by Jim Dutton
Pepe reported, “As you know, we have been looking at Hector Morales and his two, so-called legitimate businesses, L&M Freight and Recycle Yard, for five months. The Bank Secrecy Act (BSA) currency reporting documents show three million dollars per month, in cash, being deposited in eight California-based bank accounts along the border with Mexico. These accounts are either in Hector’s name, his wife’s name, or one of the two companies. Different couriers are bringing in cash in backpacks, in amounts of $75k to $100k, for deposit in these accounts. The various banks are filling out the BSA required forms. We have compiled a spread sheet, showing each deposit, and the totals for each month.”
Banks file Currency Transaction Reports (CTRs) for cash deposits or withdrawals over $10,000 with the Internal Revenue Service.
“Have you checked out his businesses?” asked Nick.
“They are incorporated in California and have fictitious business name statements filed with the county clerk. The corporate papers list Lester Sendow as their agent for service of process, with a San Diego address.”
Detective Mario Cipriani of the San Diego County Sheriff’s Office added, “We visually checked out the two business addresses and surveilled our buddy Hector a few times over the last week. There’s no way that either business or both together are generating three million in cash a month. There are a couple of old trucks in the lot behind an empty warehouse that has a sign, L&M Freight. And the recycling business looks like a junkyard, with an old codger in a booth reading a newspaper. On two of the surveillances, Hector visited a few of the banks, and on the third day he went to his recycle business for an hour. He isn’t burning the midnight oil working. He spends most of his time holed up in his five-acre spread in Rancho Santa Fe. He has big name golfers and entertainers as neighbors.”
“Sounds promising Mario and Pepe, but we still need to tie all this cash flow to drug trafficking or another felony,” said Nick.
“As if we don’t know that Nick,” retorted Pepe, “We’re working on it.”
“We can get federal tax returns on the two companies and individual returns on Hector and his wife from the IRS,” offered Homeland Security Investigations Agent Jerry Slater.
“Good Jerry, let’s do that. We’re going to need a complete financial profile on Hector and his companies,” replied Nick.
Pepe said, “There’s also a business address for L&M Freight in Tijuana. I can use my contacts to get the Baja Norte State Police to check out the address. Depending on what the policia de estado tell us, I can follow up, and go across the border to sit in on any interviews conducted by the policia.”
“Bueno! Vaya con Dios, Pepe.”
“Nick, I won’t do anything if you keep using your mangled Spanish on me. Just because I was born in Mexico, it doesn’t mean I have to be subject to your fifth grade Spanish.”
“Pepe, give an ugly American gringo a break,”
“Ugly,” retorted Pepe, “I can live with.”
Immigration and Customs Enforcement Agent Ana Schwartz suggested, “We could put GPS trackers on the undercarriages of Hector’s high rolling cars, his Benz and Range Rover.”
Assistant U.S. Attorney Josh Sterling spoke up, “With the recent U.S. Supreme Court case, U.S v. Jones, we have to be careful about secreting a tracker on a car without a warrant. We can place a tracker on a vehicle at the border if we have reasonable suspicion of criminal activity.”
“Let’s wait until we establish more cause before we start slapping on trackers right and left.” Nick continued, “Good work on the Morales case, keep digging! Next?”
Jerry responded, “There’s the Sakia trade-based money laundering case. It’s one of those we could be looking into for years and still not come up with enough proof to make a case.”
Nick said, “We don’t have years. The higher ups are looking for something to talk about as soon as possible. You know how the state AG likes favorable media coverage.”
“Those politicians are all the same, they don’t care about what’s going on in the trenches, just how it makes them look on the six o’clock news,” growled Jerry, with a disgusted look.
“You’re preaching to the choir. But this task force depends on the ‘benevolence’ of those politicians,” said Nick.
Jerry continued, “Mr. and Mrs. Sakia have an import-export food business, called Latin America Productos, which mainly imports beef and other foodstuffs from Mexico and Argentina. They were born in Argentina and still have family ties in Buenos Aires. They have an office in Chula Vista, located halfway between the border and downtown San Diego. The business has been filing income tax returns and everything looked on the ‘up an up’ until the fall of 2012 when the married couple and their agents started declaring large amounts of U.S. cash as they crossed into California from Tijuana.”
In 2012, Mexico passed its Anti-Money Laundering Law (MAMLL), which severely restricts dollar cash deposits into Mexican financial institutions. Under MAMLL, drug cartels and others could no longer deposit U.S. cash into Mexican banks. They had to find other ways to get the cash dollars into the Mexican banking system.
Ana added, “We went through the international financial unit organization, EDMONT, and obtained export documents from Argentina and Mexico. We compared them with our U.S. Customs trade documents for the last ten years. Up until late 2012, the company appeared legitimate, importing foodstuffs into the Los Angeles Port of Entry and then brokering the food to other places in the the U.S. and Canada. The tax returns, both corporate and individual, lined up with expected income and expenses for a legitimate business. This all changed in late 2012, when all, but a few of the imports stopped, and huge amounts of cash began coming across the border.”
Jerry said, “It’s not uncommon for legitimate trade businesses to become compromised by the drug cartels and allow their businesses to act as fronts for the laundering of drug dollars.”
“Unfortunately,” lamented AUSA Sterling, “Where there are corrupt businesses that were legitimate, and portions of their business are still legitimate, it’s much more difficult to get a jury to buy off on money laundering.”
“Exactly how are they moving the money?” asked Nick.
Ana answered, “The couple and their agents are declaring around $200,000 per northbound border crossing on Currency Monetary Instrument Reports(CMIRs). The forms state that the money originates from their business, World Food Imports, located on Avenida Revolucion, Tijuana. For the last few months, they have been transporting $2.5 million a month, and then depositing the same into 10 accounts in four banks, located just across the border. The cash is declared on CTR forms, and immediately wired to the same Mexican bank account.”
It’s not illegal, in itself, to bring $200K or any large amount of cash across the border as long as the cash is declared at the border on the CMIR form.
Jerry said, “We’re also getting in Suspicious Activity Reports(SARs) from some of the banks.”
SARs are required to be filed by U.S.-based financial institutions when a transaction, or series of transactions, deviate from the norm of legitimate financial practices to the extent it raises a suspicion of criminal activity. Banks are trained by the government as to what transactions constitute “suspicious activities”. A section of the form allows an institution to specify exactly what aspects of the transactions are deemed suspicious.
Jerry continued, “One SAR sets forth Anthony Sakia’s explanation as to why he was bringing so much cash from Mexico and then wire transferring it back to Mexico. He told the bank official, ‘Our company trades food in Mexico, and the Mexican purchasers pay for the food in cash pesos, which we then exchange into U.S. Dollars at Mexican exchange houses (casas de cambio). We then have to bring the cash dollars across the border because Mexican regulations don’t allow the deposit of cash dollars into Mexican banks. We then deposit the cash dollars into our accounts in California, and wire the
dollars to our food suppliers. The suppliers want to be paid in U.S. dollars because of the historic fluctuations in the dollar-peso exchange rates.’”
“Wow!” exclaimed Pepe, “You have to have majored in economics to try to figure all that out.”
“All right, this case could be an incredible resource drain where we end up with no prosecution,” said Nick. “We need to do the following investigative steps, then re-evaluate. We must refute the Sakias’ only defense, a legitimate import-export trade business. Go through all relevant federal databases, the internet, and state filings as to their business and to them as a married couple and as individuals. Also check on their key employees. Make sure to query the U. S. Customs TEC database for all border crossings by the couple, family members and key employees over the last ten years. This could show a pattern, or a contrast, in their border crossings over the years. Let’s surveil the Sakias from when they wake up until they go to bed. Pepe, I want you to use your contacts in Mexico to check out the Sakias’ business located on Avenida Revolucion. Finally, have the banks, under our supervision, segregate some of the future cash deposits and conceal the deposits in the vault. Then see if a drug sniffing dog can make positive alerts on the cash. Make sure the dog has the right credentials and that a positive alert signifies that the cash has come into recent contact with a controlled substance. The dog must be beyond ‘reproach’ because the courts are clamping down on allowing this type of evidence in trial. Once we get this information together, we can run it by an import business expert to see if the couple’s business practices are within an acceptable norm. Of course, we have to find an expert first, but I have some ideas on that.”
“Gee Nick, anything else? We should be able to get that done by the end of the day,” the sarcasm dripping from Jerry’s voice.
“I know it’s a lot of work, but to make these cases, we have to do it. We need to know if we can get enough information to support search warrants on the couple’s business office and their home.”
“One more thing, back on the Morales case. We should also segregate some of their new cash deposits and run it by our sensory-enhanced canine friends.”
“Nick, I knew I should have left the meeting after we finished talking about my case,” said Pepe.
“That will teach you to wait around for the extra donut before leaving. That’s why I bring them for you guys.”
“Are we exhausted yet?” asked Nick. “Only one more thing to discuss. Ana, your Saladez investigation which has ties to the Sakia money laundering operation.”
“In this one, we’ve a direct association with drug trafficking,” said Ana. “Two couriers, each with close to $80,000 in cash, were arrested at the border for not declaring the cash over the $10,000 threshold. Upon being questioned, they told customs officials that they received the cash from Numero Uno, a casa de cambio in Calexico, Mexico. Numero Uno is owned by Jorge Saladez, who has a U.S. record for marijuana and cocaine distribution. The couriers had written instructions on them to deposit the cash in a U.S. border bank on behalf of Anthony Sakia and then obtain cashier’s checks in the same amounts, payable to a Mexican bank account. The busts of the two couriers, eight months ago, must have inspired the Sakias to transport the cash in large amounts themselves, or through their own couriers. Also, we determined that the cashier’s checks were going to be payable to a Mexican bank account with Banco Real. The Mexican account holder is a high ranking Mexican government official, Armando Ruiz Castillo.”
Mario said, “I don’t want to sound like a dumb shit, but if these cases are about Mexican drug cartels running drug dollars through U.S. banks, why cross into Mexico with all the drug dollars to just courier them back across? Wouldn’t it make more sense to just deposit the cash in U.S. banks upon collecting the cash for drugs in the U.S., without bringing it back and forth across the border?”
Nick replied, “Good point. Nobody said drug dealers are the sharpest tools in the shed. This question has been kicked around and there are a couple of possible explanations. First, the cartel’s drug distribution and cash collection networks are usually set up to bring the cash back into Mexico. Because Mexico now prohibits the deposit of significant amounts of cash dollars directly into Mexican financial institutions, but allows dollars to be wired to Mexican banks or deposited via checks, the cartels have to get the cash dollars into U.S. banks so they can be transferred by wire or checks to Mexican banks. Some people in law enforcement believe the drug lords like to see and ‘feel” the drug money in their own greedy, little hands before they launder it. Often, it’s only when the drug cash initially crosses the border into Mexico, that the money laundering side of the cartel kicks in. The money laundering operation is responsible for getting the money into Mexican banks. Once the cash dollars take their circuitous route back and forth across the border to reach their Mexican bank destination, the launderers can take additional steps to try to legitimize the money through off shore accounts or other front companies. Wake up Pepe! That’s all for today. We’ll meet in two weeks, same place, same time.”
CHAPTER FIVE
Later that day, Nick was packing up to go home when Mario asked him if he wanted to go with a few agents to their favorite watering hole, Days End. Visions of sawdust on floor, dart boards, and pong tables came to mind. “No thanks Mario, I have got a few things to do at home.”
“C’mon Nick, it’ll do you good, a couple of games of darts. Then you can go back to your dreary apartment.”
“What do you mean dreary?” asked Nick in a feigned, hurt voice, “Don’t you like IKEA, posters, and an orange shag rug? I haven’t had time to hire a decorator since Judy kicked me out.”
“You and Judy can work it out, she’s prima.”
Nick replied wistfully, “Too many long nights at work, mixed with a bit of alcohol, not a good concoction. See you Mario. Jack Daniels and some jazz awaits me.”
Over the din of the music and twenty-somethings yelling at each other, Ana asked Mario, “Where’s Nick?”
“He had a previous engagement with an old friend.”
Josh came up with some ping pong balls, a pitcher and cups, saying, “The pong table is free. How about Ana and I against Mario and Jerry?”
Ana said, in a disapproving voice, “Josh isn’t it time you put away childish things.”
“Thanks for the advice Mom, but pong helps with one’s eye-hand coordination, consider it training for you agent types.”
“Remind me Junior, how do you play this asinine game?”
“It’s easy. We set up six of the red cups at each end, in a pyramid shape, fill them half way with beer, then each side takes turns trying to get a ping pong ball in one of the other side’s cups. If it happens, the side who has the ball in their cup drinks the beer and removes the cup from the playing surface. Whoever has the last cup standing, wins.”
Jerry said, “I take my drinking seriously. This game makes no sense. The team that gets the ball into the cup is penalized, the other team gets to drink. Any rational player would just take a dive and let the opposing team get all the pong balls in their cups.”
“Not all pong players are alcoholics. Most like the competition of throwing a ball into the other team’s cups,” explained Josh.
Beer pong was going well—they had gone through a pitcher and were working on a second. Josh and Ana were winning most of the games. Josh was sort of a ringer, having played basketball at Yale. It seems that shooting a basketball translates to throwing a ping pong ball into a two inch diameter, 16 oz. cup. Josh and Nick had met while playing in the San Diego Legal Basketball League a couple of years back. Although most of the pop had gone out of Nick’s legs, one could say he was a wily veteran. He knew how to use his bulky body and how to push off with his elbow to create space for a shot. Josh, knowing Nick’s reputation in the legal community as a great trial attorney for the State AG’s Office, took it easy on him. However, on occasion
, Josh couldn’t resist, skying above Nick to grab a rebound over Nick’s back. You could tell how much this pissed Nick off—to be in position, boxing someone out for the rebound, and have a young attorney go right over the top, like your feet were glued to the floor. Josh struck up a conversation with Nick after their first game and they became friends, with Nick, over the last couple of years, acting as a sounding board for Josh’s legal questions. This relationship resulted in Nick asking Josh to be part of the Money Laundering Task Force. Josh, a prosecutor with the United States Attorney’s Office, jumped at the opportunity to work with Nick.
Ana called the games off. “Enough beer and fun. Time for me to go home and feed my cat.”
Pepe, who had been watching the pong games, drinking beer unfettered by whether a ping pong ball landed in someone’s cup, told Ana, “Your cat will survive another hour without its kibbles.” Ana ignored Pepe and kept walking towards the door of Days End, when a drunk, who had been leering at Ana all evening, grabbed her ass. Pepe jumped on him, twisted his arm behind his back in a lock, and smashed his forehead into the bar. The drunk grunted in pain, with a trickle of blood dripping down his face from a cut over his eye.
Ana said, “Thanks Pepe, but I can take care of myself,” as she turned the drunk around and kneed him in the balls.
“Ooooh Baby!” exclaimed Pepe, “That’s the kind of ball playing I can understand.” The drunk, gasping for breath, looked up, glassy eyed, at Pepe. Pepe using his street voice for crooks, and a look like you better not mess with me, said, “Friend, I think you owe this lady an apology.” The drunk looked around, and seeing no support, mumbled an apology and stumbled out of the bar. “Well,” said Pepe, “The Days End didn’t go so well for him.”