LETTER TO WILLIAM J. CASEY FROM JEREMIAH DENTON

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90B01370R000500780029-1
• Release Decision: RIPPUB
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• Document Page Count: 15
• Document Creation Date: December 22, 2016
• Document Release Date: October 22, 2008
• Sequence Number: 29
• Publication Date: March 2, 1984
• Content Type: LETTER

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United ~5tates senate
COMMITTEE ON THE JUDICIARY
WASHINGTON, D.C. 20510
STROM THURMOND, S.C., CHAIRMAN
CHARLES MCC. MATHIAS, JR., MD. JOSEPH R. BIDEN, JR., DEL.
PAUL LAXALT, NEV.
ORRIN G. HATCH, UTAH
ROBERT DOLE, KANS.
ALAN K. SIMPSON, WYO.
JOHN P. EAST, N.C.
CHARLES E. GRASSLEY, IOWA
JEREMIAH DENTON, ALA.
ARLEN SPECTER, PA.
EDWARD M. KENNEDY, MASS.
ROBERT C. BYRD, W. VA.
HOWARD M. METZENBAUM, OHIO
DENNIS DECONCINI, ARIZ.
PATRICK J. LEAHY, VT.
MAX BAUCUS, MONT.
HOWELL HEFLIN, ALA.
VINTON DEVANE LIDE, CHIEF COUNSEL AND STAFF DIRECTOR
DEBORAH K. OWEN, GENERAL COUNSEL
SHIRLEY J. FANNING, CHIEF CLERK
MARK H. GITENSTEIN, MINORITY CHIEF COUNSEL
Honorable William J. Casey
Director
Central Intelligence Agency
Washington, D.C. 20505
Dear Mr. Casey:
JD:ej
Enclosure
The attached article from the February 18, 1984
edition of The Nation contains several allegations and
comments concerning CIA involvement in drug trafficking
and associations with organized crime.
Please review the article and provide a response
to the allegations and comments by March 19th.
Thank you for your attention in this matter.
E>:ecutive istry
84. 93
JEREMIAH DENTON, ALA., CHAIRMAN
ORRIN G. HATCH, UTAH PATRICK J. LEAHY, VT.
JOHN P. EAST, N.C. HOWARD M. METZENBAUM, OHIO
JOEL S. LISKER. CHIEF COUNSEL AND STAFF DIRECTOR
2 March 1984
Jeremiah Denton
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186 The Nation.
A r _11CI -IJIL-1
111
GOLDEN GATEWAY FOR DRUGS
T Iie 1\'iiuii1
Connection
Abou t two and a half years ago, Penny Lernoux told us she
wanted to follow her just-published Cry of the People with
a book about banks. We assigned an intern, David Corn, as
a full-time researcher on the project. When the first draft of
her book came in, we were fascinated by some of the stories
she had collected on Miami's booming drug scene and asked
her to expand them into an article, with her banking mate-
rial serving as a backdrop. She did so and here are the re-
sults. (Additional research, supervised by Eric Etheridge,
was done by interns David Bank and L.A. Kauffman.)
-The Editors
PENNY LERNOUX
Miami international Airport. All year round, the
mile-long concourse is jammed with sweating
people who pound on ticket counters and push
through customs gates. The worst crush is at
the counters of the Latin American airlines, where crowds
of Spanish-speaking passengers mill about, surrounded by
wailing children, anxious relatives and enormous crates of
gringo goodies-inflatable boats, television sets and refrig-
erators. At Colombia's Avianca, airport security guards
are regularly called to clear a path through the nob and
the boxes.
"You live in Colombia, huh?" says the Cuban exile taxi
driver as we slam out of the airport. "I'm looking for some
extra business. You wouldn't happen to have any coke
for sa le? "
When I say no, he floors the accelerator and jumps
the light at the tollgate on the freeway. "I'm not going
to pay their fucking toll," he says. "Those gringos, their
rules are for them, not us." One hears that often in Miami.
'Casablanca on the Gulf Stream'
When the narcotics boom took off in the mid-1970s,
Miami became the drug capital of the world. More than 70 per-
Wit of' the U.S. supply flows through it. The traffic has
brought drug-related crime (Miami's murder rate is the na-
tion's second highest) and wealth in the form of "narco-
bucks," which are laundered in legitimate as well as shady
banks and financial institutions. The huge influx of hot dol-
Penny Lernou.r is The Nations Latin America correspond-
ent. This article draws on In Banks We Trust, published this
month by Anchor Press/Doubleday. ? Copyright 1984 by
Penny Lernoux. The author gratefully acknowledges the as-
sistance of The Fund for Investigative Journalism.
tars has made Miami a rival to New York City as the nation's
financial capital.
"Casablanca on the Gull Strc,un,'' one crime expert Calls
the city. The intrigue and corruption resemble that in the
movie, but the city is also a microcosm of U,S. society, with
the same venal politicians and crime overlords pulling invisi-
ble strings. Spanish-speaking criminals add Latin spice to
this down-home dish and have brought with them the cor-
rupt practices endemic to politics in their native lands.
Four groups of players are prominent in the Miami ac-
tion: Italian and Jewish crime syndicates; Cuban exile ter-
rorist groups and the Central Intelligence Agency; Latin
American drug dealers; and bankers.
The Cuba-Mafia-C.I.A. Axis
A high proportion ul' the Latin drug LIcalers arc Cuban
exiles. Actually, the Cuban drug connection goes back to
Prohibition and the rise of' Charles (l..ucky) Luciano, one
-of the most brilliant organized-crime executives of the cen-
tury. In the early 1930s lie restructured the Old Mafia into
twenty-four family cartels. Luciano also brokered an en-
tente cordiale between the Mafia and the Jewish mobs of'
Meyer Lansky, who became Luciano's lieutenant and later
the financial genius 01'01C U.S. underworld. With the end of
Prohibition in sight, Luciano turned to heroin, which of-
fered an attractive substitute for the liquor trade. His agents
developed an efficient supply network in China, where
Gen. Chiang Kai-shek had come to power with the help
of the Shanghai heroin cartel.
Under dictator Fulgencio Batista in the 1930s, Cuba be-
came the principal entry point of Luciano's heroin network.
Lansky controlled the Cuban traffic as well as most of
Havana's gambling casinos, but his base of' operations was
Florida. There he became friendly with Sicilian-born Santo
Trafficante, who had earned his reputation as an effective
organizer in the Tampa gambling rackets. Lansky came to
trust Trafficante and in 1940 put him in charge Of his in-
terests in Havana. By early in the next decade, Trafficante
had carved out an empire of his own, and lie set up his son
Santo Jr. with the Havana rackets. When the elder Traffi-
cante died in 1954, Santo became Mafia boss of Florida. Un-
ostentatious and self-effacing, he proved to be one of the
most effective organized-crime leaders in the United States.
After Luciano's death in 1962, his number-two men,
Lansky and Vito Genovese, were the logical successors.
Genovese, however, was serving a fifteen-year sentence on a
heroin-trafficking charge; Lansky, then in his 60s, was too
old and too carefully watched to become more actively
involved. Thus, Luciano's role went to Trafficante by
default.
Fidel Castro's revolution in 1959 cost Trafficante and
Lansky their lucrative Cuban operation. The loss was par-
tially offset by Trafficante's control of Florida's bolita ac-
tion. This Cuban lottery had become a big moneymaker
because of all the anti-Castro refugees who came to Flor-
ida in the 1960s. Trafficante's organization recruited Cuban
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rrhe Nation
gangsters to rim the lottery and serve as narcotics couriers
and distributors. When the C.I.A. called for volunteers for
the Bay of Pigs invasion, Trafficante mustered a respectable
contingent. Shortly before the invasion, in 1961, he col-
laborated in a C.I.A. plot to poison Castro, and in 1963 he
was involved in it bizarre boat raid against Cuba, sponsored
by the C.I.A. and William Fawley, a wealthy financier who
once owned the Havana bus system and several Cuban sugar
refineries, and who had served as a special assistant to the
Secretary of State in the Truman Administration.
The C.I.A. has its own links to the heroin traffic. In The
Politics of Heroin in Southeast Asia, Alfred McCoy shows
that during World War 11, Luciano and Lansky secretly
worked with the C.I.A.'s forerunner, the Office of
Strategic Services, as part of the war effort. Supposedly
for the same reason, O.S.S. agents in China became deeply
involved in the heroin-funded politics of Gen. Chiang Kai-
shek. After the war and Chiang's defeat by the Com-
munists, opium production shifted to Southeast Asia, and
several of the most important agents who had collaborated
with the generalissimo moved to Miami.
One of those agents was Miami banker and lawyer Paul
Helliwell, who had served as chief of special intelligence in
China. When the O.S.S. was reorganized as the C.I.A., he
was in on the ground floor. He was Colonel Helliwell in
those days, and E. Howard Hunt was one of his agents.
C.I.A. sources told The Wall Street Journal that in Asia,
Helliwell frequently bought information with five-pound
lots of opium ("three sticky brown bars"). After the war he
returned to his native Florida, where he helped set up and
run Sea Supply Inc., a C.I.A. front in Miami. Sea Supply
shipped arms to Thai opium producers and to members of
the Nationalist Chinese Army who had fled to Burma. and
were engaged in opium smuggling. During the buildup for
the Bay of Pigs invasion, he served as the C.I.A.'s
paymaster in Florida; he later opened secret accounts for
Chiang Kai-shek's relatives and U.S. mobsters in a network
of Miami and Caribbean banks. Among his business associ-
ates was Louis Chesler, a Florida real estate developer who
had dealings with Meyer Lansky. Helliwell also served as
legal counsel to a Panamanian holding company that con-
trolled a Bahamian gambling casino connected with Lansky.
According to a close associate, Helliwell kept the spook and
gangster sides of his business separate. He cultivated the im-
pression that the latter was a cover for the former when the
reverse was probably closer to the truth.
After the Bay of Pigs disaster, the C.I.A. station in
Miami continued to work with the Trafficante organization
on plots to assassinate Castro. The head of the station,
Theodore Shackley, was later transferred to Laos, where he
helped organize the C.I.A.'s secret army of Meo tribesmen,
who were deeply involved in heroin trafficking. In 1973, he
replaced William Colby as chief of covert operations in the
Far East when Colby was promoted to Director of Central
Intelligence. To complete the picture, Trafficante himself
showed up in Saigon in 1968, during a tour aimed at replac-
ing Luciano's old China network with one based on South-
east Asian opium production.
The Cuban Connection
Preparation for the Bay of Pigs plot brought it host of
C.I.A. agents to southern Florida. The agency recruited it
force of 2,000 Cuban exiles and trained them in the arts of
bomb making, demolition and murder. After the invasion
failed, survivors of the exile army were in limbo. In the
1970s, when the U.S. demand for nu Tijuana and cocaine
took off, those veterans were naturals for the narcotics
trade. A former commando leader who had trained them
told a St. Petersburg Times reporter, "These people came
out knowing how you do it. They found [drug snuiggling]
absolutely child's play when they started in over here, be-
cause [U.S. law enforcement] didn't have that type of de-
fense. They didn't even need most of their expertise."
Washington's first inkling Of a Cuban connection came in
1970, when the Bureau of Narcotics and Dangerous Drugs,
predecessor of the Drug Enforcement Administration,
cracked a major heroin and cocaine ring run by veterans of
the Bay of Pigs invasion. By the mid-1970s law enforcement
agencies were inundated by waves of exile-directed drug
traffic. Other criminal activities flourished, usually with a
political cover. Miami police said that many instances of
crime in the exile community alleged to have been politically
motivated, such as the kidnapping and fleecing of supposed
Castro sympathizers, were purely mercenary shakedowns.
"Ninety percent of the people in exile terrorist organizations
like Alpha 66 and Omega 7 are extortionists," said a former
member of the Dade County Organized Crime Bureau.
"They have no intention of going back to Cuba-that's just
a cover for the same old mob rackets. But people are afraid
to challenge them because they're killers."
The record of Cuban terrorists is impressive: at least 200'
bombings and 100 murders have been attributed to them
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The Nation. February 18, 1984
since Castro's revolution, far surpassing the carnage caused by
Italy's Red Brigades or Libya's hit squads. Many Cubans
who engage in terrorism also traffic in narcotics. According
to crime historian Hank Messick, when the exiles began
trafficking, they claimed their motives were patriotic: they
were raising money to carry on the fight against Castroism.
"Just as Lansky excused some of his crimes in the name of
protecting Jews and then Israel, so did some Cubans hide
their appetite for quick money behind the flag of freedom."
The cover story has worked. Because of their supposed
hatred of Castro, the Cubans have literally been allowed to
get away with murder. Despite their bloody careers, they
move about freely, hold press conferences and rarely go to
jail; when they do, their stay is brief. As Messick has noted,
they are now "comfortably into their third decade as America's
first and only home-grown international terrorist group."
One of the "patriots"-cum-crooks was Ricardo (Monkey)
Morales, a self-admitted assassin and drug trafficker. The
stocky, silver-haired mercenary worked briefly as a secret
agent under Castro before immigrating in 1960 to Miami,
where he was employed by the C.I.A. and the F.B.I. While
in the F.B.I.'s pay, Morales went to Caracas, where he joined
the Venezuelan secret police, DISIP, and served as chief of
airport security. By Morales's account, the head of DIS1P
was a C.I.A. informant privy to a plot involving an Air
Cubana plane that made weekly flights from Caracas. In
court testimony and published interviews, Morales boasted
of his part in planning the October 1976 bombing that cost
the lives of seventy-three Air Cubana passengers, including
the entire Cuban national fencing team. Morales was unre-
pentant about the operation, which he and Miami police in-
sisted had been a C.I.A. job. "If I had to, I would do it over
again," he told The Miami Herald. Nor did he regret his
other escapades, which included murder, assassination at-
tempts and some fifteen to twenty-five bombings in the
Miami area. Monkey could afford such bravado: his intel-
ligence connections protected him from prosecution.
Morales was deeply involved in Miami's drug trade-once
he was caught red-handed overseeing a shipment of ten tons
of marijuana-yet he was never convicted, again because
of his "undercover agent" status. In one cocaine case in
Miami, Morales, who had been granted immunity, admitted
to a defense lawyer that he had murdered an anti-Castro ac-
tivist and tried to execute another (the victim survived seven-
teen machine-gun bullet wounds). "He told me about the
murder," the lawyer recalled to The Herald, "as cavalierly
as if he were talking about a new pair of shoes." Morales
apparently thought nothing of publicizing such deeds, since
he told the same story to The Herald. At the time of the at-
tempted execution, in 1968, Morales was a contract agent
for the C.I.A.; he was working for the F.B.I. when he mur-
dered Cuban exile Eladio Ruiz in broad daylight outside an
apartment building in downtown Miami. After the execu-
tion-reportedly carried out as a warning to Castro sympa-
thizers-Morales casually climbed into a waiting car and
drove away. Witnesses reported that the car was followed by
another, in which sat two well-dressed Anglos presumably
riding shotgun. The smooth-talking Cuban nut his end during
a gun battle in a Miami bar in 1982, the victim of the only
law he respected.
Morales obtained his coke supplies from Col. Luis Arce
Gomez., one of the organizers of tlic 1980 "cocaine coup" in
Bolivia, in which military leaders heavily involved in the
international narcotics trade seized power. For a time his
country's Interior Minister and now in exile in Argentina,
Arce Gomez once employed Nazi butcher Klaus Barbic to
set up death squads to terrorize the Bolivians and protect the
fleet of airplanes Arce Gomez used for smuggling cocaine.
Evidence suggests that Barbic himself may have visited
Miami sometime after the coup to negotiate a guns-for-
drugs deal.
Other clients of Arce Gomez included Bay of Pigs vet-
erans Francisco Condone-Gil, Rafael Villaverde and Frank
Castro, who ran a coke ring in Miami until 1982, when police,
acting on information supplied by the trio's former partner,
Monkey Morales, arrested them. Like Morales, those men
had moved freely in the international milieu of terrorism
and drugs. Allegedly, Condom-Gil was an important Miami
contact for the "French connection" heroin ring in the
1960s, and Villaverde was employed by the notorious
former C.I.A. agent and arms trafficker Edwin Wilson to
knock off the enemies of Libyan strongman Muammar el-
Qaddafi. Castro is believed to have masterminded a 1976
meeting in the Dominican Republic, at which Cuban exile
terrorist groups drew up a hit list. Reportedly on that list
was the name of Orlando Letelier, Foreign Minister in
Salvador Allende's government, who was assassinated by a
car bomb in Washington in 1976. Although the F.B.I.
botched the Letelier case, independent investigations proved
that Chilean dictator Augusto Pinochet had bankrolled a
neofascist group known as the Cuban Nationalist Move-
ment, now Omega 7, to carry out the murder.
As evidenced by John Dinges and Saul Landau's Assassi-
nation on Embassy Row and their articles in The Nation
[see "The Chilean Connection," November 28, 1981, and
"The C.I.A.'s Link to Chile's Plots" June 12, 1982], the
C.I.A. did its best to stonewall the F.B.I.'s Letelier investi-
gation, presumably because of the agency's close ties to the
Pinochet regime, which it had helped bring to power. C.I.A.
complicity would also help explain the F.B.I.'s reluctance to
follow through on the case and its repeated refusal to admit
that the assassins were involved in the drug trade. According
to Miami police sources, one of the indicted accomplices in
the killing, Guillermo Novo, had worked as a "mule"
(courier) for well-known Cuban dealers. In 1977 Novo went
into hiding in Miami's Little Havana section. A year later
police spotted him in a nightclub owned by one pf the god-
fathers of the Cuban mafia. Soon after, they arrested him,,,
along with a suspected trafficker with links to the Mexican
heroin trade in whose apartment Novo had been living. A thir
occupant of the apartment, Alvin Ross Diaz, also indicted for
the Letelier killing, was arrested carrying a bag of cocaine.
In an article in "Parapolitics/USA," a now-defunct news
letter on international crime and terrorism, John Cummin
reported that Miami detectives were perplexed by the F.B.I.'
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The Nation.
189
apparent indifference toward Novo and Ross I)iaz, although
they were wanted for questioning in the Letelier affair. Even
more perplexing was the revelation that an F.B.I. informant
had provided Novo with a series of disguises and a false
passport and driver's license while he was hiding in Miami.
The F.B.I.'s explanation for ignoring the drug trail to Little
Havana was curious: it didn't want the case "messed up
with dope." A more accurate explanation is that an investi-
gation would have revealed the C.I.A.'s-and perhaps the
F.B.I.'s-use of drug dealers as informants and for terrorist
missions.
As Cuban exiles point out, in their culture "appearances
are more important than reality." That, they say, is why so
many drug traffickers play the anticommunist game. Or as
drug trafficker Villaverde put it to The Herald, "I am a
friend of the terrorists. For me that's not bad when you do
it in the defense of liberty." Large sums of money sup-
posedly donated by the Cuban community to the legal de-
fense funds of renowned terrorist patriots may actually
come from the drug traffic. According to Miami police,
that was the source of the $400,000 raised to post bail for
Novo and Ross Diaz.
Cummings explains that for years the F.B.I. claimed it
could not crack terrorist organizations like Omega 7 because
they were popular in the Cuban community and informers
were hard to find. But officers with the Dade County
Organized Crime Bureau call that idea "crap." They say
that witnesses to crimes committed by those groups are
reluctant to testify because they fear being killed-not by
outraged patriots but by ruthless gangsters. That the F.B.I.
knew this is shown by its recent use of anti-organized-crime
statutes to prosecute Eduardo Arocena, the alleged leader of
Omega 7, and his chief lieutenant for racketeering.
Whatever the F.B.I.'s shortcomings, full responsibility
for failure to stop the Cuban terrorist mafia cannot be laid
at its door. F.B.I. agents say privately that the Bureau is an
instrument of the executive branch and that enforcement
policies change with the politics of the man in the White
House. Under Carter, for example, there was neither a
crackdown on (crrorist.N nor an enruuragrnrent of (hear,
tacit or otherwise. t'hat Waffling, reflected the Administra-
tion's halfhearted at(einlits to irnl>rove relations with
Havana. Reagan, in contrast, has turned back the clock to
the early 196Os by unleashing (Ire exiles against Castro and
Nicaragua's Sandinistas, Contra training cutups operate
openly in southern Florida; one camp conrnrander even
hosts a weekly Miami radio show. And Radio Marti's anti-
Castro propaganda will soon be broadcast by the Voice of
America to Cuba,, at an annual cost of $10 million. But if
anti-Castroism is in vogue, it is doubtful that the "heroes"
of the Bay of Pigs are a threat to the Cuban President. They
have become so enmeshed with drugs that many of them
have been or are now in jail.
A Drug Economy
The high visibility of Cubans and other Latins in Miami's
drug traffic enables Anglos to blame them for all of it. But
Miami would not be the nation's gateway for drugs without
the acquiescence of the city's civic and business leaders.
"We bankers are always saying how Miami has become an
international banking center like London or New York,"
observed the chairman of a Florida bank. "But that's a lot
of hogwash. The reason so many banks have opened offices
here is because of the hot money, particularly drug money."
A prominent lawyer decries civic apathy. "There is no
real interest here in preserving the quality of life," he told
Time. "I don't think there is any real community outrage
about the drug trade. When I urge the junior lawyers here to
join civic groups instead of playing racquetball, they say
they're not interested."
Miamians who do speak out, like insurance executive
Arthur Patten, a former City Commissioner, are vilified by
their fellow citizens. Municipal leaders called Patten a
coward and told him to shut up after he made negative com-
ments about the city to the press. He lost business from
hotel owners, who were annoyed by the bad publicity he
generated, and eventually he moved to North Carolina. But
playing ostrich won't solve the problem. As The Miami
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street. Lveryonc has a personal horror story---getting
caught in the crossfire of a gangland shooting at the local
shopping center, watching in terror as the occupants 01' two
cars spray each other with machine-gun bullets at a
stoplight. Perhaps the most bitter reaction was that of a
Colombian banker. During his first week in Miami, the
banker's briefcase was stolen front under his legs while he
was paying his bill at the luxurious Omni Hotel. Then the
hubcaps on his car were stolen. One night lie and his wife
went out to dinner, leaving their newborn son with their
Colombian maid, who had been with the family for years.
Their house had two different alarm systems, one of which
was connected to the local police station. Upon returning
home, the couple discovered the maid's body floating in the
swimming pool; their baby was safe in his crib, but his
clothing was drenched, as if lie had been in the pool.
The banker swore that if one more thing happened to him
or his family, they would pack up and return to Bogota,
once considered the most dangerous city of its size in the
hemisphere.
The Miami Herald is full of such stories from people who
want to know why "the city of my dreams" has become
Dodge City South. In the last decade, the homicide rate in
South Florida has jumped more than 400 percent, making
Miami one of the most dangerous cities in the United States.
"When you see a helicopter, you know they've found an-
other body," said a college professor, whose backyard was
used as a murderer's dumping ground several years ago. The
corpse was of a young Colombian man who had attended
the birthday party of a neighbor's daughter. Like most
crimes in Miami, the murder was never solved, and to this
day the professor and his neighbors have no idea why the
man was killed, "except that lie was a Colombian."
Since 1980 the Miami police force has been enlarged, and
there are more judges on the criminal circuit; even so the city
cannot cope. "In an average month we file 2,000 felony
cases after screening," said George Ray Havens, head of the
Miami Criminal Investigative Division of the State At-
torney's office. "If every individual charged was granted a
jury trial, we wouldn't be able to file another case for at
least three years." The Criminal Investigative Division has
twenty-two agents and receives nearly 500 requests for inves-
tigations every month. "If the case is complicated-say, a fi-
nancial racket-we just can't handle it," said Havens. A law-
yer in the U.S. Attorney's office cited in Harper's said that
even if no cases were added, it would take the sixty-three full-
time lawyers under him nine years to finish those already filed.
The Miami police are reluctant to accept drug cases be-
cause they have no more room to store the evidence, even
after burning tons of marijuana in the Florida Power and
Light Company's furnaces. The Key West sheriff's office
finds itself most days with a stash worth $4 million on its
hands; the sheriff's men spend most of their time protecting
it from thieves. Convicted drug dealers are jamming Florida
prisons: between 1978 and 1980 paroles jumped 50 percent
as burglars, armed robbers and other criminals were turned
loose to make room for them. Still, most drug traffickers,
even the biggest fry, serve only a short time: the average
Herald has repeatedly said, "Reality, not image, is South
Florida's problem."
A Florida grand jury that studied crime in Miami agreed:
We recommend that the hard issues begin to be addressed.
We find that we have not fully committed ourselves as a
society to eradicate narcotics, and perhaps we never will. Our
local economy apparently has benefited enormously and our
culture has become tolerant of marijuana and even of co-
caine. Yet we ask the small numbers of law enforcement
personnel assigned to narcotics interdiction to stop a
supply for which we create a demand. That is clearly a costly
hypocrisy.
Charles Kimball, a real estate economist who watches
foreign purchases of South Florida property closely,
estimates that nearly half the $1.5 billion that foreign com-
panies invest annually in Miami real estate comes from il-
legal sources: drug dealers, organized-crime syndicates,
foreign criminals and international swindlers. The construc-
tion industry in Miami would be on the rocks were it not for
shady investors. The same can be said of retailers of luxury
items such as yachts and airplanes, and of accountants,
lawyers and other professionals who have fattened on the
narcotics traffic. In an article in Inquiry, a spokesman for
the U.S. Customs Service, one of five Federal agencies try-
ing to stop the drug traffic, said: "You know what would
happen if we really did our job here? If we were 100 percent
effective, we would so drastically affect the economy that
we would become the villains."
Dodge City South
Crime is a major concern among Miamians. Instead of
talking about the weather or last night's TV program,
neighbors discuss the latest robbery or murder on their
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rj11 u' N-4-otl,
sentence is less than Iwo years, with eligibility for parole
after it year.
About all the overburdened authorities can do about the
murder rate is to keep a body count, and that is a challenge.
So many corpses pile up at the Miami morgue that since
1981 the Dade County medical examiner has had to rent it
refrigerated hamburger van to house the overflow. "If you
stay here, you arm yourself to (Ile teeth, put bars on the win-
dows and stay at home at all times," Arthur Patten told
reporters. "I've been through two wars and no combat zone
is as dangerous as Dade County."
Gun sales are rising, as are purchases of security
devices-alarms, locks, floodlights, guard dogs, surveil-
lance systems. In 1981, gun sales in Dade County were
up approximately 46 percent over the previous year.
"Most customers are people like your mother," said the
owner of a gun shop in Time. "They're just average, every-
day folk who want to continue to live." Even those who
favor stricter gun-control laws doubt they would have much
effect in South Florida. "If you take guns away, they'll use
knives," a police captain told Mpclean's. "11 you take away
knives, they'll use a hammer. Hammer, saw. Saw, machete.
Pretty soon we'll be back to hands."
No one is immune from crime. The regional commis-
sioner for the Customs Service was mugged and robbed
outside a Miami disco. A Federal judge's life was threatened
by drug defendants. A Florida drug gang let out a $200,000
contract to hit men: their job, to kill all the State's wit-
nesses before the gang's upcoming trial. Governor Robert
Graham told inc that after lie visited Colombia seeking the
cooperation of local authorities to stop the cocaine trade, a
Colombian mob dispatched an assassin to Tallahassee to
kill him.
The Colombian Brethren
The Colombian mafias are much like the Sicilian original,
tightly knit organizations based on blood ties. The penalty
for betraying one's family is death; the sentence is usually
carried out by a Colombian-based hit man who takes the
morning flight from Bogota to Miami and returns that
night. Long the world's leaders in counterfeiting U.S.
dollars, Colombian racketeers have become more sophisti-
cated in recent years, mingling drugs, stolen securities and
counterfeit bills in giant money-cycling operations which span
three continents. They entered the U.S. cocaine market as
suppliers, but since the nlid-1970s they have taken control
of most of the distribution. (Cubans still dominate the mari-
juana traffic.) The Latin mafias arc organized like multina-
tional corporations, with separate divisions for imports,
transport, distribution and finance. A major smuggling
operation has 100 to 200 employees in Miami, usually illegal
aliens carrying false passports. The Florida organizations
are supported by larger ones in the producing countries,
where complaisant politicians are often paid to look the
other way. Some 200,000 peasant families in four countries
depend on (lie traffic for Ihcir livelihood.
Given the international scope of the traffic and the huge
sums of money involved, it is ridiculous to believe that any
THE PEOPLE OF NICARAGUA
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192
rI1,i' \tttloll
1 i brrnri t 18, 1981
police force ran interdict the flow. No matter how ninny
tons of narcotics are seized or how many people are ar-
rested, there will always be more where they came from.
Federal District Judge Alcee Hastings, who is frequently
criticized for the lenient sentences he gives in drug convic-
tions, explains that most of the people who come before him
are low-level traffickers. "Drugs are tearing the hell out of
the social fabric of America, but we're not catching the right
people," he told The Herald. "They're arresting a mule a
minute, an offender an hour. When they start catching
bankers, judges, senators ... you'll see who's tough. The
ringleaders are in a lot of trouble if they come before me."
The U.E.A.'s Numbers Came
In 1981 The Miami Herald printed the results of its f'our-
nronllr study of the Drug Enforcement Administration; it
went a long way toward explaining the basis of Hastings's
complaint. In addition to finding the usual bureaucratic in-
fighting, the study showed that the agency's principal weak-
ness is its obsession with statistics. To make the D.E.A. look
good, agents are ordered to concentrate on quick seizures
and arrests. They are often occupied for days, setting up
relatively small buys that yield no new information and no
important indictments. "All of us in law enforcement have
got to get away from this attitude that our sterling successes
involve the number of tons of marijuana and cocaine we can
seize," James York, commissioner of the Florida Depart-
ment of Law Enforcement, told The Herald. "A ton of co-
caine isn't worth a damn. You've got to penetrate the organ-
izations." Assistant U.S. Attorney Robert Perry added,
"Street operations are dangerous, disruptive, labor-
intensive, expensive and frequently unsuccessful."
Getting the high-level traffickers entails long, tedious
investigations for which few D.E.A. agents are trained and
on which they receive little support. Example: In 1981 a two-
month investigation by Operation Greenback, an interagency
task force, led to the arrest of Isaac Kattan, a Colombian and
the biggest drug-money launderer ever caught in Florida.
Kaftan was an impressive catch, but he was only a middle-
man. Others in the task force, particularly Internal Revenue
Service agents, wanted to delay his arrest, hoping he would
lead them to his bosses, but the D.E.A. insisted on nabbing
him for dealing in cocaine. "They got twenty kilos of coke
but not much else," said a member of the task force. "We
found that chopping off Kattan's head didn't kill off the
organization; another head popped up to do the same things.
If the D.E.A. hadn't been in such a hurry to make an arrest,
maybe we would have got the organization."
The Government Accounting Office criticizes the Justice
Department, which oversees the D.E.A., for not "taking
the profit out of drug trafficking." In a 1981 report, the
G.A.O. pointed out that although Congress,passed a law in
1970 enabling the government to seize the financial assets of
criminals, the D.E.A. "simply has not exercised the kind of
leadership and management necessary to make asset forfei-
ture a widely used law enforcement technique." As of
1980, the Justice Department had obtained a mere $2 mil-
lion in forfeited assets, the G.A.O. found, and most of
(]lose were items that drug rat tickers consider expendable,
like boats and airplanes.
Congress passed lire forfeiture law, expecting the Justice
Department to seize the U.S. and foreign hank accounts of'
the lop-level dealers. fit[[ drat requires all entirely new ap-
proach by the D.I-..A., which continues to see narcotics en-
forcenrent in simplistic cops-and-robbers terms. Observed
George Havens, "The attitude of the average bureaucrat is:
big cases, big problems; little cases, little problems; no
cases, no problems. People don't want problems."
It is also unhappily true that with so many narcobucks
floating around Miami, corruption among police agents,
judges and others is inevitable. One-l?iftIi of an entire divi-
sion 01'111C Dade County police force was indicted for taking
payoffs and engaging in drug trafficking. Two officers were
charged willi working willr a known drug racketeer. Jeffrey
Scharlatt, a former group supervisor of the D.E.A.'s Miami
office, pleaded guilty after being indicted by a Federal grand
jury on corruption charges. Florida's Attorney General, Jim
Smith, said in an interview on 60 Minutes, "Frankly, I lie in
bed sometimes at night and it . . . just scares me, the level
of corruption we pray have in Florida."
Terrorists and Politics
What role does drug money play in South Florida poli-
tics? The evidence is inconclusive, but the clout 01' Cuban
exile terrorists, some of them having narcotics connections,
suggests at least an indirect influence. However, their anti-
communist cover, President Reagan's support for exile
causes and local politicians' awareness of the importance of
the Hispanic vote (38 percent of the electorate in Miami)
have obscured the extent of the terrorists' penetration.
That Reagan is perceived as the Cuban exiles' friend in
Washington came up in a rather odd context in the recent
Miami mayoral race. The Democratic candidate, incumbent
Maurice Ferre, appealed to blacks and Anglos by telling
them that a vote for his opponent, Xavier Suarez, would
enable Reagan to "take control" of Miami. Suarez is a
Cuban exile.
Ferre is of Puerto Rican descent and is supposedly unsym-
pathetic to the Cubans, but even lie finds it expedient to
appeal to the Cuban terrorists who wield power in Little
Havana. Re-elected to his sixth term, Ferre calls the influ-
ence of terrorists in Miami politics "unavoidable." "It just
happens to be part of political life," lie told The Herald.
Last year, the Mayor led a delegation to Venezuela to re-
quest the release of Orlando Bosch, who was being held in a
Caracas jail, charged with participating in the Air Cubana
bombing in which Monkey Morales was involved. Although
Bosch is probably the most notorious terrorist in the Cuban
exile community, Ferre reasoned that associating with him
would be popular with the exiles.
Nor did Ferre have any compunction about associating
with Letelier hit-squad member Guillermo Novo in a came
paign to raise funds for Bosch's release. Novo was one of
eight terrorists listed on the campaign's official letterhead;
all have been indicted and some, like Novo, have drug con-
nections. Not to be outdone, Suarez dipped into his campaign
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treasury to contribute to the legal defense fund of Eduardo
Arocena, the alleged leader of Omega 7. In providing such
support, said Arthur Nehrbass, head of the Dade County
Organized Crime Bureau, politicians enhance the terrorists'
stature in Miami. "Respectability is an important weapon in
the terrorists' arsenal," he told The Herald.
Last year, Miami City Commissioner Demetrio Perez
proposed a plan to honor a Cuban terrorist who was killed
in Paris when a bomb he was assembling exploded. In 1982
the terrorist organization Alpha 66 gained respectability
when the Miami City Commission gave it a $10,000 grant
to arrange temporary housing for the Mariel refugees.
Ferre defended the grant, saying that Alpha 66 had "never
been accused of terrorist activities inside the United States."
Former Acting Chief of Police Adam Klimkowski said in
The Herald that Ferre told him he had heard "quite a bit
[about] bombings coming up" in the Miami area but refused
to provide any details. "I was flat irritated," Klimkowski
said. "Here the Mayor was saying he had information [on
terrorism], and he wouldn't divulge it to me."
The career of former City Commissioner Manolo Reboso
illustrates the shadowy line between politics and crime in
Miami. The son of Batista's military attache in Washington,
Reboso was an intelligence officer in the Bay of Pigs opera-
tion and later represented the Miami interests of Nicara-
gua's Somoza dictatorship. He also had business ties with
the Mianli-based World Finance Corporation (W.F.C.), which
laundered proceeds from drug sales. One of his principal
campaign fund-raisers was later indicted for embezzling
from a Texas bank that was a subsidiary of W.F.C. In 1981
Reboso ran for mayor amid accusations by Monkey Morales
-never proved-that drug traffickers were financing his
campaign. Like Ferre, Reboso defended the city's patriot
terrorists when he was City Commissioner.
In late 1983 officials of a Venezuelan government bank
charged that Reboso had failed to account for more than
$9 million of the $36.5 million it had loaned him to construct
a Miami high-rise which was to have housed the bank's
offices. The deal had all the markings of a Miami scam, in-
cluding offshore front companies and a cooperative banker,
who actively pushed Reboso's requests for unsecured loans.
The claim was eventually settled out of court.
Bank Laundrornuts
If the role of drug money in politics is murky, it is well
documented in the banking industry. Miami is the Wall
Street of the United States' $80 billion drug traffic. There
are more than a hundred banks in the city representing two
dozen countries. The most prestigious banking address is
Brickell Avenue, a block from Biscayne Bay, where gold-
and-black skyscrapers rise incongruously above the palm
trees. Coral Gables, where a hundred multinational cor-
porations have their Latin America headquarters, is also
considered it chic location. Architecture tends to reflect
management style: Citibank's Miami headquarters is housed
in a sleek glass building embellished with ultramodern
chandeliers; Credit Suisse's offices gleam with chrome and
mirrors. In contrast, the Republic National Bank, which is
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owned by Cuban exiles, operates out of an old-fashioned
structure decorated with middlebrow Latin American art.
Then there are the fly-by-night operations, some of which look
like converted hamburger stands. The initial capitalization
needed to obtain a bank charter in Miami is only $1.5 million (ill
a similar-size Ohio city, say, it can be as much as $5 million). If
a bank attracts even a small fraction of the $4 billion deposited
by Latin Americans each year, the profits are enormous.
When bankers know that money is hot, they accept it only
for deposit in non-interest-bearing accounts, or change it
into cashier's checks, which usually aren't returned to the
bank for collection for months, providing another pool of
interest-free funds. Some banks launder drug money on it
regular basis, earning up to 3 percent in commissions on it
and lending it out at a foal profit as well.
Unprofitable banks are easily sold; buyers, usually for-
eigners, are willing to pay two to three times the real value of
a bank simply because it has a Florida charter. The smaller
the bank, the more dubious the buyers it is likely to attract.
"In Miami they have a saying in Spanish: 'The sharks are on
the streets, not in the sea,''' said Richard 1-1. Dailey, presi-
dent of the small Dadeland Bank, who started his career in
California. "You wouldn't believe how many people come
in here to ask if the bank is for sale. This would never hap-'
pen in San Francisco."
"We used to have the same problem," agreed Aristides
Sastre, president of Republic National Bank, "but it's be-
come less prevalent because we've grown so much. I don't
know anywhere else in the United States where people just
walk in off the street and offer to buy the bank."
In addition to foreign and locally controlled banks,
Miami has forty-two Edge Act corporations (foreign and
out-of-state bank subsidiaries that deal exclusively in over-
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194
seas transactions) and another forty-eight foreign bank agen-
cies and representatives. Indeed, banks in Miami are more
plentiful than supermarkets-one to a block. The out-of-
state and foreign bankers claim that their institutions have
been attracted to South Florida by the area's explosive
growth, its Latin American trade or the need to service
customers like the multinational corporations in Coral
Gables. But according to it Treasury Department report, at
]cast it third of the banks in Miami are drawn by the huge
profits to be made from laundering drug money. As many
as forty banks have neglected to report cash deposits of
$10,000 or more, as required by law. The majority of those
are small banks, known to cops and crooks as Coin-0-
Washers. At least four such banks are controlled by drug
dealers, according to local and Federal law enforcement of-
ficials. The advent in 1981 of international banking facilities in
Florida, subsidiaries which operate under less stringent controls
than their parent banks, has contributed to the free-for-all.
Predicted a senior bank official in New York City at the time:
"It's going to be the biggest laundering game in history."
Because retail sales of marijuana, heroin and cocaine are
made on the street, dealers amass large numbers of small
bills. The banks feed bales of them into high-speed money
counters or simply weigh them (300 pounds of $20 bills
equals $3.6 million). A common sight in Miami banks is a
Latin lugging several shopping bags crammed with cash to a
teller's window. Professional middlemen prefer to deliver
cardboard boxes of cash to a bank's back door. If there are
any questions, the courier will often abandon the money.
When a Miami teller asked a woman why the money she car-
ried in a shopping bag had a fishy odor, she dropped it and
fled, leaving behind $200,000.
While the Federal government has tightened bank report-
ing regulations for large cash transactions and has arrested
a half-dozen Miami bankers, laundering operations still
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flourish. Since the drug boons began, the Florida banking
system has Consistently registered staggering annual sur-
pluses of cash-on average, $6 billion to $8 billion it ycar-
more than twice the surplus cash reported by banks in the
rest of the country. Financial experts calculate that more
than half the Florida surplus is hot money.
Customs officials say the banks have been inure Coopera-
tive in recent years. But William von Raab, U.S. Connuis-
sioner of Customs, told The New York T'ime's that in 1981,
Florida banks did not report $3.2 billion in cash transac-
tions, evidence of "flagrant violations by sonic of the em-
ployees of many of the institutions and even by some of (lie
institutions themselves." The practice declined briefly in
1980, alter Senator Williatll I'roxnlire Caine down hard on
the banks during hearings that summer on drug-money
laundering before his Colnnlittee on Banking, I lousing and
Urban Affairs. "But now we're back to pre-Proxmire
levels," claimed an undercover agent who worked on a
Miami F.B.I. Sting in which tile agents posed as middlemen
in a laundering operation. "The bankers were delighted to
deal with me when I was 'dirty,' '' she continued. "Bank
guards were always willing to carry crates of money into it
back room with counting machines. Cash reporting require-
ments never hindered banks, since they could afford to pay
the fines if caught."
Every Florida banker will swear his bank is clean, but as
Miami banker Anthony Infante told Proxmire's committee,
"Without banks . . . it would be almost impossible that
these transactions would continue to happen." Infante said,
"It is extremely difficult for it professional banker not to be
aware of the way in which drug traffickers try to use our in-
stitutions to facilitate their illegal transactions. In twenty
years as it bank officer in Florida, I have seen very few cases
in which cash deposits of any substantial amount are neces-
sary in the normal transactions of a customer."
Infante said that bankers must go beyond "the letter of
the law" to solicit information about customers. In his
testimony Rudolph Giuliani, a former U.S. Associate
Attorney General who helped Chemical Bank stop drug-
money laundering at its branches, agreed: "The law places
the responsibility on banks to obtain and report [informa-
tion] concerning domestic and foreign transactions."
Giuliani said he found that many bank employees were ig-
norant of cash reporting regulations and that ignorance led
to negligence-or worse. He urged closer scrutiny of
customers. "Among the problems I've seen is that there
were accounts maintained for drug traffickers and for
others who were engaged in illegal activities under phony
corporate names, and a simple visit to the business entity,
the address that was given when the account was opened,
would have revealed the fact that there was no such business
Address
City St to
in that location."
But many Miami bankers assert that it's none of their
business where the money-conies from. They apparently do
not realize how seriously connections with criminals can
damage an institution's reputation. "Thefe is no doubt .. .
that if the drug situation continues, the decent and respect-
able members of our community will eventually leave the
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February 18, 1984
r1sI)(' Nation.
THE NEW YOKK
PUBLIC LII3IIAIIY
I'ItLSLN I'S
area," Infante warned, "thereby damaging the image that
Miami has been for so long trying to build as an interna-
tional banking center." Alexander McW. Wolfe Jr., vice
chairman of Florida's giant Southeast Bank, told tile, "Peo-
ple will not take this place seriously as an international
banking center until this hanky-panky stops."
Southeast ought to know. When confronted by the com-
mittee's evidence that a major Colombian drug-money
launderer kept large deposits in his bank, president David A.
Wollard sheepishly admitted that lie had no information
on the man. "I honestly read more about it in the paper
than anyplace else," he explained. When asked whether
putting some bankers behind bars would encourage their
brethren to obey the law, he replied, "I can see where that
would greatly stiffen the resolve of all banking officials to
comply."
But no Florida banker has received a prison sentence,
possibly because, as one frustrated bank regulator told me,
juries "always seem to think that if the guy wears a three-
piece suit, he can't be guilty of any serious crime." The
Proxmire hearings and studies by the G.A.O. show that
most bankers believe they risk a slap on the wrist, at worst,
since regulatory agencies are unable or unwilling to stop the
banks from laundering drug money.
The Absent Regulators
The Bank Secrecy Act of 1970 gave regulators a powerful
tool for uncovering illegal banking transactions, but accord-
ing to the G.A.O., they have not used it. The act requires
banks to provide the Treasury Department with information
on the depositor for cash transactions of $10,000 or more,
except in the case of a customer that has a large cash now,
for example, a big department store. The information is
supposed to be filed within fifteen days of the deposit.
Transfers of $10,000 or more to foreign banks must also be
reported. The G.A.O. found that a significant number of
banks ignore those requirements. Some that do comply de-
lay their reports for as long as two months after the transac-
tion; by that time it is too late to take action. Few of the
banks surveyed by the G.A.O. claimed that the reporting re-
quirements were onerous, so excessive paperwork is no
excuse for their failure to follow the law.
According to an employee of the state banking regulatory
agency, most of the reports that are filed gather dust at the
Treasury Department because "nobody knows what to do
with them." The G.A.O. confirmed that few law enforce-
ment agencies use the reports and blamed Treasury for fail-
ing to encourage their distribution. The Proxmire hearings
revealed that divisions of the Treasury Department, in-
cluding the I.R.S. and the Office of the Comptroller of the
Currency, hide information from one another and from
state banking regulators, the Customs Service and the
D.E.A. Robert Serino, director of enforcement in the
Comptroller's office, told the committee that "bank
secrecy" prevents regulators from disclosing suspicious in-
formation, no m4tter how general, to any other agency.
Given the regulators' "dismal" record on reporting cash
transactions, said Senator Proxmire, it looks as though the
I IIli I'tORZIILlMI:R
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TUGS., FLIT. 21, The Artist and Photo-
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JOIN THE MADRE TO MADRE CAMPAIGN
Nicaragua is suffering severe shortages due to
contra attacks on key ports and an undeclare
U.S. boycott. Supplies urgently needed. Coll
funds now for fortified powdered milk
Joining hands and hearts
with mothers and children
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 Approved For Release 2008/10/22 : CIA-RDP90BOl370R000500780029-1
196
riijU' Nation.
Ft'bruurY 18, 1984
regulators use bank secrecy to protect violators, Paul
Homan, then deputy comptroller in the Comptroller's of-
fice, told the Proxmire committee that regulators are not
zealous in cracking down on laundering by the banks be-
cause drug-money deposits have no effect on a bank's
"financial safety and soundness." According to Homan,
"So long as the bank invests those deposits in overnight
money and is able to cover when the deposits are with-
drawn, there is no financial threat to the bank other than the
peripheral one of perhaps affecting the confidence that
people have in it, because of known associations with
criminals." In other words, the fact that a bank does busi-
ness with criminals, or is owned by them, is of minor impor-
tance to the overseers of the nation's banks.
Unable to prod bank regulators into action, the enforce-
ment division of the Treasury Department has initiated a
series of joint task forces in conjunction with the Justice De-
partment, using reports filed in accordance with the Bank
Secrecy Act to identify individuals and organizations involved
in laundering drug money. Modest in scope and relatively
new, those operations mark the first successful attempt to
take the profits out of drug trafficking. They have also pro-
vided an education in how money is laundered.
Isaac Kattan, the Colombian drug-money launderer ap-
prehended by Operation Greenback, ran a sizable operation
in Miami. (Kattan was given thirty years in prison for co-
caine trafficking, one of the few harsh sentences received
by a Florida dealer.) Although he dealt in hundreds of
millions of dollars, Kattan's methods were crude compared
with those of the top dealers. As go-between for Colombian
drug suppliers and U.S. buyers, Kattan received instruc-
tions, usually by telephone, to pick up payments for drugs
in Miami parking lots, restaurants, alleys and even on busy
Biscayne Boulevard. He and his Latin helpers lugged the
cash to his apartment, which was equipped with five count-
ing machines, a computer and a telex. When the money had
been sorted and stacked neatly in cardboard boxes, Kattan
took it to one of his friendly Miami banks for deposit, using
a currency-exchange business run by his Miami travel agen-
cy as a cover. The money was either telexed from the bank
to a Colombian currency-exchange house or was sent on a
more roundabout route through a brokerage firm or real
estate operation. When the dollars arrived in Colombia, the
exchange house converted them to pesos, usually on the black
market. For those services Kattan, like other middlemen in
the drug trade, collected a stiff fee. Task force agents
estimated that Kattan's Swiss bank account stash was worth
more than $100 million.
Since it is the source of three-quarters of the cocaine and
marijuana entering the United States, Colombia plays a key
role in laundering. The principal exchange houses used for
that purpose there are located in Barranquilla (marijuana),
a coastal town on the Caribbean, and Medellin (cocaine),
the second largest city. The more sophisticated operations
include a network of offshore banks in Panama, the Baha-
mas and the Cayman Islands, as well as dummy companies
incorporated in Panama and the Netherlands Antilles. The
idea is to create so many zigs and zags of intermediary stops
that it is virtually impossible to (race the paper trail out of,
and often back into, the United States. Kattan got caught
because he made only perfunctory attempts to hide his trail.
He often carried boxes of cash to the bank, and lie broke a
cardinal rule of money launderers by dealing dope. But lie
made his biggest mistake by relying on the discretion of the
Miami office of the brokerage first Donaldson, Lufkin and
Jenrette, which alerted the D.L'.A, that suspiciously large
amounts of money were moving through one of its accounts.
Smelly Money
That firm's scruples contrasted sharply with those of four
Miami banks with which Kaftan also did business: Great
American Bank, the Bank of Miami, Northside Bank of
Miami and the Popular Bank and Trust Company. When
Federal agents raided the Bank of Miami in 1981, they
found that bank employees had been switching funds from
one of Kaftan's accounts to another. According to the inves-
tigators, Kattan and members of his organization regularly
hauled huge sums of motu'y to the Bank of Miami and the
Great American Bank ($60 million to the latter in just over
a year). In an affidavit, an agent testified that lie once
heard Kattan apologize to Great American Bank official
Carlos Nunez for a suspicious-looking transaction. "Don't
worry-the main thing now is to count the money," Nutlez
assured him.
During a concurrent raid on the Great American Bank,
agents found a number of other irregularities, according to
court documents. An article in the July 20, 1981, Newsweek
summed up their discoveries:
Large cash deposits were sometimes taken to the bank's
installment-loan department ... and the depositors would
be given a cashier's check; (he cash was then logged in as the
bank's own money. Pages of the cash-deposit log and some
cashier's checks were missing. When questioned about the
practice, Nutiez said that a bank vice president, Lionel
Paytuby, had approved the procedure as a favor to special
customers. One bank employee told authorities that Latins
bearing cardboard boxes arrived almost daily at the bank.
Agents said that bank employees assigned to count the
money sometimes complained that the bills were wet or
smelly-as if they had been buried.
While bank officials complained that the task force
raiders had "descended on the bank en masse like storm
troopers," there was a hollowness to the complaint. Before
the raid, the Bank of Miami had been identified by a Treas-
ury Department report as an institution frequently used by
drug dealers to launder their cash. As for the Great Ameri-
can Bank, it was again in the news in late 1982 when Pay-
tuby and three other bankers were arrested by the D.E.A.
on charges of operating a giant laundering operation, which
involved forty-one domestic and five foreign bank ac-
counts. The bank was charged with laundering $94 million
in dope profits over a fourteen-month period. The twenty-
one-count indictment marks the first time a South Flor-
ida bank has been charged with laundering; if convicted the
hank could be fined up to $6.1 million. John Walker, the Treas-
ury Department's chief of enforcement, told reporters the
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198
The Nation. February 18, 1984
Great American Bank was indicted because it had consis-
tently failed to fulfill currency reporting requirements and
that this failure "wasn't due to the actions of an isolated
employee but was, in fact, a bank practice."
Cashier's checks are probably used most commonly in
money-laundering transactions. They are safer to carry than
cash and harder to trace than ordinary checks, because they
do not have to bear the payee's name and address. The
checks frequently change hands eight or nine times before
returning to the bank, and they are common currency on the
black markets of drug-producing countries. According to
bankers, any bank that has more than 3 percent of its de-
posits in such checks is likely to be engaged in a laundering'
operation. In 1980, according to the Proxmire committee's
report, two dozen Miami banks held a higher percentage.
Not coincidentally, many Florida banks implicated in the
drug traffic are controlled by Latins. While some have
unblemished reputations, more than a third of the twenty-
one South Florida banks owned by Latins have been sus-
pected of laundering by U.S. authorities. One such is Conti-
nental National Bank, founded in 1974, the first Miami
bank to be owned and managed entirely by Cuban exiles.
The first indication that Continental was accepting large
dope-money deposits came in 1978, when the Customs Serv-
ice and the Treasury Department uncovered a laundering
operation run by a well-known Colombian narcotics dealer,
Arturo Fernandez, who worked with Isaac Kattan. Eight
banks were involved, but the largest portion of the money-
$95 million-had been deposited in Continental. Fernandez
had made most of his early transactions with the Bank of
Miami and the Canadian Royal Trust Bank of Miami, but
when Orlando Arrebola, a Bank of Miami official who
knew Fernandez, moved to Continental as a vice president,
Fernandez switched most of his accounts to that bank.
There, according to government investigators, he usually
dealt with Arrebola. The banker was charged with launder-
ing drug money but was acquitted when a Miami jury ruled
that tape recordings of Arrebola's conversations with under-
cover F.B.I. agents were insufficient proof of his involve-
ment in a conspiracy. The undercover agents claimed that
Arrebola had helped them open an account at Continental
and had counseled them on laundering money. According to
Arrebola's attorney, the banker may have had reason to
suspect that drugs were the source of the money pouring
into Continental, but the government's case fell far short of
proving anything more than that. "His intent was merely to
do his job well at his bank; his intent was to further the
business of the bank," the lawyer claimed in The Herald, al-
though he admitted that Arrebola's actions might have
"helped the conspiracy along."
There appears to be some truth in the lawyer's contention
that Arrebola was just doing his job. In a 1978 report to the
Comptroller of the Currency, a Florida bank examiner said
he had informed Continental's management that even if the
bank "is in compliance with the reporting regulations, some
of the transactions may involve the laundering of' illicit
moneys," and he went on to cite thirty-four such cases. But,
said the examiner, Continental's management "does not in-
tend to discourage" such transactions "since a ice is Icy icd
for the handling of' these deposits."
As any banker will point Out, it is nlanagelllent's respollsi-
bility to see that employees comply with the law. Bankers
also admit that compliance involves more than filling out
forms; it means that the banks must not engage in activities
that the law is intended to prevent. But Continental's vice
chairman, Bernardo Benes, told NBC News that it is enough
to fulfill the letter of the law: "It's not really up to bankers
to become investigators of customers."
More than carelessness or complacency is to blame for
that attitude. Senator Proxmire's statement four years ago
still holds true: "Many banks are addicted to drug money,
just as millions of Americans are addicted to drugs."
A Mirror of the United Slates
Driving northwest through the Everglades on Highway 41,
one feels a great sense of relief at having escaped the gaudy,
violent world of Miami. Midway to Naples, there's a gas
station with a ham-and-eggs joint that caters to the redneck
trade and identifies itself as a checkpoint on the border be-
tween alien South Florida and the rest of the country. A sign
on the wall announces, "Will the last American leaving
South Florida please bring the flag! "
But Miami is as much a reflection of the United States as
it is an extension of Latin America. Without the social ac-
ceptance that has made organized crime the biggest industry
in the United States, gangsters like Lansky and Trafficantc
could not have flourished in Miami. Unfortunately, there is
no quick fix for the evils generated by the Miaini connec-
tion. Moral leadership is lacking in a nation that accepts and
even admires Mafia godfathers, and whose President has
unleashed C.I.A.-backed contras against Nicaragua's rev-
olution just as the Kennedy Administration encouraged
anti-Castro contras in the early 1960s-some of' whom sit
atop Miami's big candy mountain of drug money.
Remedial action can be taken in certain areas-enforcing
the laws against bank laundering of drug money, for exam
pie. But the C.I.A.-mob-narcotics connection will not be
broken by this Administration.
Would a Democratic Administration change things? No
likely. The party has proved itself as myopic as the Republi
cans when it comes to understanding the social and eco
nomic roots of pervasive drug use in America. Latin Amer
cans, at least, are less hypocritical about it. As the Colom
bians say, cocaine is good for the economy. Many Miamian
would agree, in private.
The response from Washington has been and will pro
ably continue to be "political posturing," in the words
Lester Wolff, former chairman of the House Select Co
mittee on Narcotics Abuse and Control. The Federal gu
ernment has "declared so many wars on drugs," W
said, "that if we lost that many wars, the United Sta
wouldn't be around." Perhaps the loss of all those w
against drugs has deeper implications than we realize. H
so many principles been sacrificed to greed and Realpol
that the nation is in spiritual ruin? It is a question
Americans care to ask.
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