The Washington Post
Tuesday , August 29, 2000 ; A01

U.S., Colombia to Confront Lucrative 'Peso Exchange'

By Karen DeYoung
Washington Post Staff Writer

BOGOTA, Colombia Early this month, a $1.5 million Bell helicopter was tracked by Colombia-based U.S. Customs agents
from here to Panama, where it was seized by local authorities acting at U.S. request. The helicopter, a seven-seat Bell 407, had
been purchased in 1998 by a Colombian multimillionaire with laundered drug-smuggling money, according to Customs and the
Justice Department.

The Texas-based manufacturer, Bell Helicopter Textron Inc., has denied knowing that drug profits were the source of the
money in its New York bank account, where payment for the aircraft was deposited via 31 separate wire transfers from
unrelated individuals. Bell, which is due to sell 42 military helicopters destined for Colombia as part of a $1.3 billion U.S.
anti-drug aid package, is aggressively contesting the Justice Department's decision last year to freeze the account and demand
the money be forfeited.

U.S. authorities described the purchase as one example of a money-laundering scheme known as the black market peso
exchange, which Colombia says turns an estimated $5 billion a year in ill-gotten U.S. currency into Colombian pesos through
the purchase and illegal import of American products, often through neighboring third countries.

The black market peso exchange constitutes what James E. Johnson, undersecretary for enforcement at the Treasury
Department, called "perhaps the most dangerous and damaging form of money laundering that we have ever encountered."

Although the amount pales when compared to the hundreds of millions of dollars devoted to military equipment and training,
nearly $40 million of the controversial new U.S. aid package will directly or indirectly help finance programs designed to
strengthen Colombia's ability to catch and prosecute those involved with contraband or the laundering of drug money.

The increasingly close relationship between U.S. and Colombian customs agencies--a relationship that surpasses ties between
the two nations' still sometimes wary military forces--will be on the agenda when President Clinton pays a visit to Colombian
President Andres Pastrana on Wednesday.

In addition to supplying computers and software to enable the Colombians to better track their own imports, the United States
will expand an existing training program for Colombian customs agents. "What we wanted was for U.S. Customs to come in
and take over" the Colombian service, which was "corrupt, unprepared, with no technology and no resources," said one
Colombian trade official.

Colombia broke international precedent last spring by agreeing to send its monthly legal import records to Washington, where
U.S. Customs agents collate them with U.S. banking and other law enforcement records and with shipping manifests for
products leaving the United States for Colombia. Those recorded as leaving the United States, but not listed as arriving in
Colombia, are considered contraband, and the information is passed to Colombian authorities.

For its part, a U.S. government that long denied American exporters were part of the problem has launched a campaign to
warn companies such as Bell--and the cigarette, alcohol, appliance, electronics and auto parts manufacturers whose products
consistently are illegally offered for sale here--that they risk losing their money or worse if they turn a blind eye to clear signs of
smuggling or payment in laundered funds.

"When a company receives payment for its exports in the form of wire transfers, checks or cash from random third parties with
no connection to the transaction, alarm bells should go off at corporate headquarters," said U.S. Customs Commissioner
Raymond W. Kelly. "This is not how standard business deals are done."

In the Bell case, none of the 31 deposits to pay for the civilian helicopter had any ostensible link to any other or to the aircraft's
actual purchaser, identified as Victor Carranza, who the Justice Department has alleged was well known to Bell and whose
company had previously done business with Bell. Moreover, five of the deposits were made by undercover Customs agents
who had infiltrated a drug money laundering ring operating across the United States. Its exposure in July 1999 resulted in 34
U.S. indictments; the seizure of 1,160 pounds of cocaine and $4.5 million in cash; and the freezing of 65 bank accounts,
including Bell's.

Carranza, the principal shareholder in Colombia's largest emerald mining company, is in prison here on charges of sponsoring
and financing right-wing paramilitary forces. Colombian and U.S. investigators have also alleged that he is involved in drug
smuggling.

A Customs affidavit laying claim to the helicopter was unsealed this month in federal court in Washington, after the aircraft was
seized. According to officials in Washington, associates of Carranza had flown the helicopter from Colombia to Panama to try
to conceal it. No one has asked the U.S. government to give it back.

 

Neither Bell nor the Justice Department would comment on the frozen funds case, which is in U.S. District Court in Mobile,
Ala.

Responding to the Justice Department's claim that Bell should forfeit the money, the company said in a court filing that it "denies
that any funds on deposit in [the specified bank account] are proceeds of drug trafficking activity or are forfeitable pursuant to
any statutory provision."

What was already an established laundering and contraband system in Colombia grew exponentially in the early 1990s as drug
exports soared and smugglers found a ready-made way to turn profits obtained from U.S. drug sales into pesos at home.

Drug traffickers give their dirty dollars to peso brokers in the United States. Colombians who want to import U.S. products
circumvent official requirements for obtaining dollars and deposit their pesos with brokers here. After taking a cut of 20 percent
or more on both sides, the U.S. broker pays manufacturers and their distributors with the dollars, usually through a series of
ever-changing accounts in the names of paid individuals who are told where to wire cash and in what amount. The broker in
Colombia then deposits the purchaser's pesos in the traffickers' Colombian accounts.

The purchased U.S. goods are delivered to Colombia, usually via free trade zones in Panama and Aruba, through a network of
ports on Colombia's Caribbean coast that have long been dominated by smugglers. While some products, such as Carranza's
helicopter, go directly to their ultimate purchasers, others are sold to consumers at markets across the country, called
sanandrecitos, after the free trade zone on the Colombian island of San Andres in the Caribbean.

U.S. officials, who had long considered Colombia's customs system an irremediable part of the country's corruption,
acknowledged that they spent much of their time in the past haranguing their Colombian counterparts. But in two official visits to
Washington in 1998--first by the newly elected Pastrana and later by senior finance officials--Colombians charged that U.S.
manufacturers were a major part of the problem.

The Colombians asked if it were likely that the U.S. companies would not notice big jumps in their sales to Colombia or strange
deposits into their accounts. As a result, task forces and working groups were established with the U.S. government, and
Customs Commissioner Kelly negotiated a mutual assistance agreement that was signed last September. A similar agreement is
now being discussed with the U.S. Internal Revenue Service.

Both governments also have started talking to manufacturers. Officials have pointed out the anomaly in booming sales of
hundreds of millions of dollars' worth of washing machines, dryers and refrigerators to Colombia, even as manufacturers' own
registered, tax-paying Colombian distributors were going out of business. Law enforcement officials in both countries warned
that they would start paying closer attention, even if the manufacturers did not.

Representatives of the Association of Home Appliance Manufacturers, which includes almost every major U.S. producer, have
met with officials from the Treasury Department and the Colombian government and signaled an intent to cooperate. The
companies want to avoid being labeled as having links to drug trafficking, said a U.S. official who declined to be named, and
they also are afraid they will be made legally responsible for ensuring that they are not being used for illicit transactions.

But Colombian officials said that, based on their seizures of contraband in ports and markets, they have seen few results of the
promised cooperation.

In one promising area, cigarette maker Philip Morris agreed this summer to undertake measures to stem the smuggling of
Marlboros, the vast majority of whose substantial sales here were estimated to be illegal. Despite the agreement, however,
Colombia's 22 state governments and the federal district of Bogota sued Philip Morris International last spring in U.S. federal
court for past lost tax revenue. The suit, whose charges the company has vehemently denied, alleges that more than 95 percent
of Philip Morris products that entered Colombia in the 1990s were illegal imports, many of them paid for with laundered drug
money.