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Wachovia Paid Trivial Fine for Nearly $400 Billion of Drug Related Money Laundering

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If this news story does not prove that banks are effectively above the law, I don’t know what does. The Guardian, in an account yet to be picked up anywhere in the US media (per Google News as of this posting, hat tip readers May S and Swedish Lex) reports that Wachovia was at the heart of one of the world’s biggest money laundering operations, moving $378.4 billion into dollar-based accounts from Mexican casas de cambio, which are currency exchange firms. While these transfers took place over a period of years, the article notes that it equals 1/3 of Mexican GDP. And the resolution?

Criminal proceedings were brought against Wachovia, though not against any individual, but the case never came to court. In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Now that the year’s “deferred prosecution” has expired, the bank is in effect in the clear. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine.

The operation may have started sooner, but the Wachovia admitted in the settlement that as of 2004 it had reason to address the procedures used for these transfers and chose not to. Martin Woods, a London-based employee and former member of the Metropolitan drug squad, had been hired as a senior anti-money laundering officer and started tightening up the activities within his reach. In 2006, he identified a number of obviously problematic transactions coming out of the casas:

Woods discussed the matter with Wachovia’s global head of anti-money laundering for correspondent banking….He then undertook what banks call a “look back” at previous transactions and saw fit to submit a series of SARs, or suspicious activity reports, to the authorities in the UK and his superiors in Charlotte, urging the blocking of named parties and large series of sequentially numbered traveller’s cheques from Mexico. He issued a number of SARs in 2006, of which 50 related to the casas de cambio in Mexico. To his amazement, the response from Wachovia’s Miami office, the centre for Latin American business, was anything but supportive – he felt it was quite the reverse.

As it turned out, however, Woods was on the right track. Wachovia’s business in Mexico was coming under closer and closer scrutiny by US federal law enforcement. Wachovia was issued with a number of subpoenas for information on its Mexican operation. Woods has subsequently been informed that Wachovia had six or seven thousand subpoenas. He says this was “An absurd number. So at what point does someone at the highest level not get the feeling that something is very, very wrong?”

In April and May 2007, Wachovia – as a result of increasing interest and pressure from the US attorney’s office – began to close its relationship with some of the casas de cambio. But rather than launch an internal investigation into Woods’s alerts over Mexico, Woods claims Wachovia hung its own money-laundering expert out to dry….

Later in 2007, after the investigation of Wachovia was reported in the US financial media, the bank decided to end its remaining relationships with the Mexican casas de cambio globally. By this time, Woods says, he found his personal situation within the bank untenable…

On 16 June Woods was told by Wachovia’s head of compliance that his latest SAR need not have been filed, that he had no legal requirement to investigate an overseas case and no right of access to documents held overseas from Britain, even if they were held by Wachovia…

Late in 2007, Woods attended a function at Scotland Yard where colleagues from the US were being entertained. There, he sought out a representative of the Drug Enforcement Administration and told him about the casas de cambio, the SARs and his employer’s reaction. The Federal Reserve and officials of the office of comptroller of currency in Washington DC then “spent a lot of time examining the SARs” that had been sent by Woods to Charlotte from London.

The article recounts how the DEA, the criminal division of the Internal Revenue Service and the US attorney’s office in southern Florida were taking a hard look at wire transfers out of Mexico and found that they wound up at the correspondent bank account of the casas at Wachovia were supervised by its Miami branch. From the Guardian:

“On numerous occasions,” say the court papers, “monies were deposited into a CDC by a drug-trafficking organisation. Using false identities, the CDC then wired that money through its Wachovia correspondent bank accounts for the purchase of airplanes for drug-trafficking organisations.” The court settlement of 2010 would detail that “nearly $13m went through correspondent bank accounts at Wachovia for the purchase of aircraft to be used in the illegal narcotics trade. From these aircraft, more than 20,000kg of cocaine were seized.”

The story provides a great deal more detail about the money laundering operations and the investigation. It is an excellent job of reporting and I urge you to read it in full. It is very clear the US put a lot of resources into the investigation. So why did Wachovia get off so easy?

At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were “the only liquid investment capital” available to banks on the brink of collapse. “Inter-bank loans were funded by money that originated from the drugs trade,” he said. “There were signs that some banks were rescued that way.”…

[Paul] Mazur [lead infiltrator of the Medellin drug operation] said that “a lot of the law enforcement people were disappointed to see a settlement” between the administration and Wachovia. “But I know there were external circumstances that worked to Wachovia’s benefit, not least that the US banking system was on the edge of collapse.”

I suspect you never imagined “too big to fail” and “too big to jail” were this intimately connected.

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58 comments

  1. YankeeFrank

    But they put that jogger dude in jail for taking out a “liar’s” mortgage. They had wiretaps and undercover surveillance to get him. It was law enforcement at its most effective taking down a man who had done nothing wrong; yet criminal money laundering on a titanic scale, the largest bank frauds in history (by orders of magnitude), thousands, possibly millions of document forgeries leading to massive frauds against the courts of the land, illegal foreclosures, insider trading, front running… and on and on and on….

    Don’t you think there are some DEA agents out there a bit pissed that their work is being massively compromised, their lives endangered, by $400 billion in money laundered through Wachovia? How do the prosecutors look at themselves in the mirror every morning and not see that THEY are now massive frauds too?

    1. DownSouth

      YankeeFrank asks: “Don’t you think there are some DEA agents out there a bit pissed that their work is being massively compromised…?”

      Nah.

      Anyone who has the temerity to question, much less challenge, the larger agenda is purged.

      My brother, who lived in Bolivia for eight years, puts it this way: “The only purpose the DEA in places like Bolivia serves is to make sure the flow of drugs to the United States goes uninterrupted.”

      1. DownSouth

        Ha! Ha!

        I’d say an honest American cop has about the same chances for survival as an honest Mexican cop does.

        Here in Mexico, if you survive any time at all as a policeman, prosecutor, judge or prison supervisor, there’s probalby a 99.99% probability that you’re corrupt.

        It’s the same in the United States, the only difference being that many, if not even most, rank and file Mexicans are aware of what’s going on, whereas most Americans have their heads so wedged up their backsides that it’s well nigh impossible for them to catch a ray of illumination.

        1. Dave of Maryland

          Re: local drug corruption, you can work it out on a local level.

          There are California towns that are, in effect, on dead-end roads. (Ojai, famed new age retreat, being one of them.) Yet every one, without exception, is overrun with illegal drugs.

          How can this be? Drugs are not manufactured in the town itself, so they must be imported. But the towns themselves are not very large – sometimes less than five thousand people. Which means that not only can they be one man’s turf (or one gang or one family, etc.), but that he – or they – must be well-known to everyone in town. They live at a known address, they drive known vehicles, they have regular weekly or daily deliveries & service regular customers – JUST LIKE ANY OTHER BUSINESS.

          So why is this tolerated? Because it could easily be shut down, if anyone wanted. Presumably because one or more law enforcement officers are on the take.

          And it only takes one bad cop. None of the others will touch the dealer, because that will get them in trouble with the bad cop. And that’s too close to home.

          But the good cops extract a price. Which is that luckless fools are routinely recruited (usually, but not always, by the dealer) and then set up as fall guys. Penny-ante subcontractors who don’t know the ropes. Rather like drug mules. The cops get a victim, the DA gets an easy case, the public’s anger at drugs in the street finds an outlet, etc.

          All of which can be deduced from a single road & the small town at the end of it.

          What is true of small towns is also true, scaled up, for large cities surrounded by water, i.e., on islands. Manhattan, for example, which has limited access to the mainland, and in which, on any given day, TONS of drugs are bought & sold. Do not imagine that mom & pop outfits, smuggling a pound or two at at time, can handle the volume. The vast majority of Manhattan drugs are hauled in from elsewhere, by the truckload.

          Whatever the situation in Manhattan, that on Long Island is even more extreme. There are precisely three routes to the island that do not involve Manhattan surface streets. On the island itself are tens of thousands of users, and, once clear of Brooklyn & Queens, hundreds of independent municipalities.

          We can look at drugs from the macro level, in which case we plead for the feds to enforce banking law, or we can look at it from the micro level, where we can take action in our own communities. Macro is disempowering. Micro is empowering. Modern government, in all countries and on all levels, is disempowering. Which I suppose explains why there are so many unhappy kiss-and-tell-all blogs.

          1. DownSouth

            Why is drug supply prosecuted so vigorously and demand so leniently? Who in the United States is receiving drugs from Colombia, laundering the money, marketing the drugs every day to 30 million U.S. citizens, bribing lawyers, the police, and politicians? There must be U.S. drug barons far more powerful than any Colombian trafficker. But the people who are dying are those fighting them in Colombia, not in the United States.

            [….]

            What is the basis of the anti-Mexican phobia…? During a recent visit to Los Angeles, I heard the same arguments over and over… [Mexicans] are…the reason for unemployment in California, and, last but not least, they introduce drugs.

            These are just plain lies.

            Drugs do not enter the United States through Tijuana and San Diego tied up in migrant workers kerchiefs. They arrive in planes belonging to U.S. dealers whose names no one knows and who are never the objects of the sort of publicity and persecution given their Latin American counterparts.

            The United States has washed its hands of its drug barons—-and laundered their money. All guilt is in the offer, none in the demand. It is easier—-and more pharisaical—-to militarize Bolivia than to militarize the Bronx.

            ▬Carlos Fuentes, A New Time for Mexico, 1996

    2. kj22679

      I grew up with a DEA agents kid and family, great kid went to the Marines and become force recon and all, now he trains private contractors to survive the middle east. Anyway enough pointing out my friend is not a problem, His dad the DEA agent, largely a Miami operative and a Colombia undercover agent was dirty as fuck, most DEA agents are, they are almost all on the take or hooked on what they’re busting or both, not sure how it is now but back in his dad’s days thats how it was. How do I know you ask.. well after his dad bought his 10th corvette over the years we had been drinking at his house with his pop and he told us all the dirty shit he and his people used to do and thats why he has so much money stockpiled and basically he’s untouchable because of all the shit he has on important people.

      Most cops aren’t bad or dirty cops but when it comes to the DEA its completely the opposite … most of the DEA is dirty as shit and looking for more paydays

  2. Ina Deaver

    I think I’m going to be sick.

    You know, the new sentencing guideline amendments would increase the penalties mere humans will face for this kind of thing – if they have “any reason to suspect,” essentially, that the money is dirty. Clearly, the horse is way out of the barn in clear down in Michoacan.

    Absolutely incredible. I suppose when they amend the constitution to provide that living people are 3/5s of a corporation, who are the only people with full citizenship rights, I shouldn’t be too surprised.

  3. Allen C

    I first picked this up on BBC. Glad to read that you have added it to your ongoing collection of criminal banking behavior. Where and when does this all end?

  4. Sleeper

    Folks, please quite complaining. !!!

    If you haven’t realized yet there is a two tier justice system in the US.
    If you are a relatively small fish say less than 10 million and you are not connected to the pollitical system expect jail time even if you are not guilty. The US attorney’s offices routinely communicate threats of more jail time ect if you do not submit. Note that communicating threats is a felony in many states.
    However if you are big enough, buy a senator or two no worries.
    So quit complaining and get on with your life.

    1. Jim Haygood

      Here’s the nub of the issue: ‘money laundering’ is a victimless crime — a ‘crime’ with no basis in common law; a ‘crime’ which was manufactured out of whole cloth as an adjunct of the failed, fanatical War on Drugs.

      Like federal mail fraud and wire fraud statutes, money laundering is a ‘gotcha’ law, a derivative offense which serves as an easy shortcut to a conviction when prosecutors have no evidence of an actual crime with an actual victim.

      Wachovia’s tale suggests that like the phony war on drugs, the FATF’s phony war on money laundering is almost wholly ineffective. But as collateral damage from the AML sham, ordinary folks have to jump through hoops now to open financial accounts, as well as have their banks secretly file Cash Transaction Reports and Suspicious Activity Reports if they step outside their usual profile.

      Criminalization of money laundering is inconsistent with personal freedom. But the US and Europe have exported this vile form of repression to the rest of the world.

      Pray that the 21st century will finally bring a secure, widely accepted, anonymous and liquid digital currency, obsoleting forever the recklessly managed, politicized talismans of brightly colored, badly printed confetti bearing engravings of notorious imperialists and war criminals, and lacking any intrinsic value other having been declared ‘legal tender’ at government gunpoint.

      1. Sleeper

        Here’s a good example of the two tier system.

        Now before we get started
        I am not defending the behavior of these folk just using them as an example

        Elliot Spitzer is prosecuted for the victimless crime – the Mann act. Supposedly caught because he transfered more than $ 10,000.

        Senator Ensign transfered $96,000 and transported a woman across statelines in violation of the Mann Act – no prosecution.

      2. James Cole

        Criminalization of narcotics use is also inconsistent with personal freedom, and creates opportunity for vast profit by imposing moral and practical barriers to entry. It also fuels the violence because of the inability to resort to courts to adjudicate disputes within the industry.

      3. YankeeFrank

        Money laundering is most certainly not a victimless crime. Without the money laundering the cartels collapse. Its that simple.

        1. jonboinAR

          I agree. Either it’s silly to call money laundering victimless, or I’m not understanding something.

      4. k

        A “secure digital currency” ?????

        Are you nuts !?!?!?

        If you think regulations are onerous now, then digital currency will be pure tyranny.

        Who controls the switch to the computer to determine whether your “currency” is available to you or not ???

        Who do you trust? the bank ?? government ??

  5. Max424

    “…the proceeds from drugs and crime were “the only liquid investment capital” available to banks on the brink of collapse.”

    I would like to thank you, Mexican Drug Lords, for keeping our TBTF banks afloat during the troubled times that preceded the financial crisis. Without your support, our TBTF banks would have collapsed before we had a chance to intercede with our prudent, get-all-the-money-back, $500 billion — roughly (LOL!) — TARP programs (trillion dollar backdoor bailout scams! LOL!).

    In gratitude, I would like to assure you that we will take no steps to legalize, or decriminalize, drugs. Such measures would severely crimp, and quite possibly eliminate, our mutually beneficial $800 billion illegal drug market.

    As we both know, without the constant cha-ching of the US black (anti-libertarian? LOL!) market for drugs, you would not have hundreds of billions of dollars available for deposit (to launder? LOL!) in our TBTF banks. As a result, inner-bank lending amongst the illiquid and insolvent TBIFs could freeze up at any time. Neither of us want that ;) ;) … that means, wink, wink. Comprende, emoticons?

    Keep up the good work, mi amigos. As always, if you need guns, rockets, artillery; give me a call. As you know, things are a little tight around here (I’m fightin’ lots of wars! LOL!), so I can’t provide you with tanks, or a no-fly zone — at least not yet.

    Yours truly,

    BHO

    President of the United States (LOL!)

  6. DownSouth

    Provisioning the American populous with an ample supply of drugs and other consumer addictions while at the same time pursuing America’s extremely violent “war on drugs” within Mexican territory are policies of the United States government that seem to be working at cross-purposes. If one peels back a couple of layers of the onion, however, one discovers that both are part and parcel of a much bigger, overall plan. Framed within this larger context, seemingly contradictory actions no longer seem to be so much at odds.

    The diplomatic cables that Bradley Manning allegedly released to Wikipedia go a long way in exposing what that bigger, overall plan is, and especially the parts exposing the “war on drugs” being conducted by the United States government on Mexican territory.

    The cables have gone viral here in Mexico, for they reveal the extent to which Mexican authorities have surrendered sovereignty to the United States.

    The U.S. ambassador to Mexico has been forced to resign.

    And the cables have unleashed a flood of articles like this one, “The cycle of terror and intervention” by VÍCTOR M. QUINTANA S.

    “Bi-national war where one country makes the decisions and the other pays the price” is the way Quintana begins. He goes on to make the case that the United States incites crises in countries like Mexico so that it can intervene into the internal politics of the country. The reason the United States “perpetrates terror, provokes terror and reacts against terror” is in order to “maintain its very weakened hegemony in the region.”

    “The cycle of intervention-terror-intervention is the only way to keep us following the doctrine of the decadent empire.,” Quintana continues. “Against this the Mexican government has responded as we suspected: slowly and fearfully.”

    Financing the narco-traffickers is of course just part and parcel of the larger plan of the Untied States government to “perpetrate terror” in Mexico. It is done to achieve U.S. covert and not-so-covert intervention in Mexico to, as Quintana cynically puts it, “help the weak, indecisive and corrupt Mexican system to fight organized crime.” “If in spite of all these forms of intervention the U.S. government has failed to win the war against drugs; if the same U.S. government recognizes its apparent failure, this must say that perhaps the final objective of said government is not really to liquidate organized crime,” Quintana concludes.

    1. Dirk77

      Has it always been like this (as at least Smedley Butler’s speeches would suggest) or is it just seem new because the Internet allows this stuff to be exposed more easily? Or am I just paying more attention because as pickings have gotten slimmer, our overlords have turned on their own people such as me (an American)? Or have pickings not gotten slimmer but just the unraveling of a society provides more opportunities? If the latter, the second act is going to be a more violent one?

      By the way, don’t forget that May 1 is Rule of Law Day.

      1. DownSouth

        Dirk77 asks: “Has it always been like this…?”

        I like how Peter Turchin puts it in War and Peace and War. He theorizes that within the larger cycles (the rise and fall of empires) are smaller cycles, so that we get cycles within cycles. So the United States, for instance, as Kevin Phillips so beautifully documents in Wealth and Democracy, can experience rising and falling cycles of corruption. The Gilded Age and Roarin’ Twenties, Phillips asserts, were periods of high corruption, which were successfully reined in.

        Turchin and Phillips both agree that, when the corruption doesn’t get reigned in, that’s the end of the empire.

        1. DownSouth

          And let me be very explicit as to what I’m saying here. When I say “reined in” I’m not saying “eliminated,” but reduced to a level where the society can continue to function and doesn’t come flying apart at the seams.

          1. Siggy

            Cogent contribution.

            As to drugs, a very poor personal choice.

            As to addiction, cocaine, heroin, meth, etal, are hard to kick and even then it’s rather like alcoholism, the addiction remains but it can be reined in.

            As to Wachovia, zombie bank should have been nationalized.

            As to Banksters, until we have some serious prosecutions, they will continue doing what they do best, steal.

            As to the polity, notwithstanding the tea partiers, it’s not engaged and absent engagement there’ll be no societal change.

            For us who find all of this so distressing, where are we to go?

          2. DownSouth

            Siggy asks: “For us who find all of this so distressing, where are we to go?”

            I don’t know, Siggy.

            Here in Mexico the people grow angrier and more disgusted by the day. Back in 2008 a huge demonstration against the corruption and insecurity was organized in Mexico City, some photos are available here.

            But things since then have only gotten worse, much worse. Every day the corruption of the police, prosecutors, judges and prison officials becomes more blatant. Every day they operate with increasing impunity.

            The people have absolutely no control over their government. And I don’t see the situation in the United States being any different.

      2. Dirk77

        @Lambert: I was worried someone would say that.

        @DownSouth: well, that gives me hope. But it would help if there were a past period which was more corrupt but got reined in. I am glad though that Yves and her like minded bloggers are keeping at it. If the last unwittingly ignorant person can be rooted out, leaving only the willfully deluded, then victory will be hopefully close.

      3. darms

        Meaning this year’s calender has an April 31st continuing to May 2nd but no May 1st, eh?

  7. lambert strether

    We should assume this is ongoing behavior, right? After all, Wachovia’s fine is just a cost of doing business, and none of the execs were disciplined at all, right?

    1. readerOfTeaLeaves

      I assume it’s ongoing behavior; after all, that fine didn’t come out of anyone’s paycheck as near as we can tell. BTW: That Guardian article had some interesting comments on its thread last night, and I’ll catch up with emptywheel over at FireDogLake shortly – she’s done some interesting things on money laundering over the past few years.

      But just for some perspective on what all this might means, I clicked over to a favorite resource: The US Census Bureau.

      I wondered how this data at the Guardian compares with sums of debt which, in the US, are driving some governors to outlaw collective bargaining, are impacting school and higher ed budgets, and are resulting in fewer cops and public employee benefits:

      The Guardian, in an account yet to be picked up anywhere in the US media (per Google News as of this posting, hat tip readers May S and Swedish Lex) reports that Wachovia was at the heart of one of the world’s biggest money laundering operations, moving $378.4 billion into dollar-based accounts from Mexican casas de cambio, which are currency exchange firms. While these transfers took place over a period of years, the article notes that it equals 1/3 of Mexican GDP.

      A few interesting facts from the US Census report, “State Government Finances Summary: 2009: (p 3) “…Sales and gross receipt taxes were the predominant tax sources for state governments, totaling $342 billion and 47.9 percent of total taxes in 2009. This was the first decline in the last 5 fiscal years. Taxes totaled $359 billion in 2008, $353 billion in 2007, $338 billion in 2006, and $314 billion in 2005.”

      (p 5) “…State governments spent $567 billion on education and $437 billion on welfare (36.5 percent and 28.2 percent of general expenditures, respectively).”

      To summarize:

      The combined total spent by US state governments in 2009 was $567 billion.
      The combined total spent by US state governments in 2009 on welfare was $437 billion.
      Meanwhile, in 2009, the combined total sales and gross receipt taxes – the dominant revenue source for all US state governments – was $342 billion.

      It appears that the $378.4 billion laundered into dollars by Wachovia (probably between 2003 – 2008) on behalf of the Mexican drug cartels exceeded the total sales and gross receipt taxes generated by all 50 US states in a single year (2009). So if I’m reading this correctly, the Mexican drug cartels were laundering the equivalent of 1/5th of the amount generated by all 50 US states for their sales tax revenues for at least five years.

      They were laundering sums that would pay for entire states’ pension funds, or state education systems.

      NO ONE went to jail.
      They paid a fine in 2010, and now they’re good to go.

        1. readerOfTeaLeaves

          You know, it’s hard being such a humorless dolt as I am.
          It’s a lotta work.
          And then along comes someone to take a rimshot right off me.
          Uff….

          ;-)

      1. Dirk77

        Yeah, $400G Is a big number. And that is just the supplier end. What value would it be on American streets? $2T? If Wachovia was doing this for five years, that’s $400G/year street value. But Wachovia was not laundering everyone’s drug money, so it is higher. However, $400G per year is 5% of the national GDP? Given how DC economists argue for perpetuating any crime if it is “vital” to the economy, I guess we shouldn’t be surprised the war on drugs is a self-perpetuating charade like everything else out of DC.

  8. Enough of This

    Don’t do any business with Wachovia in your city, town. When the drug war ends, and Wachovia is out of business, you’ll be banking either with a Bank that has re-earned trust in the community it serves or a credit union.

  9. Mickey Marzick in Akron, Ohio

    Dope, money, and guns… More dope, more money, and more guns.

    It’s a replay of the TRIANGULAR TRADE in some respects – human chattel, rum and cotton, and manufactured goods. Or better still, the Opium Wars in China where the British knowingly “pushed” opium on the Chinese to facilitate commerce. If not officially state-sponsored, this commerce was enforced by Victoria’s imperial fleet. And now the US Navy is a force for good! Anyone else seen that commercial?

    The War on Drugs and the War on Terror are two pillars of the MIS – Military Industrial Security – Complex in which narcoterrorism undermines the rule of law and civil liberties both here and abroad. To preserve our freedoms we have to give them up? I don’t understand…

    Afghanistan [poppies], Mexico [marijuana], Colombia and Bolivia [cocaina]… DEA agents and miltary advisers? US ground forces? And we wonder why the supply never dries up? It is now organized by the US government to provide the much needed liguidity for a zombied-out financial system. Can’t afford to have the disruptions and petty squabbles of local cartels or new entrants interrupt the trade… financial and/or otherwise. Funny how things work out…

    Agencies of government working at cross-purposes is not an accident but by design. It also provides much needed employment opportunities in what is otherwise a stalled out economy. Between the growth of prisons and the security/law enforcement industries, what else is growing? Counseling services, drug treatment/rehabilitation facilities, halfway houses, etc all funded with public monies. Paying for addiction is expensive and there’s money to be made…

    The only difference this time around is that Americans are the targeted population of this drug trade controlled by other Americans. Perhaps we ought to ask why it is that Americans have come to rely on SOMA – both illegal and legal – so heavily?

    Acid, booze, and ass
    Needles, guns and grass.
    Lots of laughs, lots of laughs
    [Blue - Joni Mitchell (1971)]

      1. Mickey Marzick in Akron, Ohio

        My ear for “espanol” isn’t what it used to be, but I was able to understand most of the reporting. Gracias!

        What is amazing is how the rest of the world sees the CIA for what it is and Americans don’t or simply accept the offical explanation that its behavior is necessary to preserve “our way of life”, never considering how this very same behavior is undermining it.

        A replay of “Escape from Freedom”?

        1. Mickey Marzick in Akron, Ohio

          Unemployment and/or the threat of it with prescription drugs – valium, vicodin, viagara – or copious amounts of alcohol with an occasional line of cocaine or a joint for recreation for the middle/working classes.

          No work, maybe foodstamps, living in the underground economy with methamphetamines, marijuana, and crack cocaine for sale by the underclasses. Busted for dealing, with the criminal justice system overwhelmed by the case load, incarceration becomes the US equivalent of “disappearing” into the prison archipeligo. And even when you are released you quickly realize that you’re employment prospects are now slim and none. So recidivism becomes a seemingly “rational choice”. Three-strike laws do the rest.

          There’s simply too much “logic” in the synchronization of US domestic policy with foreign policy and vice versa for this to be an accident.

          A substitute for the “Cold War” against COMMUNISM had to be found lest the peace dividend threaten the existence of the military industrial complex. Lo and behold, the wars on drugs and terrorism materialized and the peace dividend went up in smoke much like the tons of marijuana burned every year. But supply is always there to meet the demand…

          1. DownSouth

            Mickey said: “There’s simply too much ‘logic’ in the synchronization of US domestic policy with foreign policy and vice versa for this to be an accident.”

            Along those lines, you might find the final few minutes of the first part of this interview interesting:

            Aristegui – Desapariciones Forzadas En Mexico (Mision De La ONU) 1/2

            Aristegui – Desapariciones Forzadas En Mexico (Mision De La ONU) 2/2

            The person being interviewed, Ariel Dulitzky, is one of the United Nations’ personnel who conducted the investigation of disappeared persons in Mexico. As he indicates, the reported number of incidents of disappeared persons in Mexico has increased rapidly over the past few years. Here’s what Dulitzky said beginning at minute 13:30 of Part 1:

            The withdrawal of the armed forces is a preventative measure to avoid disappeared persons. Why do we say this? First because the logic of a military combatant and the logic of a policeman are completely different. The logic of the army is to confront an enemy force. The logic of a policeman is to guarantee the safety of the citizen. In this logic the training that a soldier and the training that a policeman receives are different, and they are different because the interaction with an enemy is different than the interaction with a citizen. Our experience is that when one brings the logic of confronting an enemy to the activity of public security, the violations of human rights increase. In fact this does not surprise us. The number of complaints against the Mexican state have over the last five years increased exponentially. What we have seen is that the armed forces are operating without a protocol that regularizes the use of force.

            Is this not exactly the same thing we are seeing with our own soldiers in Iraq and Afghanistan?

            I believe the hope of U.S. and Mexican officaldom is to desenthesize their respective populations. This is one of the major themes of Hannah Arendt in Eichmann in Jerusalem: A Report on the Banality of Evil.

    1. DownSouth

      Another big income producer for the cartels is human trafficking.

      The interviewee in this report claims the income from human trafficking exceeds that from drug trafficking.

      I doubt that. The numbers just don’t add up. The Mexican government estimates that there are 11.8 million persons born in Mexico currently living in the U.S. Even if a fourth of that number enters the U.S. illegally each year, and let’s say each pays $2,500 on the average to the cartels to be smuggled into the U.S., that amounts to only $7.5 billion per year. That pales in comparison to the $35 to $40 billion per year it is currently estimated the cartels earn smuggling drugs.

  10. john

    Meanwhile, an eighteen year old arrested for moving 1/10000th of the value of cocaine is sent to prison and effectively persona non grata for the rest of his life.

    Stupid question, why isn’t the fine = to the amount they moved?

  11. Schofield

    After that Guardian article I’m really looking forward to Rand Paul telling us we should be reliant on the drug cartels bailing out the banks next time they screw up instead of the American tax payer. In fact I’m looking forward to him telling us we can rely on the drug cartels to run the country so we don’t have to pay any taxes. A truly private sector solution!

    1. lambert strether

      This episode certainly does explain why legalizing marijuana (for example) is “off the table,” despite the fact that this policy polls extremely well in Obama’s putative base.

      With legalization, there would be no money to launder!

      1. Tipo de Cambio


        With legalization, there would be no money to launder!

        Please! We are trying to recover from a recession. Don’t close down suppliers of political contributions. But why contribution to defeat Democrat but equal contribution to defeat Republican? Isn’t that a waste of money, Laundry Lady.

  12. Cedric Regula

    Personally, I don’t understand why we need imported drugs in this country in the first place?

    We already have domestically produced beer. And it’s not like other “Made in America” products that most or all of the parts are really imported and we just put ‘em in a cardboard box stateside. All beer ingredients can be sourced locally, and made by American Workers, or their imported replacements.

    So right off the bat, the Domestic Beer Model beats the Imported Drug Model.

    Now I had always thought that all those Panama Banks owned the market niche of drug money laundering in the financial industry space. But to find out it was Wachovia is a bit disheartening to me, and probably even more so to the guys over at Miami Vice. I mean, how would you like documented proof you missed almost half a trillion in drug busts?

    Then there are the economic externalities of maintaining the illusion of fighting Imported Drugs here and abroad. No one has ever been sent to an expensive US prison for drinking beer, at least as the sole reason. And we don’t see the US Military, FBI and CIA swarming all over St. Louis and Milwaukee , do we?

    The Domestic Beer Model a clear winner as tax revenue producer as well. I mean, the banks went negative, didn’t they? Contrast that with nearly half the price of a six pack going for state and federal tax, funding things like schools, police and fire departments. Drinking beer makes our society smarter, more educated, safer and more secure.

    You can not make that claim for imported drugs!

  13. Paul P

    Of course the banks launder drug money. Given the billions of dollars involved in the drug trade, there is no way the drug producers could function without banks.

    If memory serves, shorlty after 9/11 some propsals on the regulation of money transfers were sucessfully opposed becase they not only would interfer with terroists and drug lords, but with business.

  14. skippy

    WWII vets exposed to the empowerment provided by Meth liked to ride bikes and sort out peaceniks for the man, before this it was an ad hoc social affair, no clustering of users on such a scale in the good old USA.

    The taste of the sixty’s blew into the seventy’s. Young boys born to good family’s could scavenge the old hemp farms of the Midwest / South, down dusty roads late at night, cops else where. Panel vans quick stops aided by hand breaks…no tail lights signal. Military flash lights with red filters and duffel bags, on ones back, across the ground, picking the fruits above.

    Ounces become pounds into a few tons, half sold to buy kind and churned to improve its luster. happy days of freedom, long road trips to sunny places, gas, grass or ass, free association. Future alliances are born in funky times, dads business acumen takes a generational leap (later he will say you made choices son, after putting practice with a water glass in the Pebble Club dinning room {displaying dissatisfaction at waiters tardiness}), Spain is nice, but, family funerals are a miss.

    Money flows, too much, too party away, liquidity finds its own level, representational cover has its advantages, who knew Rock Concert F&B / T-shirts et al was so profitable, lovely distribution / client interface, the music never stops, Apt in Manhattan, Houses in upstate, Snowmass, L.A. and Maui. Boss gone to ground in some bar, questions asked, trusts beckoning, 6 hours till the right number is dialed…Continental USA, Pacific Islands, Europe…wtf…Jamaica…responsibility is a hard cost.

    Green becomes white, value added, scarcity’s blessing, egos triumph inhaled, kickback-ed gives way to I have arrived[!], female acquaintances become household appliances, need becomes survival.

    Old school chums followed the parochial path, establishment still likes to party here and there…eh…chasing yield is hard work, liquidity seeks its level…in the wee hours as well as the business…ha. Indiscretion becomes norm, white becomes green again, but, in another form…electrons are easier to transport and harder to stop at traditional distribution bottle necks…lol.

    Soft white skin is no match to the hardened brown soldiers, as long as they know who’s the boss, hard to spend your toil if you cant move it to the register…of your desire. Leaving the youthful high spirits distillation to market yield expectations, less gunfire and kidnapping on the trading-room floor or better yet a market terminal…old expectations die hard when lead risk becomes a lesson in photon disappointment.

    en fin.

    Skippy…1G a month to live on the beach, 80s style. Three month stake out by local constabulary using 3 cars of different stripe. My morning window whilst I shave, shows me absurd delights. The well heeled local Dr Good Times with his bank-bag in tow, is taking last nights pizza out to them…I want to shout out…don’t feed the wild life…it only attracts more!

    PS. Observing the wild life can be dangerous in so many ways…take precautions if you do.

  15. PianoRacer

    Monday is my last day as an IT contractor hired for the Wachovia – Wells Fargo merger. Thanks to Yves and this site for helping me see the bigger picture. I don’t think I’ll be going back.

  16. Doc Holiday

    Obviously the bigger point is being missed, which is the fact that all these crooked banks get away with tax evasion — and then every town in America is paying the massive price for all the shitty bankers and bad drug deals. Too bad that the GOP is so connected to all this and the KKK. Go walmart!

    1. skippy

      Large distribution chains, franchise or corporate….ummm ummm good!

      Skippy…Me lady… I have cough, fixed…snort, your shoes!

      PS. snort this see: Thomas Hutchinson | 01 January 2008

      She Don’t Lie: The Economics Behind Cocaine

      Let’s start with cocaine itself, in its purest, whitest form. For this we must give credit to the Johnny Appleseed of Cocaine, Oscar Danilio Blandon. When Blandon brought cocaine to America he must have had a faint glimmer of what might happen should it catch on. This is America, after all: we buy what we what, when we want it, and the amount we want. What he had no idea of though, was that he would create an economic system so flawless it leaves every other business yearning for his model.

      http://theprometheusinstitute.org/index.php?option=com_content&view=article&id=122:She_Dont_Lie_The_Economics_Behind_Cocaine&catid=46:freedom&Itemid=35

  17. Jon

    Nothing like Big banks thinking they can keep cashing in their own Cheques and individual and small businesses can continue to pay the price for corporate greed.

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