Blood Profits
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Table of Contents
About the Author
Photos
Copyright Page
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For Stuart, and the ones, now stilled, now silent—who sacrificed
ACKNOWLEDGMENTS
My earliest formulations of the links between illicit trade and terrorist finance appeared in publications for the Foreign Policy Research Institute.
This book would not have been possible without the valuable insights and contributions of numerous brilliant and talented professionals. I am greatly indebted to my agent, Keith Korman, of Raines & Raines, and my editor, Karen Wolny, of St. Martin’s Press. I am indebted also to: Jack Radisch of the Organisation for Economic Development and Co-operation (OECD); Professor Thomas Pogge at Yale University’s Global Justice Program (GJP); Dr. Lieutenant Colonel Scott Crino; the Johns Hopkins University Applied Physics Laboratory; Danielle Schwab; “Chris Howard”; Deborah Ayis of the Counter-Terrorism Committee Executive Directorate (CTED) of the United Nations; General David Petraeus; former president of Mexico Felipe Calderón; Jean-Luc Moreau; Ron Noble; and Dr. Mathew Burrows of the Atlantic Council.
From “A Smuggler’s Song,”
by Rudyard Kipling
.….….… …
Five and twenty ponies,
Trotting through the dark—
Brandy for the Parson, ’Baccy for the Clerk.
Laces for a lady; letters for a spy,
Watch the wall my darling while the Gentlemen go by!
.….….….….….….….…
If you meet King George’s men, dressed in blue and red,
You be careful what you say, and mindful what is said.
If they call you “pretty maid,” and chuck you ’neath the chin,
Don’t you tell where no one is, nor yet where no one’s been!
.….….… …
Five and twenty ponies,
Trotting through the dark—
Brandy for the Parson, ’Baccy for the Clerk.
Them that asks no questions isn’t told a lie—
Watch the wall my darling while the Gentlemen go by!
Introduction
This book and the events it describes were born of love and anger: love of two countries (the US and Venezuela), freedom, and dignity; anger at repression, corruption, and manipulation. It’s in my blood.
My Neumann grandparents were Czech Jews, who lost most of their family to the Nazis and then escaped Soviet oppression with the help of a smuggler who got them to Venezuela, after the US had rejected them. In 1949, Venezuela was under a military dictatorship, but it was still the Promised Land to poor refugees: my grandparents worked hard and prospered, so much so that within ten years their son (my father) was going to boarding school in Millbrook, New York. He eventually married a middle-class American girl he met through her godparents, who worked for Shell Oil in Venezuela. The Neumann family business, Corimon, listed on the New York Stock Exchange in 1993, one of the first South American companies to do so. We and other Venezuelan business leaders set up an MBA program, one not only modeled on Harvard’s, but actually under the guidance of Harvard Business School professor Michael Porter, the guru behind the books Competitive Strategy and Competitive Advantage.
I was too naïve to realize it then, but change was afoot. While attending Columbia University, I spent my summer holidays working on The Daily Journal (our English-language newspaper; much of its staff would move to The Latin American Herald Tribune, founded by The Daily Journal’s former editor) and in Corimon’s corporate planning and finance departments. As a Caracas socialite, I was featured in society pages, magazine covers, and even cinema newsreels.
The last Air France Concorde flight from Paris to Caracas was March 23, 1982, just a few months before I moved to the US. Middle-class Venezuelans used to make fun of Americans as poor, and there were frequent shopping flights from Caracas to Miami: fly out in the morning, shop all day, return to Caracas at night. It was the trope in a signature comedy sketch not unlike those one might see on Saturday Night Live: hordes of ill-mannered, newly middle-class Venezuelans would wreak havoc in Miami and then end the sketch with: “It’s cheap—give me two.” Those were the “Days of the 4.30,” when Venezuela’s currency, the Bolívar, was 4.30 to 1 US dollar. Now that currency is about Bs.F. 2,200,000 = US$1,1 and the channel on which that show aired—started by the Venezuelan branch of the Phelps family, Rockefeller relations—was long ago closed by President Hugo Chávez. It was the channel with the broadest reach in Venezuela. I was there when the change began, but I was too naïve to recognize its implications.
Colonel Chávez burst onto the political scene with fiery revolutionary rhetoric and great charisma during his failed coup in February 1992. In his one minute of national television the government gave him to call down his troops, Chávez announced: “Our cause has not succeeded por ahora.” Por ahora (for now) became his motto—and remained so more than a decade later when he ruled as president. In that 1992 speech, he expressed both I-will-be-back determination and accountability for what had gone wrong that day. Angry, poor, marginalized Venezuelans were impressed. No Venezuelan leader had taken any responsibility for anything that had gone wrong in decades: not the rising crime, not the rising inequality, not the rising corruption. Hugo Chávez instantly became a revolutionary hero to many: the battle for justice for the oppressed poor now had a hero’s face (Chávez) and a slogan (por ahora).
After being released from prison for the coup attempt, he prevailed in the 1998 presidential election: he rode a wave of anger and riots all the way to the presidential palace. After Chávez was elected, my grandfather cofounded another newspaper, called Tal Cual, which translates roughly as “Just So”—it’s how you punctuate a story you are telling in detail (“It happened just so!”) or how you express agreement with a story you are hearing. Tal Cual was designed to counter Chavismo, as the ideology of Hugo Chávez came to be known, and to be distributed in the poorer, pro-Chavista areas. The newspaper’s cofounder and editor-in-chief, Teodoro Petkoff, was a former Communist guerrilla, which made his rejection of the Chávez regime all the more powerful.
In my doctoral dissertation for Columbia University in the early 2000s, I wrote critically of Hugo Chávez’s rise to the presidency of Venezuela and of his subsequent consolidation of power, which he justified in angry and divisive rhetoric. I thought it was a recipe for corruption and a dictatorial trampling of human rights.
I was right. By 2006, I was splitting my time between teaching political philosophy at Hunter College in New York and working for the International Institute of Strategic Studies, a London-based think tank that specializes in analyzing armed conflict. I was examining details of the low-intensity civil war in Colombia and looking at the roles of both the Chávez government in neighboring Venezuela and drug trafficking in empowering Colombia’s violent narcoterrorist insurgency (a terrorist insurgency that controls drug production in its territory), the Revolutionary Armed Forces of Colombia, better known by their Spanish acronym, FARC. From
my research, I knew the Venezuelan Chávez-led Bolivarian Revolution was full of crime, corruption, and its own imperialist agenda, but in his first decade as president, Chávez had parlayed socioeconomic resentment into near-invincibility.
His armor was dented, though, in December 2007, when he lost a referendum on the constitutional changes that would have extended his dictatorial powers to rule by decree, suspending civil rights and effectively making him president for life. He quickly turned defiant: “For me, this isn’t a defeat. This is por ahora.”
In 2008 I married into a British family that was both political and journalistic: my father-in-law, Bill Cash, MP, was a renowned Thatcherite Tory (a Conservative Euroskeptic); my husband, William Cash, was a writer and magazine owner. Our wedding reception was in the Speaker’s Palace of the Palace of Westminster, the UK Parliament, and was attended by the editor and owner of every single major UK publication, from the Financial Times to The Sun, except for The Guardian.
Not liking the results of the 2007 referendum, President Chávez held another one in 2009—the one that got me on the BBC and launched my political commentary career. When I returned to New York, press interest in Venezuela continued, and I rode the wave. I appeared on Al Jazeera English, continued writing for the British magazine Standpoint, and started writing for the US conservative magazine The Weekly Standard. Then the Colombian government (which is Conservative, pro-American, and anti-Chavista) invited me to come to Colombia, twice.
In 2010 I incorporated as Vanessa Neumann, Inc. My first professional foray into this dark world of illicit trade was in 2011, when I was asked to assist in an anticorruption investigation. A Washington, D.C., investigative firm tapped me specifically because they knew I had unique access into the company in question. The client company (long-standing, legitimate, and huge) had had a substantial portion of its assets seized for the benefit of a rival company (into which I had access) by government officials. The stolen assets were used as collateral for a loan from a foreign bank. Much of the money from the loan was funneled into bank accounts of the government officials in a jurisdiction with strong banking secrecy. It was not an easy case to unravel or to explain, but we won. Since then, anticorruption has been a personal cause.
In 2013, I signed my first long-term client, a global corporation that has big problems with both counterfeiters and competition from businesses owned by huge criminal organizations. I rechristened my company Asymmetrica, to apply the precepts of asymmetric warfare (the ways in which a small and agile power can defeat a larger one) with the stated mission of combating illicit trade for corporate and government clients. This is the story of our experiences.
1
A Simple Transaction
Jackie loves a bargain, and she’s very chic—always on trend. As a banker, she knows a good deal when she sees one, and this was a deal that stopped her in her tracks.1
She was on her way out of Bloomingdale’s in New York City, where she’d picked up a bottle of her favorite perfume, when she came across the street vendor and his counterfeit luxury handbags. Her eyes scanned the offerings: limited-edition Louis Vuittons decorated by Japanese artist Takashi Murakami (some with cherries, some with blossoms), some D-shaped cross-body Pradas, and quilted Chanels.
“Nice selection,” said Jackie.
Her eyes settled on a cream Chanel. The tall, very black man noticed.
“You have good taste,” he said in a French African accent.
Jackie picked up the bag and inspected it. The leather was soft and smooth, the stitching good and straight.
“Where are you from?” she asked, opening the bag.
“Senegal.”
She looked up. “Alors, vous parlez francais?”
“Oui.”
The bag didn’t have the raised interlocking Cs on the inside, but it was a convincing replica from the outside.
“How much?”
“A hundred fifty dollars.”
“That’s expensive,” she protested. The real thing retails for over $4,300.
“It’s good bag,” he answered.
“No Cs on the inside,” she countered. He probably would not know the difference, but she was showing she did: if she could convince him of its defects, she could get him to lower the price.
He held firm. “It’s good price for good bag.”
“Eighty,” she offered.
“No. One fifty.”
“One twenty,” Jackie countered.
“Okay.”
A little yelp of pleasure escaped her lips as she pulled six twenties from her wallet and handed them to the vendor.
The vendor’s name was Amadou, and his family was still in Senegal. He was trying to get them out of poverty, away from Al Qaeda in the Islamic Maghreb and drug traffickers and the separatists in Senegal’s Casamance region, where his family lived, a staging point for insurgents doing cross-border attacks into their neighboring homelands, The Gambia and Guinea-Bissau. All of this activity means a lot of men are smuggling weapons through Amadou’s village. The armed men are also protecting their Senegalese crops of marijuana, as well as shipments of heroin from Southwest and Southeast Asia and cocaine from South America; the drugs are bound for Europe.
Smugglers brought Amadou to the US, via Mexico, for a cost of $10,000.2 That was a princely sum for him, but he was told he could work it off and pay over time, and that this would be easy, as he would immediately get a job in America and even have money left over to send home to his family in Senegal.
But the journey was hard, and the reality very different from how the smugglers had sold it to him. He was provided a fake passport and flown to Spain. From there he traveled by boat to Colombia; Cuba, Ecuador, or Argentina were his other options. He stayed working in Colombia for six months to earn a bit more money to pay the smugglers for his onward journey into Mexico and then into the United States.
His debt to the smugglers never seemed to decline. His transporters had become his captors: they took away his passport and charged him for room and board in a building in Queens that warehoused many other illegal aliens they had brought in. The conditions were primitive: the aliens shivered in sleeping bags at night, their cold, huddled bodies covering the bare floor. He thought the people who smuggled him might even be related (either just through business or, more likely, families) to the Chinese smugglers who manufactured and shipped the handbags he was recruited into selling.
The counterfeit bags likely passed through Dubai’s Jebel Ali Free Zone area in the United Arab Emirates. Some Dubai customs officials know about the shipments from China and handle them personally, because they are paid bribes by the criminal network’s local representative. The corrupt customs officials stamp the paperwork to read that the shipments have been separated into new parcels and add new local company names to make it appear that the shipments originated in Dubai, rather than China, which would be a red flag for US customs agents to check for counterfeits.
To make doubly sure the counterfeits get through, the bags and labels are shipped separately, and the labels are stuck on the bags only after they both arrive at the Queens warehouse. Without the labels, the fake bags don’t count as an infringement on intellectual property rights and therefore cannot be seized by law enforcement. The practice of legally shipping in generic items, then having workers, many of them illegal immigrants, stamp, embroider, or attach logos or other identifying details in the retail market is called “finishing.”3
Jackie’s Chanel, like the rest of Amadou’s bags, was likely made in Guangzhou, China. China is the primary source economy for counterfeit and pirated goods: it accounts for 63 percent of all counterfeit seizures, with a total value (based on suggested retail price) of $772 million; Hong Kong ranks second with $310 million, or 25 percent.4
Or perhaps they were made in Thailand, through child slavery: little children, all under ten years old, sitting on the floor assembling counterfeit leather handbags. They work under brutal conditions: some of them have their legs
broken so they cannot stand. In some cases, the lower legs are tied to the thigh bone, so the bones won’t mend.5
The Chinese criminal network (known as a triad) that owns the factories also ships heroin, crystal meth, and cocaine, sometimes by placing them inside the counterfeit bags. As well as illegal immigrants like Amadou, they also smuggle Asian girls, who then become prostitutes in Paris or Amsterdam or in the “massage parlors” of Camden, New Jersey—or any other city. The triads are well-organized networks of criminals, but they also have deep political connections in China and other countries with a significant Chinese population—all the Chinatowns in the world, for a start.
The profits from trafficking in people and drugs are then laundered through bets on fixed games and casinos the triads also own. A gambler in one country can access an online betting platform located in another country and maybe bet on the results of sporting events taking place in a third country in real time. From the casinos, the money from the winnings is then wired to London or straight to Geneva, where a good banker takes a higher-than-normal fee to “layer the money”—combine it with that of several other clients—into financial products held by trusts, controlled by a law firm in Liechtenstein or Panama. The money is now fully secure and untraceable.
The good Swiss banker will, when requested, transfer millions (or tens of millions) to a company incorporated in the Seychelles, with an office address in Dubai and a bank account in Guernsey. This is the company of an arms dealer, who ships weapons to fighters for the Colombian FARC, Lebanese Hezbollah, Boko Haram and Al Qaeda in the Islamic Maghreb in West Africa, Al Shabaab in Somalia, and Daesh (the Arabic name for ISIS) in Syria and Iraq.
My doorbell rings. It’s Jackie.
“Oh my God, chica, I have to show you my new amazing buy.” She pulls out her new cream-colored Chanel. “Isn’t it great?! You can barely tell it from the real thing. You’ve got a great vendor right here, just a few blocks away. A hundred and twenty dollars, instead of forty-three hundred at retail.”