http://www.globalresearch.ca/index.php?context=va&aid=20210

Money Laundering and the Global Drug Trade Fueled by Capitalist Elites

by Tom Burghardt


Global Research, July 21, 2010

When investigative journalist Daniel Hopsicker broke the story four years ago that a
DC-9 (N900SA) "registered to a company which once used as its address the hangar
of Huffman Aviation, the flight school at the Venice, Florida Airport which trained
both terrorist pilots who crashed planes into the World Trade Center, was caught in
Campeche by the Mexican military ... carrying 5.5 tons of cocaine destined for the
U.S.," it elicited a collective yawn from corporate media.

And when authorities searched the plane and found its cargo consisted solely of 128
identical black suitcases marked "private," packed with cocaine valued at more than
$100 million, the silence was deafening.

But now a Bloomberg Markets magazine report, "Wachovia's Drug Habit," reveals
that drug traffickers bought that plane, and perhaps fifty others, "with laundered
funds they transferred through two of the biggest banks in the U.S.," Wachovia and
Bank of America.

The Justice Department charge sheet against the bank tells us that between 2003
and 2008, Wachovia handled $378.4 billion for Mexican currency exchanges, "the
largest violation of the Bank Secrecy Act, an anti-money-laundering law, in U.S.
history."

"A sum" Bloomberg averred, equal to one-third of Mexico's current gross domestic
product."

Since 2006, some 22,000 people have been killed in drug-related violence.
Thousands more have been wounded, countless others "disappeared," torture and
illegal imprisonment is rampant.

In a frightening echo of the Reagan administration's anti-communist jihad in Central
America during the 1980s, the Bush and now, Obama administration has poured fuel
on the fire with some $1.4 billion in "War on Drugs" funding under Plan Mérida.
Much of that "aid" is destined to purchase military equipment for repressive police,
specialized paramilitary units and the Mexican Army.

There is also evidence of direct U.S. military involvement. In June, The Narco News
Bulletin reported that "a special operations task force under the command of the
Pentagon is currently in place south of the border providing advice and training to
the Mexican Army in gathering intelligence, infiltrating and, as needed, taking direct
action against narco-trafficking organizations."

One former U.S. government official told investigative journalist Bill Conroy, "'Black
operations have been going on forever. The recent [mainstream] media reports
about those operations under the Obama administration make it sound like it's a big
scoop, but it's nothing new for those who understand how things really work'."

But, as numerous investigations by American and Mexican journalists have revealed,
there is strong evidence of collusion between the Mexican Army and the Juarez and
Sinaloa drug cartels. A former Juarez police commander told NPR in May that "the
intention of the army is to try and get rid of the Juarez cartel, so that [Joaquin "El
Chapo" Guzman] Chapo's [Sinaloa] cartel is the strongest."

The cosy relations among the world's biggest banks, drug trafficking organizations
and the U.S. military-intelligence apparatus is not however, a new phenomenon.
What is different today is the scale and sheer scope of the corruption involved. As
Michel Chossudovsky points out,

"This trade can only prosper if the main actors involved in narcotics have "political
friends in high places." As legal and illegal undertakings are increasingly intertwined,
the dividing line between "businesspeople" and criminals is blurred. In turn, the
relationship among criminals, politicians and members of the intelligence
establishment has tainted the structures of the state and the role of its institutions,
including the military." (The Global Economic Crisis: The Great Depression of the XXI
Century, Montreal:Global Research, 2010, pp. 195-196)

While the Bloomberg story should cast new light on highly-profitable links amongst
major financial institutions and narcotrafficking organizations in what may be
protected drug rackets green-lighted by corrupt officials, media silence, particularly
by outlets such as The Wall Street Journal and the Financial Times, threaten to propel
what should be an international scandal into a one-off news item scheduled for a trip
down the memory hole.

"Cocaine One"

If, as New York Times columnist Thomas Friedman claims "the hidden hand of the
market will never work without a hidden fist," then perhaps too, drug cartels work
their "market magic" with their own "hidden fist" or, as the Russians like to say
akrysha, a web of protectors--and facilitators--drawn from business, finance,
organized crime and the secret world of intelligence.

Dubbed "Cocaine One" by Hopsicker, the DC-9 was curious for a number of reasons,
not least of which was the fact that "one of the chief shareholders" of a dodgy outfit
called SkyWay Aircraft "is a private investment bank in Dallas which also raised funds
for a Mexican industrialist with reported ties to a Cali and Juarez Cartel narcotics
trafficker."

More curious still, the airline kitted-out its fleet with distinctive colors and a seal
"designed to impersonate planes from the U.S. Dept. of Homeland Security." And
when he learned that "SkyWay's genesis can be traced to In-Q-Tel Inc., a secretive,
Arlington, Va., investment group owned, operated, and financed out of the black box
budget of the Central Intelligence Agency," well you can bet corporate media ran
themselves ragged investigating that!

To top it off, when another drug plane crash landed in the Yucatan Peninsula
eighteen months later and broke apart, a Gulfstream II business jet (N987SA) that
spilled "4 tons of cocaine across a muddy field," Hopsicker reported that it had
originated from the same network and used the same source for its financing, the
"Casa de Cambio Puebla SA, a country-wide network of currency exchanges."

And to make matters even more intriguing from a parapolitical perspective, after
searching through FAA records Hopsicker discovered that the Gulfstream II business
jet "was owned by a secretive Midwestern media baron and Republican fund-raiser,
who had a business partner who, incredibly, owned the other American drug plane,
the DC-9, recently busted in Mexico."

In fact, as Bloomberg investigative journalist Michael Smith learned years later, these
were the same planes and same currency exchange which Hopsicker reported back in 2007 traffickers had used to purchase drug jets with funds laundered through
Wachovia.

"One customer that Wachovia took on in 2004 was Casa de Cambio Puebla SA,"
Smith wrote. The Puebla, Mexico currency exchange was the brainchild of Pedro
Alatorre, a "businessman" who "had created front companies for cartels."

Alatorre, and 70 others connected to his network, were seized in 2007 by Mexican
law enforcement officials. Authorities discovered that the accused drug money
launderer and airline broker for the cartels controlled 23 accounts at the Wachovia
Bank branch in Miami and that it held some $11 million, subsequently frozen by U.S.
investigators.

In 2008, a Miami federal grand jury indicted Alatorre, now awaiting trial in Mexico
along with three other executives, charging them with drug trafficking and money
laundering, accusing the company of using "shell firms to launder $720 million
through U.S. banks." The Justice Department is currently seeking Alatorre's
extradition from Mexico.

According to Bloomberg, "Puebla executives used the stolen identities of 74 people to
launder money through Wachovia accounts." Jose Luis Marmolejo, the former head
of the Mexican attorney general's financial crimes unit told Smith, "Wachovia handled
all the transfers, and they never reported any as suspicious."

Some $300,000 was transferred by Wachovia to a Bank of America branch in
Oklahoma City. With cash in hand Bloomberg reports, traffickers "used the funds to
buy the DC-9 through Oklahoma City aircraft broker U.S. Aircraft Titles Inc." When
queried by Smith about the sale, "U.S. Aircraft Titles President Sue White declined to
comment."

Jeffrey Sloman, the federal prosecutor who handled the Wachovia case said in a
press release that "Wachovia's blatant disregard for our banking laws gave
international cocaine cartels a virtual carte blanche to finance their operations."

Yet, as Hopsicker wrote nearly three years ago, "the politically-explosive implications
of the scandal may explain why American officials have been reluctant to move
against, or even name, the true owners of the planes and basically 'turned a blind
eye' to the American involvement exposed by the drug trafficking seizures."

As of this writing, no Americans have been criminally charged in the cash-for drug
planes banking conspiracy.

"Troubled Assets" or Something More Sinister?

When Wells Fargo bought Wachovia, once America's fourth largest bank in 2008 at
the fire-sale price of $12.8 billion, the bank and its former CEO, Kennedy "Ken"
Thompson, who "retired at the request of the board" before the full-extent of the
financial meltdown hit home, were in deep trouble.

Before the Wells takeover, Wachovia had been on a veritable shopping spree. After
the firm's 2001 merger with First Union Bank, Wachovia merged with the Prudential
Securities division of Prudential Financial, Inc., with Wachovia controlling the lion's
share of the firm's $532.1 billion in assets. This was followed by the bank's purchase
of Metropolitan West Securities, adding a $50 billion portfolio of securities and loans
to the bank's Lending division. In 2004, Wachovia followed-up with the $14.3 billion
acquisition of SouthTrust Corporation.

Apparently flush with cash and new market clout, Wachovia set it sights on acquiring
California-based Golden West Financial. Golden West operated branches under the
name World Savings Bank and was the nation's second largest savings and loan. At
the time of the buy-out, Golden West had over $125 billion in assets. For Wachovia
however, it was a deal too far.

With an enormous housing bubble fully inflated, and a new speculative merger-
mania in full swing, one can only surmise that the need for liquidity at any price, had
driven banking giants such as Wachovia to play dumb when shadier, yet highly-
profitable transactions, such as the "arrangement" with Casa de Cambio Puebla SA,
were involved.

Bleeding cash faster than you can say "mortgage backed securities," Wachovia was
on the hook for their 2006 $26 billion buy-out of Golden West Financial at the peak of
the housing bubble, a move that BusinessWeek reported generated "resistance from
his own management team" but ignored by Thompson.

Why? "Because no one outside of Thompson and Golden West CEO Herb Sandler
seemed to like the deal from the moment it was announced," a company insider told
BusinessWeek.

While the buy-out may have given Thompson "the beachhead in California he had
long desired ... the ink was barely dry on the Golden West deal in late 2006 when the
housing bubble in markets including California and Florida began to deflate."

Hammered by the housing bust, Wachovia's share price, which had risen to $70.51
per share when the Golden West deal was announced had slid to $5.71 per share by
October 2008. In other words, Wachovia, along with the world's economy, began
circling the proverbial drain.

However you slice it, although it was clear that the Golden West deal had gone south
quicker than you can say "credit default swaps," this didn't seem to stop Wachovia
from paying "smartest guy in the room" Thompson $15.6 million in total
compensation in 2007, a year after the fatal Golden West transaction. Nor did these
losses stop the bank from showering Thompson with a severance package worth
nearly $8 million.

But was something else going on here?

Wells Fargo bank admitted in a signed Deferred Prosecution Agreement with the
federal government that they would not contest charges brought by the Justice
Department in itsindictment of the bank.

The banking giant was forced to admit charges by prosecutors that "On numerous
occasions, monies were deposited into a CDC [Casa de Cambio] by a drug trafficking
organization. Using false identities, the CDC then wired that money through its
Wachovia correspondent bank accounts for the purchase of airplanes for drug
trafficking organizations. On various dates between 2004 and 2007, at least four of
those airplanes were seized by foreign law enforcement agencies cooperating with
the United States and were found to contain large quantities of cocaine."

Bloomberg reported that Wells Fargo, in the wake of the settlement "declined to
answer specific questions, including how much it made by handling $378.4 billion--
including $4 billion of cash--from Mexican exchange companies."

There was however, more than "troubled assets" and charges of money laundering
to the story. In fact, the purchase of these drug planes have been tied to some of
the Bush administration's most secretive "War On Terror" programs.

Drug Flights, CIA Renditions. Just Another Day at the Office!

Replicating a pattern used by the Central Intelligence Agency during the Iran-Contra
scandal of the 1980s, the secret state used a network of cut-outs and legitimate
businesses to transport prisoners to Agency black sites for "special handling."

During Iran-Contra it was "guns in, drugs out." Today one might say its "drugs in,
tortured prisoners out." The results however, were the same; egregious crimes and
lawbreaking on a staggering scale.

Subsequent investigations by Narco News revealed that "this particular Gulfstream II
(tail number N987SA), was used between 2003 and 2005 by the CIA for at least three
trips between the U.S. east coast and Guantanamo Bay, home to the infamous
'terrorist' prison camp," Bill Conroy reported.

"In addition," Conroy wrote, "the two SkyWay companies are associated with
individuals who have done highly sensitive work for the Department of Defense or
U.S. intelligence agencies, public records show and Narco News sources confirm."

According to AFP, the Mexican daily El Universal said "it had obtained documents
from the United States and the European Parliament which 'show that that plane flew
several times to Guantanamo, Cuba, presumably to transfer terrorism suspects,'" the
French newswire reported.

The plane was carrying "Colombian drugs" bound for the U.S. for the "fugitive leader
of Mexico's Sinaloa cartel, Joaquin 'Chapo' Guzman," when it crashed in the Yucatan.

According to El Universal, the Federal Aviation Administration's "logbook registered
that the plane had traveled between US territory and the US military base in
Guantanamo," and that its last registered owner was "Clyde O'Connor in Pompano
Beach, Florida."

The Independent confirmed separately in January of this year that "Evidence points
to aircraft--familiarly known as 'torture taxis'--used by the CIA to move captives seized
in its kidnapping or 'extraordinary rendition' operations through Gatwick and other
airports in the EU being simultaneously used for drug distribution in the Western
hemisphere."

Hugh O'Shaughnessy, confirming earlier reporting by Bill Conroy and Daniel
Hopsicker said that "a Gulfstream II jet aircraft N9875A identified by the British
Government and the European Parliament as being involved in this traffic crashed in
Mexico in September 2008 while en route from Colombia to the US with a load of
more than three tons of cocaine."

While O'Shaughnessy got the tail-number and date wrong, he's correct when he
states that U.S. intelligence assets "continue the drug dealing they indulged in during
the Iran-Contra affair of the Reagan years."

Narco News, citing DEA sources, learned that the crashed Gulfstream loaded with
four tons of cocaine "was part of an operation being carried out by a Department of
Homeland Security agency."

However in a later report, Mark Conrad, a former supervisory special agent with ICE's
predecessor agency, U.S. Customs, toldNarco News that the crashed Gulfstream used
to transport drugs and prisoners was controlled by the CIA and "that the CIA, not ICE
... [was] actually the U.S. agency controlling the ... operation. If this were the case,
then "any individuals or companies involved in a CIA-backed operation, even ones
that are complicit in drug trafficking, would be off limits to U.S. law enforcers due to
the cloak of national security the CIA can invoke."

In other words, a jet purchased by drug traffickers with funds laundered through an
American bank and used in the CIA's "extraordinary rendition" program may have
been part of aprotected drug operation by U.S. intelligence agencies. An operation
furthermore, whose purpose is still unknown.

This report tracks closely with evidence uncovered by Peter Dale Scott. In a recent
piece in Japan Focus Scott wrote that "it is not surprising that the U.S. Government,
following the lead of the CIA, has over the years become a protector of drug
traffickers against criminal prosecution in this country."

"A recent spectacular example" Scott tells us, drawing on research from his
forthcoming book, is the curious case of CIA Venezuelan asset, General Ramon
Guillén Davila.

General Ramon Guillén Davila, chief of a CIA-created anti-drug unit in Venezuela,
was indicted in Miami for smuggling a ton of cocaine into the United States.
According to the New York Times, "The CIA, over the objections of the Drug
Enforcement Administration, approved the shipment of at least one ton of pure
cocaine to Miami International Airport as a way of gathering information about the
Colombian drug cartels." Time magazine reported that a single shipment amounted
to 998 pounds, following earlier ones "totaling nearly 2,000 pounds." Mike Wallace
confirmed that "the CIA-national guard undercover operation quickly accumulated
this cocaine, over a ton and a half that was smuggled from Colombia into Venezuela."
According to the Wall Street Journal, the total amount of drugs smuggled by Gen.
Guillén may have been more than 22 tons. (Fueling America's War Machine: Deep
Politics and the CIA's Global Drug Connection (in press, due Fall 2010 from Rowman
& Littlefield).

Scott adds that "the United States never asked for Guillén's extradition from
Venezuela to stand trial; and in 2007, when he was arrested in Venezuela for plotting
to assassinate President Hugo Chavez, his indictment was still sealed in Miami.
Meanwhile, CIA officer Mark McFarlin, whom DEA Chief Bonner had also wished to
indict, was never indicted at all; he merely resigned."

But the stench of Iran-Contra, like that of the CIA's torture program, as with earlier
secret state machinations with drug cartels never went away; in fact, like a cancer,
one managed drug operation seamlessly metastasized into another.

Greasing the Wheels

The United Nations Office on Drugs and Crime (UNODOC) state in their 2010 Annual
Report that "money-laundering is the method by which criminals disguise the illegal
origins of their wealth and protect their asset bases in order to avoid suspicion of law
enforcement and to prevent leaving a trail of incriminating evidence," and that
financial institutions, particularly U.S. and European banks are key to efforts to
choke-off illicit profits from the grisly trade.

The trouble is these institutions, along with U.S. intelligence agencies, are the
problem.

UNODOC estimate that profits derived from narcotics rackets amount to some $600
billion annually and that up to $1.5 trilliondollars in drug money is laundered through
seemingly legitimate enterprises.

Part of the fallout from capitalism's economic meltdown has been that "drugs money
worth billions of dollars kept the financial system afloat at the height of the global
crisis," The Observer disclosed late last year.

Antonio Maria Costa, UNODOC's director, told the British newspaper he saw evidence
that proceeds from the illicit trade were "the only liquid investment capital" available
to some banks on the brink of collapse last year and that "a majority of the $352bn
(£216bn) of drugs profits was absorbed into the economic system as a result."

The UN drugs chief said that in "many instances, the money from drugs was the only
liquid investment capital." And with markets tanking and major bank failures nearly a
daily occurrence, "liquidity was the banking system's main problem and hence liquid
capital became an important factor."

According to Costa, "Inter-bank loans were funded by money that originated from
the drugs trade and other illegal activities... There were signs that some banks were
rescued that way."

Web of Corruption

Although the UN's top anti-narcotics official declined to identify either the countries or
banks that have benefited from the murderous trade, a web of corruption envelops
the entire financial sector of the capitalist economy as the quest for "liquid assets"
trumps everything.

Martin Woods, once director of Wachovia's anti-money-laundering unit in London told
Bloomberg, "It's the banks laundering money for the cartels that finances the
tragedy." Woods told the magazine he "quit the bank in disgust" after executives
"ignored his documentation that drug dealers were funneling money through
Wachovia's branch network."

Despite warnings from the Treasury Department since 1996 that Mexican currency
exchanges were laundering drug money through U.S. banks, "Wachovia ignored
warnings by regulators and police, according to the deferred-prosecution
agreement,"Bloomberg reported.

"As early as 2004, Wachovia understood the risk," the bank admitted in court.
"Despite these warnings, Wachovia remained in the business."

At the bank's anti-money laundering unit in London, Woods and his counterpart Jim
DeFazio in Charlotte, NC told Smith "they suspected that drug dealers were using the
bank to move funds."

Former Scotland Yard investigator Woods, said he "spotted illegible signatures and
other suspicious markings on traveler's checks from Mexican exchange companies,"
and that he sent copies of his report to the U.K.'s Financial Services Authority, the
DEA and U.S. Treasury Department.

But rather than being rewarded for his diligence, Woods told Smith "his bosses
instructed him to keep quiet and tried to have him fired." In one meeting, "a bank
official insisted Woods shouldn't have filed suspicious activity reports to the
government, as both U.S. and U.K. laws require."

According to a whistleblower suit filed with an employment tribunal in London,
Barrons reported last year before the Wachovia scandal broke, that Woods claimed
"his bosses bullied and demoted him, then withdrew his reports of other suspicious
activities in Eastern Europe."

It gets worse. Woods' complaint alleges "that Wachovia staff may have even tipped
off Mexican-exchange clients about his laundering suspicions," and the veteran
investigator told Wachovia officials "he feared for his safety."

In response, bank spokesperson Mary Eshet said at the time, "Wachovia believes that
it has acted appropriately in its business dealings, and Mr. Woods' claims to the
contrary are without merit."

Meanwhile, on the American side of the pond, 21-year FBI veteran DeFazio said "he
told bank executives in 2005 that the DEA was probing the transfers through
Wachovia to buy the planes." The bank ignored his warnings and continued along on
their merry way until their indictment.

The law enforcement veteran told Bloomberg, "I think they looked at the money and
said, 'The hell with it. We're going to bring it in, and look at all the money we'll
make'."

The former Scotland yard investigator added, "If you don't see the correlation
between the money laundering by banks and the 22,000 people killed in Mexico,
you're missing the point."

But Wachovia wasn't the only large financial institution "missing the point."
Bloomberg also revealed that Bank of America and the London-based "HSBC Holdings
Plc, Europe's biggest bank by assets," American Express Bank, Banco Santander SA,
Citigroup Inc., as well as "the world's largest money transfer firm," Western Union
were also up to their eyeballs in dubious transactions.

In 1994 for example, American Express paid $14 million to settle with the federal
government after "two employees were convicted in a criminal case involving drug
trafficker Juan Garcia Abrego."

Yet between 1999-2004, Bloomberg reported "the bank failed to stop clients from
laundering $55 million of narcotics funds, the bank admitted in a deferred-
prosecution agreement in August 2007 ... and paid $65 million to the U.S. and
promised not to break the law again." Charges were dismissed a year later under
terms of the agreement.

And back in 2004, The Independent disclosed that "HSBC, the UK's largest bank,
have been slammed for lax money-laundering procedures in a report by a US Senate
subcommittee."

Journalists Hugh O'Shaughnessy and Paul Lashmar revealed that "the UK-based
multinational stands accused of laxity in the fight against money laundering, drug
trafficking, corruption and terrorism, notably in the oil-rich African state of Equatorial
Guinea."

"In one of the few cases" when the scandal-plagued and now-shuttered Riggs Bank
"seems to have properly followed US anti-money-laundering legislation," Riggs
formally asked HSBC and a Spanish bank, Banco Santander, "to divulge the identities
of the owners of two companies that kept accounts with them and that were
receiving suspicious wire transfers totalling in excess of $35m (£20m). The banks
refused to say who the owners were."

Bloomberg disclosed that "federal agents caught people who work for Mexican cartels
depositing illicit funds in Bank of America accounts in Atlanta, Chicago and
Brownsville, Texas, from 2002 to 2009." Authorities contend that "Mexican drug
dealers used shell companies to open accounts at London-based HSBC."

Nevertheless, neither bank were accused of wrongdoing by the federal government
and both firms denied any involvement in money laundering schemes.

Bank of America spokeswoman Shirley Norton told Smith that they "strictly follow the
government rules." Norton said, "Bank of America takes its anti-money-laundering
responsibilities very seriously," a fact not readily apparent from Bloomberg
Marketsinvestigation.

Both Norton and HSBC spokesman Roy Caple told Smith that "[privacy] laws bar
them from discussing specific clients."

And so it goes.

Fallout? What Fallout!

In the wake of Wachovia's admission to federal prosecutors, Wells Fargo will pay
"$160 million in fines and penalties, less than 2 percent of its $12.3 billion profit in
2009."

"If Wells Fargo keeps its pledge," Bloomberg reports, then "according to the
agreement [the federal government will] drop all charges against the bank in March
2011."

Why might that be? Large banks are immune from vigorous prosecution for violating
the Bank Secrecy Act "by a variant of the too-big-to-fail theory."

Veteran Senate investigator Jack Blum, who led probes into the Iran-Contra drug
connection and the CIA's favorite shadow bank during the 1980s, the Bank of Credit
and Commerce (BCCI) toldBloomberg, "the theory is like a get-out-of-jail-free card for
big banks."

"There's no capacity to regulate or punish them because they're too big to be
threatened with failure," Blum says. "They seem to be willing to do anything that
improves their bottom line, until they're caught."

Meanwhile as the bodies pile up, there's no jail time for executives and the assets of
firms that could charitably be described as part of a "continuing criminal enterprise"
haven't been seized; only a slap on the wrist and a promise to "do better next time."

Tom Burghardt is a frequent contributor to Global Research.

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