ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Sunday, March 2, 1997 TAG: 9703030002
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: JAN VERTEFEUILLE STAFF WRITER
OPERATION EL CID helped Colombian drug traffickers launder millions and move it out of the country for years before arrests were made.
Shortly before Christmas 1991, Roanoke drug agents traveled to New York City to collect $500,000 in illicit cash, their first money pickup at the start of Operation El Cid. The money was turned over to them in two packages, festively done up in holiday gift wrap.
To the Drug Enforcement Administration agents who picked it up, the package truly did hold a gift - the successful start to a six-year investigation that would lead them up the ranks of the Cali cartel.
The money belonged to a Colombian cocaine trafficker who thought he was handing it over to dirty businessmen, money launderers who could deposit it in a foreign bank account without tipping off authorities.
Operation El Cid, wrapped up by the Roanoke DEA office last month, offered a service the Colombian drug traffickers badly needed - getting money out of the U.S. undetected and converted into currency they could use.
"In many respects, the money trafficking is the most difficult area" for drug syndicates, U.S. Attorney Bob Crouch said at a news conference last week to announce the results of El Cid.
Other than that news conference, Crouch has refused to discuss El Cid with The Roanoke Times.
DEA agents and informants traveled coast to coast between 1991 and '94, picking up money owed to Colombian traffickers and wiring it into South American bank accounts. They picked up $47 million for traffickers and transferred about $42 million of it back to Colombia, keeping the rest as their commission.
Most of the billions of dollars in drug profits in America starts out as street-level drug buys made with $10, $20, sometimes $100 bills. The sheer volume of cash presents problems for traffickers. They must find a way to convert roomfuls of bills into currency they can more easily move, and hide its origin. That's when "money laundering" comes in - washing "dirty" money so it appears clean.
Before the United States realized in the 1980s what a problem money laundering was, smugglers often carried enormous amounts of cash out of the country in suitcases or deposited it openly in friendly banks. It's harder now.
Going after traffickers' money is more effective than going after their drugs, some experts believe. Drug cartels and other crime organizations are so rich they have the ability to corrupt banks and influence global economic conditions, which can lead to economic and political instability. But experts also express some concern with such stings.
It's important to go after the people who can "poison the international financial system, but there is a tremendous moral price we pay in doing this," said Eric Sterling, a former congressional attorney who helped write the first money-laundering laws in the 1980s.
The goal of El Cid was to earn the trust of high-ranking traffickers and exploit that to learn how they operate. But what cannot be ignored is that for three years, federal agents were helping Colombia's Cali cartel get its money out of the country.
"From a moral standpoint, is it different if the cartel is laundering its own money or if it's using the government to launder it?" Sterling asked. "If the bottom line is the cartel's money gets laundered, what's the difference?"
A Justice Department official, who did not want to be identified, said such stings are closely monitored because of that concern.
"The benefits are weighed very carefully since actual money is being laundered," the official said. "At the conclusion of a sting, we make an effort to seize as much money as possible."
A DEA official at Tuesday's news conference said that agents initially had hoped to persuade the heads of the Cali cartel to move their money into the United States. But no money or bank accounts apparently were seized in the Roanoke operation, and agents sent the money they laundered back to Colombia, according to the indictments.
Sterling suggested that in-house oversight by the DEA and the Justice Department isn't enough. Law enforcement operations that benefit criminals are "morally ambiguous" and should be reviewed regularly by Congress, he said.
But congressmen are often reluctant for fear they'll look soft in the "war on drugs," Sterling said. He was assistant counsel to the House Judiciary Committee from 1979 to '89, with oversight of the DEA for the committee.
"Overseeing law enforcement is not a big payoff proposition. Congress would much rather be in the position of patting them on the back," he said. "My sense is the DEA's oversight at the congressional level is superficial."
The prosecution of El Cid is just beginning, so many questions remain unanswered.
For instance, only $7.6 million worth of transactions by DEA agents is mentioned in the indictments unsealed last week. It's unclear if the other $40 million laundered by the DEA will result in charges.
The indictments don't mention any money-laundering activity beyond September 1993, so it's unclear why the case wasn't closed until more than three years later.
Crouch suggested at the news conference that agents had hoped to delve deeper into the cartel. "If at some point earlier on it had been determined, `OK, we're just going to take the money and run,' then obviously it would have blown the cover these [informants] had, shattered that trust and not enabled them to proceed up the ladder and deeper into the or-ganization."
None of the 13 people named in El Cid's money-laundering indictment has been arrested - or appears likely to be. Colombia's constitution prohibits extradition of its citizens to other countries.
But Crouch said the investigation provided a wealth of information. Thirty-five additional investigations around the country, leading to 136 arrests, were started because of intelligence gathered through El Cid, according to the DEA.
New front in drug war
When the DEA arrested Javier Cruz in 1991, they decided he was too valuable to simply prosecute and put in prison. If he could be convinced to go undercover, agents realized, he could lead them to even bigger fish.
Cruz had been running a drug-smuggling operation out of his used-car lot on Melrose Avenue Northwest in Roanoke, moving tons of cocaine for a Colombian drug kingpin living in New York, Leonardo Rivera-Ruiz.
With the contacts Cruz and Rivera had and their willingness - with life sentences in prison hanging over them - to cooperate, the DEA seized the opportunity to begin the investigation.
Money-laundering stings offer criminals a seemingly legitimate business that is willing to help filter their money into the banking system so it can't be traced to drugs. And with the Cali cartel reportedly making $7 billion in profits annually, the traffickers are in great need of laundering services.
The DEA persuaded cartel members that Cruz and Rivera ran a money-laundering business from Roanoke and that they could collect drug money in the United States and transfer it to Colombia without being detected.
Drug syndicates have become so specialized that the money side and the drug side are often run separately. By infiltrating the money side, agents may learn details of the organization they couldn't on the drug end.
The DEA began conducting such stings in 1981, when a Miami agent came up with a plan to open a phony investment firm that would help traffickers filter their illegal money through bank accounts and business transactions to obscure its origins. Because they hoped to spear the big ones, they called the plan Operation Swordfish.
The special agent in charge of the Miami field office at that time was Peter Gruden, who now oversees the Virginia offices from his post in Washington, D.C. He was on hand last week for the government's news conference.
"This is a war," he said, "and we take it one battle at a time."
Interestingly, one of the defendants indicted in Roanoke appears to be one that got away from Gruden during Swordfish. Armando Velez-Gomez, identified as one of the biggest suspects indicted here, walked away from a Miami courthouse in 1982 after being released on bond and never came back. He forfeited his $950,000 cash bond. If he is ever arrested on the Roanoke charges, it's unlikely he would be given bond.
Federal agents have become more sophisticated in their operations since Swordfish and have conducted a number of stings. But stings are unlikely to cripple the cartel, said Fletcher Baldwin Jr., a University of Florida law professor who specializes in international financial crime.
Baldwin teaches federal agents about money laundering for the Treasury Department. He thinks such investigations are more effective than going after drugs, but that their effectiveness is limited.
"There's so much money involved, it might cripple one leg but organized crime grows another one," he said. "The only thing the government can hope to do is make inroads. There's no light at the end of the tunnel."
Staff writer Laurence Hammack contributed information to this story.
LENGTH: Long : 155 lines ILLUSTRATION: PHOTO: (headshots) Cruz, Crouch, Gruden. color. Graphic: Mapby CNBand chart by Robert Lunsford. color. KEYWORDS: MGR