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Show arbc Business Salt Ialrc Srilmnr Monday Section Morning-Janu- 20, ary 16 Page 5 B Investigators Pursue Trails of Cash to Expose Drug Dealers By David Eisner Chicago Tribune Writer On Feb 1. 1983, banker Raymond L Ugalde welcomed three new clients a banker, a businessman and the man's wife to RepublicBank of Houston Each was carrying a suitcase stuffed with cash. In later court filings, Ugalde, then a vice president in the bank's international section, said he had made advance inquiries about one of the visitors, Carlos Behn Freosa, and learned he was the manager of a GuaBanco Nacional dalajara branch de Mexico and the scion of a wealthy family. Ugalde expressed atonish-men- t that a man of Behn's reputation was involved in a kind of transaction commonly associated with drug traffic. "All the information I received was favorable," Ugalde said. "Thats why when he came in the first time, I didnt expect, you know, cash in suitcases and all that. But that didnt stop Ugalde from helping Behn open accounts or from inviting the trio into the bank's vault, where other bank employees emptied the suitcases and counted the bundles of cash. He even asked Behn to cal! in advance the next time so the bank could handle their money more expeditiously. In December, Ugalde and Behn were among 44 people, a bank and two offshore companies indicted by a federal grand jury in connection with a drug ring accused of importing 250,000 pounds of marijuana into the United States from Mexico. Ugalde and Behn were charged with devising g a scheme that sent $6,275,000 from RepublicBank to two shell corporations in the Cayman Islands, then to New York and back to money-launderin- Houston. In another count of the same And in another in- Franklin Savings of Mission. Texas, and a relative by marriage of the alleged leader of the drug ring, was charged with ordering a $10,000 cash transaction broken into two $5,000 transactions and instructing tellers to lie if asked about Bank of McAllen, Texas, and its president, James Fox, were charged with helping convert proceeds from drug sales into loans, which were used to buy gold The government charged that Fox ordered bank tellers not to file currency-transactioreports on the transactions. Currency-transactioreports are the single most important tool available to law enforcement officers to trace unwarranted surpluses of cash in banks and the movement of money around the country from drug operations and other illegal activities Under law, banks must file reports on all transactions of $10,000 or more. n it n Federal prosecutors charge that some 40 banks were used to launder, disguise, hide, convert and protect illicit profits The indictment traces about $20 million through institutions ranging from BankAmerica and Citicorp to the Edinburg (Texas) Teachers Credit Union Only Metropolitan National Bank was indicted Federal Los Angeles Times Service Finance ministers and central bankers from the free worlds five largest nations agreed Sunday to extend their cooperation to control the value of the dollar and rejected a proposal for a coordinated reduction of interest rates. e A terse, statement issued by the British Treasury at the end of the two-da- y meeting expressed satisfaction with the 14 percent to 16 percent drop of the dollar against the strongest currencies since the five first announced their joint effort to reduce its value. three-sentenc- They agreed that cooperation should continue and that the progress which has been made should not be reversed, the statement declared. The meeting of the Group of Five included the ministers and central bankers from the United States, Britain, West Germany, France and Japan. d The dollar has been a contributing factor to the large U.S. trade deficit and massive surpluses achieved by Japan and West Germany during the past two years. Japan last week reported a record $46.1 billion surplus on merchandise trading for last year. This included a $39 billion surplus with the United States. Although there was no mention in the official statement of a discussion on interest rates, one source attending the meetings, who declined to be over-value- Morrison-Knudse- n Morrison-Knudse- n BOISE, Idaho (UPI) Corp. plans to transfer up to Co. Power 63 of its 78 Division employees from Idaho to Cleveland in order to have the division closer to its markets, spokesman Vern Nelson says. All but 15 of the 78 Boise Power Division employees have been given the opportunity to move to Cleveland, Nelson said, but he did not know how many would accept the transfer. i cmpgaim? 20 DOWN ON GOLD, SILVER & PLATINUM Bannister Brighton's Layaway Program allows you to control $10,000 worth of precious metals with as little as $2,000 Call Toll Free Today! prosecutors say that the others were more or less dupes, though suspicions should have been roused when, for instance. couriers purchased multiple cashiers checks in amounts of just less than $10.0o0 so they wouldn't filtrigger the currency-transactioings The Texas case, dubbed Operation Cash Crop" by federal agents, is instructive for the variety of money- laundering techniques employed, but it's hardly unique As part of a continuing attempt to squeeze drug dealers and cut them off from their funds, federal prosecutors are increasingly pursuing paper trails of money to identify and convict traffickers In the process, a number of banks Chicago Tribune Service which creates a pa'er trail of the transaction for the Treasury I The checks are deposited and consolidated in rk tuunts from where thty may wired overseas. Snuggling Some money laundering schemes involve smuggling currency out of the country to bar. ir cocrnes with strict bank secrecy laws. By accepting cash shipments from drug tre'ficker or others engaged in illegal activities, a money launderer provides two services. He disguises the origin of the money by depositing it into the offshore bank and later withdrawing it as a wire transfer or loans to shell corporations, and he arranges for payment to a drug supplier in the currency used in that country. The Presidents Commission on Organized Crime has estimated that apof the illegal proximately Money can be laundered in a number of ways The simplest is to exknown in change $5s, $10s and $20s as the parlance of the dreg trad for larfac-- bills street money art-men- t. r Other methods include: Smurfing. "Smurfs' a.e the financial mules of money lauutu.. iii6, the couriers who wash dirty money by buying cashiers checks with illicit funds. The banks they hit are said to have been smurfed. Smurfs travel by car and even airplane from city to city, often visiting to a dozen banks a day. avoid suspicion, they prefer banks that are lax in asking for identification. One ring consisted mainly of middle-age- d women. Smurfs always have checks issued for less than $10,000 to avoid having to file a currency transaction report, off-sh- Well-dresse- d two-thir- ds drug me ey madn n .he United Slates 'h t movs .r.U ir.U national financial channels through Columbia, Panama, tne Bahamas or the Cayman Islands. Currency exchange. A more elaoorate scheme involves a currency exchanger or other seemingly bus. ness that handles large a iounts of ersh. The cuirency exchange or other isiness will process crime proceeds under the cover of the business and will withdraw it in cashier's checks. These checks are not made payable to the criminal client but to their intended payees, such as boat builders who supply the craft for drug running. Other checks are carried abroad to pay drug suppliers. Casinos. Proceeds from drug sales or other illicit activities are taken to Nevada and Atlantic City casinos, where they are exchanged for . rses - Duffy FROM W.6. Cronwell i pres . TO; All managers identified either by name or nationality, said that a proposal to coordinate a reduction of interest rates was re- As you know, our consultant Philip Lucre is capable of solving a problem a minute . jected as impractical at the present time. Japanese Finance Minister Nororu Takeshia and his French counterpart, Pierre Beregovoy, had both called publicly for such action as a way to stimulate world trade and ease servicing charges on the estimated $800 billion in debts that saddle Third World countries. However, both West Germany and the United States reportedly felt that in the present economic climate, such a move might generate renewed inflationary pressures. The representatives from the five nations also reportedly discussed, but apprently took no immediate action on, a plan presented by Secretary of the Treasury James A. Baker III to lend the financially struggling Third World countries an additional $47 billion over the next three years. Nearly half this money would come from from commercial banks, the balance from international agencies such as the World Bank. The financial leaders from the five countries meet routinely to review global economic trends, usually attracting little publicity. That attention was heightened significantly when West German Economics Minister Martin Bangemann last weelt said that the meeting would discuss a plan to lower interest rates. to have a serious problem shortage, causing a drastic rise in cost per solution However, we seem . More Mergers Expected the identity of depositors and help thwart federal reporting requirements on domestic or foreign transactions "Fees are always a part of the deal, said Charles Blau, deputy associate attorney general in charge of the Justice Department's task force against organized crime. Ive not run into a case where the bank or financial institution did it for free No one knows how much money from drugs, gambling, loan sharking and other illegal activities is being laundered through the nation's banking system Estimates range from $40 billion to $120 billion a year. Recent developments indicate a widening scope for money laundering and involvement by some of the nation's largest and most respect banks As federal law enforcement agenhave increased their scrutiny of cies The somemoney launderers, chips. times without gambling, take the banks in Florida and other drug cenchips back to the window and ask the ters, traffickers have shifted much of casino to wire the money to a foreign their money laundering to other parts of the country, including the financial account. centers of Houston and Chicago' inTo discourage money laundering, vestigators said. Nevada casinos, like banks, were reBig and small bank3 are involved cently required to file currency reThere appears to be only one comfor of transactions more than ports mon denominator, Blau said, and $10,000. Atlantic City casinos already that's greed were required to file the reports. In the last year, no fewer than six Foreign launderers. A currency major institutions have said they exchanger abroad maintains domesbreached the law designed to thwart tic and foreign accounts, with a manlaundering, though the banks aging agent in the United States to money say it's improper to infer that they collect and transport money. were involved in such schemes. Since No cash or monetary instruments 1975, 25 banks and 15 of their employneed leave the United States. The ees have been convicted of criminally principal money launderer receives violating currency-transactiorenotification from his U.S. agent that a requirements. porting deposit has been made to a U.S. acLast August, San Francisco-base- d count. He then pays off the clients Crocker National Bank, a unit of Madrug suppliers. rine Midland BaaV "PLC of London, was fined $2,250,000 by the Treasury Department for failing to report 7,877 by Bruce Ilammond cash transactions totaling $3.98 billion. Most of those funds involved transfers from banks in Hong Kong, identified by the President's Commission on Organized Crime as a banking center for the heroin trade. Four big New York banks paid a total of $1.2 million for similar violations. And in what would be the largest penalty, BankAmerica Corp. is reportedly ready to pay as much as $7 million. In that instance, First National pleaded guilty to a felony charge of knowingly and willfully" failing to report $1.22 billion in cash transactions with nine foreign banks and was fined $500,000. Much of the money was carried in satchels on commercial flights across the Atlantic to the Boston bank, government investigators said. According to Treasury officials, the Internal Revenue Service has 55 to 60 criminal investigations-- ' open the competition at its own game. banks around the country. against sevThey did beat the competition About 60 banks, including BankAmereral analysts here described the ica, have come forward to tell of curfuture as bleak and disviolations. rency were but profit margins mal currency-transactio- n Nevertheless, trimmed diastically in the bargain. reports and currency- - or strument Now, however, those winners in reports for foreign e the war, who attempted to transactions haven't effectively idenmake up what they lost in profits with tified or halted money laundering. sales volume, now face devastating Even when reporting requirements competition from specialty retailers aren't deliberately ignored, its- - easy and curtail costs who boost profits to hide the launderers' identities. by selling only to carefully targetFurther, reporting delays frequented market segments like executive ly make it hard to trace money movewomen and Yuppie children. ment. A major problem in uncovering schemes has been Retailers are learning a hard lesthe tremendous volume of paperwork son, that building volume no longer through which investigators have had produces profits, said Arnold Aronto wade. You almost have to knpw in son, chairman of Batus Retail, which advance what youre looking for," owns Fields and Saks. In fact, it can c said one prosecutor. erode profits. money-launderin- money-launderin- g n Small Gains to Force Retail Regrouping Chicago Tribune Service With 1986 sales and profits expected to show only marginal gains, retailers will face a wave of consolidations, mergers and acquisitions in the next 11 months, said executives at the National Retail Merchants Association's annual convention here. "Retail sales will grow a maximum of 6 to 7 percent, which translates to 2 to 3 percent when inflation is taken out, said Kurt Barnard, a New York retail consultant and publisher of Barnard's Retail Marketing Report. We ll see a lot of a lot of consolidations and as retailers begin to personnel cuts figure out that this is the way its going to be for the foreseeable future. NEW YORK - to Move Bulk of Idaho Workers Based in Cleveland, M-- Ferguson employs about 600 people and specializes in construction and engineering services for industries ranging from food processing to aerospace. Nelson said Friday the Power Division has been hurt by the nationwide slowdown in construction of coal-fire- d and nuclear power plants. Most of the work in the division has turned to retrofitting and disman tling nuclear power plants, and converting old fuel oil plants to coal or natural gas. Since most of those plants are located in the East, the division should be closer to its market. Nelson said. The latest move of Power Division employees from Boise to Cleveland follows the similiar relocation to Cleveland last April of 43 Power Division employees from the design section. A scant three weeks into the year, what could become a deluge of consolidations has already started, with K mart Corp. divesting two unprofitable subsidiaries and the Batus Retail group putting nearly half its operation on the selling block. The Batus units, particularly the 36 troubled Gimbels units in the Midwest and East, were believed to be only marginally profitable at best. Thomas M. Macioce, chairman of Allied Stores Corp., said the countrys department stores and mass merchandisers have no one to blame but themselves for their flat sales and dwindling profitability. They do business pretty much by rote, by what they did last year, he said. Theyve got to learn that they cant look at market share only in terms of sales volume, that theyve got to look at it in terms of profitability, Macioce said. And that means were going to see some redeployment of assets. 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