforcement Bulletin: March 1993: "Forensic examination of money laundering records."

Federal Reserve Bulletin: July 1993: "Statements to the Congress."

Financial Market Trends: June 1994: "Financial action task force on money laundering: annual report 1993-1994."

The Financial Post: Nov 12, 1994: "Too easy to wash money in Canada." July 6, 1991: "Bank shut in global crackdown."

Financial Services Report: August 29, 1990: "Money laundering deterrence costs banks millions of dollars, survey shows."

Financial World: Feb 1, 1994: "Dirty dollars." May 15, 1990: "Dr. shoals." March 21, 1989: "The IRS: the gang that can't shoot straight." November 29, 1988: "The bank that knows too much." March 18, 1986: "Secret money; the world of international financial secrecy." September 18, 1985: "The flip side of the coin."

Forbes: August 14, 1995: "Salad oil, $720." June 7, 1993: "Closing in - Tracking down laundered money in a consumer fraud case." April 26, 1993: "Cash capital - Los Angeles replaces Miami as city where most money laundering activity occurs." July 23, 1990: "Middle East." July 23, 1990: "The Americas." November 13, 1989: "The paradox of antidrug enforcement." October 30, 1989: "In the all out drug war, a low cost blow to the jugular." May 29, 1989: "Scam capital of the world." April 17, 1989: "The Bulgarian connection." December 26, 1988: "Drug smuggler's startup." November 14, 1988: "Too rich to ignore." June 1, 1987: "The biggest drug bust." April 6, 1987: "Stash accounting." October 6, 1986: "See no evil." May 5, 1986: "T-man videos." April 7, 1986: "New hub for an old web." September 23, 1985: "America's Hottest Export - Funny Money Stocks." September 9, 1985: "How the smart crooks use plastic." January 28, 1985: "Guilt by association." December 5, 1983: "Everybody's favorite laundryman."

Foreign Affairs: July-August 1994: "The drug money maze."

Fortune: July 25, 1994: Ask Mr. Statistics. November 5, 1990: "The S&L felons." June 20, 1988: "The drug trade." March 2, 1987: "Turmoil time in the casino business." April 1, 1985: "Money laundering more shocks ahead;" "Editor's Desk." April 4, 1983: "The feds eye the herd; Merrill Lynch swears off cash."

George Washington Journal of International Law and Economics: Issue #3 1989: "Dollar diplomacy."

Governing: October 1990: "To catch the drug kingpins, follow the money."

Government Computer News: Sept 20, 1993: "Project Gateway gives state cops access to financial data."

Insight: Oct 2, 1995: "Federal protection system could double as spy scam." July 23, 1990: "Cleaning out money launderers." August 21, 1989: "Drug money soils cleanest hands."

International Bank Accountant: Feb 15, 1993: "New guidance for U.K. accountants strengthens government's curb on money laundering."

International Financial Law Review: March 1990: "Bank liability under the UN drug trafficking convention."

International Management: May 1991: "Anxiety in the Alps."

Jewelers Circular Keystone: October 1991: "Feds nab money launderers." May 1991: "LU Kustom indicted in money-laundering case."

Journal of Accountancy: August 1995: IRS cracking down on reports of cash transactions over $10,000." February 1992: "IRS says more businesses are complying with anti-money-laundering rules." March 1990: "The telltale signs of money laundering."

Journal of the American Medical Association: February 16, 1994: "Gifts from industry - laundering money or supporting education?"

Kansas City Business Journal: March 26, 1993: "Insurance executive's lawyer sees indictment as vendetta." August 2, 1991: "FBI eyes financing efforts for topless bar." September 25, 1989: "Ex-AMC exec indicted over embezzlement; money laundering, tax evasion also alleged."

Kyodo: July 29, 1992: "Bankers group compiles manual to tackle money laundering."

Law Enforcement Bulletin: April 1990: "Laundering drug money."

Life: March 1990: "Our man in Panama: the creation of a thug."

Los Angeles Business Journal: Oct 3, 1994: "Marathon council disclosure draws mixed response." June 3, 1991: "Cash pay going under the table erodes economy." July 13, 1987: "Barry Minkow's favorable treatment in press exposes reporters own vulnerability to fraud."

Maclean's: April 10, 1995: "'I'm a hostage' - One Canadian's legal nightmare in Peru." Sept 12, 1994: "Drug-busting dramas: police forces mount two spectacular raids." August 5, 1991: "A scandal in waiting." October 23, 1989, "The laundering game: cleaning dirty money is crucial"; "Canada's crackdown: a new law has led to more seizures"; "Grabbing the drug bounty: the Miami tally is $150 million"; "Hiding the drug money: criminals are using Canada to launder billions of dollars in drug profits." September 11, 1989: "Terror in the drug world." September 4, 1989: "The cocaine war: Washington and Bogota battle the drug lords." May 29, 1989: "Battling crime through the banks." October 31, 1988: "A dangerous trail; police pursue profits from drug sales." November 2, 1987: "Cashing in on ill-gotten gains." August 17, 1987: "The criminal element." March 25, 1985: "Trailing laundered cash." February 11, 1985: "Questions behind locked doors." April 4, 1983: "Offshore banking secrets."

MacWEEK: March 29, 1993: "MacFriends duo to be sentenced."

Management Today: May 1990: "The Mafia: the Long Reach of the International Sicilian Mafia."

Money: November 1989: "Life styles of the rich and heinous."

Mother Jones: March-April 1994: "Kafka's banker: Bob Maxwell's nightmarish ride from banker to bartender."

Multichannel News: August 19, 1991: "Magness and Romrell tied to BCCI affiliate."

Nation: October 7, 1991: "The C.I.A. and the cocaine coup." February 4, 1991: "Tinker, tailor, banker, spy." November 19, 1990: "The looting decade: S&Ls, big banks and other triumphs of capitalism." July 9, 1990: "Minority Report - CIA involvement." March 26, 1990: "Drugs." November 13, 1989: "Get Noriega but don't touch the bankers." October 2, 1989: "Contradictions of cocaine capitalism." August 27, 1988: "Dealing with Noriega." February 20, 1988: "Our man in Panama." November 7, 1987: "The crimes of patriots: a true tale of dope, dirty money, and the CIA." September 5, 1987: "How the drug czar got away." August 29, 1987: "The Iran Contra connection: secret teams and covert operations in the Reagan era." February 21, 1987: "Crazy Charlie - Carlos Lehder Rivas." September 6, 1986: "The offshore money; Swiss banks still sell secrecy." February 23, 1985: "Stop blaming the system." February 18, 1984: "The Miami connection."

Nation's Cities Weekly: July 24, 1989: "Crime pays off for Torrance Calif."

National Review: Sept 11, 1995: "Gekko." March 30, 1992: "BCCI and Senator Kerry revisited." December 16, 1991: "Godfather Fidel." October 7, 1991: "The real scandal - BCCI."

National Underwriter Property & Casualty-Risk & Benefits

Management: June 24, 1991: "La. regulator sent to prison; called amoral." June 11, 1990: "Grand jury indicts La. commissioner in Champion case."

New Internationalist: October 1991: "How To Make Dirty Money Squeaky Clean."

New Leader: September 18, 1989: "A country under siege; fighting anarchy in Colombia."

New Republic: November 27, 1989: "The kingdom of cocaine: the shocking story of Colombia's habit." September 18, 1989: "A mess in the Andes: Columbia's government-by-cocaine." June 12, 1989: "Dear Manny." March 13, 1989: "Robbin' Hoods: how the big banks spell debt 'relief.'" April 15, 1985: "Inside dope in El Salvador: where did d'Aubuisson's pal come up with $6 million in cash."

Newsweek: November 16, 1992: "A CIA-BNL link?" October 12, 1992: "The last martini." August 21, 1991: "The CIA and BCCI"; "The bank that prays together." August 5, 1991: "What did they know - and when?" March 18, 1991: "The pain of a power broker." April 10, 1989: "A drug crackdown in the Alps;" "A Bungled deal with Panama." March 27, 1989: "Scandal in Switzerland." February 22, 1988: "The dictator on the dock." September 23, 1985: "Hong Kong's funny money." May 20, 1985: "E.F. Hutton: it's not over yet." February 25, 1985: "Banking by paper bag." March 28, 1983: "Trying to shut down the money laundry;" "The grandma Mafia on trial."

New York: August 26, 1991: "A Noriega laundry." January 22, 1990: "The Panama connection." October 31, 1983: "Money laundering: how crooks recycle $80 billion a year in dirty money." January 23, 1978: "Ladies of the night clean up their act."

New York Times Magazine: March 29, 1992: "Where the money washes up."

New York University Journal of International Law and Politics: Summer 1984: "The use of offshore institutions to facilitate criminal activities in the United States."

Penthouse: April 1984: "Blood money."

People: August 6, 1990: "A conspiracy of crowns." June 19, 1989: "Masters of deception; a prominent Indiana family in exile is accused of running a drug ring."

Philadelphia Magazine: July 1985: "The day they raided Shearson."

Pittsburgh Business Times: October 14, 1991: "Coastal Marketing owner pleads guilty to $2.2 million loan scam." March 18, 1991: "Local businessmen indicted in alleged drug-money deals."

Playboy: May 1990: "Just say nothing, Noriega; we created the monster we've now propped up on trial. Could be kind of awkward." November 1989: "Inside job; the looting of America's savings and loans." November 1987: "The crimes of patriots."

Progressive: June 1992: "The banker who said no to the CIA."

Reader's Digest: September 1978: "The Swiss connection."

Real Estate Today: Sept 1993: "Don't be blind to the buyers' money source."

Regardie's Magazine: April-May 1991: "What did Clark Clifford know, and when did he know it?" March 1990: "R.I.P. DRG: the rise and fall of a real estate dynasty."

San Antonio Business Journal: June 21, 1991: "Feds crack down on exchange houses."

San Diego Business Journal: October 8, 1990: "Silberman is fined for money laundering role."

Security Management: May 1990: "When the walls come tumbling down."

Social Studies Review: June 1991: "Big crime - the international drug trade."

South Florida Business Journal: July 8, 1994: "Miamians convicted in loan scam."

State Legislatures: Feb 1994: "Texas cleans up money laundering."

Supermarket News: Nov 1, 1993: "Court papers detail Leonard scheme."

SwissBusiness: May-June 1990: "Keeping to the code; Switzerland's bankers have set up their own good-conduct guidelines." January-February 1990: "Tackling a tarnished image."

Sunday Correspondent Magazine: July 1990: "The Florida sting."

Time: June 19, 1995: "Kingpin checkmate." Nov 7, 1994: "Sweet, sweet surrender." October 12, 1992: "Follow the money." April 20, 1992: "A worrisome brand of Japanese investor - Money laundering by the Japanese mob - the Yakuza." March 23, 1992: "Drug money fears halt state bond sale." December 16, 1991: "All that glitters." July 21, 1991: "The dirtiest bank of all." July 1, 1991: "A day with the chess player." March 4, 1991: "A capital scandal." December 3, 1990: "The fling of the high roller: living a ghetto, the coke trade from poverty to riches and into prison;" "Meanwhile, in Latin America: with whole economies at stake, the drug war rages on." November 26, 1990: "Meanwhile, back in Panama: If the Noriega trial seems like a fiasco, consider the plight of his country one year after the U.S. invasion." June 25, 1990: "Grapevine - France may legalize brothels to combat AIDS, drug money laundering." February 19, 1990: "Too soft on the laundry." January 29, 1990: "Kink in the drug pipeline." January 15, 1990: "Noriega on ice." December 18, 1989: "A torrent of dirty dollars." October 16, 1989: "Putting an ear to the wires." August 21, 1989: "Wringing out a money laundry." April 24, 1989: "Crackdown on Swiss laundry." October 31, 1988: "Indicted, Patrick Swindall." October 24, 1988: "The cash cleaners." February 22, 1988: "Noriega's money machine; his former aides tell of corruption on a grand scale." February 8, 1988: "A briefcase for the general?" January 18, 1988: "Afoot in a field of men." July 20, 1987: "ZZZZ Best may be ZZZZ worst." May 18, 1987: "Hooking some big fish." July 7, 1986: "Washday blues; scandal strikes Shearson." February 3, 1986: "Painful legacy; BankAmerica's bad days." December 2, 1985: "Fetal delusions; a shooting on Wall Street." October 28, 1985: "My, what a friendly customer." September 9, 1985: "Record fine for Crocker National Bank." July 1, 1985: "Cleaning up the cash laundry." March 25, 1985: "Crackdown on greenwashing; lawmakers warn banks to quit helping criminals launder money." March 11, 1985: "Boston's embattled bank." February 25, 1985: "Dirty cash and tarnished vaults; two large US banks struggle to recover from serious missteps." February 25, 1985: "Fighting the cocaine wars: drug traffic spreads, and the U.S. finds itself mired in a violent, losing battle." February 18, 1985: "Carry on cash connection." November 12, 1984: "Dirty money in the spotlight: a proposal to get tough on banks that launder cash."

Travel Weekly: June 4, 1992: "Helping the IRS." May 28, 1992: "Money-laundering regulations redefine cash." December 17, 1990: "Large cash sales must be reported." April 23, 1987: "Drug trafficking, money laundering and the travel industry." March 9, 1987: "Weak currencies and weak agencies recipe for riches in Nigerian scheme"; "Airline crackdown shows results against money-laundering scam."

UN Chronicle: Sept 1993: "World conferences on organized crime, money laundering to be hosted by Italy."

Underwriter Life & Health-Financial Services: August 21, 1995: "Execs of insolvent N.C. insurer convicted of fraud."

United States Banker: November 1989: "Snaring the smurfs."

US Department of State Bulletin: September 1986: "Narcotics trafficking in Southwest Asia."

US Department of State Dispatch: August 17, 1992: "Statement on Pablo Escobar Gaviria." May 11, 1992: "Narcotics activities in Panama: mutual legal assistance treaty needed." (R. Grant Smith address). March 2, 1992: "Progress in the international war against illicit drugs." (Melvyn Levitsky address). March 2, 1992: "Fact sheet: combating drug money- laundering." September 10, 1990: "International narcotics control." September 3, 1990: "Narcotics: threat to global security."

US Distribution Journal: November 1989: "Cash business targeted for laundering probe."

US News & World Report: October 19, 1992: "Cocaine kings and mafia dons - Crime in Italy and Colombia." December 23, 1991: "New target - the Cali cartel." August 26, 1991: "Washing the dirtiest money: why drug lords don't need BCCI to launder cash." August 19, 1991: "How BCCI banked on global secrecy." August 5, 1991: "Was there a BCCI coverup? In Washington and London, fallout from the rogue bank is spreading." January 28, 1991: "Jorge Luis Ochoa Vasquez." December 31, 1990: "Easing back in the war on drugs?" April 30, 1990: "The drug warriors' blues." January 29, 1990: "The Godfathers of Cocaine Cry Uncle." January 15, 1990: "The case against Noriega." December 18, 1989: "To each according to his greed?" August 21, 1989: "The drug money hunt." April 10, 1989: "Hot money: city of angels, indeed." October 24, 1988: "Caught in the money laundry wringer." July 4, 1988: "Psst -- Swiss accounts are no secret." May 30, 1988: "A king pin falls." April 11, 1988: "Inside America's biggest drug bust." February 15, 1988: "Tales of a pineapple pol." February 8, 1988: "How cocaine rules the law in Colombia." January 11, 1988: "The Honduras connection; drugs and money." January 11, 1988: "A narco traficante's worst nightmare." February 16, 1987: "Caught - cocaine's Mr. Big." December 8, 1986: "How White House built a 'black ops' fund." June 2, 1986: "Why its getting tougher to hide money." March 31, 1986: "Europe's immigration battles; slowdown of economies, ethnic discord set off backlash." February 3, 1986: "Busting the mob." March 11, 1985: "Banks caught in fed's squeeze on mobsters." November 5, 1984: "Asian gangs stake out turf in US." April 23, 1984: "Breaking up the pizza connection." August 1, 1983: "Computer cops: on the trail of runaway dollars." August 1, 1983: "Offshore tax havens lure Main Street money."

Variety: May 15, 1985: "Casino industry united in opposition to laundering regs."

Vital Speeches: July 15, 1990: "Money laundering; you make it, we'll take it." (Richard Thornburgh address). April 15, 1990: "Dirty business - money laundering and the war on drugs." (Helen K. Sinclair address).

Washington Business Journal: June 25, 1990: "Suit says Maryland bank masked CIA transactions."

Washington Monthly: June 1991: "Cliffhanging; how the consummate counsel came to need a lawyer." October 1987: "Hot money and the politics of debt."

Washingtonian: January 1992: "Dirty money."

Whole Earth Review: Spring 1988: "The Iran Contra Connection."

Women's Wear Daily: April 7, 1992: "Paris cops bust 100 laundering money in luxury shops."

World of Banking: September-October 1990: "Money laundering - problems and solutions for the banking industry."

World Press Review: November 1985: "Drugs and tax havens."

- Newspapers -

Specific newspaper sources are too many to list individually. Suffice it to say that articles consulted appeared in, among other places: (North America) The Atlanta Constitution, The Boston Globe, The Chicago Daily News, The Chicago Tribune, The Christian Science Monitor, The Dallas Morning News, The Detroit News, The Los Angeles Times, The Miami Herald, The Montreal Gazette, The New York Times, The Toronto Globe and Mail, The Wall Street Journal and The Washington Post. Also, the wires of The Associated Press; (UK) The Financial Times, The Guardian, The Independent, The International Herald Tribune, The Mail, The Mail on Sunday, The Sunday Independent, The Sunday Times, The Sunday Telegraph, The Telegraph, The Times. Also, the wires of Reuters and The Press Association. Continental newspapers include leading dailies in France, Italy, Germany and Switzerland, in addition to the wire services of Agence France Press.

- Miscellaneous Sources: Reports, Papers, Transcripts -

Ashe, Michael: Money Laundering - Domestic Legal Issues; Paper delivered to the Conference on Money Laundering, Richards Butler, London, 1992.

Ashe, Michael: Reflections on Civil Liability; Paper delivered to the Conference on Money Laundering, Henry Stewart Conference Studies, London 1991.

The Bank of England: Countering Money laundering; London, 1992.

The Bank of England: Money Laundering - Guidance Notes for Banks and Building Societies; London, 1990.

The Bank for International Settlements: Statistics on Payment Systems in Eleven Developed Countries; Basle, 1992.

The Basle Committee on Banking Regulations and Supervisory Practices: Statement of Principles on Prevention of Criminal Use of the Banking System for the Purpose of Money laundering; Basle, 1988.

Bosworth-Davies, Rowan: Money Laundering - Looking Towards the Future From A European Perspective; Private paper, London, 1992.

Bosworth-Davies, Rowan: What Money Is It?; Paper delivered to the Conference on Money Laundering, Henry Stewart Conference Studies, London 1991.

Brightwell, Tony: The Laundering of Criminal Funds; Paper delivered to the Conference on Money Laundering, Richards Butler, London, 1992.

The British Commonwealth: International Efforts to Combat Money Laundering; Cambridge International Document Series Vol. 4, Grotius Publishing, Cambridge, England, 1992.

The British Commonwealth: Scheme Relating to Mutual Assistance in Criminal Matters Within the Commonwealth, Including Explanatory Commentary; London, 1990.

The British Commonwealth: Extracts from the Commonwealth Heads of Government Meeting; Kuala Lampur, 1989.

Brooks, Christopher: What the Police are Doing - When and How to Contact Them; Paper delivered to the Conference on Money Laundering, Henry Stewart Conference Studies, London 1991.

Cassidy, William: Fei-Ch'ien - Flying Money - A Study of Chinese Underground Banking; Annotated text of an address before the Asian Organized Crime Conference, Ft. Lauderdale, 1990.

Clutterbuck, R: Terrorism; Wrexton Paper Series, Wrexton College Wrexton Abbey, England, 1990. Conway, Robert: The Techniques of Money laundering - Who Does What; Paper delivered to the Conference on Money Laundering, Henry Stewart Conference Studies, London 1991.

The Council of Europe: Recommendations of the Committee of Ministers on Measures Against the Transfer and Safekeeping of Funds of Criminal Origin; Strasbourg, 1980.

The European Economic Community: The Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime; Brussels, 1990.

The European Economic Community: Payment Systems in EC Member States; Committee of Governors of the Central Banks of the Member States of the European Economic Community, Brussels, 1992.

The European Economic Community: Proposal for a Council Directive on Prevention and Use of the Financial System for the Purpose of Money Laundering; Brussels, 1989.

The Federal Bureau of Investigation, Criminal Investigation Division: The Cosa Nostra in Canada; Washington DC, 1985.

The Federal Bureau of Investigation, Criminal Investigation Division: Colombian Narcotics - Trafficking Organizations; Washington DC, 1986.

The Financial Action Task Force: Notes from the Caribbean Drug Money Laundering Conference; Aruba, 1990.

The Financial Action Task Force: Report on Money Laundering; Paris, 1990.

The Financial Action Task Force: Economic Declaration of the G-7; Paris 1990.

Gilmore, Dr. William C: International Responses to Money Laundering - A General Overview; Paper given at the Money Laundering Conference of the European Committee on Crime Problems, Strasbourg, 1992.

Haines, Peter: How To Identify and Prevent Potential Money Laundering Schemes; Paper delivered to the Conference on Money Laundering, Henry Stewart Conference Studies, London 1991.

The House of Commons, the Treasury Committee: Report on Banking Supervision and BCCI - International and National Regulation. London, 1991.

Hurley, Peter: Prevention and Staff Training; Paper delivered to the Conference on Money Laundering, Henry Stewart Conference Studies, London 1991.

Hyland, Michael: The British Bankers Approach; Paper delivered to the Conference on Money Laundering, Henry Stewart Conference Studies, London 1991.

The National Crime Authority of Australia: Taken to the Cleaners - Money Laundering in Australia. Canberra, 1992.

The President's Commission on Organized Crime: Cash Connection - The Interim Report on Organized Crime, Financial Institutions and Money Laundering. Washington DC, 1984.

The President's Commission on Organized Crime: A Report to the President and the Attorney General of the United States: America's Habit - Drug Abuse, Drug Trafficking and Organized Crime. Washington DC, 1986.

The President's Commission on Organized Crime: The Impact - Organized Crime Today. Washington DC, 1986.

Rider, Dr. Barry A. K: Fei Ch'ien Laundries - The Pursuit of Flying Money; The Journal of International Planning, August, 1992.

Rider, Dr. Barry A. K: Techniques of Money laundering; Paper delivered to the Conference on Money Laundering, Richards Butler, London, 1992.

Saltmarsh, Graham: Understanding The UK Legislation; Paper delivered to the Conference on Money Laundering, Henry Stewart Conference Studies, London 1991.

Solly, Mark W: Offshore Havens - The Role and Responsibility of Financial Institutions to Assist in the Prevention of Money Laundering; Financial Supervision Commission, Isle of Man, 1989.

Stucki, Dr. H.U: Swiss Banking Secrecy Revisited; Private Paper, Stucki & de Senarclens, Attorneys at Law, Zurich, September 9, 1992.

Tattersall, John: Providing Assurance That All Is Well - What Role For The Internal and External Auditor; Paper delivered to the Conference on Money Laundering, Henry Stewart Conference Studies, London 1991.

Tenth International Symposium on Economic Crime: Hot, Dirty and Stolen Money - Identifying, Tracing and Restoring Flight Capital and the Proceeds of Crime. Collected papers, delivered July 12-18, 1992, Jesus College, Cambridge. Tupman, William: The Laundering of Terrorist Activities; Paper delivered to the Conference on Money Laundering, Richards Butler, London, 1992.

The United Nations: Political Declaration and Global Program of Action of the General Assembly; New York, 1990. The United Nations: Convention Against the Illicit Traffic in Narcotics Drugs and Psychotropic Substances; New York, 1988.

The United Nations: Comprehensive Multidisciplinary Outline of Future Activities in Drug Abuse Control; New York, 1987.

The United States Attorney for the US Southern District, Manhattan: Chronology of Events. (Prepared for the jury considering the case known as "The Pizza Connection.") New York, 1985. The United States Court of Appeals for the Fourth District: The United States of America versus Moffitt, Zwerling and Kemler - Appeals, transcripts and briefs. The United States Department of State: Agreement with the Government of Venezuela Regarding Cooperation in the Prevention and Control of Money laundering Arising from Illicit Trafficking in Narcotic Drugs and Psychotropic Substances; Washington DC, 1990.

The United States Department of State, Bureau of International Narcotics Matters: International Narcotics Control Strategy Reports. Washington DC, 1988, 1989, 1990, 1991.

The United States Department of State: Progress in the International War Against Illicit Drugs. Transcript of an address by Melvyn Levitsky, Assistant Secretary of State for International Narcotics Matters. Washington DC, March 2, 1992.

The United States Department of the Treasury, the Financial Crimes Enforcement Network: An Assessment of Narcotics Related Money laundering; Washington DC, 1992.

The United States House of Representatives, Hearings before the Committee on Banking, Finance and Urban Affairs: Bank of Credit and Commerce International (BCCI) Investigation. Washington DC, 1991, 1992.

The United States House of Representatives, the Subcommittee on Financial Institutions, Supervision, Regulation and Insurance of the Committee on Banking, Finance and Urban Affairs: Statement on Behalf of the American Bankers Association on Money Laundering Deterrence by Boris F. Melinkoff. Washington DC, March 8, 1990.

The United States Senate, Permanent Subcommittee on Investigations of the Committee on Government Operations. Final Report of the McClellan Subcommittee - Organized Crime and Illicit Traffic in Narcotics. Washington DC, 1965.

The United States Senate, Hearings before the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs: Drugs and Money Laundering in Panama. Washington DC, 1988.

The United States Senate, Hearings before the Subcommittee on Terrorism, Narcotics and International Operations of the Committee on Foreign Relations: Panama. Washington DC, 1988.

The United States Senate, the Foreign Relations Committee: Testimony of the Deputy Secretary of the Treasury, the Honorable John E. Robson, on the Work of the G-7 Financial Action Task Force on Money Laundering. Washington DC, April 27, 1990.

The United States Senate, Hearings before the Subcommittee on Consumer and Regulatory Affairs of the Committee on Banking, Housing and Urban Affairs: The Bank of Credit and Commerce International. Washington DC, 1991.

The United States Senate, Hearings before the Subcommittee on Terrorism, Narcotics and International Operations of the Committee on Foreign Relations: The BCCI Affair. Washington DC, 1991, 1992.

The United States Senate, Report of the Subcommittee on Terrorism, Narcotics and International Operations of the Committee on Foreign Relations: The BCCI Affair. Washington DC, 1992.

The World Ministerial Summit: Declaration to Reduce Demand for Drugs and to Combat the Cocaine Threat; London, 1990.

Wren, Tim: Money laundering Legislation; Paper delivered to the Conference on Money Laundering, Richards Butler, London, 1992.