Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

February 5, 2009


Sam Smith

Based on media coverage at least, name the largest industry in America that never contributes to political campaigns, never tries to influence politicians, never is involved in political corruption and has no lobbyists in Washington? In other words, name the cleanest business in America - that is, if you believe the media

The answer: the illegal drug trade.

For example, the Review has been among the lonely voices raising the possibility that drug and mob money may have played a much larger role in the current fiscal crash than has been noted.

It is clear the media doesn't want to touch this matter. But they've had a setback with the testimony of financial investigator and Madoff whistleblower Harry Markopolos. Talking Points Memo notes: "Markopolos elaborated while being questioned by lawmakers, alleging Madoff 'had a lot of dirty money' from the Russian mafia and Latin American drug cartels."

In the end, Markopolos realized he had done the mobs a favor. Here's part of a Q&A with Rep. Gary Ackerman:

ACKERMAN: I'm talking about, when you talk about the Russian mob and organized crime, these are people who invested through European investors or European feeder funds?

MARKOPOLOS: Correct. And I didn't fear of them, and I didn't think they were going to come after me, I want to make this perfectly clear to all those Russian mobsters and Latin American drug cartels out there. . .

ACKERMAN: You're talking directly to them.

MARKOPOLOS: I was acting on your behalf trying to stop him from zeroing out your accounts. I'm the good guy here. Just like to make that clear.

And the Independent in Britain reports that "Amid persistent rumors that Russian mob money found its way into the Madoff Ponzi scheme, a panic button has been installed in the [Madoff] apartment, along with 24-hour surveillance, as much to protect him as to check he is not planning to flee. He wears a bullet-proof vest for trips to court."

It seems obvious that the parallel rise of the illegal drug trade and the use of hedge funds and other devices to hide the origin and movement of money deserves, at the very least, deep looking into. There seems a reasonable possibility that our current crisis was driven in some part by a need to launder large sums belonging to criminal groups.

Why is the media so reluctant to consider this? Partly because it sounds too movie-like. But, as we have recently learned, Bernie Madoffs actually exist outside of Hollywood.

Part is because the media traditionally takes its cue on covering crime from law enforcement, which may itself - as with other government bodies - be involved, incompetent or indifferent.

Finally we have the little noted problem that in a hyper-corporatized media, a good scoop can ruin a career as fast as it can make one if the wrong people in power are angered by it.

I have been alternately frustrated and fascinated by the money laundering story and the refusal of major media for the most part to even mention it. To the media, the drug trade is largely the result of minorities and undisciplined young white dudes. It makes the story so much easier.

But when I started covering the Clinton story, I found myself repeatedly stumbling into other aspects of the tale. Here are a few examples from the Review archives:

1994 - Writing in the London Telegraph, Ambrose Evans-Pritchard wrote that Arkansas was a "major point for the transshipment of drugs" during the 1980s and "perilously close to becoming a 'narco republic' -- a sort of mini-Columbia within the borders of the United States."

1995 - While portions of the Mena, Arkansas affair have been reported elsewhere (including here), the Denton/Morris piece is significant . . . First, it is based on more than 2000 documents from the files of ex-drug smuggler -- and sometime intelligence asset -- the late Barry Seal. . . The Denton/Morris story tells of "literally hundreds of millions of dollars in drug profits" being developed by the Mena operation, of CIA involvement, and of nine different official investigations being stifled under two presidents (Reagan and Bush) and one governor (Clinton).

1996 - Jim Leach of the House Banking Committee is reported running into stonewalling on the grounds of "national security" as he investigates drug smuggling and money laundering out of Mena, Arkansas. As Insight magazine points out in its January 29 issue, there have been nine separate federal and state probes over the last decade that "have managed to establish that Mena was indeed the center of a brazen narcotics-trafficking operation."

1996 - The White House hosted a major drug dealer at its Christmas party last year. . . Cabrera was indicted in 1983 by a federal grand jury -- on racketing and drug charges -- and again in 1988, when he was accused of managing a continuing narcotics operation. He pleaded guilty to lesser charges and served 54 months on prison. Since his visit to the White House he has been sentenced to 19 years on prison for transporting 6,000 pounds of cocaine into the US.

1997 - In his book, The Secret Life of Bill Clinton, Ambrose Evans-Pritchard quotes an ex-drug pilot as saying that he once brought a Cessna 210 full of cocaine into eastern Arkansas where he was met by a state trooper in a marked police car. "Arkansas," he said, "was a very good place to load and unload." Later Evans-Pritchard wrote:

"On my first visits to Arkansas, I could smell that something was wrong. The place reminded me of Central America, a sort of anglophone Guatemala, where a corrupt and violent political machine operated behind the scenes. People dissembled in interviews, instinctively. The deeper I looked, the clearer it became that the Dixie Mafia had a foothold in official Arkansas, and that intimidation was part of the culture.

"Dissident members of the Arkansas State Police provided me with stacks of confidential reports showing that one of Mr. Clinton's biggest financial backers during his assent to power . . .had been under investigation for international drug-trafficking. . . .

1998: Arkansas Highway Police have seized $3.1 million in cash from four suitcases in a tractor-trailer rig's sleeper section. The driver was charged with money laundering among other things. The seizure was the fourth largest in American history and nearly fifty times more than all the illegal money seized by Arkansas highway police in a typical year.

Arkansas has long functioned as a center of narcotics activity. The airport at Mena has been used for major drug trafficking, and sparsely populated areas have proved attractive for "kick drops" in which drug shipments are released from a plane to confederates on the ground who are given the geographical coordinates of the shipment. It has also been alleged that drug money was laundered through the Arkansas Development and Finance Administration.

1997 - Progressive Review editor Sam Smith interviews Billy Bear Bottoms, pilot for Barry Seal, who, until he was murdered, was considered by some the biggest illegal drug importer. Bottom thinks this is inflated but says that
Seal "testified in a trial in Las Vegas that he had made about 50 trips of 300 kilos each. His transportation fee was $5,000 per kilo. We actually only made about 25 trips." The transportation fee alone works out to $1.5 million a trip or $75 million for 50 trips; half that for 25. [That would be about $2.7 million a trip in today's dollars].

1999 - From "Partners in Power" by Roger Morris:

"[Key investigators] Duncan and Welch watched the Mena inquiry systematically quashed and their own careers destroyed as the IRS and state police effectively dissolved their investigations and turned on them. 'Somebody outside ordered it shut down,' one would say, 'and the walls went up.' Welch [a state trooper] recorded his fear and disillusion in his diary on November 17, 1987: 'Should a cop cross over the line and dare to investigate the rich and powerful, he might well prepared himself to become the victim of his own government. The cops are all afraid to tell what they know for fear that they will lose their jobs.'"

1999 - Bill Duncan: An IRS investigator in Arkansas who drafted some 30 federal indictments of Arkansas figures on money laundering and other charges. Clinton biographer Roger Morris quotes a source who reviewed the evidence: "Those indictments were a real slam dunk if there ever was one." The cases were suppressed, many in the name of "national security." Duncan was never called to testify. Other IRS agents and state police disavowed Duncan and turned on him. Said one source, "Somebody outside ordered it shut down and the walls went up."

1999 - Rusell Welch: An Arkansas state police detective working with Duncan. Welch developed a 35-volume, 3,000 page archive on drug and money laundering operations at Mena. His investigation was so compromised that a high state police official let one of the targets of the probe look through the investigative file. At one point, Welch was sprayed in the face with poison, later identified by the CDC as anthrax. He would write in his diary, "I feel like I live in Russia, waiting for the secret police to pounce down. A government has gotten out of control. Men find themselves in positions of power and suddenly crimes become legal." Welch is no longer with the state police.

1999 - Jean Duffey was head of a joint federal-county drug task force in Arkansas. Her first instructions from her boss: "Jean, you are not to use the drug task force to investigate any public official." Duffey's work, however, led deep into the heart of the Dixie Mafia, including members of the Clinton machine. The local prosecuting attorney, Dan Harmon issued a subpoena for all the task force records, including "the incriminating files on his own activities. If Duffey had complied it would have exposed 30 witnesses and her confidential informants to violent retributions. She refused." Harmon issued a warrant for her arrest and friendly cops told her that there was a $50,000 price on her head. She eventually fled to a secret address in Texas. The once-untouchable Harmon was convicted in June 1997 of five counts of racketeering, extortion and drug dealing.

2000 - Insight Magazine: Canadian police have identified Clinton donor and Macao gambling tycoon Stanley Ho as the leader of a triad gang of organized criminals with strong ties to Communist China. President Clinton personally accepted $250,000 from a Macao gambling tycoon whom Canadian police identify as a "leader" of a Chinese triad, or organized-crime syndicate. . . According to a separate Canadian Security Intelligence Service report, the triads are involved in "drug trafficking; money laundering; corruption; computer-software piracy; credit-card forgery and fraud; counterfeit currency and identification operations; and migrant smuggling."

2001 - Stewart Tendler, Times, London: Customs officers have seized nearly $2 million in cash after it was flown into Britain on behalf of Marc Rich, the fugitive billionaire pardoned by Bill Clinton. Mr Rich, whose presidential pardon is under investigation by the FBI, now has to prove that the cash was honestly acquired, or he could lose it. Investigators are holding the cash under powers aimed at preventing drug traffickers moving their profits from country to country. . .

2001 - In 1984, a Clinton bodyguard, state trooper L.D. Brown, applied for a CIA opening. Clinton gave him help on his application essay including making it more Reaganesque on the topic of Nicaragua. According to Brown, he met a CIA recruiter in Dallas whom he later identified as former member of Vice President Bush's staff. On the recruiter's instruction, he also met with notorious drug dealer Barry Seal in a Little Rock restaurant, later joining Seal in flight to Honduras with a purported shipment of M16s and a return load of duffel bags. Brown got $2,500 in small bills for the flight. Concerned about the mission, Brown consulted with Clinton who said, "Oh, you can handle it, don't sweat it." On second flight, Brown found cocaine in a duffel bag and again he sought Clinton's counsel. Clinton allegedly said to the politically conservative Brown, "Your buddy Bush knows about it" and of the cocaine, "that's Lasater's deal."

2001 - In 1985, Clinton established the Arkansas Development Finance Authority that would become, in the words of one well-connected Arkansan "his own political piggy bank." Though millions of dollars were funneled to Clinton allies, records of repayments would be hazy or non-existent. . . Later, an investigator found evidence of an electronic transfer of $50 million from the Arkansas Development Financial Authority to a bank in the Cayman Islands.

2001 - In 1989 Terry Reed filed a civil action against Buddy Young, chief of the Clinton security detail and later a top FEMA official. Reed argued that he had been framed after trying to pull away from his involvement in the Iran-Contra machinations. . . One estimate was that ten million dollars were passing through Mena every week. Patterson said the matter was repeatedly discussed in front of Clinton by his bodyguards. Patterson said the governor had "very little comment to make; he was just listening to what was being said." Reed's case unraveled when the state judge ruled that no evidence regarding Mena, the CIA, Dan Lasater, the Arkansas Development Finance Agency, or the Clintons would be permitted.

As one examined the story, it was clear even back then that there were major ties to other major scandals such as BCCI and the savings & loan crisis, forerunners of current mass fiscal manipulation gone awry. The state of Arkansas was laundering money in Grand Cayman, which had a population of 18,000, 570 commercial banks, one bank regulator and a bank secrecy law. Foreign investors helped to set up a bank in a small town near the major drug center at Mena. One secretary told told an IRS investigator that she was ordered to obtain numerous cashier's checks, each in an amount just under $10,000, at various banks in Mena and surrounding communities, to avoid filing the federal currency transaction reports required for all bank transactions that exceed that limit. Bank tellers testified before a federal grand jury that in November 1982, a Mena airport employee carried a suitcase containing more than $70,000 into a bank. "The bank officer went down the teller lines handing out the stacks of $1,000 bills and got the cashier's checks."

Mind you, most of this occurred more than a decade ago, yet, with a few exceptions like Roger Morris, Sally Denton and Ambrose Evans-Pritchard, reporters haven't wanted to touch it and have spent their efforts instead creating a benign Clinton myth. Clinton was - like a typical prohibition era politician - a beneficiary and peripherally complicit at the very least through studied indifference, but in a sense he was really just part of the background. He was a window into the real story: how a huge part of the American economy - created by the crudely misnamed War on Drugs - operated in just one state.

If the media had honestly followed the money back then, if they had asked obvious questions about the war on drugs, if they hadn't fallen for the politicians' lines on BCCI and the S&L scandal, if they had wondered why so much money was moving around without any visibility or regulation, we might have approached the end of 2008 in better shape.


Anonymous Anonymous said...

Wouldn't surprise me in the least.
Where does one put all that "cash" from the sale of illegal drugs.
It also makes you wonder, when large fiscal deficits for states, municipalities, and the federal government exist, why are we not talking about de-criminalizing the drug trade. The taxes imposed on the sales would generate enormous revenue. Who in fact would have an interest in NOT having drugs de-criminalized. The relative low costs incurred now by dealers -- losses due to confiscations of product, some arrests now and then, are nothing compared to the costs of legalization, taxes, minimum wage laws, pension plans, etc.

February 5, 2009 6:01 PM  
Blogger corporatebully said...

RBC Bank President Gordon Nixon - Salary $11.73 Million


I'm a commercial fisherman fighting the Royal Bank of Canada (RBC Bank) over a $100,000 loan mistake. I lost my home, fishing vessel and equipment. Help me fight this corporate bully by closing your RBC Bank account.

There was no monthly interest payment date or amount of interest payable per month on my loan agreement. Date of first installment payment (Principal + interest) is approximately 1 year from the signing of my contract.
Demand loan agreements signed by other fishermen around the same time disclosed monthly interest payment dates and interest amounts payable per month.The lending policy for fishermen did change at RBC from one payment (principal + interest) per year for fishing loans to principal paid yearly with interest paid monthly. This lending practice was in place when I approached RBC.
Only problem is the loans officer was a replacement who wasn't familiar with these type of loans. She never informed me verbally or in writing about this new criteria.

Phone or e-mail:
RBC President, Gordon Nixon, Toronto (416)974-6415
RBC Vice President, Sales, Anne Lockie, Toronto (416)974-6821
RBC President, Atlantic Provinces, Greg Grice (902)421-8112 mail to:greg.grice@rbc.com
RBC Manager, Cape Breton/Eastern Nova Scotia, Jerry Rankin (902)567-8600
RBC Vice President, Atlantic Provinces, Brian Conway (902)491-4302 mail to:brian.conway@rbc.com
RBC Vice President, Halifax Region, Tammy Holland (902)421-8112 mail to:tammy.holland@rbc.com
RBC Senior Manager, Media & Public Relations, Beja Rodeck (416)974-5506 mail to:beja.rodeck@rbc.com
RBC Ombudsman, Wendy Knight, Toronto, Ontario 1-800-769-2542 mail to:ombudsman@rbc.com
Ombudsman for Banking Services & Investments, JoAnne Olafson, Toronto, 1-888-451-4519 mail to:ombudsman@obsi.ca





"Fighting the Royal Bank of Canada (RBC Bank) one customer at a time"

February 5, 2009 9:12 PM  
Anonymous Anonymous said...

Wasn't there a big investigation back in the 80's that was concerned with the chemical exports to Colombia as being way out of sync with the industrial needs of the country at the time? An investigation that involved New York banks and was ultimately called off by George Bush Sr.?

February 5, 2009 11:27 PM  
Anonymous Anonymous said...

My guess is that the media is loathe to lift the "Drug Money" log for two reasons: First, when the enormous wealth, power, and corruption the Drug War has engendered comes to light it can't help but force the intelligent nose to the unpalatable conclusion that the Drug War needs to end and no one wants to be the one who says it, not least because of Reason Two: What happens to those unfortunate enough to lift that log - Gary Webb, for example.

BTW, local example you might be interested in as a sometime Mainah; the clear connection of the Russian Mob to the recent interception of Credit Card accounts from Hannaford supermarkets was underplayed to a ridiculous degree by the local press.


February 6, 2009 9:24 AM  
Anonymous Anonymous said...

You only need to use logic to come to the conclusion that American politicians and drug money are connected.

Why are there illegal narcotics? Take marijuana, for example. There is no medical, health, safety, or moral reason for marijuana to be illegal. The only reason for the illegal status is financial. Illegal substances are worth more money. Any politician who is against legalizing marijuana has only one reason for their position, and that is financial. Logic proves that any politician against the legalization of marijuana has taken that position because they are paid to do so. Drug cartels are no different from any other big business; they want to protect the value of their goods. The bribes (whoops, I mean "campaign contributions") they make to politicians are miniscule compared to the profit they make. Thus politicians accept money from drug cartels to keep narcotics illegal.

February 9, 2009 5:38 PM  
Anonymous treecraft said...

Iran-Contra, Barry Seal, Mena, Bill Clinton, Hillary Clinton, WalMart, Wall Street, Money Laundering, Campaign Contributions, Bailouts. . .

Any connection?


February 24, 2009 12:59 PM  

Post a Comment

<< Home