Republicans' Phony Outrage at DEA Money Laundering Activities
The height of Republican hypocrisy is the phony outrage of Congressman Darryl Issa at the DEA's money laundering stings, particularly in Mexico. These stings are as old as the hills and well-publicized. (Issa's absurd letter to AG Eric Holder is here.) Even Fox News says he's missed the beat on this one.
Why wouldn't they? DEA, the IRS and Customs (now ICE) have been engaging in undercover laundering of proceeds for drug traffickers at least since Ronald Reagan was President. Republicans crowed about the stings then. [More...]
The money laundering statute expressly provides for stings. From the U.S. Attorney's Manual:
Section 1956(a)(3) relates to undercover operations where the financial transaction involves property represented to be proceeds of specified unlawful activity. The proceeds in § 1956(a)(3) cases are not actually derived from a real crime; they are undercover funds supplied by the Government. The representation must be made by or authorized by a Federal officer with authority to investigate or prosecute money laundering violations. The representation may also be made by another at the direction of or approval of a Federal officer.
The money laundering statute also provides for extra-territorial jurisdiction (see 1956(b)(2).
(On a related note, it was President Reagan, who in 1986, signed a "secret" National Security Decision Directive (#221) declaring that international drug trafficking was a matter of national security and authorizing the use of military personnel in foreign anti-drug campaigns.)
In 1980, there was Operation Swordfish, a drug and money laundering sting. As the DEA describes it:
The DEA set up a bogus money laundering corporation in suburban Miami Lakes that was called Dean International Investments, Inc. The DEA agents teamed up with a Cuban exile who had fallen on hard times and was willing to lure Colombian traffickers to the bogus bank. ...During the 18-month investigation, agents were able to gather enough evidence for a federal grand jury to indict 67 U.S. and Colombian citizens. At the conclusion of the operation, drug agents seized 100 kilos of cocaine, a quarter-million methaqualone pills, tons of marijuana, and $800,000 in cash, cars, land, and Miami bank accounts. Operation Swordfish was a significant attack on South Florida's flourishing drug trade.
You can read the facts of the Swordfish scheme in this court opinion, United States v. Alvarez-Moreno, 874 F.2d 1402, 1403-1404 (11th Cir. Fla. 1989). Part of the case was indicted in Colorado and since I represented one of the defendants, I remember it well. It was also made into a lousy movie starring John Travolta.
By late 1986, Operation C-Chase had gained considerable momentum and hundreds of thousands of dollars had been successfully "laundered." Agent Abreu periodically picked up envelopes of cash from Mora, Sr. or Jimmy Mora and deposited the money into Uribe's accounts in increments less than $ 10,000 to avoid the currency transaction reporting ("CTR") requirements (a method known as "smurfing"). In various "drop cities," federal agents posing as couriers picked up suitcases of cash, funds derived from street sales of cocaine and crack, and deposited the money into American banks cooperating [**4] in the federal investigation.
In December 1986, in a meeting in Uribe's electronically monitored apartment in Tampa, Uribe introduced Mora to Agents Abreu and Mazur. Agent Mazur posed as a financial consultant representing American clients with legitimate funds seeking to avoid tax liability, as well as representing clients needing to launder cocaine proceeds. Agent Mazur and Mora negotiated a new method of laundering unrestricted amounts of illicit cash through American banks using front corporations. The parties agreed that Agent Mazur and his "group" would pick up drug proceeds in select American cities, deposit the money in the name of front corporations operated by Agent Mazur, send blank pre-signed checks to Mora in Colombia, and share various commission payments.
In April 1987, in a meeting in Los Angeles, Agent Mazur told Mora that he had devised a system to launder money through Panama. Under the system, drug proceeds would be picked up in American cities and deposited into the accounts of Agent Mazur's cash-generating front businesses. Agent Mazur then would transfer the money to his investment account at BCCI-Tampa and, from that account, send it to BCCI-Panama, where it would be deposited into an account of IDC International, S.A. ("IDC"), a Panamanian shelf corporation Agent Mazur had acquired. Checks drawn on the IDC account would then be used to distribute the money to the owners of the drug proceeds.
He obtains a cover name, assumes the role of a high executive of the drug Mafia and flashes plenty of money. He always makes a strong impression. His bosses cater to his requests. He is allowed to have everything, from Lear Jets to the large sums he needs to become an authentic money launderer.
He frequents the banking, legal and political circles. He rents expensive hotel suites and hires secretaries. He has the ability to make the right moves. Later, when he is deep in the net of money launderers, he turns over hundreds of thousands of dollars to them, and plans the final assault.
To finalize his operations, he calls upon his associates in the United States of America. Then, he prepares a large and resounding event and invites all the launderers. When all the guests have arrived, he exposes his DEA badge and, without pity, sends them to jail.
In 1992, there was Operation Green Ice. In 1997, the Drug Control budget touted the success of Operation Cali-Man, which granted the Miami Field Division an Attorney General's Exemption until January 2000 to allow the DEA to conduct a money laundering investigation/sting.
Operation Cali-Man: In August 1997, the Miami Field Division was granted an Attorney General's Exemption until January 2000 which allowed DEA to conduct a money laundering investigation using undercover financial transactions to identify organizational targets. ... Using its undercover transactions, Operation Cali-Man helped DEA initiate forty separate investigations of money laundering cells that operate across the country. Supporting this operation were the DEA Field Divisions in New York, Houston, Los Angeles, Boston, and Chicago, along with their district and resident offices, and foreign offices in Colombia, Panama and Spain. While operating under the Attorney General's exemption, Cali-Man laundered $7.6 million and generated information that led to over 161 Title III intercepts, 171 arrests, and over $82 million in seizures ($27.8 seized directly by Cali-Man). This operation involved representatives from the INS, IRS, U.S. Postal Service, Metro-Dade Department of Public Safety, and police departments from North Miami Beach, Aventura, Indian Creek and Homestead, Florida.
Then in 1998, there's the biggest money laundering sting in history, involving Mexico. Operation Casablanca was a three year operation conducted by the Department of Justice and Treasury Department, with assistance from the Federal Reserve.
There was one major problem. The agencies conducted it without informing Mexico or the Secretary of State, or even the Drug Czar. Mexico was furious. It even threatened to extradite and charge the U.S. agents involved. Here's a "document dump" for Operation Casablanca.
As a result of Operation Casablanca, in 1998 Attorney General Janet Reno and Mexico's Attorney General, Jorge Madrazo Cuellar, signed the Brownsville Agreement, in which both countries pledged to notify each other about "sensitive" cross-border law enforcement operations. Whatever has happened since has supposedly been with Mexico's knowledge (if not approval.)
Mr. President, I am puzzled. In the last week or so, we have seen U.S. Customs' agents wrap up one of the most successful undercover operations in history. This effort, Operation Casablanca, has nailed a bunch of international bankers, mostly in Mexico, who have been laundering drug money. These white collar drug thugs have violated United States law, Mexican law, and international law. They have violated their trust. They have abetted one of the nastiest businesses on the planet. And they have conspired to do all of this to make an illegal dollar. Drug traffickers are bad enough. But their financial advisers and bankers are truly despicable. Thus, the Customs' undercover operation that exposed some of these low lifes is to be celebrated. My hat is off to the agents and informants that risked their lives to help defend our institutions and bring these pinstripe bandits to justice.
But I am still puzzled. What has me scratching my head is the reaction of the Mexican Government to this event. Instead of joining hands in congratulating efforts to protect the integrity of our international banking institutions and our shared concern to stop drug trafficking, what have they done. The Foreign Minister of Mexico has called the law enforcement people the criminals. She has raised the banner of so-called national sovereignty to provide cover to criminal activities of Mexican nationals. Mexico has called for the extradition of the law enforcement people in this operation, claiming they have violated Mexican law. What is wrong with this picture? Let me count the ways.
...I am equally concerned about the response from our own State Department. I have a letter here that our Secretary of State has sent to the Secretary of the Treasury. I will submit this for the Record. Instead of congratulating the law enforcement effort and joining hands with Secretary Rubin, Secretary Albright complains about inadequate consultation with Mexico. What is wrong with this picture?
Former Undersecretary for Enforcement, Ray Kelley issued a press release in 1998, making it abundantly clear we were laundering proceeds in Mexico during Casablanca:
The case was made possible because the Cali and Juarez cartels were infiltrated by informants and undercover agents of the us customs service. The money laundering scheme worked like this:
Undercover agents picked up drug proceeds on the streets of major US cities and deposited those funds into undercover bank accounts controlled by the US Customs service.
The funds were transferred electronically to Mexican banks that employed the arrested individuals. Banks drafts drawn on the us accounts of Mexican banks were delivered back to undercover agents in the US. The funds were then disbursed at the direction of the launderers.
The Treasury Department and Justice Department issued this press release. President Clinton issued his own bragging statement. They said Casablanca was the largest, most comprehensive and significant drug money laundering case in the history of U.S. law enforcement. Agents seized $103 million in currency and lots of drugs. The U.S. indicted 26 Mexican bankers and 3 Mexican banks. The indictment alleges that officials from 12 of Mexico's largest 19 banks were involved in the money laundering activities. Bankers from two Venezuelan banks were also indicted.
PBS did a show on Operation Casablanca, interviewing law enforcement. Here's how one agent described it:
We actually did pickups in various manners. Some monies were brought to us. Others, we would meet couriers in parking lots. We would deposit some of the monies in the banks in the United States. And then we would move some of it electronically to the banks in Mexico. In other cases, we would actually move the bulk cash to a bank in Mexico. So there were various ways that the money was moved into Mexico in those banks.
When asked whether U.S. Customs agents drove the the money into Mexican banks, the agent responded:
Actually, the informant took money across the border, in at least one case that I know of. The majority was by electronic transfer. In some cases we used Caribbean banks that we had set up. And the money would move from Los Angeles to the Caribbean bank. From the Caribbean bank to Mexico, it would then either move back to the United States in converted form into Mexican bank drafts, and be deposited in various accounts that we stipulated, or it would move from those accounts, to other accounts sometimes offshore in the Caribbean. Or it could be transferred directly out of the Mexican bank to Colombia. And in some cases it would go not just to an individual bank account, but yet be laundered a second time in Colombia through a peso or currency exchange. So its identity became further remote.
Attorney General Janet Reno presented the John Marshall Award, the highest DOJ honor, to the thirteen Justice Department attorneys involved in Operation Casablanca. The House passed a resolution, 404-3, praising the operation. Trent Lott wrote a letter to Mexico's President, saying:
Operation Casablanca "is not 'inadmissible' or a 'violation' of your sovereignty. . . . It should be welcomed by all governments interested in combating those who profit from trafficking in illegal narcotics."
An offshoot of Casablanca was Operation Checkmark. Here's an appeals court decision describing it.
For more old money laundering sting operations, check out this recap by former prosecutor Wilmer Buddy Parker, III in testimony to the Financial Services Committee.
More recently, there was Operation Circling Vultures, indicted in federal court in New York. (Press release here.) Jader Gomez was one of those charged and extradited from Colombia to the U.S. He was sentenced to 96 months. Customs moved his money all over the world, including to Hong Kong.
This year, there was the Vikram Datta case. In a brief filed days ago (Case 1:11-cr-00102-LAK, Document 67, 12/02/11), opposing a motion for new trial, the Government explained:
Datta accepted millions of dollars in United States currency that had been transported over the Mexican border as payment for perfume. As Datta explained to Mario Recinos, an undercover agent who was posing as a Guatemalan money launderer, Datta knew the dollars were drug proceeds generated by the Sinaloa Cartel, a major Mexican narcotics trafficking operation. ...Datta understood that he was part of a larger operation (the BMPE) in which his perfume sales were fueled by cheap dollars supplied by other participants, including Faustino Garza and other Mexican peso brokers.
...The evidence at trial further established that, in addition to accepting tens of millions in drug proceeds that were transported over the Mexican border by Faustino Garza and Hilario Martinez, Datta agreed to launder cash that undercover officers had represented to be drug money. Datta met with the agents in Las Vegas in August 2010, where, despite believing they
were criminals, he agreed to take their money. (Tr. 893-94). As payment for perfume, he then accepted nearly $38,000 in cash that the agents had represented to be drug money.
A recent DEA Factsheet reports:
From FY 2005 through March 2011, the DEA stripped approximately $17.7 billion in revenue from drug trafficking organizations
For Republicans to say laundering proceeds of drug traffickers in Mexico and elsewhere is the work of the Obama Justice Department is just laughable. It was equally the work of the Ronald Reagan, George H. Bush, Bill Clinton and George W. Bush Justice Departments. Both political parties are responsible and both endorse it.
Are these money laundering stings a source of abuse? Of course. Just read The Princess' story (legal version of Operation Princess is in this 2009 opinion of the Federal Court of Claims.) There's lots of missing money, in addition to the failure of the DEA to follow their own rules. A trial on damages was held in September (no ruling yet.) In an earlier opinion in the case, the Court discussed Attorney General Exempt Operations (GS-92-X003 v. United States, 74 Fed. Cl. 637 (Fed. Cl. 2006)):
The term "Attorney General's exemption" refers to the approval by the United States Attorney General or his/her delegatee of a proposal by the Drug Enforcement Administration (DEA) for authority to engage in certain activities in support of an undercover operation. Congress, in annual appropriations legislation, has typically provided that DEA, with the approval of the Attorney General, may use appropriated funds for activities in furtherance of undercover operations such as leasing office space and establishing and operating business entities. Congress has also typically provided that DEA, with the approval of the Attorney General, may deposit proceeds from undercover operations in bank accounts and may expend such proceeds for the necessary and reasonable expenses of the undercover operation.
If Rep. Issa is as clueless about Attorney General Exempt Operations as he pretends to be in his letter to AG Holder, he should resign. He has no business voting on budgets that include them if he doesn't know what they are. (But of course he knows what they are.)
The New York Times did not disclose anything new. Several of the reporter's unnamed DEA and other law enforcement sources have written books about their Most Excellent Foreign Adventures. They tell the stories at law enforcement training seminars and on the lecture circuit. These stories are readily available -- and also repeated in case law involving the convicted defendants. If I were Holder, I'd tell Issa to do his own research, that's what he has aides for. They should start with the Reagan library archives, then move to Bush, then Clinton, then Bush II, and then give him a call. He'll probably be retired by then.
The point is, it's no secret that the DEA, IRS, Customs and the Justice Department have been in bed with the drug traffickers for decades, sending them money, drugs and equipment and recovering some but not all of the proceeds. (I'm purposefully not referencing the CIA here, not because they weren't doing it too but because it opens a whole other can of worms.)
Congress has been aware of and expressed its approval of these laundering activities time and again. It's been complicit in authorizing funding for the stings which are in the agency budgets.
The Mexican Government (and all the other Governments) have been on board with the plans, especially after Operation Casablanca and the Brownsville Agreement in 1998. Mexico entered an MLat treaty with us. (The MLat Treaty is used when a prosecutor wants to compel the testimony of a foreign witness, obtain documents from foreign countries and get another country to conduct searches and seizures and freeze overseas assets.)
It was Republicans like Grassley and Trent Lott who most loudly objected to having to notify Mexico in advance of undercover plans. Repbulicans' phony outrage now, as if Fast and Furious opened their eyes to something they never knew, is just galling. Like everything else with Republicans, it is pure posturing and gamesmanship.
Sure, it would be great if Congress really cared about putting the brakes on the undercover money laundering operations that send drug dollars to foreign countries. The operations are rife with opportunity for corruption, theft and danger to informants and even bystanders. (Read the horror story in this case about a 1991 operation in which DEA and Customs couldn't get their acts together, stepped over each other until they dropped the ball entirely, failing to notify Honduras and Belize there were bringing in 45 kilos of cocaine in a sting operation, causing the arrest and incarceration of the unsuspecting pilot and passenger. Pure Keystone Cops. The bungling and infighting was so apparent and negligent, the 11th Circuit not only upheld the Government's liability to the pilot and passenger, it ordered damages be awarded the passenger's wife at home for loss of consortium.)
But Congress doesn't really mind and nothing is going to change. Republicans and unfair drug war tactics go together like apple pie and ice cream. They don't really object, they just want Holder (and Obama's) heads on the chopping block.
I hope the Princess gets $10 million or more from the Government for what the DEA did in her case. Her expert witness, former DEA Agent Michael Levine, filed an 861 page report (97-cv-00579-MCW, Document 196, Filed 05/31/11). I''m surprised there hasn't been a made for TV movie of the case yet. It's filled with tales of informant and agent-induced money laundering schemes,cops picking up money and sending it around the world, kidnappings, agents breaking rules and even stealing the traffickers' money, and corrupt foreign officials. The pleadings are filled with references to specific DEA rules on informants and undercover operations not readily available. But I'll leave the Princess for another day, this post is long enough.
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