Chemical Cowboys

by Lisa Sweetingham

  She was shaking nervous the day of her assignment. When she got to Amsterdam, Erez and Reicherter sent her to a hotel room across from Erez's apartment and told her to wait. She was alone when a tall Dutch man with glasses knocked on the door and took the bag of cash from her. She later identified Michel Denies in a photo lineup: Yes, that was the man.

  Jessica was not arrested and no drugs or money were found in the couple's apartment. But among the items seized was Jessica's college-lined journal. It was filled with page after page of girlish observations (“I thought my man was cheating on me. But he wasn't”), daily recitations of outfits (“May 4: Today I am wearing a Nelly Hansen sweater with my Fila boots and white DKNY hat”), and recent acquisitions (“Diana gave me a nice shirt… and lent me the Monica Lewinsky book”). There was a final entry on the day of her boyfriend's arrest: “So far nothing. His Boss called him and he went to go meet him. I am starving. Cleaned.”

  Across the top of every single page, scribbled with the obsessive-compulsive will of youth, Shimi had written, “I Love You, Jessica.”

  66 THE END OF THE

  SEAN EREZ ERA

  IN THE NEXT FORTY-EIGHT hours DEA agents, Customs officials, and police detectives in New York and Florida were on cue, arrest warrants in hand, ready to take down the entire Sean Erez distribution network. With Erez and Reicherter in custody, Gagne called the response groups in Miami and Long Island to give the go. They had to work fast, because Tiny, GQ, and Goombah all knew that if Erez wasn't calling every few hours to harass them about business, he was dead or in jail.

  Giacomo “Goombah” Pampinella was arrested in a Burger King parking lot and brought to DEA's Long Island office for questioning.

  “Do you know an individual by the name of Sean Erez?” a detective asked.

  Goombah said he didn't know anyone by that name. They played a recording of one of his phone conversations with Erez to refresh his memory. The detective asked again if he knew anyone by the name of Sean Erez.

  Goombah admitted that he knew Erez, but said he only collected money for him and never touched the pills. They showed him two Western Union receipts they'd found in his car, receipts made out to Erez for $900 apiece—profits from drug sales. One of the detectives asked Goombah what he did with all the money he had made. The twenty-three-year-old dealer said he had just $1,400 to his name. In the last eight months he had spent about $80,000 on vacations, partying, and investing in his family's coffee business.

  Erez's twenty-nine-year-old Miami partner, Richard “Tiny” Berman, was arrested as he stepped off the elevator at his Miami Beach apartment building. His Rolodex contained the phone numbers of Erez's entire network. Filed under D was a card marked “Drugs” with Steve Hager's number.

  When twenty-four-year-old Yves Cesar Vandenbranden III, aka “GQ,” was arrested in Miami, his girlfriend made a frantic call to GQ's brother, Eric Vandenbranden. Eric instantly thought of the strange visit he had had from Tiny earlier that morning, when Tiny left a suitcase behind for GQ. Eric rushed into the bedroom to pry open the mysterious locked case. Inside he found thousands of pink and blue pills. He threw the case in his car, drove to the middle of the Rickenbacker Causeway, pulled off, and hoisted the case over the ledge, tossing it into Biscayne Bay. Days later, he would take DEA agents to the bridge to show them where he dumped the pills. A Miami-Dade dive team came up empty-handed.

  Back in the Netherlands, Gagne was trying to flip Diana Reich -erter. He knew she had helped Erez by secreting pills in rolled-up socks and packing them in couriers’ luggage. Erez was always yelling at her to stop getting her fingerprints on everything. If Gagne could get Reicherter to flip, Erez would have to fold, because his girlfriend knew everything about the business. But Reicherter was tough. And terminally pissed off.

  “I'm not talking to you guys,” she said.

  “Diana, it's in your best interests to cooperate now,” Gagne said. “If we have to go through all the trouble of extraditing you to the States and then you decide to cooperate, it's only going to be a mark against you.”

  “I got nothing to say.”

  “Look, we already know all about your role in the business.”

  “I know about everything, but I didn't do anything.”

  “I think you're lying, Diana.”

  “Fine,” she hissed.

  Erez, on the other hand, was ready to make a deal.

  “I just knew,” Erez told Gagne. “I knew this was coming.” The first thing Gagne asked Erez to do was to make recorded phone calls to Ecstasy supplier Michel Denies. Gagne needed to keep his promise to the Dutch police to help them collect evidence against Denies and Lijklema.

  67 THE MONEY TRAIL

  “YOU DON'T KNOW WHAT a night I went through, oh, my God. I'm in Israel,” Erez was calling Denies from a police precinct in the Netherlands.

  “Israel?”

  “I was on my way to St. Tropez. Missed my flight, and as I'm waiting to get my suitcases back, which I didn't get back until now, I get a phone call from my sister. Her kid got into a car accident and is in a coma.”

  “Oh, man. Shit,” Denies said.

  “Shit like you wouldn't believe it.”

  Gagne was amazed at how easily the lies fell from Erez's lips. No coaching or nothing, Gagne thought as he recorded Erez's half-dozen calls to Denies from an undercover phone.

  “Don't give this number to no one,” Erez bluffed to Denies. “I want to keep it safe.”

  Erez told Denies he was on his way to Canada, then New York. He tried to coax Denies to visit him in the States. He said he wanted pills, and a lot of them, quickly.

  “I would like them landed,” Erez said, at Gagne's direction.

  Requesting the pills “landed” meant Denies would be responsible for their transportation—and any liability if they were seized—but Erez would pay a dollar or two more per pill upon receipt of the load. Normally, Erez would just give Denies half of the money up front. But there was no way Gagne was going to agree to front Erez any money.

  When Erez started cooperating, Reicherter caved. Before he left Holland, Gagne convinced them both to waive extradition, voluntarily return to the States, and cut plea deals. Once Gagne returned home, for the next three days he and Don Rospond orchestrated three-way calls. Rospond would get Erez on the phone in the Netherlands, Erez would call Denies and pretend to be in Israel—and all of their conversations were being routed through and taped in New York.

  But in an unexpected change of plans, Ecstasy's Bonnie and Clyde suddenly decided that cooperating wasn't in their best interests anymore. Erez had hired an attorney who thought they could beat the case. Erez shut down. The couple decided the liberal Netherlands prison system was a better deal: Erez could use a cell phone, pay to have steak and lobster brought in for dinner, and enjoy conjugal visits with Reicherter. They vowed to fight extradition.

  In the meantime, a federal grand jury in the Eastern District of New York handed up an indictment for Erez and his co-conspirators on Ecstasy charges and money laundering. Judge Fred Block (who, coincidentally, had presided over the Gatien case) signed a restraining order prohibiting the couple from getting their hands on any drug assets subject to forfeiture.

  Gagne and Lacewell uncovered evidence that indicated Erez had received about $5 million in Ecstasy proceeds during his eight-month stint in Amsterdam. They tried to seize his money but the trail was tenuous.

  Confidential sources told Gagne that Erez hid his money with the help of one or more attorneys in Luxembourg who created paperwork for dummy companies for Erez in the British Virgin Islands. The attorneys would then introduce Erez to private banking reps in Luxembourg and vouch for the legitimacy of his business. Erez would tell the banker that he was in the diamond business or real estate. Once his dummy companies had legitimate bank accounts, Erez was able to deposit cash and move millions of dollars among different accounts to branches in Luxembourg, Israel, Miami, and New York.

  Lacewell made formal reques
ts to the courts of Israel and Luxembourg for assistance in procuring Erez's financial records, bank accounts, safe-deposit boxes, and any information on contacts he made with foreign financial officers. She knew it could take years to get that kind of information. She subpoenaed Erez and Tiny's joint bank account records from Florida, and the Federal Reserve Bank for any recorded wire transfers. About $200,000 was discovered in safe-deposit boxes in Miami and Luxembourg. But then, just as they were tracking the rest of Erez's drug money, Gagne and Lacewell discovered Erez had been busy making calls from a Dutch prison. He had already moved $330,000 cash into a bank in Jerusalem and had begun closing his European accounts. He was hiding his money.

  As Gagne studied Erez's wire transfer records, he was intrigued in particular by two notations. The first, in April 1999, was for $72,803.58 to his Alcor Bank account by order of a New Jersey yeshiva, or school for religious studies. A second wire in May for $93,000 to Erez's Banque Leu account was by order of a Hasidic yeshiva in Lod, Israel. Why was he receiving funds from religious institutions?

  Gagne recalled the time he'd heard Erez arguing on the wire when Goombah refused to body-carry cash. Erez yelled at him, demanding that Goombah pay the 3 percent fee Erez was going to lose by having to send the cash “through the religious guy.” They argued about the fee until Erez finally relented and told Goombah in frustration: “Just meet up with the religious guy and finish it up properly.”

  68 DIRTY MONEY

  THE AMOUNT OF MONEY laundered globally in one year, according to the International Monetary Fund, is about 2 to 5 percent of the world's GDP—that's $800 billion to $2 trillion in U.S. dollars. The main sources of illegal proceeds laundered in the United States are drug trafficking, organized-crime enterprises, and white-collar crime.

  “Money laundering” is a broad term, but the intrinsic aim of a money launderer is to engage in financial transactions that will disguise the origins and/or the destination of the money he makes from illegal activities. In other words, it's a way to make dirty money look clean so that law enforcement can't seize it.

  Money laundering is the most important phase of the drug business and traffickers employ the classics: offshore bank accounts and front companies in cash-heavy businesses such as strip clubs, restaurants, and Laundromats. Making structured deposits, or “smurfing,” is one way traffickers get around the U.S. laws requiring banks to file currency transaction reports for deposits over $10,000. The dealer simply walks into one bank, deposits $9,800 in cash, goes around the corner to another bank, and so on. “Smurfs” are couriers who body-carry just under $10,000 to avoid reporting the cash on Customs forms.

  In the mid-1990s, U.S. Customs estimated that at least $10 billion in laundered money flowed through New York City and that drugs generated up to 90 percent of it. Customs agents at JFK, along with their money-sniffing canine partners, had revealed remarkable money-smuggling methods: couriers who swallowed $100 bills rolled in condoms, $7 million in a forty-foot-long refrigerated container, and $6.5 million in twenty-six Colombia-bound canisters that were labeled as containing bull semen.

  Drug traffickers face a distinctly unique challenge when laundering money because their profits come in small denominations—and cash is heavy. In 1999, $1 million worth of Ecstasy weighed about 18 pounds, the size of a medium bag of dog food. But $1 million cash, in fives, tens, and twenties, can weigh up to 250 pounds—not easy to stash in a suitcase. When the European Union decided it would issue 500-euro notes, the U.S. Federal Reserve was none too pleased about the effect it would have on money laundering. The $100 note is the highest denomination the United States has printed since 1969, and if criminals had access to the equivalent of $500 bills, then $1 million could weigh as little as 4.4 pounds.

  A case study in heavy, dirty money: The largest drug-cash seizure in the world to date was $207 million discovered in a March 2007 raid of the Mexico City mansion of a Chinese businessman and alleged methamphetamine trafficker. The stash was almost entirely in $100 bills and weighed more than two tons. It took three trips to ship the bills to New York, where Bank of America was paid $1.4 million by the Mexican government to count the cash five times and then electronically transfer the money into the Bank of Mexico and the Mexican treasury. It earned $1.6 million in interest in three months.

  Some traffickers convert cash into gold or diamonds to lighten the load and evade detection by dogs. In a 1999 case that implicated employees of Metalor USA Refining Corp., one of the largest gold refineries in the United States, money launderers purchased gold in the States using drug profits and smuggled the gold to South America where it was melted into other forms. From there, the money launderers “exported” the gold back to the States, where it was refined, repackaged in shampoo bottles, and shipped again to South America. Metalor blamed the illegal activity on a few corrupt employees, agreed to pay a fine of $9 million, and pleaded guilty to illegal financial transactions that helped South Americans launder $4.5 million. The investigation began in part after it was discovered that the amount of gold being exported from Colombia in 1999 far exceeded its production capability.

  The black-market peso exchange (BMPE) is still one of the most popular laundering methods. The BMPE works in different ways, but at the heart of the system a trafficker in Colombia brings his dirty U.S. dollars to a money broker. The money broker uses the drug dollars to purchase goods in the United States on behalf of Colombian importers who want to evade the Colombian government's tariffs and taxes. The importer then sells the goods in Colombia and pays the broker back in pesos minus a fee, and the broker passes the clean pesos on to the trafficker after collecting a fee. The black-market peso exchange recycles an estimated $5 billion a year.

  The repercussions of money laundering have staggering social, economic, and security concerns—most notably the financing of terrorism. In July 1999, the Clinton administration froze $240 million belonging to al-Qaeda and the Taliban in Western banks in response to the 1998 terror attacks on U.S. embassies in Kenya and Tanzania. One lesson the terrorists learned from this was to turn their cash into commodities—gold, tanzanite, emeralds, sapphires, and diamonds—which could easily be transported and then bartered or sold to turn back into cash.

  But how did al-Qaeda move its cash? The answer, according to the 9/11 Commission, was hawala—an ancient informal banking system based entirely on trust. Hawala is the same technique that dozens of Ecstasy traffickers used to move money safely, without risk of detection.

  In a typical hawala transaction, a client goes to a hawaladar, hands him $10,000 in cash, and asks him to transfer the money in, say, rupees to his cousin in India, or shekels to his brother in Jerusalem, or whatever currency is legal tender in the country of the recipient. The hawaladar takes about 3 to 5 percent off the top, calls a hawaladar contact in the destination country, and has that broker deliver the remaining cash to the recipient. The client does not get a receipt, and no record is made of his individual transaction. Hawaladars keep only a running tab of the amounts owed one another.

  Hawala works like a global bank account—no money actually moves, but at some point in time the brokers balance their books and settle the differences with cash or goods. The hawaladar doesn't know where a client's money comes from and doesn't want to know. But he will often raise his fee if the transaction seems suspicious. For instance, a client who brings a hawaladar $100,000 in $20 bills could pay up to 14 percent. The smaller the bills the higher the fee.

  Hawala was introduced in India before the onset of traditional Western banking and is primarily used today by migrant workers who need to send money to their home country. Hawaladars have worldwide branches in such places as Dubai, Great Britain, Canada, the Netherlands, Belgium, and such glamour spots as New York, Los Angeles, and Miami. Hawala is illegal in India and Pakistan but still exists there.

  Because hawala is a valued and legitimate form of ethnic banking, it is legal to a point in the States. The Bank Secrecy Act of 1970 and Money Laundering Su
ppression Act of 1994 forbade anonymous banking in the United States and forced banks to create anti-money-laundering practices, respectively. While some hawaladars are registered and pay taxes, it's virtually impossible for regulators to know if they are recording every transaction.

  Because ultra-Orthodox men may not have physical contact with women who aren't their wives, especially gentiles, Western banking is not an option, and hawala within ultra-Orthodox communities has been a legitimate and innocuous alternative for hundreds of years. But any system based on trust is vulnerable and ripe for exploitation by organized crime.

  Given that there were no records of Erez's transactions with “the religious guy,” it was virtually impossible for Gagne to ferret him out. Gagne learned through confidential sources that Steve Hager too had sent several deliveries of up to $190,000 at a time to a partner in Israel through hawaladars who asked no questions and gave no receipts.

  Oded Tuito also was known to launder money through charitable “contributions” to religious organizations. He could drop off cash at 10:00 a.m. at a yeshiva through a rabbi he was friendly with, and by the afternoon one of Tuito's trusted reps could pick up money in the form of a cashier's check from a bank in Israel or Europe, minus 6 or 7 percent—the “donation.”

  When Gagne called headquarters to have them check on Fedwire's records of financial transactions moving through the yeshivas linked to Erez's bank accounts, he was told that the two schools had moved tens of millions of dollars a year between Israel and the States. But whether any of it was dirty money, he'd never learn. Israel had no money-laundering laws in place at the time, and when Gagne felt out headquarters for assistance, he was told they were shorthanded. At the time DEA was wrapping up several money-laundering operations targeting cocaine and hashish traffickers who used the black market peso exchange. Religious institutions weren't exactly on DEA radar.