Updated – see correction below
With All Eyes On Mexico, South America Re-Emerges. Money Launderers Are Banking On It
By: Mark Christopher
[Miami, FL] Several recent high profile federal cases are reminding us of the difficulties that authorities face when they try to keep cocaine from entering the United States through Miami via South America, where the plant is grown and much of the processing occurs.
Then there are the multitude of U.S. banks and middlemen who profit from laundering the smugglers’ proceeds.
It is a “war” that has lasted for more than three decades, thanks to our porous borders, seemingly unsatisfiable appetite for cocaine and willing South Americans and island hoppers who will do just about anything to provide it to us.
But much of our law-enforcement focus has shifted to the U.S.-Mexican border.
“Recent trends indicate that a majority of cocaine brought into the United States comes through Mexico and the Southwest United States border,” Drug Enforcement Agency (DEA) Special Agent Mark R. Trouville said last month.
While the DEA watches coke bundles hop the fence or flow through a tunnel, tons of South American cocaine continues to come into the United States the old fashioned way: through international shipments from the Caribbean and from countries such as Bolivia, Venezuela, Colombia and Ecuador.
And the resulting money can be conveniently laundered right in South Florida by “legitimate” banks who have looked the other way for years, even when under the watchful eye of regulators.
Last week, the announced sentencing of a two Bolivian nationals as well as the extradition of a major player in the Colombian cocaine network sent shock waves through the front lines on the “war on drugs.”
South America is back, baby. It is simple: Mexico requires more immediate attention as the blood spills and the violence hits a little too close to home. The established cocaine-smuggling routes of the ’80s and ’90s have been dusted off and improved by South American entrepreneurs.
“Drug trafficking, and the lure of drug money, has no bounds,” said U.S. Attorney Wifredo Ferrer, who has been a major player in prosecuting the cocaine distributors. “Law enforcement in South Florida is taking proactive approaches to develop forward-looking strategies to stay ahead of the ever-changing face of narcotics trafficking.”
DEA-seized cocaine bricks
You just can’t stop the rock, brick or powder from reaching our shores. Especially when some of the players are high-ranking government officials and presidents of respected banks.
How high up the food chain does the corruption go?
- A former Bolivian general in charge of narcotics
- Bolivia’s head of intelligence
- A colonel with the Bolivian National Police’s anti-narcotics unit
- Executive President of Banco del Pacifico in Quayaquil, Ecuador
- Wachovia, one of the largest banks in the U.S.
According to official court documents, all have either taken part in drug smuggling or watched as their personal or professional profits soared from ill-gotten gains as a result of drug smuggling.
It is a culture of corruption from South America all the way to South Florida.
The General, The Director & The Colonel
Back in the summer of 2010, Marcelo Foronda-Azero – then a high-ranking Bolivian civilian official with the title of Director of Intelligence – and associate Jorge Sanchez-Pantoja approached a representative of a Colombian drug trafficking organization to negotiate selling huge amounts of cocaine.
That representative turned out to be a confidential source for the DEA.
The director and Jorge Sanchez-Pantoja were recorded selling hundreds of kilos of coke to a DEA undercover agent and a confidential source. The drugs were to be distributed in Miami as well as other parts of the United States. They claimed that their cocaine was protected by Bolivian police authorities.
But they wanted their money to be wired to bank accounts in Hong Kong, not to Bolivia, the poorest country in South America.
At another meeting, the general and his two soldiers met with whom they believed to be members of the Colombian cocaine distribution ring. These meetings were also secretly recorded with the assistance of Carabineros de Chile, the Chilean National Police Force.
Rene Sanabria-Oropez (the general) should have known better – he is the former head of the Bolivian National Police anti-narcotics unit, known as FELCN (La Fuerzas Especial de Lucha Contra el Narcotrafico). The involvement of Sanabria-Oropeza – the high-ranking director of Bolivian Intelligence – shows just how pervasive and entrenched the distribution networks really are.
There’s simply too much money in it.
Need proof? Besides the general and the intelligence guy, a third player in this scheme was Milton Sanchez-Pantoja, a colonel with the Bolivian National Police’s anti-narcotics unit. Both the colonel and the intelligence guy promised to use their official positions “to provide protection … so that the cargo container holding the cocaine would safely cross the Bolivia-Chile border without being seized,” according to the U.S. Attorney.
But they weren’t finished yet.
Sanabria-Oropeza (the general) also indicated that they “controlled the airport and could protect cocaine shipments sent by commercial airlines from Bolivia.” His price? $2,500 per kilo plus another ten grand to be spread around the operation. The DEA hooked them up with $50,000.
In September of last year, after traveling through Bolivia to the Port of Arica in Chile, 144 kilos of cocaine hit the Port of Miami on a ship hidden inside a cargo container full of zinc. DEA confiscated the goods and started the process of picking these guys up. It was all part of “Operation Just Because,” an ongoing investigation of the DEA’s Organized Crime Drug Enforcement Task Force (OCDETF).
“This office stands committed to prosecuting high-level international drug trafficking organizations, and those that would protect their criminal enterprise, which, in this case, included a retired Bolivian General,” said Ferrer.
La Paz, Bolivia – the highest capital city in the world. No doubt.
The general got 14 years while the intelligence director got 9 years. Those sentences are extremely light, considering the quantities. They must have talked.
The Drug Lord
After nearly 20 years of bringing cocaine into the United States, Juan Carlos Rivera-Ruiz – known in the drug biz as “06” – was extradited from Colombia to face federal drug charges. He was arraigned in a federal court room in Miami on Friday.
Rivera-Ruiz had been in Colombian jails since his arrest in September 2009. The Colombians have long made life difficult for U.S. agents seeking to extradite drug criminals from their country. Many Colombian officials are paid handsomely for their stonewalling efforts.
Although it is believed that Rivera-Ruiz brought huge quantities of cocaine into the U.S., he is only charged with being part of a conspiracy to import and distribute 5 kilos of cocaine. He faces 50 years to life.
“Juan Carlos Rivera-Ruiz was one of the most significant drug traffickers operating in Colombia,” stated DEA Special Agent Mark R. Trouville.
True, Rivera-Ruiz was a former top lieutenant of Wilber Varela in the North Valley Cartel, responsible for smuggling massive amounts of cocaine into the United States. According to the U.S. Attorney, Varela was killed in Colombia in 2008.
But why then only charge Rivera-Ruiz with 5 kilos? And why did it take 20 years to get it done?
You need proof, hard proof to put these guys behind bars. And when you have that much money and are willing to kill anyone who threatens your operation, informants are hard to come by.
The Fly Boys
In July, Ferrer announced that an indictment had been unsealed alleging that thirteen were involved in a far-reaching international smuggling operation that brought vast quantities of cocaine from Colombia and Venezuela to the British Virgin Islands and ultimately, the United States.
U.S. Attorney for the Southern District of Florida, Wifredo A. Ferrer
The 19-count indictment includes charges against those living in Colombia, the British Virgin Islands, the U.S. Virgin Islands, Miami, New York and San Juan, Puerto Rico.
The international consortium conspired to fly hundreds and hundreds of kilos of cocaine from Apure, Venezuela, to the British Virgin Islands. The coke was dropped into the Caribbean Sea and picked up using speed boats. The cocaine was to be distributed in the United States.
“ICE-HSI has clearly seen a recent increase in maritime narcotics smuggling emanating from the Caribbean,” said Immigration and Customs Enforcement (ICE) Acting Special Agent in Charge Michael Shea.
With the Department of Homeland Security (DHS) and the DEA actively pursuing smugglers using the Mexican-American border, some of the South Americans and veteran smugglers in the Caribbean Basin are turning to their old tricks.
The Spanish Laundry
In another recent case, Ferrer announced that indictments charging three Floridians and a Spaniard of conspiring to launder $26 million in drug money had been unsealed. A fourth Floridian was charged with “bulk cash smuggling.”
It is alleged that Alvaro Lopez Tardon (of Miami Beach) and his brother Artemio Lopez Tardon (who lives in Spain) arranged with David William Pollack (of Miami) to launder huge sums of drug money earned from smuggling cocaine from Colombia to Spain. After the coke was sold, Artemio would wire-transfer the money or send as courier to Miami.
Fabiani Krentz (of Miami) and Pollack would help Alvaro launder the funds by purchasing exotic cars, including a Bugatti Veyron, a Ferrari Enzo, a Rolls-Royce Ghost, a Mercedes-Benz SLR McLaren, a Mercedes-Benz Maybach 57S, a Bentley Continental GT, an Aston Martin DB9, a Lamborghini Murceliago, a Lamborghini Gallardo, an Audi R8 and other models of Mercedes-Benz as well as BMWs.
A Mercedes Maybach 57 similar to that purchased by Alvaro Lopez Tardon
They would also purchase real estate, specifically luxury condos in Miami and Miami Beach.
All told, it is believed that $26 million was laundered this way since 2004.
The whole operation came apart when in April of this year, Vincente Orlando Cardelle, was stopped at Miami International Airport. He was headed to Madrid, Spain with 21,605 euro.
Now he is headed to prison for a maximum of five years. Alvaro, Artemio, Krentz and Pollack are facing maximums of 20 years if convicted.
“International money launderers can no longer seek refuge behind jurisdictional barriers. The outstanding cooperation among international law enforcement agencies and governments leaves no place to hide for those who profit from the drug trade,” said Ferrer.
Maybe they should have used a bank instead …
In August, the largest privately-owned state-chartered commercial bank that is headquartered in Florida entered into a “deferred prosecution agreement” with the U.S. Attorney’s Office in the Southern District of Florida to resolve charges that it willfully failed to establish an anti-money laundering program.
The DEA’s investigation into Ocean Bank, which has 21 branches in South Florida, centered around the fact the financial institution allowed multiple customers to use Mexican currency exchange houses, in violation of the Bank Secrecy Act (BSA). These exchanges – or “casas de cambio” (CDCs) – are commonly used for money laundering.
According to court documents, Ocean Bank was aware way back in 1996 of risky nature of some of their customers’ deposits and that it was highly likely that drug proceeds were being laundered through CDCs. Ocean Bank ignored warnings from state and federal regulators, DEA and others about those risks.
That’s because they were making (ahem) bank.
One of Ocean Bank’s Miami branches
Growing ever-suspicious, investigators reviewed five accounts at Ocean Bank. Three of those were owned by the Bernal-Palacios drug trafficking organization, through which large sums of money were transferred using CDCs.
The other two accounts were used by a Miami-area businesses. These “business” transferred money from Mexican CDCs or deposited large sums of cash from convicted drug traffickers and money launderers into their Ocean Bank accounts. None of this activity fit within the normal business activities of the account holders, yet Ocean Bank said or did nothing, as required by law.
Ocean bank looked the other way as unusually large cash deposits came in, ranging from $10,000 to $140,000. They also didn’t ask why deposits were structured in a way as to avoid bank currency reporting requirements. They also allowed thousands of sequentially numbered money orders and travelers checks to be deposited.
There were also wire transfers from Mexican CDC’s and “same day incoming and outgoing wire transfers” in massive, yet suspiciously even, dollar amounts.
Ocean Bank failed to report any of these suspicious transactions for many years.
As punishment for those “serious and systemic BSA violations,” Ocean Bank has agreed to pay up nearly $11 million to the United States, the sum total of drug monies laundered through just those five accounts.
What about the accounts they didn’t see?
Joaquin Urquiola, one of Pacific National Bank’s fined board members
“Ocean Bank has a responsibility to not turn a blind eye to the money laundering activities of drug traffickers,” said Trouville, DEA Special Agent. “In this instance, Ocean Bank failed in its duty to the public and now faces justice.”
They are not alone. Not by a long shot. Pacific National Bank, the one-branch bank, owned by the Ecuadorian government, has had history of not complying with BSA laws, specifically those pertaining to money laundering.
It simply did not listen to the regulators who ordered Pacific National to put an end to its shady practices that went back to 2005.
That’s why it was fined $7 million earlier in the year and four of its board members and its former CEO were all fined for their failure to follow the law intended to limit money laundering. (see correction below)
Ferrer points out that it is not just the smaller banks that have allowed drug money to be laundered state side – even the big boys of banking got into the act.
“Just a little over a year ago, we announced the deferred prosecution of Wachovia, one of the largest banks in the United States, for similar failures,” added Ferrer.
South America may have seemed like it was out of the cocaine game, but as court documents show, it never left. And as long as Americans have an appetite for the white powdery stuff, there will be someone willing to risk it all to smuggle it into the country and make a healthy profit in the process.
You can bank on it.
***CORRECTION*** Ralph Fernandez was noted in a previous version of this story as being a/k/a Carlos Fernandez-Guzman. This was not true, the two are not related. Also, it was improperly reported that Ralph Fernandez was a member of the Greater Miami Chamber of Commerce, which is also not correct. We regret any error any apologize for the harm it may have caused as we were reporting in good faith.
Images: Mercedes Maybach 57 & 62 (Tribalninja), Wifredo A. Ferrer (website), Pacific National Bank (website), Ocean Bank (website), La Paz (Donvittore), cocaine bricks (DEA website)
Resources: U.S. Attorney’s Office – Southern District of Florida, U.S. Attorney’s Office – Southern District of Florida, U.S. Attorney’s Office – Southern District of Florida, U.S. Attorney’s Office – Southern District of Florida, U.S. Attorney’s Office – Southern District of Florida, DEA