U.S. to Probe 754 Accounts in 173 Banks for Drug Links

The Justice Department moved Tuesday to obtain records from 173 banks on hundreds of accounts in which Colombian drug kingpins allegedly deposited nearly $400 million from selling cocaine in the United States.

Department attorneys, seeking clues to complex money-laundering operations of the Medellin cartel, obtained federal court orders requiring the banks and other financial institutions to turn over information from 754 suspect accounts.

The court orders require the banks to freeze three-quarters of the accounts--the first step toward seizing any remaining deposits.

Treasury Secretary Nicholas F. Brady characterized the move as “one of the most significant law enforcement undertakings involving bank account seizures in U.S. history.”

Atty. Gen. Dick Thornburgh said the tactic is designed “to lift the veil of secrecy over the financial network of these narco-terrorists.” He described money as “the drug-traffickers’ lifeblood” and said: “If we can seize it or disrupt its flow, we can strangle their operations.”

However, the prospect of recovering substantial amounts directly from the accounts is “remote,” said Peter G. Djinis, a trial attorney in the Justice Department’s narcotics section who has been involved in the crackdown from the outset.

That is because most of the funds, which totaled an estimated $400 million in early 1989, probably have been moved elsewhere since then or spent on the cartel’s operations in the United States.

Officials said the 754 accounts are spread across 22 states, including California, as well as the District of Columbia. They are held in many of the nation’s largest financial institutions, including the Bank of America and Security Pacific National Bank.

U.S. officials stressed, however, that there is no indication that any of the 173 banks knew about the true source of the funds in the accounts. “There is no information that the banks are anything other than unwitting service providers,” said David Runkel, Thornburgh’s chief spokesman.

Djinis noted that bank cooperation had led to some of the early successes of Operation Polar Cap, the government’s crackdown on drug money laundering.

He said the real value of the court orders--the latest phase of the Operation Polar Cap money-laundering crackdown--will come from helping the government to obtain details about laundering operations and to trace the current location of the funds.

“For the first time, we have been able to trace cash proceeds directly from cocaine and crack sales on the streets of American cities to foreign bank accounts owned by the Medellin cartel,” Brady said.

The interest in the bank records grew out of the March 6, 1989, indictment of four Medellin cartel members--Pablo Escobar, Jorge Ochoa, Gustavo Gaviria and Geraldo Moncada--and others on charges of importing tons of cocaine and marijuana into the United States from Colombia.

The indictment led to the discovery that $1.2 billion in drug sale profits had been laundered, mainly through New York banks into foreign accounts controlled by the cartel, mostly in Panama, Uruguay and other countries.

Thornburgh and Brady, in a joint statement, said Tuesday’s action resulted from “an unprecedented level of cooperation given by eight foreign governments, cooperation which was unheard of even a year ago.”

The eight countries were identified as Colombia, Panama, Uruguay, Luxembourg, Switzerland, the United Kingdom, Canada and Austria.

Last January, after the ouster of Panamanian strongman Manuel A. Noriega, the new government of Panama agreed to U.S. requests for records of bank accounts identified as having been used by cartel money launderers.

Examination of those and other foreign accounts disclosed that almost $350 million of the $1.2 billion in profits from U.S. drug sales had been transferred by wire back to U.S. banks, primarily in New York and Florida. An additional $50 million is believed never to have left U.S. accounts.

Thornburgh said the cartel needs the U.S. accounts to provide working capital for its daily activities in America and to maintain its payroll.

“Our ability to examine these bank records may well be the key to unlocking the totality of the secret financial arrangements of the cartel in the United States,” the attorney general said.

Djinis, the narcotics section attorney, said the cartel used imaginative covers for its accounts. One was maintained under the name of a 2-year-old relative of a cartel member.

Despite attempts to disguise the real ownership, however, the accounts frequently contain a common element, such as an address or a telephone or facsimile machine number linked to cartel members, the Justice Department said in papers filed in U.S. District Court in Atlanta.

The records, Djinis said, are expected to provide “a really rare look into their underground use of accounts in this country. We think this is going to point fingers in a lot of directions.”

Federal investigators believe the cartel has purchased real estate in the United States, something the bank records could corroborate, according to Djinis. Some of the funds, he said, have been used for “purchases of consumer goods for members of the cartel--to fill up their living rooms.”

In California, court orders were sought for accounts held in seven banks and one brokerage house. They are Bank of America’s offices in Los Angeles and San Jose, Security Pacific National Bank and Mercantile National Bank in Los Angeles, Foothill Independent Bank in Glendora, Merrill Lynch in San Diego and Wells Fargo Bank and Bank of the Orient in San Francisco.

Spokesmen for several of the institutions said they will cooperate with authorities.

“Like other banks, we are called on frequently to cooperate in law enforcement investigations, and we’ll do that in this case,” said Peter Magnani, a spokesman for the Bank of America in San Francisco.

Kim Kellogg, a spokeswoman for Wells Fargo, noted that the bank had helped start Operation Polar Cap by reporting to authorities unusually large deposits by firms found to be operating as launderers. “We are obviously going to cooperate,” she said.