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.

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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.

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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.

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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.

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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.

 

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