The Corporate Connection

How drug money is finding its way to the bottom line.

Last summer, Panamanian officials acting at the request of the U.S. Customs Service seized a Bell model 407 helicopter belonging to Victor Carranza, a Colombian who, according to U.S. and Colombian investigators, has ties to both drug traffickers and the Colombian right-wing paramilitaries who often protect them. But Carranza’s checkered past wasn’t the reason for the seizure. The helicopter, U.S. Customs agents claimed, had been purchased from Bell Helicopter Textron with the proceeds from a massive Colombian cocaine and heroin operation.

The traffic in illegal drugs is a global problem, and money- laundering schemes take many forms. But for American companies like Fort Worth­based Bell, the Colombian Black Market Peso Exchange (BMPE) poses by far the greatest risk. Described by former U.S. Customs commissioner Raymond W. Kelly as “perhaps the largest, most insidious money-laundering system in the Western Hemisphere,” the BMPE enables drug traffickers to use their profits to buy consumer goods in the States, masking the money’s illicit origins. For U.S. companies, that’s a problem that goes far beyond the public relations nightmare of having their products connected with the narcotics trade, because it is a crime to knowingly accept money that is connected to drug trafficking.

And when it comes to BMPE transactions, “knowingly” is hard to assess. Law enforcement officials insist that these transactions involve obvious red flags, but many U.S. companies claim they are difficult for accounts-receivable departments to detect. The consequences are serious: Companies that accept BMPE payments risk seizure of the money, forfeiture of the goods, fines, loss of their export licenses, and even criminal prosecution. Criminal fines range as high as $500,000 per violation or twice the value of the property involved. If specifically charged as individuals, company officers and employees are subject to the same fines, as well as up to 20 years’ imprisonment. Philip Morris, in New York, whose Marlboro-brand cigarettes are a favorite BMPE contraband item, instituted strict rules in March 2000 regarding acceptable forms of payment. Exceptions, the policy notes, “must be approved by the chief financial officer and the chief executive officer of the operating company.”

WASHING MACHINE

The process that transforms cocaine sales into a CFO’s headache is complex. Anxious to quickly pocket drug profits amassed in the United States, drug cartels in Colombia sell the dirty dollars at a 20 to 40 percent discount to a Colombian-based peso broker, who pays them in pesos. With its pesos in hand, the cartel’s laundering effort is complete.

Meanwhile, the peso broker’s agents in the United States pick up the tainted dollars and salt them away in multiple bank accounts. In Bell’s case, according to court documents, an undercover U.S. Customs agent, acting on instructions from indicted Colombian peso broker Armando Mogollon, picked up a suitcase containing $492,500 in Queens, New York, on January 21, 1999. The following day, he deposited the money in four phony business accounts at a Regions Bank in Mobile, Alabama.

In Colombia, there’s a ready market among importers for stateside dollars. To buy dollars legally from the country’s Central Bank, importers must prove they have paid the necessary duties and taxes on the foreign goods they plan to buy. To evade this requirement–and get a much better exchange rate–they pay the peso broker instead. The broker then authorizes his agents in the United States to pay for the goods the importers have ordered. Just one day after an undercover agent picked up the profits of drug sales on the streets of New York, court documents say, he received instructions from Mogollon to wire five separate payments ranging from about $60,000 to $100,000 to Bell Helicopter Textron.

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