Where the NarcoDollars Go
Sent: Friday, February 06, 2004 1:47 PM
Subject: Where the NarcoDollars Go
Where The Narcodollars Go
We have seen how the CIA (through its agents, contractors, and proprietary
companies) set itself up to manage a burgeoning drug trade on several
continents. One purpose of this trade is the covert funding of paramilitary
forces to harass or overthrow uncooperative governments.1 But a larger purpose
is to funnel money into US banks and stock exchanges. In this article, fifth
in a series on the so-called War on Terrorism, we examine this part of the
picture. The reader will quickly see its pertinence to the US military
presence in Central Asia, where the current (April 2002) US allies, formerly
the Northern Alliance, are overseeing a booming opium crop.2 The series begins
at
http://sf.indymedia.org/news/2002/01/114339.php; follow the links in the
comments to subsequent stories.
The author is indebted to Michael Ruppert and Catherine Austin Fitts for
pointing out much of the information in this article. Their Websites are
http://www.copvcia.com and http://www.solari.com respectively. Ruppert draws
some of the connections between top CIA officials and Wall Street:
"[T]he current Number Three at CIA, the Executive Director, a man by the name
of A.B. "Buzzy" Krongard, was, until 1998, the chairman of A.B. Brown. The
company went from being owned by Banker's Trust to being owned by Deutsche
Bank. . . .
"Historically speaking, we go back to 1947, we look at Clark Clifford, who
wrote the National Security Act, in 1947 [which established the CIA]. He was a
Wall Street banker, and a lawyer from Wall Street. He was the chairman of
First American Bancshares that brought BCCI [a notorious money laundering
bank3] onto US shores in the late 1980s. He was given the design for the CIA
by John Foster and Allen Dulles, two brothers: John Foster becoming Secretary
of State, Allen becoming director of Central Intelligence, who was fired by
John Kennedy. They were partners in what is until this day the most powerful
law firm on Wall Street: Sullivan Cromwell. Bill Casey, the legendary CIA
director from the Reagan/Iran Contra years, had been chairman of the
Securities and Exchange commission [sic] under Ronald Reagan. He, in fact, was
a Wall Street lawyer and a stockbroker.
"I've already mentioned Dave Doherty, the Vice President of NYSE [New York
Stock Exchange] who is the retired CIA general counsel.
"George Herbert Walker Bush [former Director of Central Intelligence] is now a
paid consultant to the Carlyle Group, the 11th largest defense contractor in
the nation, very influential on Wall Street. . . . John Deutsch [sic], the
former CIA director, who retired a couple of years ago, a few years ago, is
now on the board of Citibanc or Citigroup. And his number three, Nora Slatkin,
the [then] Executive Director at CIA is also at Citigroup. [Citigroup recently
merged with Banamex,4 which was owned by Roberto Hernandez, who has been
accused of cocaine smuggling. Although 200 kilos of cocaine had been seized on
Hernandez's property, the Mexican government has not proceeded with the case.
Hernandez now sits on Citigroup's board of directors.5 And Maurice 'Hank'
Greenburg, who is the chairman of AIG insurance, which is the third largest
investment pool of capital in the world, was up to be the CIA director in 1995
and Bill Clinton declined to nominate him. So there is an inextricable and
unavoidable relationship between CIA and Wall Street."6
So what if there is a revolving door between the CIA and the pinnacles of US
finance? In itself this suggests nothing more than a taste for both spookery
and financial high rolling. But a look at international organized crime and US
foreign policy reveals a much wider web of intrigue.
In April 2000 Le Monde Diplomatique, the premier newspaper for career
diplomats, published an article by Christian de Brie on international
organized crime and its attendant money laundering. According to de Brie,
"Financial crime . . . is a coherent system closely linked to the expansion of
modern capitalism and based on an association of three partners: governments,
transnational corporations and mafias." But this crime does not take place in
a vacuum: "Big business complicity and political laisser faire is the only way
that large-scale organised crime can launder and recycle the fabulous proceeds
of its activities. . . . Politicians are directly involved and their ability
to intervene depends on the backing and the funding that keep them in power.
This collusion of interests is an essential part of the world economy. . . .
All this would be impossible without the power of the state and international
and regional organisations, especially their ability to keep restrictive
regulations to a minimum, to abolish or override such rules as do exist, to
paralyse inquiries and investigations or put them off indefinitely, and to
reduce or grant amnesty from any penalties."
Large corporations especially like to soak up the cash: "More than anything
else, banks and big business are keen to get their hands on the proceeds -
laundered - of organised crime. . . The annual profits from drug trafficking
(cannabis, cocaine, heroin) are estimated at $300-500bn [billion]. . . that is
8% to 10% of world trade." De Brie estimates that the profits over ten years
equal "one quarter of the capitalisation of the world's top five stock markets
and ten times that of Paris." We shall see later that the US stock markets are
not ignorant of which side their bread is buttered. According to de Brie, "the
world's financial brains have their place in this milieu, since these are the
people whose help the criminal organisations need if they are to launder all
this money and recycle it through legal channels. And the criminal kingpins
have learned their lessons well: they go for the highest gains: hedge funds,
inflating the bubble of financial speculation, emerging markets, property, new
technologies."
And who is the world leader in this criminal milieu? None other than the US,
"international financial crime's number one partner," which is teaching its
lesser consorts the fine art of political lobbying, "a service industry in
which the Americans have a considerable lead over their competitors, not only
in know-how, but also in the vast financial and logistical resources they are
able to make available to their multinationals; these include the secret
services of the world's most powerful state apparatus [i.e., the CIA and other
US intelligence servces], which, with the cold war over, have moved into
economic warfare." De Brie lists a number of US corporations he considers
experts in the matter: Lockheed, Boeing, IBM, General Motors, Exxon, General
Electric and Texaco.7
Other sources corroborate de Brie's thesis. The Organisation for Economic
Co-operation and Development, a group with 30 member countries "sharing a
commitment to democratic government and the market economy,"8 states:
"The International Monetary Fund, for example, has stated that the aggregate
size of money laundering in the world could be somewhere between two and five
percent of the world's gross domestic product.
"Using 1996 statistics, these percentages would indicate that money laundering
ranged between US Dollar (USD) 590 billion and USD 1.5 trillion. The lower
figure is roughly equivalent to the value of the total output of an economy
the size of Spain."9
US Senator Carl Levin, ranking Democrat, published a report by the Minority
Staff of the Permanent Subcommittee on Investigations (of the Senate Committee
on Governmental Affairs) which concluded: "U.S. banks, through the
correspondent accounts they provide to foreign banks, have become conduits for
dirty money flowing into the American financial system and have, as a result,
facilitated illicit enterprises, including drug trafficking and financial
frauds."10 They do not move small change: "The largest amount of money
processed by a U.S. domiciled bank is over $1 trillion daily. Eleven of the
banks surveyed move over $50 billion each in wire transfers in the United
States each day; 7 move over $100 billion each day. The smallest bank surveyed
moves daily wire transfers in the United States totaling $114 million."11
And money from drug rackets and other organized crime has found its way into
some big US companies. According to the New York Times, in June of 1999,
(then) Attorney General Janet Reno and other top Justice Department officials
met quietly with executives from Hewlett-Packard, Ford Motor Company, and
Whirlpool. "With the intensifying federal crackdown on money laundering," the
Times reported, "agents had been tracking drug money into the accounts of
American corporations and their distributors and dealers. In fact, federal
officials said, about $5 billion a year in Colombian drug money is used to buy
goods and services--from cigarettes to computer chips--from American
companies." Federal authorities also identified Phillip Morris and Bell
Helicopter Textron as recipients of drug money. The companies said they didn't
know the money came from drugs.
One example, from South America, is the black market peso exchange. A drug
dealer has couriers deposit narcodollars in US banks, placing small deposits
in many accounts to avoid notice. The dollars are then sold at a discount to
other Colombian businesses, which then use them to buy US goods. "This is
positive for U.S. business, there is no doubt about it," said Mike Wald, who
runs a consortium of law enforcement agencies in Florida focusing on the peso
exchange. "The Colombian, if he pays less for his dollars, can buy more goods.
That's a pretty obvious economic fact. But we have to realize where this money
originates. It's drug money."12
But there is a more direct way for such companies to add drug and other
criminal money to their bottom lines. Major corporations enjoy a loophole in
reporting requirements which makes them easy conduits for dirty dollars.
According to the US Bank Secrecy Act, "A CTR [Currency Transaction Report to
the US Treasury] must be filed for each deposit, withdrawal, exchange of
currency, or other payment or transfer, by, through or to a financial
institution, which involves a transaction in currency of more than $10,000."
However, As of April 30, 1996, banks were not required to file CTRs on large
currency transactions conducted by certain exempt persons' defined as:
. . .
"4. Any entity, other than a bank, whose common stock or analogous equity
interests are listed on the New York Stock Exchange, the American Stock
Exchange, or whose common stock, or analogous equity interests have been
designated as a Nasdaq National Market Security listed on the Nasdaq Stock
Market (except stock or interests listed under the separate 'Nasdaq Small-Cap
Issues heading')."13
This means that if a drug kingpin wants to buy (say) helicopters directly from
Bell Helicopter Textron, he can simply hand the salesman suitcases full of
cash, and Bell can take it to the bank -- no questions asked. In fact,
according to the Times article cited above, Bell did sell a helicopter to "a
Colombian businessman linked to the country's right-wing paramilitaries." (The
article states that the peso exchange was used to pay for it, however.)
The stock market provides a way for the directors and top executives of big
publicly-traded corporations to multiply their ill-gotten gains. Catherine
Austin Fitts, a former managing director of Wall Street investment bank Dillon
Read and former analyst for the US Dept. of Housing and Urban Development,
explains:
"The power of narco dollars comes when you combine drug trafficking with the
stock market.
"The 'pop' is a word I learned on Wall Street to describe the multiple of
income at which a stock trades. So if a stock like PepsiCo trades at 20 times
it's [sic] income, that means for every $100,000 of income it makes, it's
[sic] stock goes up $2 million. The company may make $100,000, but its 'pop'
is $2 million. . . .
"The board is the group of people who decides what goes. The senior management
officials who run the company day to day are also on the board. Most of the
money they make comes from stock options that they get to encourage them to
get the stock to go up for the investors. That means that what everyone who
runs the company wants is for the stock to go up. . . .
"So if I have a company that has a $100,000 of income and a stock trading at
20 times earnings, if I can find a way to run $100,000 of narcotics sales by a
few teenagers in West Philadelphia through my financial statements, I can get
my stock market value to go up from $2 million to $4 million. I can double my
'pop.' That is a quick $2 million profit from putting a few teenagers to work.
. . ."14
The movers and shakers of US stock markets are quite aware of the mountains of
cash produced by Colombia's cocaine trade. In June of 1999, Richard Grasso,
chair of the New York Stock Exchange, met Raul Reyes, a commander of the
Revolutionary Armed Forces of Colombia (FARC), a leftist group which controls
about a third of Colombia and about half of its coca-producing area.15 The
FARC tax crops grown on land under their control, including coca leaf.
According to the Associated Press, "Grasso said he hoped his visit `will mark
the beginning of a new relationship between the FARC and the United
States.'"16 (See photo below)
Fitts remarks: "It does not take much reading in between the lines to conclude
that Grasso's mission somehow relates to the continued circulation of cocaine
capital into and through the US financial system. Perhaps it would not be so
wonderful if the Colombian rebels started circulating their profits back into
local development without the assistance of the American depository and
investment system. Worse yet, it would not be so wonderful for organized crime
profit margins or the War on Drugs if the FARC's increasing military and
political effectiveness were to, as FARC proposes, remove illegal profits by
controlling the decriminalization of cocaine."17
As of this writing (April 2002), the FARC have not changed their
pro-legalization stance. Their Website proclaims: "We reject the narcotics
traffic. But, since the US government uses the existence of the narcotics
traffic as the pretext for its criminal activity against the Colombian people,
we call upon it to legalize the consumption of narcotics. In that way, the
huge profits produced by the illegality of this business would be suppressed,
consumption could be controlled and those with drug dependence could receive
treatment and this cancer could be definitively eliminated."18 Of course, if
cocaine were decriminalized, removing the illegal profits, there would be much
less money to launder.
It is interesting to note that one of the largest right-wing paramilitary
groups seems quite comfortable placing its money in US financial
institutions:
"The most recent [private] army, founded in the '80s, is Colombians United in
Self-Defense (AUC), led by Carlos Castaqo. . . .
"It is financed, he says, by 'the people who have no police, no army, no
state. They are fishermen, lumbermen, freight companies, businessmen, small
cattle ranchers, and large landowners...plus the money from the coca
growers.'"19
In an interview on Colombian television, Castaqo said that "in La Gabarra and
in San Lucas there are 600 million [pesos] in taxes collected from the coca
growers and those two fronts collect the financing there. They have to finance
the entire North Bloc of the AUC. This doesn't make me a drug trafficker, not
in any way. . . ."20
Admittedly, cocadollars pervade the entire Colombian economy. But the AUC does
its banking in Miami: in October 1999 the army arrested six men suspected of a
massacre earlier that month and found checks drawn on a Miami bank. "The men
were found with rifles, grenades, AUC bracelets and the checks from accounts
in U.S. banks [sic]."21
"The bank was Barnett Bank, and the checks were reportedly cut in 1995, before
Barnett was purchased by NationsBank in 1998.
"Consistent with financial analyst Catherine Austin Fitts' [sic] primer on
Narco-Dollars For Dummies, published today on Narco News and the influence of
narco-capital in U.S. banking and financial institutions, the reported use of
Barnett Bank checks to fund the paramilitaries in 1995 coincided with the
bank's financial rebound that preceded its sale."22
The Colombian military, aided by the US government, is backing the AUC:
"'There are mountains of evidence' of collaboration, says Carlos Salinas,
Latin America advocate for Amnesty International. 'And it happens to this
day,' he adds, citing a June incident when FARC guerrillas attacked a region
controlled by Carlos Castaqo, the notorious leader of a right-wing
paramilitary alliance, and the Colombian army airlifted soldiers to the region
to combat the guerrillas. Congress' [sic] own research service published a
report last month noting that such collaboration continues."23
And the US military is training Colombian troops, and possibly their officers
as well:
"Pentagon officials, under pressure to investigate alleged links between elite
U.S. military trainers and Colombian forces implicated in a 1997 civilian
massacre, have confirmed that they trained soldiers commanded by the officer
accused of masterminding the attack. . . .
"A Pentagon official, speaking on condition that he not be identified,
confirmed that [Colombian Army Col. Lino] Sanchez was commander of the 2nd
Mobile Brigade, which received training by U.S. Special Forces at a river base
about 80 kilometers from Mapiripan [where 49 civilians were killed]. The
Defense Department has said it is investigating further to determine whether
Sanchez himself was trained by U.S. Special Forces."24
A 5/3/02 report by the National Security Archives (a library and archive of
declassified US documents obtained through the Freedom of Information Act)
confirms that the Colombian government, with a nod & a wink from Uncle Sam,
has been using US "Drug War" aid to fight its leftist guerrilla opposition:
"As early as the first Bush administration, the U.S. 'Andean Strategy' was
developed as a 'deal' struck with Andean governments to provide them with
counterdrug aid that could also be used against their principal adversary: the
guerrillas. . . .
"One CIA report concluded that, 'officials in Lima and Bogota, if given
antidrug aid for counterinsurgency purposes, would turn it to pure
antiguerrilla operations with little payoff against trafficking. . . .'
"Two Colombian brigades that lost U.S. aid in September 2000 for human rights
violations work as part of a joint strike force with antidrug battalions
specifically created to qualify for U.S. funds. The new units, according to
one document, were 'bedding down' with a counterguerrilla battalion reportedly
involved with illegal paramilitary groups. Current Bush administration
proposals would unfetter all of these units for operations against guerrilla
forces. . . .
"As the end-use agreement was being negotiated with the Colombian defense
ministry, a congressional delegation led by Rep. Dennis Hastert (R-IL) --
currently Speaker of the House of Representatives who was then chairman of the
House subcommittee on national security -- secretly encouraged Colombian
military officials to ignore human rights conditions on U.S. aid.
"CIA and other intelligence reports from the late 1990s on the notorious
Colombian paramilitaries suggested that the Colombian government lacked the
will to go after these groups. A 1998 CIA report found that, 'informational
links and instances of active coordination between the military and the
paramilitaries are likely to continue and perhaps even increase.'"
According to a CIA report (Document 53 in the National Security Archive's
collection) right-wing paramilitaries protect "wealthy businessmen, including
narcotrafficers," but there were "scant indications that the military is
making an effort to directly confront the paramilitary groups or to devote
additional men or resources against them. . . ." In short, this
"counternarcotics aid" has been going to an army which cooperates with some of
the big drug dealers' hired guards.25
Meanwhile, the Bush administration is lining the FARC up in its gunsights:
"The president has asked Congress to remove restrictions that prevent Colombia