Sunday, April 28, 2013
In the Wake of Last Year's 'Soft Coup' Against Paraguay's President, Will a New Narco-Dictatorship Emerge?
Paraguay's April 21 election of Horacio Cartes, a dodgy "tobacco magnate," rancher and banker, whose Banco Amambay has been accused of laundering drug money, tax evasion and other crimes, raises the specter of "state capture" by powerful drug cartels linked to US intelligence agencies.
In the context of US efforts to manage not eliminate, the multibillion dollar global trade in illegal narcotics, Cartes electoral victory might very well be a shot in the arm for certain three-lettered US intelligence agencies, eager beavers always on the lookout for new allies--and an endless supply of black funds--to carry out hemisphere-wide dirty ops against leftist governments. The current US destabilization campaign targeting Venezuela's newly elected president, Nicolás Maduro and the Bolivarian revolution, is instructive in this regard.
A key factor driving US regional operations is control over the narcotics market. As researchers Oliver Villar and Drew Cottle revealed in Cocaine, Death Squads and the war on Terror: "Paraguay was the first country in Latin America to be publicly exposed for its involvement in the drug trade. Paraguay in the early 1970s was a vital center for the Corsican mafia, leading to the development of a vast heroin-trafficking network supplied from Turkey, and based in Marseille, the infamous 'French Connection.' Corsicans coordinated the transport of heroin from Marseille to the United States via Paraguay. The CIA," Villar and Cottle averred, "used such networks as transit stops in transporting Asian heroin to the United States with the help of corrupt high-ranking government and military officials."
"Later," journalist Vicky Pelaez disclosed in The Moscow News, "cocaine trafficking was added. It was transported through Chaco's wild and rough terrain. Chaco is a vast, semi-arid and semi-humid region in western Paraguay, where there are at least 900 covert airplane runways and where between 60 and 70 tons of cocaine circulate annually, according to former Interior Minister Carlos Filizzola."
"Curiously," Pelaez averred, "there are two US bases in that region. One is located in the city of Pedro Juan Caballero, in the Amambay province, and is operated by the Drug Enforcement Agency (DEA). The other, run by the Pentagon, is part of the Mariscal Estigarribia airport, in the Boquerón province, and boasts a 3,800-meter long runway."
When Fernando Lugo was removed from office last year after an expedited impeachment "trial" by Paraguay's Senate, it was widely denounced across Latin American as a parliamentary coup d'état which had more than a passing resemblance to the 2009 ouster of Honduran President Manuel Zelaya.
And like the Honduran coup against Zelaya, the World Socialist Web Site pointed out that "both countries have been the focus of attention of the US military and intelligence apparatus, which shares intimate connections with its local counterparts. Security forces in both countries have been trained and advised by the Pentagon and would not support the overthrow of an existing government without its approval."
Elected in 2008, Lugo, a former Catholic bishop and proponent of Liberation Theology, promised to combat Paraguay's endemic corruption and implement policies favoring a "preferential option for the poor." Lugo however, was no Hugo Chávez, Evo Morales or Rafael Correa, populist leaders who defied the Global Godfather by charting an independent course.
Despite a mildly reformist agenda which increased access to healthcare and education for Paraguay's working class majority, when it came to the key issue of land reform Lugo's administration hit a brick wall.
Shortly after assuming office, Lugo became the target of that nation's entrenched landed oligarchy, multinational agricultural corporations (including such paragons of virtue as Monsanto, Pioneer, Syngenta, Dupont, Cargill, Archer Daniels Midland, and Bunge) and the transnational drug cartels which continue to rule Paraguay with an iron fist much as they did under the 35-year dictatorship of Alfredo Stroessner.
Paraguay, a landlocked nation in which 2 percent of the population control more than 80 percent of the landed wealth, most of which had been expropriated by the kleptocratic Stroessner regime and handed out to favored cronies of his Colorado party, agrarian reform should have topped Lugo's agenda.
As The Moscow News pointed out, "Monsanto was naturally involved in the conspiracy. The world's largest producer of genetically modified crops disapproved of Lugo's idea to abolish the per-ton royalty of $4 on soybeans, to be paid by growers using Roundup Ready RR1 and Intenta RR2 Pro seeds. Recall that on his fifth day in office, the new president, Federico Franco, offered new concessions to Monsanto concerning the distribution of its GM cotton, soybean and corn seeds in Paraguay."
According to Pelaez, "Over the past ten months, unofficial employment has soared to 66% (this proportion is higher only in Peru (67%) and in Haiti (92%)). The bulk of the shadow labor market is formed by farmers pushed off the fields by such groups as Monsanto and Cargill, which use biotechnology to industrialize agricultural production and convert farmland into a contaminated 'green desert,' slowly but surely implanting a system of 'farming without farmers'."
Blocked at every step, and relying on the right's largesse to remain in office, Lugo's betrayal of the campesino base that put him in office and his retreat and capitulation to Paraguay's elite doomed his administration.
In fact, as journalist and researcher Benjamin Dangl reported in UpSideDownWorld last year, "Lugo was no friend of the campesino sector that helped bring him into power. His administration regularly called for the severe repression and criminalization of the country's campesino movements. He was therefore isolated from above at the political level, and lacked a strong political base below due to his stance toward social movements and the slow pace of land reform."
Using a police provocation and subsequent massacre of 11 landless farmers who had occupied land belonging to ex-Colorado Senator Blas Riquelme, illegally seized by the Stroessner regime as a pretext, the Chamber of Deputies launched proceedings to remove Lugo from office. Scarcely 24 hours later, the Senate voted to impeach the president. Who was leading the charge for Lugo's removal? Why none other than the Colorado Party's declared candidate for the presidency, then-Senator Horacio Cartes.
But the final straw may have been the decision by Lugo's administration three years earlier, to cut off access to the country by the US military. By 2007, the Pentagon had deployed some 400 Marines under the guise of "medical readiness training" exercises that were denounced by grassroots activists as a ploy to identify "dangerous" rural leaders of the landless movement. At the same time, the Pentagon was planning to expand US operations at the giant Mariscal Estigarribia air base, 120 miles from the Argentine and Bolivian borders.
Journalist Conn Hallinan reported back in 2005, "US Special Forces began arriving this past summer at Paraguay's Mariscal Estigarribia air base, a sprawling complex built in 1982 during the reign of dictator Alfredo Stroessner. Argentinean journalists who got a peek at the place say the airfield can handle B-52 bombers and Galaxy C-5 cargo planes. It also has a huge radar system, vast hangers, and can house up to 16,000 troops. The air base is larger than the international airport at the capital city, Asunción."
During a 2009 press conference, Lugo rejected further US troop deployments under the Bush-era "New Horizons" program. In a decision that greatly angered Washington, Lugo remarked, "we don't see it as convenient that the Southern Command has a presence in Paraguay."
Coming on the heels of Ecuador's 2009 closure of the giant US airbase at Manta, of which Ecuadorean president Rafael Correa famously said: "We can negotiate with the US about a base in Manta, if they let us put a military base in Miami," the Pentagon and CIA looked to Paraguay for a platform for what Southern Command described as "counternarcotics surveillance," but which regional neighbors denounced as a threat to hemispheric security.
Ominously, the US ambassador in Asunción, Liliana Ayalde declared: "It's a regrettable decision."
Indeed it was, for Lugo and the Paraguayan people.
The (Narco) Ties that Bind
In their relentless drive to accumulate riches at the expense of their citizens, comprador elites, particularly those who mix land grabs, far-right politics with currying favor from their imperialist overlords, utilize state institutions as cash cows.
And when those elites are also plugged into the international narcotics trade and control the state's machinery of repression, well, it's a win-win all around!
Who would imagine that a central banker would have ties to criminals and narcotraffickers? Why, the US Embassy that's who!
A 2007 Cable Gate file published by WikiLeaks noted that former Central Bank president Dr. Angel Gabriel González Cáceres, "a strong Colorado with close ties to [former] President Duarte, who appointed him Central Bank president in September 2003," was named "Paraguay's new director of SEPRELAD, the Secretariat for the Prevention of Money Laundering," and that reviews of his previous performance were "quite mixed."
Variously described by the Embassy as "a technician with a long trajectory at the Central Bank who has cooperated with the Embassy on money laundering and terrorist financing," as Banking Superintendent however, González "opposed creation of SEPRELAD because he wanted the Central Bank to retain responsibility for fighting money laundering."
But perhaps there were other factors, and interests, at work?
According to Asunción Deputy Chief of Mission Michael J. Fitzpatrick, Paraguay's counternarcotics director Hugo Ibarra would have "nothing to do with" González. The counternarcotics chief then "volunteered that González had a direct personal role as Central Bank president in white-washing ('blanquear') funds for so-called pillar of the community Horacio Cartes and his Banco Amambay, noting that 80 percent of money laundering in Paraguay moves through that banking institution."
"Ibarra indicated," Embassy officials averred, "that González is still involved with Amambay, and questioned why a former Central Bank president would take a lower level position as SEPRELAD director--managing an office with less than a dozen employees--in the absence of some other financial incentive."
Certainly a relevant question; however, no answers were forthcoming.
In 2008, another WikiLeaks file disclosed that shortly after assuming office, Lugo informed the US Embassy of his interest "in closer counternarcotics cooperation with the United States and requested U.S. assistance with microenterprise development during a Friday, August 29 dinner with the Ambassador."
Significantly, "Lugo made clear that he does not trust some of his closest advisors or cabinet ministers. During dinner, which took place before the weekend rumors emerged regarding coup planning, Lugo told Ambassador about a tape recording of former President Duarte and General Lino Oviedo betting that Lugo will last only three to eight months in office."
A 2009 secret WikiLeaks file, "Paraguayan Pols Plot Paraguayan Putsch," noted that "discredited General and UNACE party leader Lino Oviedo and ex-president Nicanor Duarte Frutos are now working together to assume power via (mostly) legal means should President Lugo stumble in coming months."
Oviedo, "serving time for involvement in the 1999 assassination of Vice President Luis Argana and the subsequent Marzo Paraguayo massacre of unarmed student protesters," the Embassy noted it was Duarte "who used his control of the Supreme Court to free Oviedo from jail" in 2007.
A 2003 CIA report published by the Library of Congress informed us that "Brazilian and U.S. officials generally consider former General Lino César Oviedo to be head of the so-called Paraguay Cartel. He reportedly has amassed at least US$1 billion, including numerous properties in the TBA [Tri Border Area]."
The Argentine investigative news magazine Página/12 published a 2001 Argentine Chamber of Deputies report on money laundering which noted that according to Brazilian officials, the US Embassy and the DEA, Oviedo was involved with "drug trafficking (cocaine and marijuana), weapons, money laundering and the smuggling of various items."
In 1994 for example, a "load of seven tons of cocaine, worth $70 million, which was seized with the participation of the CIA, and destined for the USA," was linked to Oviedo and his employees. Later that year, according to DEA documents, another load of five tons of cocaine was seized from "Oviedo accomplices" attempting to smuggle it across the Paraguayan border.
The Chamber of Deputies report concluded: "Oviedo is accused of being the head of a drug trafficking, arms trafficking [cartel] and being involved in the murder of media entrepreneur Carlos Honorio Cubillas and Paraguayan Vice President Argana. The various charges against him made by the DEA were, by former U.S. Ambassador to Paraguay and the Brazilian CPI."
As noted above, in 2007, Oviedo's conviction for orchestrating an attempted military coup in 1996 was annulled by Paraguay's Supreme Court. Again a candidate for the presidency in 2013, nominated by the ironically named National Union of Ethical Citizens (Unión Nacional de Ciudadanos Éticos, UNACE), Oviedo died in a "helicopter accident" after a campaign appearance in February, clearing the path to power for Horacio Cartes.
The Cartel: Back in Power
Last Sunday in an unusually critical article, The New York Times reported that during the campaign, Cartes "was pressed to explain why antinarcotics police officers apprehended a plane carrying cocaine and marijuana on his ranch in 2000; why he went to prison in 1989 on currency fraud charges; and why he had never even voted in past general elections."
Good questions, all of which were dismissed by Cartes' top aides as "conspiracy theories" and "slander."
The most serious charges involve Cartes connection to drug trafficking, money laundering and the smuggling of contraband cigarettes.
Another WikiLeaks file, this one from 2010, informed us that a joint that a joint ATF-DEA-ICE-OFAC US anti-money laundering investigation dubbed "Heart of Stone," revealed that Cartes is the head of a transnational criminal organization and the main target of the operation.
"OPERATION HEART OF STONE is a coordinated, transnational investigation focused on the disruption and dismantlement of a significant drug trafficking and money laundering enterprise operating within the Tri Border Area (TBA) of Argentina, Paraguay, and Brazil, and elsewhere throughout the world. This investigation has established links between and among drug trafficking, money laundering and other criminal organizations and, as such, was approved as a designated Consolidated Priority Organizational Target (CPOT) investigation during April 2009."
The WikiLeaks file averred: "The investigative team has implemented strategies and operations aimed at attacking the financial infrastructure of drug trafficking supply network (DTO's) and other criminal enterprises operating within the TBA. Using a strategic approach to target the international command and control centers of these criminal organizations based in the TBA, agents have successfully focused investigative activity in an effort to develop this investigation with an aim toward a DEA UC introduction to CPOT designee Horacio CARTES. Through the utilization of a DEA BACO cooperating source and other DEA undercover personnel, agents have infiltrated CARTES' money laundering enterprise, an organization believed to launder large quantities of United States currency generated through illegal means, including through the sale of narcotics, from the TBA to the United States."
Despite the seriousness of the allegations, and others enumerated below, The Independent reported that Cartes "has publicly denied the allegations and says he has received assurances from the embassy that the US Drugs Enforcement Agency and Bureau of Alcohol, Tobacco and Firearms are conducting no investigations against him, something the cables allege."
If true, this raises a disturbing question: did the DEA drop the ball or were they ordered to back away from the investigation by Obama's State Department?
"'When it comes to drug trafficking, Horacio has made it clear what his position is,' says Julio Velazquez, a Colorado senator standing for re-election tomorrow."
Ludicrously, Velazquez told The Independent: "'There's no concrete allegation against him. Horacio has investments in the US. Do you think the Americans would allow a narco to bring money into their country?'"
Memo to Senator Velazquez: Not only would the Yankees "allow a narco to bring money into their country," they'd look the other way as US banksters laundered the funds and extracted hefty fees in the process!
Another front in the Cartes empire involved Banco Amambay and illegal tax evasion. The International Consortium of Investigative Journalists (ICIJ) reported earlier this month that "five directors of Banco Amambay created a secret bank in the Cook Islands with no building and no staff."
Journalists Marina Walker Guevara and Mabel Rehnfeldt disclosed that "top officials of a Paraguayan bank owned by Horacio Manuel Cartes, the country’s leading candidate in this month's presidential election, operated a secret financial institution in a tax haven in the South Pacific."
According to the ICIJ's investigation, "Cartes' father, Ramón Telmo Cartes Lind, and four other executives of Paraguay's Banco Amambay S.A. created Amambay Trust Bank Ltd. in 1995 in the Cook Islands, a tiny chain of atolls and volcanic outcroppings more than 6,000 miles away from the South American nation."
"The Cook Islands bank, which was operational until 2000," the same year the Cook Islands landed on of the OECD's money laundering blacklist, "a dishonor roll for places the OECD considers havens for dirty money," was de-registered a month prior to OECD sanctions.
Guevara and Rehnfeldt reported that the Cook Islands were condemned for "'excessive secrecy provisions'" that "allowed owners of offshore companies and accounts to hide in the shadows. It noted the islands' government had 'no relevant information on approximately 1,200 international companies that it had registered' and that the offshore banks located in the Cooks weren't required to document the identity of their customers."
"It was not the only time that Banco Amambay and its officials made headlines for alleged money laundering, but the accusations have never resulted in convictions."
"Just last month," the ICIJ averred, "the head of Paraguay's anti-money laundering agency said that the bank was being investigated alongside other financial institutions for illegal money transfers abroad. The following day the official recanted his words and said he had misspoken. Amambay denied any involvement in criminal activities."
With the election of another "teflon president" accused of operating a drug trafficking and money laundering enterprise, and with powerful connections to prominent right-wing politicians suspected of decades' long ties to global narcotics rackets, the Pentagon and US secret state agencies must be salivating over the prospect of the cartel's return to power.
After all, as State Department spokesperson Patrick Ventrell said during an April 22 press briefing when queried about Cartes dodgy record: "The United States values its relationship with Paraguay and looks forward to working with the President-elect, with President-elect Cartes, on many of our shared interests, such as defending and promoting democracy, human rights, and the rule of law, and expanding trade and economic opportunities."
When pressed about Cartes long history of criminal allegations, Ventrell didn't bat an eyelash and averred: "I'm not aware of specific allegations one way or another, but we do congratulate him on his electoral victory. And I think I just was clear about working with him going forward."
And so it goes...
Sunday, April 7, 2013
Toothless Federal Reserve 'Enforcement Action' Hands Citigroup/Banamex a Pass Over Drug Money Laundering
In October 2005, at the height of the speculative financial bubble that eventually cost taxpayers trillions of dollars and devastated millions of lives, Citigroup Equity Strategy analysts Ajay Kapur, Niall Macleod and Narendra Singh published their provocative, though accurate portrayal of bourgeois amorality, Plutonomy: Buying Luxury, Explaining Global Imbalances.
According to these worthies, the egregious economic disparities between the filthy ruling rich and the rest of us revolve around the salient fact that the "world is dividing into two blocs--the plutonomies where economic growth is powered by and largely consumed by the wealthy few," and the great mass of proletarians who need to sit down, shut up and worship at the feet of their masters.
To whit, their evocation of "disruptive technology-driven productivity gains, creative financial innovation, capitalist-friendly cooperative governments . . . overseas conquests invigorating wealth creation" as the engines driving capitalism's criminogenic "wealth waves . . . exploited best by the rich and educated," recalled Orwell's dystopian vision of a future which imagined "a boot stamping on a human face--forever."
In a follow-up piece published in March 2006, Citi claimed that "so long as the rich continue to get richer, the likelihood of these conundrums [obscene income disparities] resolving themselves through traditionally disruptive means (currency collapses, consumer recessions etc) looks low."
Indeed, "While we have concerns about the spending power of the middle-income consumer in the US in the event of a housing slowdown, the richest 10% are less exposed to a housing slowdown, as their wealth is more diversified."
In other words, while Citi's "plutonomic" clients were gobbling up an ever greater share of the world's wealth, hyperinflating the real estate bubble and peddling fraudulent "investment instruments" that still threaten to drive the global economy into the abyss, "we believe that the rich are going to keep getting richer in coming years, as capitalists (the rich) get an even bigger share of GDP as a result, principally, of globalization."
"We expect the global pool of labor in developing economies to keep wage inflation in check," they opined, "and profit margins rising--good for the wealth of capitalists, relatively bad for developed market unskilled/outsource-able labor."
If you're an average worker, even one with an advanced degree and mountains of student debt, well, too bad suckers!
What could go wrong with this rosy picture? "Beyond war, inflation, the end of the technology/productivity wave, and financial collapse, we think the most potent and short-term threat would be societies demanding a more 'equitable' share of wealth." (emphasis added)
Worry not dear plutonomes, there's an app for that too in the form of militarized police deploying the latest in "less than lethal" technologies--pepper spray, tear gas, tasers and the like to keep those uppity proles at bay!
Lost amidst their prattle about the merits of investing in firms which cater to the rich ("do I buy Bulgari, Burberry and Coach or do I limit my options to Hermes and Toll Brothers?" The consensus opinion: "Buy them all!"), was any discussion of the social costs of these massive frauds, bloody imperialist wars of conquest or the hyperinflation of bank balance sheets with veritable "wealth waves" generated by the global drug trade and organized crime, some "3.6 percent of GDP (2.3-5.5 percent) or around US$2.1 trillion in 2009," according to the United Nations Office on Drugs and Crime (UNODC).
There you have it, "market wisdom" in all its glory from an insolvent, bailed out bank!
Handed some $45 billion (£29.78bn) in TARP funds, the Treasury Department and Federal Reserve secretly backstopped more than $300 billion (£197.31bn) in toxic assets on their books in addition to the "$2.5 trillion [£1.64tn] of support from the American taxpayer through capital infusions, asset guarantees and low-cost loans," as financial analyst Pam Martens pointed out in Wall Street on Parade.
'Dark Alliance' 2.0
Although journalists and researchers have spent decades documenting the links between secret state intelligence agencies like the CIA and organized crime conglomerates who butter their bread through global narcotics rackets, the role of major financial institutions in the grisly trade continues to be relegated by corporate media to the realm of "conspiracy theory."
But in the wake of rising public anger over the Obama administration's collusion with Wall Street drug banks, we were informed by The New York Times that the "Federal Reserve hit Citigroup with an enforcement action on Tuesday over breakdowns in money laundering controls that threatened to allow tainted money to move through the United States."
According to the Times, the Federal Reserve "took aim at Citigroup and its subsidiary Banamex USA over failure to monitor cash transactions for potentially suspicious activity."
The Fed's Consent Order charged that Citigroup and Banamex USA "lacked effective systems of governance and internal controls to adequately oversee the activities of the Banks with respect to legal, compliance, and reputational risk related to the Banks' respective BSA/AML [Bank Secrecy Act/Anti-Money Laundering] compliance programs."
An unnamed bank spokeswoman told the Times, "Citi has made substantial progress in a comprehensive manner across products, business lines and geographies," and will continue "to take the appropriate steps to address remaining requirements and build a strong and sustainable program."
Nothing to see here, right?
Tellingly however, neither Citigroup nor Banamex USA admitted wrongdoing. In what is standard boilerplate in such agreements, the Fed meekly submitted that their "enforcement action" was issued "without this Order constituting an admission or denial by Citigroup of any allegation made or implied by the Board of Governors." Nor did the Fed "give specific examples of problems" at either bank, Reuters reported.
During Senate Banking Committee hearings last month, Senator Elizabeth Warren (D-MA) grilled federal banking regulators over their non-prosecution of Wall Street drug banks.
Referencing penalties levied against HSBC after the British banking giant was caught red-handed laundering billions of dollars for Colombian and Mexican drug cartels, Warren demanded: "What does it take? How many billions of dollars do you have to launder for drug lords" before a criminal prosecution?
Judging by the actions of Obama's Justice Department, apparently the sky's the limit.
But if history is any guide to current Citigroup "lapses," you can bet that the bank's balance sheet is awash with dirty money.
As a prelude to the Federal Reserve's Consent Order, last April the Office of the Currency (OCC) issued a cease-and-desist order charging Citigroup with "deficiencies in its BSA/AML compliance program."
OCC regulators stated that the bank had "failed to adopt and implement a compliance program that adequately covers the required BSA/AML program elements due to an inadequate system of internal controls and ineffective independent testing."
According to OCC, Citigroup "did not develop adequate due diligence on foreign correspondent bank customers and failed to file Suspicious Activity Reports ('SARs') related to its remote deposit capture/international cash letter instrument activity in a timely manner."
In their infinite wisdom, the Federal Reserve did not include fines against the bank, but the Board of Governors hastened to assure Citigroup's masters (their future employers?) that the Consent Order was issued "solely for the purpose of settling this matter without a formal proceeding being filed and without the necessity for protracted or extended hearings or testimony."
You bet it was!
Citigroup and Banamex: The Salinas Affair
If all this sounds familiar, it should.
One of the more infamous cases involving taxpayer bailed-out Citigroup's ties to money laundering drug cartels emerged in the late 1990s when Raúl Salinas de Gortari, the brother of former Mexican President Carlos Salinas, was arrested after his wife, Paulina Castañón, attempted to withdraw $84 million from a Swiss account controlled by Raúl under an alias.
Salinas, who spent ten years in prison over the murder of his brother-in-law, political rival José Francisco Ruiz, was released in 2005 when a Mexican appeals court overturned that conviction.
After nearly 13 years of legal proceedings into the origins of the Salinas fortune, SwissInfo reported that "Switzerland will hand over $74 million (SFr77.3 million) to Mexico from bank accounts linked to the brother of a former Mexican president."
"The funds--more than $110 million in bank accounts linked to Raúl Salinas--were originally frozen after the Swiss authorities initiated criminal proceedings against Salinas in 1995 for money laundering."
But as Narco News investigative journalist Al Giordano reported back in 2000, "The Chief Operating Officers of drug trafficking are not Mexicans, nor Colombians: they are US and European bankers, those who launder the illicit proceeds of drug trafficking. Institutions like Citibank of New York--as this report documents--are the true beneficiaries of the prohibition on drugs and its illegal profits."
Indeed, "some of these men," Giordano asserted, "like Banamex CEO Roberto Hernández Ramírez--are rags-to-riches stories. Hernández, according to Forbes magazine, could not afford to finance an American Express credit card in 1980. Today he earns the largest annual salary in Mexico--reported as $29 million dollars--and is a billionaire presiding over Mexico's top banking institution."
According to Narco News, when former President Carlos Salinas initiated bank privatization during the 1990s at the urging of the Bush and Clinton administrations, "the single biggest winner" was none other than his old pal Roberto Hernández. And Hernández, according to investigative journalist Mario R. Menéndez Rodríguez, the editor of Por Esto!, was "the financial engineer of the Gulf Cartel, launched in the 1980s by Juan N. Guerra and based in the Texas border city of Matamoros, Tamaulipas."
Reprising their earlier investigations, Giordano reported that "Hernández had been accused--publicly and via a criminal complaint--by the daily newspaper Por Esto! of trafficking tons of Colombian cocaine through his Caribbean costa properties on that peninsula since 1997."
"The newspaper," Narco News averred, "published photos of the drugs, the smuggling boats, the Colombian garbage strewn upon the shores, the airfield and small airplanes that, witnesses testified, brought the cocaine north to the United States, with confirmation from sources as diverse as local fishermen and high officials of the Mexican Armed Forces."
For their investigative efforts both Giordano and Menéndez were sued for libel by Banamex and Hernández in 2000, a case summarily dismissed by the New York Supreme Court, which "established, for the first time, First Amendment protections for Internet journalists in the United States."
Banamex was bought by Citigroup in 2001 for the then princely sum of $12.5 billion (£8.21bn).
As El Universal Gráfico journalist José Martínez reported at the time of the Citibank-Banamex buy out, "One of the mechanisms utilized by Mexican investors is the opening of secret accounts in foreign banks that have business in this country. There, the exclusive Citibank, for decades, has been the preferred bank of the elite of wealthy and powerful people involved in the middle of scandal. In recent years this financial institution has been involved in innumerable cases connected to the management of dirty money."
According to Martínez, "Citibank has been linked to the political scandals derived from the diversion of funds by part of the Mexican elite, among them some narco-traffickers."
And as Mexico City's Milenio newspaper columnist Jorge Fernández Menéndez detailed in his 1999 book Narcotráfico y Poder in reference to Raúl Salinas:
The relation of of Raúl Salinas with the Gulf Cartel presumably surged at the end of the 1980s and began with Juan N. Guerra, who since the middle of the decade had led this organization dedicated to drug trafficking (above all, marijuana) and contraband. In 1989, Guerra made various investments in construction projects, mainly in Villahermosa, with Raúl Salinas. But, already an old man with grave health problems, with a limited vision of his activity, Juan N. Guerra was not the ideal individual to head the project that would be settled by the strong growth of the Cali Cartel: the change from marijuana to cocaine.
Fernández noted that when the Gulf Cartel was taken over by Juan García Abrego, "...as the person responsible for the operation of the cartel, Raúl Salinas de Gortari [w]as the presumed chief of political relations and power of the same."
Never mind that before his arrest on money laundering charges, Raúl only earned an annual salary of $190,000 as a "public servant," Swiss and US investigators uncovered an illicit cash horde to the tune of hundreds of millions of dollars.
Where did Salinas' money come from?
In addition to the outright theft of funds from the Treasury as alleged by federal prosecutors in Mexico, according to a 1995 Los Angeles Times report, Salinas "amassed at least $100 million in suspected drug money."
Switzerland's top prosecutor at the time, Carla del Ponte, "launched the investigation after the U.S. Drug Enforcement Administration supplied information that led Swiss agents to the accounts in Geneva, where they arrested Raúl Salinas' wife and her brother on Nov. 15 as the pair attempted to withdraw more than $83 million."
Del Ponte told the Los Angeles Times that after observing Salinas' interrogation by Mexican federal prosecutors the sums found in those accounts were "suspected to be from the laundering of money related to narcotics trafficking."
In 1998, when Swiss prosecutors completed their Salinas investigation, The New York Times disclosed that "Swiss police investigators have concluded that a brother of former President Carlos Salinas de Gortari played a central role in Mexico's cocaine trade, raking in huge bribes to protect the flow of drugs into the United States."
That Swiss report stated, "When Carlos Salinas de Gortari became President of Mexico in 1988, Raúl Salinas de Gortari assumed control over practically all drug shipments through Mexico. Through his influence and bribes paid with drug money, officials of the army and the police supported and protected the flourishing drug business."
Leveraging "a low-profile position in the administration's food-distribution agency," Swiss investigators revealed that "Raúl Salinas commandeered Government trucks and railroad cars to haul cocaine north, skimming payoffs that the Swiss estimate at upwards of $500 million. On what some of his reputed former associates referred to as 'green light days,' he arranged for drug loads to transit Mexico without concern that they might be checked by the army, the coast guard or the federal police."
But without the complicity of major banks, amassing and then hiding, that much loot would be impossible. Enter Citibank's "Private Banking" division.
A 1998 report by the General Accounting Office (GAO) pointed a finger directly at Citibank. Investigators revealed that "Mr. Salinas was able to transfer $90 million to $100 million between 1992 and 1994 by using a private banking relationship formed by Citibank New York in 1992. The funds were transferred through Citibank Mexico and Citibank New York to private banking investment accounts in Citibank London and Citibank Switzerland."
With the connivance of bank officials, in 1992 Salinas was able to "effectively disguise" the source of those funds and their destination.
Indeed, with hefty fees secured from assisting their well-connected client Salinas, Citibank "set up an offshore private investment company named Trocca, to hold Mr. Salinas's assets, through Cititrust (Cayman) and investment accounts in Citibank London and Citibank Switzerland."
Forget due diligence or "know your customer" (KYC) rules firmly in place under the Bank Secrecy Act (BSA), Citibank "waived bank references for Mr. Salinas and did not prepare a financial profile on him or request a waiver for the profile, as required by then Citibank know your customer policy" and "facilitated Mrs. Salinas's use of another name to initiate fund transfers in Mexico."
This should have triggered alarm bells over at OCC, but like today's banking scandals involving Wachovia, HSBC and JPMorgan Chase, US "regulators" sat on their hands and did nothing.
Eager to extract those fees from a dodgy client, Citibank's Vice President for Legal Affairs was forced to admit to GAO investigators that the bank "only" violated one aspect of their KYC policy, their failure to prepare a financial profile of Salinas.
However, a 1999 Senate Permanent Subcommittee on Investigations report on "Private Banking and Money Laundering" revealed that "a culture of secrecy pervades the private banking industry."
"For example," Senate investigators disclosed, "in the case of Raul Salinas . . . the private bank hid Mr. Salinas' ownership of Trocca by omitting his name from the Trocca incorporation papers and naming still other shell companies as the shareholders, directors, and officers. Citibank consistently referred to Mr. Salinas in internal bank communications by the code name 'Confidential Client Number 2' or 'CC-2.' The private bank's Swiss office opened a special name account for him under the name of 'Bonaparte'."
And despite the fact, as Senate staff averred, "Federal Reserve examiners stated in internal documents that the Citibank private bank lagged behind other private banks they had reviewed," and that Citi's Swiss headquarters had received the "worst possible audit rating" in 1995, and that Citibank's "poor audit score were 'not taken seriously' within the private bank," no regulatory action was taken.
Two years later, a Federal Reserve examiner wrote: "The auditors are a key asset of [the private bank]. The problem is that for years audit has been identifying problems and nothing has been done about it. In 1992 [the private bank had] 66% favorable audits in 1997 the percentage of favorable audits was 62%. ... It appears that there are no consequences for bad audits as long as [the private bank] meets their financial goals."
As Time Magazine investigative journalist S.C. Gwynne reported at the time, Citibank and the soon-to-be-merged with Travelers behemoth now known as Citigroup (that 1998 merger was illegal under Glass-Steagall, but that's another story, one which directly correlates to the Act's 1999 repeal by the Clinton crime family and their Republican co-conspirators in Congress), private banking for upscale clients with the means to invest at $1 million "is now the crown jewel in the financial giant's strategy for growth."
"That strategy," Gwynne wrote, "calls for Citibank and its parent, Citigroup, to reduce their reliance on cyclical corporate and real estate lending, which tends to be high risk and relatively low profit. It will emphasize the lower-risk, higher-margin business of consumer banking--and especially one-stop financial shopping for the world's booming population of the newly rich."
Keep in mind, Gwynne was writing in 1998 before the real estate bubble was inflated and Wall Street banksters dove head first into the dubious "residential mortgage" marketing machine that nearly sunk, and still threatens to sink, the capitalist economy under endless waves of fraud and corruption.
"At Citigroup and like-minded institutions around the world," Gwynne noted, "folks with six- and seven-figure portfolios can find not only traditional banking services like checking and savings accounts but also strategic financial advice; introduction to high-yield investment vehicles like hedge funds; tax advice and accounting; estate planning and all manner of insurance. They can also get help in protecting their assets from potential claimants like creditors and ex-spouses, which can involve moving money discreetly from country to country."
Indeed, private banking funds were "part of a $17 trillion global pool of money belonging to what bankers euphemistically call 'high-net-worth individuals'--a pool that generates more than $150 billion a year in banking revenue."
Hidey holes in the Cayman Islands and other destinations used for squirreling-away illicit cash, such as the world's largest financial black holes, the US State of Delaware and the City of London, remain convenient resting places for loot amassed by various global narcotics combines.
Limited at the time by an "ongoing Department of Justice investigation," a lawyerly dodge that prevents corporate criminality from ever coming to light, GAO investigators "could not determine whether Citibank's actions violated law or regulation."
The Federal Reserve were also less than forthcoming and "did not comment on whether Citibank's actions were violations because information available to it at the time we inquired was insufficient for it to make a determination."
According to asleep at the wheel regulators at OCC, Citibank's "actions did not violate civil aspects of the Bank Secrecy Act" since under rules then in place "private banking's know your customer policies are voluntary and not governed by law or regulation."
But as the Mexican weekly news magazine Proceso reported in 2001 during the Salinas affair, "Citibank of New York was transferring Juárez drug cartel money to Uruguay and Argentina, where Mexican drug lord Amado Carrillo Fuentes and his associates went calmly about their business, with help from local politicians and businessmen. Not long after, investigations would reveal that in 1998-99, more than $300 million belonging to Mexican drug traffickers went through Citibank."
As El Universal Gráfico noted, when the self-described "Lord of the Heavens" sought refuge in South America, he "had account # 36111386 in Citibank of New York. From this place, the financial operators of the narco-trafficker passed large sums in millions of dollars to ghost banks like MA Bank of the fiscal paradise of the Cayman Islands."
In late 2000, when the Senate Permanent Subcommittee on Investigations again began looking into drug money laundering allegations against Citibank, they received information from Argentine legislators who claimed there was "a gigantic political-financial conspiracy involving even Citibank President John Reed."
Years later, those suspicions were corroborated when a US investigation, Operation Casablanca, "revealed that [money from] the Juárez cartel entered Argentina through two Citibank accounts and others in shell banks in the Cayman Islands and the Bahamas."
Juan Miguel Ponce, the head of Mexico's Interpol branch, "took advantage of Operation Casablanca to explore the vein of Juárez cartel allies in Argentina. He claims to have discovered documents in Mexico proving that large contributions were made by the cartel to 1999 campaign in Argentina of Peronist presidential and vice presidential candidates Eduardo Duhalde and Ramon 'Palito' Ortega," Proceso disclosed
As James Petras reported in 2001, when Salinas was arrested "and his large-scale theft of government funds was exposed, his private bank manager at Citibank, Amy Elliott, said in a phone conversation with colleagues (the transcript of which was made available to Congressional investigators) that 'this goes [on] in the very, very top of the corporation, this was known ... on the very top. We are little pawns in this whole thing'."
Fast forward twelve years: More than 120,000 Mexican citizens have paid with their lives as a result of the grisly trade and the American people are still the pawns of "plutonomic" banksters whose "wealth waves" come from the perverse influence bought by oceans of drug money flowing through a thoroughly corrupt capitalist system.