They might have provided data on institutions and individuals who were assisting in money-laundering and drug-money investments. They might also have provided the first detailed accounting of the monetary size of the Medellin Cartel's operation. Based on Rodriguez's testimony, that cartel's share of the cocaine market seemed much less than was being suggested by official US Government reports. If this is true, one possible con- clusion is that there were several other Colombian cartels that were considerably larger than the Medellin Cartel, and that were operating in the shadows while the Medellin Cartel received the publicity and the blame59.
It is hard to believe that the US arresting agents were so careless. It is even harder to believe that the information could not have been reconstructed. According to information routinely provided to individuals in the national security area by intelligence specialists with agencies such as the National Security Agency, even the information on a disk that has been erased can be reconstructed, which is why computers with hard disks that are used to process classified information always have to be locked up when not in use.
The story on Rodriguez's computer records logically originated with US officials.
Unbelievable as it sounds, it could be true; but, is it? And, if not, what is the reason for the cover story? The people who would seem to benefit most if the records really were destroyed are the drug-traffickers and money-launderers, as well as the real estate and financial companies that invest the laundered money.
There have been three highly-publicised operations against money-laundering in recent years [to 1990]. Operation Pisces, which was directed against money-laundering in Panama, a 1988 operation against the Luxembourg-based Bank of Credit and Commerce International (BCCI), and operation Polar Cap. Jose Blandon [see page 34, Note 11, and page 78] testified that he did not regard the Pisces operation as a major victory because it captured a mere $18 million60.
If there was a victory, it was in respect of penetrating secrecy legislation, not in respect of the volume of money seized, as Blandon pointed out. Similarly, in the BCCI case, only
$14-$32 million was involved (that was the range mentioned)61. If there was any victory, it was only that the case might have represented a start. To place these seizures in perspective, recognise that the amounts are only 'pocket change' to the drug dealers62. Recall that the total amounts laundered each year are probably measured in hundreds of billions of dollars. The potential cache available for attachment as drug money is probably in the trillions of dollars. The Polar Cap operation resulted in the seizure of bank accounts in Atlanta, Miami, New York and San Francisco, and a lawsuit to recover $433.5 million in drug profits. While much higher than prior operations, this was still small potatoes when compared with the total volume and monetary value of the trafficking.
One of the primary problems in combating money-laundering, as explained by Michele Sindona [see footnote, page 100], a professional who knows the inside of the money- laundering business, is that the authorities writing the laws simply do not understand either international banking or money-laundering63. Nor, one might add, based on Rodriguez's testimony, does there appear to be any concerted effort to learn. As Senator
D'Amato has explained, there was no attempt by US authorities to utilise Rodriguez's knowledge. 'If it weren't so serious', he remarked, 'it would be laughable'64. Sindona* added an especially important perspective. Laundering money, he has explained, allows criminals to use dirty money openly, and then the law has no way of interfering:
'The real evil of money-laundering is its power to allow dirty money - the instrument of crime - to enter the mainstream of economies undisturbed, to consume important sectors of those economies and to transform them into feudi of an international criminal oligarchy beyond the reach of the law - an oligarchy that is to be brought down by men who do not understand money'65.
The extent to which the US Justice Department is prepared to go after the banks for their role in assisting drug-trafficking remains to be seen. In previous years, its efforts appear to have been minuscule. Alternatively, it may have been thought, for a time, that the measures launched against the Bank of Credit and Commerce International may have represented a belated change of approach.
Court documents examined in Tampa, Florida, revealed that 41 banks had their records subpoenaed in a widening money-laundering investigation covering Manufacturers
Hanover Trust Company, Republic National Bank of New York, Security Pacific Corporation, Wells Fargo & Company and Bank America Corporation, German and Israeli banks, and obscure, closely-held banks such as the Total Bank in Miami. At least
* Editor's Note:The most revealing account of Michele Sindona's own exotic money-laundering 'adventures' is to be found in the early pages of The Final Conclave, by Dr Malachi Martin (Stein and Day, New York, 1978). Emerging from Sicily in 1947, with glowing recommendations from the Bishop of Messina, after having operated a lucrative trading business from a truck serving the US forces on the island during the war, he had by 1959 somehow acquired Banca Privata Finanziaria [BPF] and a steel foundry (which he sold to the American Crucible Company); established a Liechtenstein holding company, Fasco AG, through which he had obtained a controlling share in Finabank Geneva; founded a foreign exchange brokerage, Moneyrex; established close relations with the Vatican's Institute for Religious Works [IRW]; become legal adviser to SNIA-Viscoa (textiles), President of Mediterranean Holidays and Philips Carbon Black Italiana, Managing Director of Cheesborough Ponds, and a member of the board of Remington Rand Italiana. After Sindona had raised $2.4 million from Milanese business circles for Archbishop Montini to finance an Old People's Home, Pope Paul VI formally authorised Sindona to become the Vatican's chief money manager. Sindona began by selling the Vatican's controlling interest, worth $350 million, in Societa Generate Immobiliare, then moved $40 million to a Luxembourg bank, Paribas Transcontinental, while IRW took a large block of shares in Sindona's Finabank. After divesting the Vatican of its holdings in Italian companies like Condotte d'Acqua (1969), Pantanella (1970) and Serono, a maker of contraceptive pills (1970), Vatican funds were dispersed all over the place and Sindona himself became President of 7 Italian companies, Vice-President of three banks and majority shareholder in the Vatican-linked Banca Union [BUI. Having forged links with Hambros (25%) and the ill-fated Continental Bank of Illinois (15%), Sindona found himself in close touch with the US Treasury, as that bank's Chairman, David Kennedy, became US Treasury Secretary under President Nixon. Mr Kennedy later became a board member of Fasco AG. After transferring to the United States, Sindona bought a controlling interest in Franklin National Bank. Il crack Sindona (the Sindona catastrophe) began to develop when the US Securities and Exchange Commission [SEC] halted all trading in Vetco Offshore Trading Industries, after a Los Angeles investor was found to have acquired 25% of Vetco's outstanding shares in violation of SEC regulations. It transpired that 20% of Vetco's shares and options had been acquired on behalf of IRW through the Liechtenstein- based Fiduciary Investment Services (FIS) which had an office in Sindona's Rome office complex. After the Vatican had been obliged to pay a fine of $320,000 by the SEC for having acquired 454,000 Vetco shares as part of
714,000 Vetco shares sold by FIS, the largest block of shares ever traded to date on the American Stock Exchange, Sindona's BPF sustained foreign exchange losses of $48 million (1973) and of a further $150 million in 1974. It was then discovered that Franklin National Bank had a minimum of $43 million in losses hidden as 'phony profits' in foreign exchange deals with Sindona-controlled Swiss banks. Thereafter, other Sindona-controlled or -linked banks started collapsing, all triggering further Vatican losses. By October 1974, the Italian authorities felt 'ready' to move against Sindona - charging him with falsification of accounts back in 1960! On January 9,1975, the Swiss authorities closed Sindona's Finabank, after it had sustained foreign exchange losses of $82 million. Malachi Martin adds that 'Sindona made a last fruitless attempt to raise capital (about $300 million) by offering for sale new capital shares in a small holding company, Finambro. But Guido Carli, Governor of the Bank of Italy, scotched that idea.... Swiss banking sources speak of [Vatican losses] in the region of $240 million.... Reports persist that these losses may have gone well over the billion-dollar mark'.
half of the 41 banks were Florida banks or Florida-based branches of foreign banks66.
In his talk to a drug enforcement conference on April 27, 1989, President Bush referred to the insidious roles played by Hong Kong bankers and Middle Eastern couriers67. To appreciate the unintentional irony of this statement, consider that at least one large US bank, Marine Midland, is now owned or controlled by a Hong Kong bank. Similarly, there are US banks that are owned or controlled by Middle Easterners with close ties to Middle East money-launderers, such as the Republic National Bank of New York68.
One puzzling, perhaps damning, dimension of money-laundering was revealed during an 'American Interests' television special, Follow the Money, aired on PBS on July 12, 1989, in Washington. The subject of the programme was Western loans to the Soviet Bloc.
One part of the programme examined how such Western loans were channelled to support terrorist activity69. Norman Bailey, a former National Security Council [NSC] official, reported that when he joined the NSC, he first searched the files concerned with financial developments around the world and East-West economic activity, finding next to nothing. There was some information coming in but it was entirely human intelligence. 'It was not based on intercepts', Bailey explained. Then he described how almost all monetary transfers in the Western world of any importance go through three major clearing houses and how it is relatively simple to track certain transfers if you have command of powerful computing
mechanisms. Accordingly, through the National Security Agency [NSA], he began a program of following money movements around the world as a means of identifying certain activities the NSC was trying to follow70.
The activity of interest was a $600 million loan which was lead-managed by First
National Bank of Chicago to the East German Aussenhandels Bank. Bailey explained that:
'[A] loan was cleared in London. The money went to East Berlin, to the Aussenhandels Bank. It was disbursed from there to various front companies and various tax havens around the world. It was then concentrated again in Libya and was sent from Libya to various accounts, which were controlled by terrorist organisations, and was then used by those terrorist organisations in their activities.... Approximately $60 million of the original tranche that was drawn down by the Aussenhandels Bank ended up in the coffers of
various terrorist and guerrilla groups around the world'.
'Of these, approximately equal amounts were provided to the Red Brigades in Ger- many, to the provisional IRA in Northern Ireland, and to the M-19 forces in Colombia, about $20 million each, in other words'71.
According to other reports, the narrator added, $25 million of the loan was wired directly to an account in Panama held by the Government of Nicaragua.
This information raises several questions. First, why was there no information avail-
able in the files when Bailey first joined the NSC? The idea of using the NSA to track the transfer of illicit funds and the CIA to identify account ownership should be obvious, if not automatic. Equally obvious is the need to map the flow of drug money as an integral task in combating drug-trafficking, just as would be done with any other criminal activity.
Following these money transfers would appear to be the single most important step in any attempt to learn who is behind the drug trade, who is facilitating the drug trade, and in attaching the illicit profits. But, evidently, this had not been done.
It is not as though the intelligence community had never been approached about the problem. In October 1969 President Nixon declared war on drugs and formed a White House Task Force on Heroin Suppression72. The Director of Central Intelligence, Richard
Helms, was a member of this task force, of the Ad Hoc Cabinet Committee on Narcotics (1970) and of the Cabinet Committee on International Narcotics Control (1971)73. Helms established an Office of Narcotics Coordinator within the Deputy Directorate of Plans, which began assembling narcotics intelligence on trafficking in Southeast and Southwest Asia, Europe and Latin America. When one of the analysts suggested that they examine the banks and the money trail, he was given a pat on the head and told: No.
In 1970, the Head of BNDD, John E. Ingersoll [see page 67, and Note 39, page 109], sent a request to the National Security Agency for assistance.
The BNDD's requirements were listed as follows:
1. The BNDD has a requirement for any and all COMINT [communications intelli- gence, i.e. electronic eavesdropping] information which reflects illicit traffic in narcotics and dangerous drugs. Our primary interest falls in the following categories:
O Organisations engaged in such activities; O Individuals engaged in such activities;
O Information on the distribution of narcotics and dangerous drugs; O Information on cultivation and production centres;
O International agreements and efforts to control the traffic in narcotics and dangerous drugs;
O All violations of the laws of the US concerning narcotics and dangerous drugs74.
Curiously, information on money-laundering was not included in this list of requirements.
The NSA collection operation against drug-traffickers was run from April 1970 to July
1973, when it was shut down amid concern over the risk of exposure. The CIA also participated, but pulled out over concern that some of the data collection occurred on US soil and was in support of law enforcement rather than of national security. This may be why so many CIA analysts were transferred to the strategic intelligence office in BNDD -to accord with US law75. Frank Raven was in charge of the collection of intelligence data at the National Security Agency [NSA]. His assessment of the problem is instructive:
'Before we retired, we did some very nice drug busts.... We demonstrated that we could follow drug transactions and drug dealers. We could do it quite economically - it wasn't even a high-budget item.... NSA could really have cleaned up the drug business, drug-running and such.... But it got so screwed up in American law and American red tape that it wasn't worth the effort'76.
Tracking drug money is still an essential task today; is it now being done? If not, why not? Certainly, the 'legal' problems identified above do not apply to overseas banks, or foreign banks, or even to US banks where national security is an issue; and the President's National Security Decision Directive [NSDD], 'Narcotics and National Security', signed in April 1986, explicitly identified drugs as a national security issue. Moreover, in 1984 the NSA was used to track drug shipments77.
Why not drug money? Alternatively, if the NSA and CIA were collecting such infor- mation, why are not measures in hand to seize all such assets and identify all the people and banks involved? Why does the US Government focus so much publicity on small multi- million dollar seizures, when the potential is present to capture trillions of dollars, as is clearly implicit in Norman Bailey's testimony?
There would seem to be only one possible answer - namely, that the war on drugs is really not a serious war within the US Government at all.
The involvement of banks, financial institutions and real estate investment firms in
drug-money-laundering is nothing new It has been going on for decades and has been well-known for decades. Every so often there is a flurry of activity as the US Government appears to be cracking down; but indictments are dropped or small fines assessed and the money-laundering goes on, relatively unencumbered. The Government comes to the aid of banks when billions of dollars of loans to Third World and Communist countries go sour,
but then seems to avoid holding the banks responsible for their major role in making
international drug-trafficking and other crimes profitable. As the outgoing US Customs
Commissioner, William von Raab, observed in his resignation letter dated July 31,1989:
'Maybe it is time for the war on drugs to take its place as our nation's top priority - to interfere with other interests such as banking and Third World debf78.
A statement by Clyde D. Taylor, of the Bureau of International Narcotics Matters, US Department of State, before joint Senate hearings in 1985, revealed the official US analysis of the illicit drug and narcotics challenge and, by implication, US policy designed to combat trafficking. With regard to state-sponsored narcotics trafficking, Taylor recognised that the authorities had seen 'some indications' and that: 'In the few instances, the further indication is that certain of the Communist countries have engaged, to some degree, in facilitating narcotics trafficking'. However, he he went out of his way to stress that 'another fact which we would like to establish before your committees is that narcotics trafficking in Latin America, in Asia, in the Middle East and in Europe, is dominated by narcotics traffickers who are governed only by their greed and whose only ideology - if you can call it one - is the pursuit of profit' [emphasis added]. That is, according to Taylor, politics are not involved. Moreover, Taylor continued,
'Most of these groups cannot be called terrorists, or even political insurgents, nor do we have evidence of a Communist conspiracy to use drugs to undermine Western democracies or our own society in particular'79 [emphasis added].
The dictionary defines conspiracy as the act of planning together to commit a crime or wrongful act. If what has been taking place is not a conspiracy, under this definition, what is
In the same Senate hearings, the DEA, while appearing equally oblivious to the history of Communist drug-trafficking, at least recognised its political dimension. As the Drug Enforcement Administration official, David L. Westrate, explained:
'The emerging trend of using drug-traffickers to support political aims represents a major change in the historical pattern of drug-trafficking, in which drug-traffickers were only interested in profits. The expanded use of drug-trafficking for political purposes has already had an effect on and could have far-reaching implications for drug enforcement worldwide and US foreign policy'80. Quite true. If the US Government were to recognise the existence of the Soviet drug strategy, not only would US drug policy, but the entire image of Soviet foreign policy which underlies contemporary US policy, would be liable to come tumbling down like a house of cards.
Over the years, the participation of various Soviet satellite states in drug-trafficking operations has gained a certain measure of public attention. The most notable examples are Bulgaria, Cuba, and most recently, Nicaragua. But the US Government leans over backward to avoid any direct statement that these countries - or Czechoslovakia, Hungary, East Germany, Vietnam, North Korea and China - are officially involved. Indeed, most official
energies are devoted to suggesting that such activities are the consequence of the activities of a few corrupt officials. If anyone does acknowledge that there have been reports of official government involvement, this is quickly followed by the assertion that there is no confirmation of such reports. The most the US State Department will acknowledge is that certain countries - Bulgaria, Cuba and Nicaragua - facilitate the drug-trafficking of others or, as was indeed confirmed by David L. Westrate, who was then Deputy Assistant Administrator at the Drug Enforcement Administration:
'I would say in relation to Bulgaria, Cuba and Nicaragua we have substantial infor- mation that would indicate that the governments, at a minimum, condone this activity in our belief. As I say, we do not have a tape recording or a videotape of a meeting by gov- ernment officials deciding to and agreeing to'81.
A notable example of the State Department's approach was its response to the Anti- Drug Abuse Act of 1986. The penalty applicable to any country which encourages the pro- duction or distribution of illegal drugs, or whose officials do likewise, or which threatens US drug enforcement officials, or fails to cooperate, is clearly stated in legislation:
'The law requires the President to suspend all United States assistance, and to oppose any loans or other use of multilateral development bank funds for the benefit of any such country'82.
If a country, especially a Communist country, or its officials, were found to be involved in drug-trafficking, that could have a serious impact on US financial and business transactions
with the country concerned. Encouraging exactly such transactions has been a significant
Soviet policy objective under Lenin, Stalin, Khrushchev, Brezhnev, and, of course, Gorbachev. Encouraging such activity has also been a primary objective of US foreign pol- icy since 1969. This is still a high priority thrust of US State and Commerce Department activities83. Nor is any change in this policy foreseeable.
Nearly all the industrialised countries are similarly involved, most notably Japan, Great Britain, West Germany, Italy, France and Switzerland, in addition to the United
States. This background is important in analysing the State Department's approach to complying with the Anti-Drug Abuse Act. It is also important to recognise that in addition to penalties, there are provisions whereby those penalties can be set aside if the President certifies that the identified countries show signs of cooperating. Unfortunately, the President delegated this certification authority to the Secretary of State.
The State Department's list of countries that produce illicit drugs or facilitating their
distribution, published in May 1998, consisted of the following:
Afghanistan, The Bahamas, Belize, Bolivia, Brazil, Burma, Colombia, Ecuador, Hong Kong, India, Iran, Jamaica, Laos, Lebanon, Malaysia, Mexico, Morocco, Nigeria, Pakistan, Panama, Paraguay, Peru, Syria and Thailand84.