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"Is Smuggling a Patriotic Act?" is a condensed version of this investigative report. Read Philip Morris's reponse to this report. And check out the NOW With Bill Moyers website for many other related resources.

Drug-Money Laundromat

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Mark Schapiro
Mark Schapiro is an investigative journalist in New York specializing in foreign affairs. In addition to The Nation,...

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In addition to cultivating the dependence of the Way'uu, the tobacco companies helped lubricate corrupt political and financial empires in Colombia. "You could say that Philip Morris has been influencing the political parties in La Guajira and Colombia for decades," comments Lucho Gomez, former mayor of Riohacha, the La Guajira state capital. Gomez has been the nemesis of an entrenched political machine run by a former senator from the state, Santo Lopesierra, a veteran political boss notorious for his connection to smugglers and commonly known in Colombia as "the Marlboro Man."

The Colombian newsmagazine Semana reported that representatives of Philip Morris's Colombian distributors, the Aruba-based Mansur family, met with Ernesto Samper during his 1994 presidential campaign and gave him more than $500,000. The Conservative Party of current President Andres Pastrana has ties to the industry too: Among several top officials with links to Philip Morris is the company's longtime lobbyist and attorney, Martha Lucia Ramirez, now minister of foreign trade.

Despite strong opposition from many in the Colombian political and economic elite, in the late 1990s the DIAN conducted an investigation and concluded that the boom in smuggling was tied to vast amounts of cash being generated by drug sales in the United States. The US Drug Enforcement Administration shared the Colombians' concern, as did other US law enforcement agencies. "In our undercover operations," Edward Guillen, chief of financial operations at the DEA's Washington headquarters, told us at NOW, "we started to find that what we initially might have thought were straw corporations...were actually involved in genuine commerce, actually buying goods, be they television sets or cigarettes...and then those goods were ultimately smuggled into Colombia."

Carlos Ronderos was minister of foreign trade from 1994 to 1998, during Samper's presidency. At a time when the US government was launching an offensive against the Colombian government for the smuggling northward of cocaine, Ronderos began pressuring the US government to rein in Philip Morris's southbound smuggling enterprise. Ronderos, interviewed in Bogotá, recalled a meeting in 1998 that he arranged with then-US Ambassador Myles Frechette, the US front man on the drug war: "I told him that you can't ask Colombia to stop the flow of cocaine if you are not willing to stop the flow of cigarettes and other goods used to launder the money from the sale of that cocaine." Frechette, according to Ronderos, rejected his plea, responding that "'it was purely a customs problem for Colombia.' And I felt like saying, 'OK, well drugs are just a customs problem for the United States.'"

He didn't say that, but after Frechette's rebuff, Ronderos went straight to Washington with his complaint. The Washington representative for the Colombian Trade Office, Carlos Acevedo--who is now working as one of the lead attorneys on the Colombian lawsuit--invited US money-laundering experts to review the government's files in Bogotá. In February 1998--at the height of the Clinton Administration's efforts to isolate the Samper government--a five-person team, including specialists in money laundering from the Treasury Department's Financial Crimes Enforcement unit (FinCen), the IRS and Customs came to Bogotá to investigate the allegations.

Al James, a top FinCen agent at the time in charge of money-laundering investigations and chief organizer of the US inquiry, has fond memories of that trip. "Ronderos was a real gentleman," he commented in a telephone interview. "He opened up everything to us, both the good and the bad stuff. We worked real well together." The joint investigation began to put into high relief a critical aspect of the narcotics trade: the means by which narco-dollars from the United States were channeled into the purchase of US goods such as cigarettes. Those goods were transferred through Caribbean tax havens and ultimately sold to Colombian consumers for pesos as part of a complex money-laundering chain that came to be known as the Black Market Peso Exchange. James became chairman of a multiagency task force known as the Black Market Peso Exchange Working Group. "We began to understand," says James, "that what they were calling contraband smuggling was actually the other side of narcotics money laundering."

During his trip to Bogotá, James met with top Philip Morris executives to express his concerns about money laundering. "I warned them when we were in Colombia," he says. The officials told him that they had nothing to do with the cigarettes once they reached Colombian shores. James had similar meetings with other companies back in the States, informing them of the potential use of their products for drug-money-laundering purposes. Most, he says, responded by taking precautionary measures and instituting tighter surveillance of their sales operations. But not, says James, Philip Morris: "The evidence [of smuggling] started to seem pretty clear to me. Philip Morris had a 'legitimate' sales office in Bogotá. But they were losing millions of dollars if you looked at their legal sales. They spent more on advertising than they were making out of legitimate cigarette sales. They told me they were spending the ad money to sustain the legitimate sales. Bullshit!" Phillip Morris refused to respond to these allegations directly, but in an e-mailed statement declared, "Philip Morris does not condone money laundering; nor do our business practices facilitate it." The company states that it has instituted "know your customer" policies suggested by US law enforcement and has stopped accepting cash or third party check payments, which could be used for laundering drug money.

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