Judge Throws Out Laundering Verdict

In a rare move, a federal trial judge has nullified a jury’s guilty verdict and acquitted a Venezuelan banker convicted last year of laundering $4 million in narcotics proceeds.

U.S. District Judge Bernard Friedman said in a 25-page opinion that the Los Angeles federal jury had no rational grounds for convicting Esperanza de Saad, who ran the Miami branch of government-owned Banco Industrial de Venezuela.

De Saad was among 100 foreigners and three major Mexican banks indicted in 1998 in connection with Operation Casablanca, a U.S. Customs Service sting targeting drug money launderers.

In his ruling, Friedman said that, even after treating the government’s evidence in the most favorable light, it was clear that De Saad had been illegally entrapped and that prosecutors had failed to show that she had known she was handling illicit funds.

De Saad, 56, has been free on bail since her arrest. She had been facing a possible prison sentence of eight to 10 years on her conviction. She is a member of a politically prominent Venezuelan family. Her brother is the country’s former finance minister and served in the national legislature, as did her father.

“Mrs. De Saad and her family are relieved and grateful for the judge’s decision,” her Miami lawyer, Joseph E. Beeler, said Wednesday.

Assistant U.S. Atty. Duane R. Lyons, who led the Casablanca prosecution team, said his office is considering an appeal.

“We believe the evidence at trial showed that the defendant knowingly laundered drug proceeds,” Lyons said. “We also argued, and the jury agreed beyond a reasonable doubt, that she was not illegally entrapped.”

Friedman, who is based in Detroit, presided over the five-week trial in Los Angeles on special assignment. He mailed his ruling to lawyers this week.

Under federal court rules, a trial judge may overturn a jury’s guilty verdict if he finds that the evidence did not support a conviction.

Laurie Levenson, a former federal prosecutor who now teaches at Loyola Law School, said such actions are rare but not extraordinary.

Central in the trial, and in Friedman’s ruling, was the conduct of Fred Mendoza, a Colombian-born U.S. citizen who worked as a money launderer and drug trafficker for the Cali cartel before becoming a paid informant for the Customs Service.

Mendoza, who received more than $2.1 million for his services, posed as the leader of a ring of Los Angeles-based money launderers. Using him as a front man, undercover customs agents were able to win the confidence of Mexican and Colombian drug syndicates.

The agents traveled across the country, picking up millions of dollars in cash from illegal drug deals, then laundering the money in the banking system with the help of the Bank of America.

Once established, the Operation Casablanca team embarked on a sting to attract corrupt bankers in Mexico and Venezuela.

In Caracas, Mendoza enlisted the help of Carmen Salima Yrigoyen, an attorney and former judge, who offered to introduce him to cooperative bankers.

But Mendoza admitted during the trial that Salima had made him promise never to mention drug trafficking in any conversations with local bankers, lest they be scared off. Instead, he and Salima agreed on the term, “hot money.”

In his opinion, Friedman said the jury could only speculate that “hot money” referred to narcotics proceeds. “Such speculation cannot be the basis for creation of logical inferences,” he wrote.

Lyons, in a legal brief opposing De Saad’s acquittal, argued that the reference to “hot money” was only one of several strong hints that Mendoza had given to indicate that the money came from drug trafficking.

They included a comment that the money came from “financially uneducated Colombians” and that Mendoza wanted De Saad to let him know if the FBI, the IRS or the Drug Enforcement Administration made any inquiries about his account.

Friedman said Mendoza’s reference to financially uneducated Colombians “relies on prejudices that have no place in the law.”

While Mendoza’s mention of the FBI, the IRS and the DEA “suggests that some form of criminal activity may have been afoot,” the judge said, it was not enough to lead a rational jury to conclude that De Saad knew the money was drug-tainted.

Friedman also discounted the significance of De Saad’s receipt of four checks totaling $20,000 from Salima, which De Saad directed her employees to cash for her.

He said there was some credible evidence that De Saad was willing to help Mendoza avoid taxes on income earned outside the United States.

“However,” he added, “that is not the crime for which De Saad was charged.”

Lyons argued unsuccessfully that De Saad’s own remarks betrayed her knowledge of the crime.

Friedman also ruled that De Saad was the victim of illegal government entrapment, finding that she had not been predisposed to launder drug money and that the government had gone to great lengths to induce her to do so.

Moreover, he said, Mendoza had a “tremendous financial incentive” to lure her into the scheme. The informant’s contract with the Customs Service called for him to receive a percentage of all money laundered.

Friedman’s ruling does not affect De Saad’s two co-defendants who were convicted in the same trial--Salima, 45, the Caracas lawyer, and Carlos Izurieta Valery, 54, an investment broker. They are in custody and awaiting sentencing.

An associate of Salima, Jose Perez, pleaded guilty on the eve of the trial. He was sentenced to time served and allowed to return to Venezuela. Two others indicted--Marco Tullio Henriquez, a vice president at Banco del Caribe in Caracas, and Roberto Vivas, a representative of International Finance Bank--are fugitives.

Of the entire cast of 100 people charged in Operation Casablanca, 60 remain fugitives. Thirty-one defendants pleaded guilty before their trials. An earlier trial of Mexican bankers and their associates ended with three convictions and three acquittals.

Two leading Mexican banks, Bancomer and Banca Serfin, also pleaded guilty on criminal money laundering charges and paid a total of $14.6 million in fines and forfeitures. A third Mexican bank, Confia, reached a civil settlement, forfeiting $12.2 million in exchange for dismissal of criminal charges.