...tractor-trailer hitches made of steel. Under the paint ... solid gold...
The golden age of crime.
Why international drug traffickers are invading the global gold trade.
World Report 11/29/99
BY DAVID E. KAPLAN
Marian Walas was feeling the heat. He had helped send more than 100
kilos of cocaine from Chicago to Eastern Europe, federal agents say,
but he owed his Colombian suppliers $2 million and they were threatening
his life. He swore that the money would be wired immediately. His partner
even showed them where: to the account of a Panamanian gold company
named Speed Joyeros. Moving money to Speed Joyeros was also on the mind
of Inocensio Lopez. According to court testimony, the Dominican drug
dealer dropped off a bag stuffed with nearly $300,000 at a Manhattan
hotel room; money to go to Moishe Hebroni, the owner of Speed Joyeros.
The connection between the two drug cases and Speed Joyeros is more than
a coincidence, law enforcement sources say. Speed is reputed to be Latin
America's largest gold trader, with $25 million in sales a month. U.S.
drug enforcement agents have seized nearly $1 million from a New York
bank account belonging to the company. Now they're examining the firm's
movement of millions of dollars of gold and cash around the world. Speed
has not been charged with any crime; company officials proclaim their
innocence and are fighting the government for release of their funds.
But to U.S. experts, the cases show that gold now plays a central role
in the billion-dollar business of washing dirty money.
Good as gold. The gold trade has become "the money laundering mechanism
of choice," according to internal law enforcement reports, and is being
used to wash "staggering amounts" of dirty cash. The way it works is
complex-and varied: Basically, drug profits are used to purchase gold,
whether as jewelry, ingots, or even scrap, then shipped across borders
and resold. The resulting profits are "clean," the drug trafficker who
bought the gold in the first place free to do with his money as he
pleases. So pervasive is its criminal use that gold is joining the U.S.
dollar as the standard currency of the drug trade.
Among the evidence:
Nearly every major U.S. money laundering case in recent years has
involved gold. Authorities have traced the movement of tons of gold and
billions of dollars to deals by Latin American drug cartels. U.S. gold
imports from Latin American drug havens have skyrocketed. Imports of
gold from Colombia - a minor producer - ballooned from virtually nothing
in 1993 to nearly $200 million in 1996. In the past 10 years, nearly
$2.5 billion in foreign gold flowed into Miami-despite Florida's lack
of a jewelry-making industry. Authorities say much of the gold is tied to
money laundering and tax scams.
Narcotics traffickers are taking over the Latin American gold trade,
industry officials say. ColombiaColombian drug dealers are paying
exorbitant prices for gold and buying up small dealers across the
region. For drug traffickers, the gold market is like a magnet.
So much of the international gold trade operates "off the books"
that it is an easy target for organized crime, officia
While many gold companies operate legitimately, interviews with traders,
refiners, and law enforcement officials depict an industry riddled with
money laundering, tax fraud, smuggling, and dubious bookkeeping. But the
impact of an illicit gold trade goes beyond the corruption of one
industry. Having refined methods to detect money laundering in financial
institutions, U.S. investigators are stymied by the ancient trade in gold.
Officials also worry that corruption in Latin America's gold trade will
spread to the United States, where refiners are importing record amounts
of gold from Colombia and Peru. "There's nothing else out there like
gold," says U.S. customs agent John Casarra. Posted to Rome in the early
1990s to investigate the Mafia, Casarra found to his surprise that gold
figured again and again as the key to laundering cases.
"Money launderers are foremost businessmen, and businessmen want
certainty," he says. "Gold gives that to them. They can exchange it
anywhere in the world." Take the case of Gustavo Upegui Delgado.
Casarra and his Italian colleagues were stunned in 1994, when they found
Delgado, a top money launderer for Colombia's Cali cartel, was buying
over a ton of gold a month with his colleagues, using drug money to
purchase the stuff, then shipping it to Panama.
The launderers moved so much of the metal, officials say, that it
depressed the price of gold between the two countries. The big surprise
is that it took traffickers like Delgado so long to tumble to the allure
of gold. The industry is largely made up of individual dealers and small
companies that prefer to deal in cash. High tariffs on gold have
attracted smugglers for years.
"There's a dual economic system in the jewelry industry," concedes
Richard Rubin, the owner of Republic Metals in Miami, a gold refiner.
"There's on the books and there's off the books." How big is the
underground gold trade? No one really knows, but customs officials got
an unsettling hint a few years ago when they began checking trade data
on U.S. gold shipments. "We began to see spikes, crazy spikes," says Lou
Bock, a customs specialist in international trade crimes. "We thought
they must have been errors at first."
Initially, analysts discovered large movements of gold between the
United States and various Caribbean islands-places known not for their
gold industry but for laundering dirty money. U.S. gold imports from the
Netherlands Antilles, for example, jumped from $68,000 in 1993 to $29
million just four years later.
In the zone.
Equally impressive spikes soon emerged from Colombia and Peru, the
centers of cocaine production. Between 1994 and 1997, U.S. imports of
Peruvian gold grew more than ninefold, from $19 million to $177 million.
Imports of gold from Colombia ballooned from a mere $120,000 in 1993 to
nearly $200 million in 1996.
Much of the jump in Peruvian production may be due to rapid growth in
that nation's legitimate gold industry, says John Lutley, a veteran
analyst at the industry-sponsored Gold Institute in Washington, D.C.
But Lutley finds the data for Colombia hard to explain. "That's a totally
incredible number," he says. The flood of Colombian gold has made at
least some American refiners wary. "We do no business out of Colombia,
for the pure and simple reason that we can't establish the identity of
the owner of the gold," says Michel Berleson, marketing manager for top
refiner Handy & Harman.
Latin American gold enters the United States largely through Miami.
From 1989 to 1998, annual gold imports through Miami International
Airport jumped from $18 million to $465 million-a 26-fold increase.
While much of this trade is legitimate, gold analysts remain wary,
given the absence of a jewelry-making industry in Florida. Indeed,
U.S. money laundering experts believe these odd statistics reflect
a myriad of schemes for laundering drug money.
One typical scheme works like this: Top refiners in Switzerland sell
their gold to jewelry makers in Italy, the world's largest supplier of
fine gold jewelry. The Italian jewelry is sold to U.S. buyers - most of
this trade is thought to be legitimate - and to their second top market,
Panama, which imported $300 million worth of Italian gold last year - 25
to 30 tons - according to Gold Fields Mineral Services, a London-based
research firm.
In Panama, nearly all the gold arrives at the Coln Free Zone,
a bustling market perched on the edge of the Panama Canal. Home
to Speed Joyeros and 1,600 other companies, the zona libre is the world's
second-largest free port, after Hong Kong. Bound by an imposing gray
wall topped by barbed wire, the 1.5-square-mile zone is home to a
dizzying potpourri of global traders: Arabs, Chinese, Indians, Jews.
More than $6 billion of merchandise passes through the district each
year-as much as a quarter of it, investigators say, financed by drug money.
In the money.
Once in Coln, much of the Italian gold is sold to Colombian front men
for the cocaine industry. It is Coln, for example, where the Cali
cartel's Delgado sent his gold each month. The gold is then smuggled
back to Colombia, where some dealers sell it for pesos and use the money
for living expenses and to fund more drug production. But others melt
down the jewelry, recast it into ingots, and sell the gold to refiners
in the United States or Switzerland, producing a stream of income that
looks legitimate.
Investigators have found that in some cases, the launderers even buy
back the same gold they've just sold for refining in the United States,
paying for it with yet more drug money. The scheme apparently is also a
good deal for tax cheats. A recent crackdown in Peru found that 40
percent of that nation's gold companies were bogus, set up largely to
take advantage of an export-tax rebate. Smugglers shipped gold to
American refiners, pocketed the tax rebate, smuggled the gold back to
Peru, then shipped it out again, grabbing yet another rebate. "I may
have handled gold coming in that was gold I sent down there to begin
with," says Richard Rubin, whose Republic Metals made large shipments to
and from Peru.
Gold traders say the influence of narcotraffickers is so pervasive that
they are taking over Latin America's gold trade, co-opting legitimate
firms and buying up traders in country after country. "They're squeezing
out the legitimate dealers," says one prominent trader who insisted on
anonymity.
Federal agents believe companies like Speed Joyeros play a key role
in the underground gold trade, a charge the firm's owners emphatically
reject. "If my clients are laundering money, why haven't they been
indicted?" argues Speed attorney Louis Diamond. Business for Speed,
meanwhile, is booming. In Coln, the company is building what a
competitor calls "a temple of gold" - possibly the largest jewelry store
in Latin America.
Drug dealers playing the gold card are doing it in increasingly
sophisticated ways. In 1989, federal agents stopped a billion-dollar
money laundry that exported so much gold from Uruguay that that country
became America's largest gold supplier. The fact that Uruguay had no
gold industry mattered little to the launderers. What mattered was
creating a credible cover for their flow of narcodollars.
Today, some criminals are importing gold-plated bronze into the United
States, others are shipping out just the opposite: gold disguised as
other metals. Having taken payment in gold, the traffickers simply want
to move their assets back home. Customs inspectors, now on the lookout
for gold smugglers, have made repeated seizures in recent months. In one
case, a woman flying to Colombia from New York was stopped with two
tractor-trailer hitches, seemingly made of steel. Under the paint,
inspectors say they found solid gold.
The gold trade poses other challenges for law enforcement. The
industry's bookkeeping practices can be nightmarish, and gold traders
often are shielded by ethnic and family bonds. "Arms cases are
comparatively easy," says Casarra, the money laundering watchdog.
"They are a commodity you follow from country A to country B. But gold
is more like a currency.
Moreover, its form can change, and that can make it extremely difficult
to follow." Law enforcement's gold bugs also face obstacles within their
own camp. Casarra and a handful of colleagues have fought a sometimes
frustrating battle within the U.S. government to focus more attention on
the gold trade.
Many investigators still view gold cases as exotic, even while their
bosses stress the importance of going after criminal money. Washington,
meanwhile, has taken its campaign against money laundering overseas,
prompting governments worldwide to put new laws on the books. But
cutting the underworld's financial pipeline will take more than seizing
bank accounts. If the focus remains merely on hard cash and not precious
metal, the world's drug barons may yet live to see a new Golden Age.
With Philip P. Willan and Eleni Dimmler in Rome, Carol Salguero in Lima,
and Mark Madden
Bill Murphy,
Chairman, Gold Anti Trust Action (GATA) gata.org
Le Patron, Le Metropole Cafe lemetropolecafe.com |
