Where The Narcodollars Go

By Ed Rippy 4/27/02



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 Castaño. . . .

"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, Castaño 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 Castaño, 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] Sánchez was commander of the 2nd Mobile Brigade, which received training by U.S. Special Forces at a river base about 80 kilometers from Mapiripán [where 49 civilians were killed]. The Defense Department has said it is investigating further to determine whether Sánchez 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 from using helicopters and other U.S. anti-drug aid to fight leftist guerrillas. Congress imposed the limits to avoid having the United States become entangled in a larger war.

"Bush also is seeking $133 million to help Colombia stop guerrilla attacks on an oil pipeline, reduce kidnappings and rebuild bombed police stations, as well as $439 million in longer-term aid."26

Although the AUC relies on cocadollars and appears on the US State Department’s list of terrorist organizations,27 this writer has found no reports that the Bush administration plans to use "helicopters and other U.S. anti-drug aid" to fight it.

Now let us consider Afghanistan, the latest country the US has bombed into submission and installed a new government in. Since it formerly produced 70% or more of the world’s opium,28 if US financial markets require more narcodollars this would be a good place to look. Indeed, on 2/28/02 the UN International Drug Control Programme "confirm[ed] earlier indications that [poppy] cultivation has resumed at a 'relatively high level’ throughout the country after the considerable decline recorded in 2001."29 Despite its shopworn declarations of a war on drugs, the US is doing little to stop poppy farming in Afghanistan: according to the Financial Times,

"The US and United Nations have ignored repeated calls by the international anti-drugs community to address the increasing menace of Afghanistan's opium cultivation. . . .

"Cindy Hamilton-Fazey, Professor of International Drug Policy at Liverpool University, said: With a weak government in Kabul and a US government that is more interested in oil and counterterrorism in the region than drugs, it is inevitable that poppy cultivation is rapidly reasserting itself and that the tribal warlords will try and maximise their revenue from it.’"30

In fact,

"The Bush administration waived penalties against Afghanistan and Haiti in the annual United States counternarcotics determinations -- despite finding that both countries had "failed demonstrably" in combating the drug trade in the past year. . . .

"'The president has further determined that it is in the vital national interest of the United States to provide the full range of assistance to support the new Afghan Interim Authority in the reconstruction of Afghanistan,’ [Assistant Secretary of State for International Narcotics and Law Enforcement Rand] Beers said."31

However, this full range of assistance does not include much to help drug enforcement; the new government in Kabul has unceremoniously tossed its drug enforcement agents out of their offices:

"'They literally threw us into the street,’ said Mir Najibullah Shams, the Secretary-General of the State High Commission for Drug Control. 'I don't have a phone to call up commanders in the provinces. They didn't even leave us with a bicycle. . . .’"32

It is difficult to believe that the Karzai government could do this if the US really wanted to stop poppy farming and heroin refining in Afghanistan. But most opiates of Afghan origin are consumed in central Asia and western Europe,33 so one may wonder how this would benefit US financial markets. One possibility is that traffickers will launder their profits through US-based multinationals, and the correspondent-banking "gateway" described above will certainly help. But perhaps the most telling development is the IMF’s support for plans to make the US dollar the official currency of Afghanistan:

"'I personally see more benefits than impediments,’ said Warren Coats, of the fund's monetary and exchange department. 'There are several versions of the afghani currency in circulation. That in itself creates an important problem.’

"Mr. Coats said the dollar could serve as an anchor for Afghanistan's money supply for two to three years, while the government wrestles with how to introduce a new currency."34

To sum up, according to the best information available, international organized crime accounts for up to 10 percent of world trade, with governments and large corporations an inherent part of the mix, and the US in the lead. Money launderers wash up to $1.5 trillion a year, with US banks the preferred vehicle through their correspondent networks. Large US corporations benefit from criminal proceeds, and US banking regulations permit many companies which trade their stock on Wall Street to deposit unlimited amounts of cash without scrutiny. The workings of the stock market multiply this income for those who own large blocks of stock in companies which get the cash, and the chair of the New York Stock Exchange has invited leftist guerrillas in Colombia to make peace and consider placing their money (much of which comes from the cocaine trade) in US financial markets. The AUC, a large right-wing paramilitary group (also subsisting largely on cocadollars) with a Miami bank account gets help from the Colombian army, which in turn gets special training from the US military. President Bush wants to allow Colombia to use US military aid to fight the FARC, but seems unconcerned about the AUC. Under the most recent US allies in Afghanistan, farmers have replanted opium fields while the Bush administration has decided not to cut aid to the interim government despite the country’s record as the world’s leading supplier of heroin, and the new government has crippled its drug enforcement agency. Meanwhile, the IMF supports Afghanistan’s tentative plan to embrace the US dollar as its official currency. All in all, it would seem that with a little help from the CIA and the military, big US corporations are making out like bandits -- and can expect to do even better as the US increases its military and political influence around the globe.

References:
1. Ed Rippy. Guns, Drugs, and Oil: The Realpolitik of the Afghan War. See also Ed Rippy’s Guns & Drugs: the CIA’s Admissions.
2. Charles Recknagel. Afghanistan: Opium Poppy Crisis Looms With No Solution In Sight.
3. Federation of American Scientists. BCCI’S CRIMINALITY.
4. Banco de Mexico. Banacci to Integrate with Citigroup.
5. Where’s Vicente Fox Today? Narco News Bulletin 7/9/00.
6. The CIA’s Wall Street connections (transcript of interview with Michael C. Ruppert on Guns and Butter, The Economy Watch with Kellia Ramares and Bonnie Faulkner. KPFA 94.1 FM, Berkeley, CA 10/12/01.
7. Christian de Brie. Thick as Thieves. Le Monde Diplomatique 4/5/01 (translated by Malcolm Greenwood).
8. Organisation for Economic Co-operation and Development. About OECD.
9. OECD Financial Action Task Force on Money Laundering. Basic Facts about Money Laundering.
10. US Senate. MINORITY STAFF OF THE PERMANENT SUBCOMMITTEE ON INVESTIGATIONS REPORT ON CORRESPONDENT BANKING: A GATEWAY FOR MONEY LAUNDERING (2/5/01)
11. Ibid.
12. U.S. Companies: Tangled in Web of Drug Dollars. The New York Times 10/10/00.
13. US Dept. of Treasury. Bank Secrecy Act/Anti-Money Laundering -- Comptroller’s Handbook. 12//00.
14. Catherine Austin Fitts. Narco-Dollars For Dummies (Part 2).
15. Michael C. Ruppert. Wall Street’s War For Drug Money (videotape). From the Wilderness Publications.
16. NYSE Chair Meets Colombia Rebel. Associated Press 6/26/99
17. Catherine Austin Fitts. The Ultimate New Business Cold Call: NYSE Exchange Chief Pitches Colombian Rebel Forces.
18. Revolutionary Armed Forces of Colombia People´s Army.COLOMBIA: LEGATIZATION OF DRUG CONSUMPTION. THE ONLY SERIOUS ALTERNATIVE FOR THE ELIMINATION OF THE NARCOTICS TRAFFIC.
19. Timothy Pratt. The Drug War's Southern Front. REASON 4/00.
20. Translated from http://www.colombialibre.org/reportajes/entrevistas_report2.htm#la_noche by Narco News Bulletin.
21. El Tiempo 10/17/01. Translated by Narco News Bulletin.
22. State Dept’s Reeker Claims Ignorance. Narco News Bulletin 10/24/01.
23. Robert D. Lamb. Colombia's powder keg. Salon 10/8/99.
24. Frank Smyth and Maud S. Beelman. Pentagon Trained Troops Led by Officer Accused In Colombian Massacre. The Public i, 3/31/00.
25. The National Security Archive. War in Colombia: Guerrillas, Drugs and Human Rights in U.S.-Colombia Policy, 1988-2002.
26. Bush praises Pastrana for fighting 'narco-terrorism.' CNN 2/18/02
27. Terrorist Group Profiles. Dudley Knox Library, Naval Postgraduate School.
28. Interpol. Drugs seizures rise sharply in 1999. Undated press release.
29. United Nations. OPIUM POPPY CULTIVATION IN AFGHANISTAN AT RELATIVELY HIGH LEVEL’, SURVEY CONFIRMS.
30. US and UN 'ignoring’ menace of opium cultivation. Financial Times 2/17/02.
31. Bush excuses Afghanistan, Haiti from drug penalties. CNN 2/26/02.
32. Patrick Cockburn. Drug Control Agency in Kabul is Evicted. Counterpunch 1/29/02.
33. Interpol, op. cit.
34. IMF Backs Official Shift to US Dollar by Afghans. The New York Times 1/31/02.