In the Wake of Last Year's 'Soft Coup' Against Paraguay's President, Will a New Narco-Dictatorship Emerge?

Paraguay's April 21 election of Horacio Cartes, a dodgy "tobacco magnate," rancher and banker, whose Banco Amambay has been accused of laundering drug money, tax evasion and other crimes, raises the specter of "state capture" by powerful drug cartels linked to US intelligence agencies.

In the context of US efforts to manage not eliminate, the multibillion dollar global trade in illegal narcotics, Cartes electoral victory might very well be a shot in the arm for certain three-lettered US intelligence agencies, eager beavers always on the lookout for new allies--and an endless supply of black funds--to carry out hemisphere-wide dirty ops against leftist governments. The current US destabilization campaign targeting Venezuela's newly elected president, Nicolás Maduro and the Bolivarian revolution, is instructive in this regard.

A key factor driving US regional operations is control over the narcotics market. As researchers Oliver Villar and Drew Cottle revealed in Cocaine, Death Squads and the war on Terror: "Paraguay was the first country in Latin America to be publicly exposed for its involvement in the drug trade. Paraguay in the early 1970s was a vital center for the Corsican mafia, leading to the development of a vast heroin-trafficking network supplied from Turkey, and based in Marseille, the infamous 'French Connection.' Corsicans coordinated the transport of heroin from Marseille to the United States via Paraguay. The CIA," Villar and Cottle averred, "used such networks as transit stops in transporting Asian heroin to the United States with the help of corrupt high-ranking government and military officials."

"Later," journalist Vicky Pelaez disclosed in The Moscow News, "cocaine trafficking was added. It was transported through Chaco's wild and rough terrain. Chaco is a vast, semi-arid and semi-humid region in western Paraguay, where there are at least 900 covert airplane runways and where between 60 and 70 tons of cocaine circulate annually, according to former Interior Minister Carlos Filizzola."

"Curiously," Pelaez averred, "there are two US bases in that region. One is located in the city of Pedro Juan Caballero, in the Amambay province, and is operated by the Drug Enforcement Agency (DEA). The other, run by the Pentagon, is part of the Mariscal Estigarribia airport, in the Boquerón province, and boasts a 3,800-meter long runway."

When Fernando Lugo was removed from office last year after an expedited impeachment "trial" by Paraguay's Senate, it was widely denounced across Latin American as a parliamentary coup d'état which had more than a passing resemblance to the 2009 ouster of Honduran President Manuel Zelaya.

And like the Honduran coup against Zelaya, the World Socialist Web Site pointed out that "both countries have been the focus of attention of the US military and intelligence apparatus, which shares intimate connections with its local counterparts. Security forces in both countries have been trained and advised by the Pentagon and would not support the overthrow of an existing government without its approval."

Elected in 2008, Lugo, a former Catholic bishop and proponent of Liberation Theology, promised to combat Paraguay's endemic corruption and implement policies favoring a "preferential option for the poor." Lugo however, was no Hugo Chávez, Evo Morales or Rafael Correa, populist leaders who defied the Global Godfather by charting an independent course.

Despite a mildly reformist agenda which increased access to healthcare and education for Paraguay's working class majority, when it came to the key issue of land reform Lugo's administration hit a brick wall.

Shortly after assuming office, Lugo became the target of that nation's entrenched landed oligarchy, multinational agricultural corporations (including such paragons of virtue as Monsanto, Pioneer, Syngenta, Dupont, Cargill, Archer Daniels Midland, and Bunge) and the transnational drug cartels which continue to rule Paraguay with an iron fist much as they did under the 35-year dictatorship of Alfredo Stroessner.

Paraguay, a landlocked nation in which 2 percent of the population control more than 80 percent of the landed wealth, most of which had been expropriated by the kleptocratic Stroessner regime and handed out to favored cronies of his Colorado party, agrarian reform should have topped Lugo's agenda.

As The Moscow News pointed out, "Monsanto was naturally involved in the conspiracy. The world's largest producer of genetically modified crops disapproved of Lugo's idea to abolish the per-ton royalty of $4 on soybeans, to be paid by growers using Roundup Ready RR1 and Intenta RR2 Pro seeds. Recall that on his fifth day in office, the new president, Federico Franco, offered new concessions to Monsanto concerning the distribution of its GM cotton, soybean and corn seeds in Paraguay."

According to Pelaez, "Over the past ten months, unofficial employment has soared to 66% (this proportion is higher only in Peru (67%) and in Haiti (92%)). The bulk of the shadow labor market is formed by farmers pushed off the fields by such groups as Monsanto and Cargill, which use biotechnology to industrialize agricultural production and convert farmland into a contaminated 'green desert,' slowly but surely implanting a system of 'farming without farmers'."

Blocked at every step, and relying on the right's largesse to remain in office, Lugo's betrayal of the campesino base that put him in office and his retreat and capitulation to Paraguay's elite doomed his administration.

In fact, as journalist and researcher Benjamin Dangl reported in UpSideDownWorld last year, "Lugo was no friend of the campesino sector that helped bring him into power. His administration regularly called for the severe repression and criminalization of the country's campesino movements. He was therefore isolated from above at the political level, and lacked a strong political base below due to his stance toward social movements and the slow pace of land reform."

Using a police provocation and subsequent massacre of 11 landless farmers who had occupied land belonging to ex-Colorado Senator Blas Riquelme, illegally seized by the Stroessner regime as a pretext, the Chamber of Deputies launched proceedings to remove Lugo from office. Scarcely 24 hours later, the Senate voted to impeach the president. Who was leading the charge for Lugo's removal? Why none other than the Colorado Party's declared candidate for the presidency, then-Senator Horacio Cartes.

But the final straw may have been the decision by Lugo's administration three years earlier, to cut off access to the country by the US military. By 2007, the Pentagon had deployed some 400 Marines under the guise of "medical readiness training" exercises that were denounced by grassroots activists as a ploy to identify "dangerous" rural leaders of the landless movement. At the same time, the Pentagon was planning to expand US operations at the giant Mariscal Estigarribia air base, 120 miles from the Argentine and Bolivian borders.

Journalist Conn Hallinan reported back in 2005, "US Special Forces began arriving this past summer at Paraguay's Mariscal Estigarribia air base, a sprawling complex built in 1982 during the reign of dictator Alfredo Stroessner. Argentinean journalists who got a peek at the place say the airfield can handle B-52 bombers and Galaxy C-5 cargo planes. It also has a huge radar system, vast hangers, and can house up to 16,000 troops. The air base is larger than the international airport at the capital city, Asunción."

During a 2009 press conference, Lugo rejected further US troop deployments under the Bush-era "New Horizons" program. In a decision that greatly angered Washington, Lugo remarked, "we don't see it as convenient that the Southern Command has a presence in Paraguay."

Coming on the heels of Ecuador's 2009 closure of the giant US airbase at Manta, of which Ecuadorean president Rafael Correa famously said: "We can negotiate with the US about a base in Manta, if they let us put a military base in Miami," the Pentagon and CIA looked to Paraguay for a platform for what Southern Command described as "counternarcotics surveillance," but which regional neighbors denounced as a threat to hemispheric security.

Ominously, the US ambassador in Asunción, Liliana Ayalde declared: "It's a regrettable decision."

Indeed it was, for Lugo and the Paraguayan people.

The (Narco) Ties that Bind

In their relentless drive to accumulate riches at the expense of their citizens, comprador elites, particularly those who mix land grabs, far-right politics with currying favor from their imperialist overlords, utilize state institutions as cash cows.

And when those elites are also plugged into the international narcotics trade and control the state's machinery of repression, well, it's a win-win all around!

Who would imagine that a central banker would have ties to criminals and narcotraffickers? Why, the US Embassy that's who!

A 2007 Cable Gate file published by WikiLeaks noted that former Central Bank president Dr. Angel Gabriel González Cáceres, "a strong Colorado with close ties to [former] President Duarte, who appointed him Central Bank president in September 2003," was named "Paraguay's new director of SEPRELAD, the Secretariat for the Prevention of Money Laundering," and that reviews of his previous performance were "quite mixed."

Variously described by the Embassy as "a technician with a long trajectory at the Central Bank who has cooperated with the Embassy on money laundering and terrorist financing," as Banking Superintendent however, González "opposed creation of SEPRELAD because he wanted the Central Bank to retain responsibility for fighting money laundering."

But perhaps there were other factors, and interests, at work?

According to Asunción Deputy Chief of Mission Michael J. Fitzpatrick, Paraguay's counternarcotics director Hugo Ibarra would have "nothing to do with" González. The counternarcotics chief then "volunteered that González had a direct personal role as Central Bank president in white-washing ('blanquear') funds for so-called pillar of the community Horacio Cartes and his Banco Amambay, noting that 80 percent of money laundering in Paraguay moves through that banking institution."

"Ibarra indicated," Embassy officials averred, "that González is still involved with Amambay, and questioned why a former Central Bank president would take a lower level position as SEPRELAD director--managing an office with less than a dozen employees--in the absence of some other financial incentive."

Certainly a relevant question; however, no answers were forthcoming.

In 2008, another WikiLeaks file disclosed that shortly after assuming office, Lugo informed the US Embassy of his interest "in closer counternarcotics cooperation with the United States and requested U.S. assistance with microenterprise development during a Friday, August 29 dinner with the Ambassador."

Significantly, "Lugo made clear that he does not trust some of his closest advisors or cabinet ministers. During dinner, which took place before the weekend rumors emerged regarding coup planning, Lugo told Ambassador about a tape recording of former President Duarte and General Lino Oviedo betting that Lugo will last only three to eight months in office."

A 2009 secret WikiLeaks file, "Paraguayan Pols Plot Paraguayan Putsch," noted that "discredited General and UNACE party leader Lino Oviedo and ex-president Nicanor Duarte Frutos are now working together to assume power via (mostly) legal means should President Lugo stumble in coming months."

Oviedo, "serving time for involvement in the 1999 assassination of Vice President Luis Argana and the subsequent Marzo Paraguayo massacre of unarmed student protesters," the Embassy noted it was Duarte "who used his control of the Supreme Court to free Oviedo from jail" in 2007.

A 2003 CIA report published by the Library of Congress informed us that "Brazilian and U.S. officials generally consider former General Lino César Oviedo to be head of the so-called Paraguay Cartel. He reportedly has amassed at least US$1 billion, including numerous properties in the TBA [Tri Border Area]."

The Argentine investigative news magazine Página/12 published a 2001 Argentine Chamber of Deputies report on money laundering which noted that according to Brazilian officials, the US Embassy and the DEA, Oviedo was involved with "drug trafficking (cocaine and marijuana), weapons, money laundering and the smuggling of various items."

In 1994 for example, a "load of seven tons of cocaine, worth $70 million, which was seized with the participation of the CIA, and destined for the USA," was linked to Oviedo and his employees. Later that year, according to DEA documents, another load of five tons of cocaine was seized from "Oviedo accomplices" attempting to smuggle it across the Paraguayan border.

The Chamber of Deputies report concluded: "Oviedo is accused of being the head of a drug trafficking, arms trafficking [cartel] and being involved in the murder of media entrepreneur Carlos Honorio Cubillas and Paraguayan Vice President Argana. The various charges against him made by the DEA were, by former U.S. Ambassador to Paraguay and the Brazilian CPI."

As noted above, in 2007, Oviedo's conviction for orchestrating an attempted military coup in 1996 was annulled by Paraguay's Supreme Court. Again a candidate for the presidency in 2013, nominated by the ironically named National Union of Ethical Citizens (Unión Nacional de Ciudadanos Éticos, UNACE), Oviedo died in a "helicopter accident" after a campaign appearance in February, clearing the path to power for Horacio Cartes.

The Cartel: Back in Power

Last Sunday in an unusually critical article, The New York Times reported that during the campaign, Cartes "was pressed to explain why antinarcotics police officers apprehended a plane carrying cocaine and marijuana on his ranch in 2000; why he went to prison in 1989 on currency fraud charges; and why he had never even voted in past general elections."

Good questions, all of which were dismissed by Cartes' top aides as "conspiracy theories" and "slander."

The most serious charges involve Cartes connection to drug trafficking, money laundering and the smuggling of contraband cigarettes.

Another WikiLeaks file, this one from 2010, informed us that a joint that a joint ATF-DEA-ICE-OFAC US anti-money laundering investigation dubbed "Heart of Stone," revealed that Cartes is the head of a transnational criminal organization and the main target of the operation.

"OPERATION HEART OF STONE is a coordinated, transnational investigation focused on the disruption and dismantlement of a significant drug trafficking and money laundering enterprise operating within the Tri Border Area (TBA) of Argentina, Paraguay, and Brazil, and elsewhere throughout the world. This investigation has established links between and among drug trafficking, money laundering and other criminal organizations and, as such, was approved as a designated Consolidated Priority Organizational Target (CPOT) investigation during April 2009."

The WikiLeaks file averred: "The investigative team has implemented strategies and operations aimed at attacking the financial infrastructure of drug trafficking supply network (DTO's) and other criminal enterprises operating within the TBA. Using a strategic approach to target the international command and control centers of these criminal organizations based in the TBA, agents have successfully focused investigative activity in an effort to develop this investigation with an aim toward a DEA UC introduction to CPOT designee Horacio CARTES. Through the utilization of a DEA BACO cooperating source and other DEA undercover personnel, agents have infiltrated CARTES' money laundering enterprise, an organization believed to launder large quantities of United States currency generated through illegal means, including through the sale of narcotics, from the TBA to the United States."

Despite the seriousness of the allegations, and others enumerated below, The Independent reported that Cartes "has publicly denied the allegations and says he has received assurances from the embassy that the US Drugs Enforcement Agency and Bureau of Alcohol, Tobacco and Firearms are conducting no investigations against him, something the cables allege."

If true, this raises a disturbing question: did the DEA drop the ball or were they ordered to back away from the investigation by Obama's State Department?

"'When it comes to drug trafficking, Horacio has made it clear what his position is,' says Julio Velazquez, a Colorado senator standing for re-election tomorrow."

Ludicrously, Velazquez told The Independent: "'There's no concrete allegation against him. Horacio has investments in the US. Do you think the Americans would allow a narco to bring money into their country?'"

Memo to Senator Velazquez: Not only would the Yankees "allow a narco to bring money into their country," they'd look the other way as US banksters laundered the funds and extracted hefty fees in the process!

Another front in the Cartes empire involved Banco Amambay and illegal tax evasion. The International Consortium of Investigative Journalists (ICIJ) reported earlier this month that "five directors of Banco Amambay created a secret bank in the Cook Islands with no building and no staff."

Journalists Marina Walker Guevara and Mabel Rehnfeldt disclosed that "top officials of a Paraguayan bank owned by Horacio Manuel Cartes, the country’s leading candidate in this month's presidential election, operated a secret financial institution in a tax haven in the South Pacific."

According to the ICIJ's investigation, "Cartes' father, Ramón Telmo Cartes Lind, and four other executives of Paraguay's Banco Amambay S.A. created Amambay Trust Bank Ltd. in 1995 in the Cook Islands, a tiny chain of atolls and volcanic outcroppings more than 6,000 miles away from the South American nation."

"The Cook Islands bank, which was operational until 2000," the same year the Cook Islands landed on of the OECD's money laundering blacklist, "a dishonor roll for places the OECD considers havens for dirty money," was de-registered a month prior to OECD sanctions.

Guevara and Rehnfeldt reported that the Cook Islands were condemned for "'excessive secrecy provisions'" that "allowed owners of offshore companies and accounts to hide in the shadows. It noted the islands' government had 'no relevant information on approximately 1,200 international companies that it had registered' and that the offshore banks located in the Cooks weren't required to document the identity of their customers."

"It was not the only time that Banco Amambay and its officials made headlines for alleged money laundering, but the accusations have never resulted in convictions."

"Just last month," the ICIJ averred, "the head of Paraguay's anti-money laundering agency said that the bank was being investigated alongside other financial institutions for illegal money transfers abroad. The following day the official recanted his words and said he had misspoken. Amambay denied any involvement in criminal activities."

With the election of another "teflon president" accused of operating a drug trafficking and money laundering enterprise, and with powerful connections to prominent right-wing politicians suspected of decades' long ties to global narcotics rackets, the Pentagon and US secret state agencies must be salivating over the prospect of the cartel's return to power.

After all, as State Department spokesperson Patrick Ventrell said during an April 22 press briefing when queried about Cartes dodgy record: "The United States values its relationship with Paraguay and looks forward to working with the President-elect, with President-elect Cartes, on many of our shared interests, such as defending and promoting democracy, human rights, and the rule of law, and expanding trade and economic opportunities."

When pressed about Cartes long history of criminal allegations, Ventrell didn't bat an eyelash and averred: "I'm not aware of specific allegations one way or another, but we do congratulate him on his electoral victory. And I think I just was clear about working with him going forward."

And so it goes...

DOJ Urges Federal Court to Approve Sweetheart Deal with Drug-Tainted HSBC

You can get much farther with a kind word and a gun than you can with a kind word alone. -- Al Capone

In Reckless Endangerment, a lively exposé of the frauds at the heart of the subprime meltdown, journalists Gretchen Morgenson and Joshua Rosner wrote that if "mortgage originators like NovaStar or Countrywide were the equivalent of drug pushers hanging around a schoolyard and the ratings agencies were the narcotics cops looking the other way, brokerage firms providing capital to the anything-goes lenders were the overseers of the cartel."

Their observations are all the more relevant given the outrageous behavior by major banks which polluted an already terminally corrupt financial system with blood-spattered cash siphoned-off from the global drug trade.

It wouldn't be much of a stretch to insist that drug money laundered by financial giants like HSBC and Wachovia were in fact, little more than "hedges" designed to offset losses in residential mortgage backed securities (RMBS), sliced and diced into toxic collateralized debt obligations, as the 2007-2008 global economic crisis cratered the capitalist "free market."

And like Wachovia's ill-fated $25.5 billion (£16.96bn) buy-out of Golden West Financial/World Savings Bank at the top of the market in 2006, HSBC's 2002 purchase of Household International and its mortgage unit, Household Finance Corporation for the then princely sum of $15.2 billion (£10.02bn) also proved to be a proverbial deal too far.

Evidence suggests that HSBC stepped up money laundering for their cartel clients as the hyperinflated real estate bubble collapsed. Along with other self-styled masters of the universe who were bleeding cash faster than you can say credit default swaps, HSBC posted 2008 projected first quarter losses of "$17.2 billion (£8.7bn) after the decline in the US housing market hit the value of its loans," BBC News reported.

From there RMBS deficits skyrocketed. By 2010, as Senate and Justice Department investigators were taking a hard look at bank shenanigans, Reuters reported that HSBC Holdings was "working off $20 billion [£13.19bn] worth of loans per year in its US Household Finance Corp. unit" where "liabilities stood at about $70 billion [£46.17bn]."

However you slice today's epidemic of financial corruption, a trend already clear two decades ago when economists George Akerlof and Paul Romer published their seminal paper, Looting: The Economic Underworld of Bankruptcy for Profit, incentives were huge as senior bank executives inflated their balance sheets with "criminal proceeds ... likely to have amounted to some 3.6 per cent of GDP (2.3-5.5 per cent) or around US$2.1 trillion in 2009," according to a 2011 estimate by the United Nations Office on Drugs and Crime (UNODC).

To make matters worse, willful criminality at the apex of the financial pyramid was aided and abetted by the US Justice Department and the federal regulatory apparatus who allowed these storied economic predators to walk.

'Change' that Banksters Can Believe In

In late January, Bloomberg News reported that US prosecutors have "asked a federal judge to sign off on HSBC Holdings Plc (HSBA)'s $1.9 billion [£1.2bn] settlement of charges it enabled drug cartels to launder millions of dollars in trafficking proceeds."

Prosecutors justified the settlement on grounds that "it includes the largest-ever forfeiture in the prosecution of a bank and provides for monitoring to prevent future violations," arguing that "strict conditions, and the unprecedented forfeiture and penalties imposed, serve as a significant deterrent against future similar conduct."

Let's get this sick joke straight: here's a bank that laundered billions of dollars for Colombian and Mexican drug lords, admittedly amongst the most violent gangsters on earth (120,000 dead Mexicans and counting since 2006) and we're supposed to take this deal seriously. Seriously? Remember, this an institution whose pretax 2012 profits will exceed $23.5 billion (£15.63bn) when earnings are reported next week and the best the US government can do is extract a promise to "do better"--next time.

That deal, a deferred prosecution agreement (DPA) was cobbled together between the outgoing head of the Justice Department's Criminal Division, Lanny A. Breuer and HSBC, Europe's largest bank. At the urging of former Treasury Secretary Timothy Geithner, no criminal charges were sought--or brought--against senior bank executives.

Why might that be the case?

During a press conference trumpeting the government's "shitty deal," Breuer breezily declared that DOJ's decision not to move forcefully against HSBC was in everyone's best interest: "Had the US authorities decided to press criminal charges, HSBC would almost certainly have lost its banking license in the US, the future of the institution would have been under threat and the entire banking system would have been destabilized."

As if allowing drug-connected money launderers license to pollute one of the world's largest financial institutions hadn't already "destabilized" the banking system!

Although Obama's Justice Department smeared "lipstick" on this pig of a deal, their own "Statement of Facts" submitted to US District Judge John Gleeson paints a damning picture of criminal negligence that crossed the line into outright collusion with their Cartel clients:

From 2006 to 2010, HSBC Bank USA violated the BSA and its implementing regulations. Specifically, HSBC Bank USA ignored the money laundering risks associated with doing business with certain Mexican customers and failed to implement a BSA/AML program that was adequate to monitor suspicious transactions from Mexico. At the same time, Grupo Financiero HSBC, S.A. de C.V. ("HSBC Mexico"), one of HSBC Bank USA's largest Mexican customers, had its own significant AML problems. As a result of these concurrent AML failures, at least $881 million in drug trafficking proceeds, including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia, were laundered through HSBC Bank USA without being detected. HSBC Group was aware of the significant AML compliance problems at HSBC Mexico, yet did not inform HSBC Bank USA of these problems and their potential impact on HSBC Bank USA's AML program.

As with Wachovia, oceans of cash generated through drug trafficking were laundered by HSBC via the Black Market Peso Exchange (BMPE), a nexus of interconnected firms controlled by Colombian and Mexican drug cartels.

According to the DPA, "peso brokers purchase bulk cash in United States dollars from drug cartels at a discounted rate, in return for Colombian pesos that belong to Colombian businessmen. The peso brokers then use the US dollars to purchase legitimate goods from businesses in the United States and other foreign countries, on behalf of the Colombian businessmen. These goods are then sent to the Colombian businessmen, who sell the goods for Colombian pesos to recoup their original investment."

"In the end," the Justice Department informed us, "the Colombian businessmen obtain US dollars at a lower exchange rate than otherwise available in Colombia, the Colombian cartel leaders receive Colombian pesos while avoiding the costs associated with depositing US dollars directly into Colombian financial institutions, and the peso brokers receive fees for their services as middlemen."

Got that? And it wasn't only plasma TVs, diamond-studded Rolexes or armored-up SUVs that cartel heavies were buying from enterprising businessmen on this side of the border. Add to their list of must-haves: fleets of airplanes and enough weapons to equip an army!

DOJ investigators discovered that "drug traffickers were depositing hundreds of thousands of dollars in bulk US currency each day into HSBC Mexico accounts. In order to efficiently move this volume of cash through the teller windows at HSBC Mexico branches, drug traffickers designed specially shaped boxes that fit the precise dimensions of the teller windows. The drug traffickers would send numerous boxes filled with cash through the teller windows for deposit into HSBC Mexico accounts. After the cash was deposited in the accounts, peso brokers then wire transferred the US dollars to various exporters located in New York City and other locations throughout the United States to purchase goods for Colombian businesses. The US exporters then sent the goods directly to the businesses in Colombia."

The investigation further revealed that "because of its lax AML controls, HSBC Mexico was the preferred financial institution for drug cartels and money launderers. The drug trafficking proceeds (in physical US dollars) deposited at HSBC Mexico as part of the BMPE were sold to HSBC Bank USA through Banknotes."

What's the "get" for the bank? Former Senate investigator Jack Blum told Rolling Stone's Matt Taibbi: "If you have clients who are interested in 'specialty services'­--that's the euphemism for the bad stuff--you can charge 'em whatever you want." Blum said "the margin on laundered money for years has been roughly 20 percent."

How's that for an incentive!

'Big Audits, Big Problems. No Audits, No Problems'

In cobbling together the HSBC deal, the Justice Department ignored Senate testimony by whistleblowers, some of whom were fired or eventually resigned in disgust when higher-ups thwarted their efforts to get a handle on AML "lapses" by the North American branch during a critical period when it was becoming clear that losses in the subprime market would be huge.

We were informed that senior level officials at HBUS were keep in the dark about the extent of problems plaguing HBMX by HSBC Group (London) executives, "including the CEO, Head of Compliance, Head of Audit, and Head of Legal," all of whom were aware "that the problems at HSBC Mexico involved US dollars and US dollar accounts."

We're supposed to believe that Canary Wharf "did not contact their counterparts at HSBC Bank USA to explain the significance of the problems or the potential effect on HSBC Bank USA's business." This fairy tale is further enlarged upon when we're informed that "HSBC North America's General Counsel/Regional Compliance Officer first learned of the problems at HSBC Mexico and their potential impact on HSBC Bank USA in 2010 as a result of this investigation."

According to the suspect narrative concocted by government prosecutors, HBUS's General Counsel was informed by HSBC Group Compliance Chief, David Bagley, that she wasn't told about "potential problems" at HBMX because the bank doesn't "air the dirty linen of one affiliate with another . . . we go in and fix the problems."

Really?

Keep in mind that the Office of the Comptroller of the Currency had issued not one, but two toothless cease-and-desist orders between 2003 and 2010 ordering HSBC to clean up their act, all of which revolved around strengthening anti-money laundering controls which were promptly ignored.

But as the US Senate Permanent Subcommittee on Investigations revealed in their 335-page report (large PDF file) and related hearings last summer, despite the fact that "Compliance and AML staffing levels were kept low for many years as part of a cost cutting measure," Senate investigators learned through HSBC internal correspondence that those charged with monitoring suspicious transactions were "struggling to 'handle the growing monitoring requirements' associated with the bank's correspondent banking and cash management programs, and requested additional staff."

"Despite requests for additional AML staffing," the Senate reported that "HBUS decided to hold staff levels to a flat headcount."

"After being turned down for additional staff, Carolyn Wind, longtime HBUS Compliance head and AML director, raised the issue of inadequate resources with the HNAH board of directors. A month after the board meeting, after seven years as HBUS' Compliance head Ms. Wind was fired," Senate investigators disclosed.

Wind, who had met with HNAH's board in October 2007 to discuss staffing, was reprimanded by her supervisor, Regional Compliance Officer and Senior Executive Vice President Janet L. Burak, for raising the issue. In an email to disgraced Group Compliance chief David Bagley, who dramatically resigned on camera during those Senate hearings, Burak "expressed displeasure" with Wind and told Bagley:

"I indicated to her my strong concerns about her ability to do the job I need her to do, particularly in light of the comments made by her at yesterday's audit committee meeting .... I noted that her comments caused inappropriate concern with the committee around: our willingness to pay as necessary to staff critical compliance functions (specifically embassy banking AML support), and the position of the OCC with respect to the merger of AML and general Compliance."

In marked contrast to the government's version, it appears that HBUS had been fully apprised of "cash management" problems three years earlier than claimed in the DPA, yet senior level executives choose to look the other way--so long as the cash keep flowing.

Burak's firing of Wind should have raised eyebrows at the Justice Department. As Regional Legal Department Head for North America, Burak was appointed by the HNAH board to serve as the bank's Regional Compliance Officer, a move which was even criticized by Bagley, but he was overruled by his Canary Wharf masters.

Her appointment as Regional Compliance Officer shouldn't come as a surprise however, considering that before joining the HSBC team, Burak "was group general counsel, Household International . . . as well as for Household's federal regulatory coordination and compliance function," according to a 2004 BusinessWire profile. And with the bank on the hook for some $70 billion (£46.17bn) and counting in toxic Household International mortgage liabilities, her choice by London to supervise AML operations was a slam dunk.

In her new dual-hatted role, Burak was taken to the woodshed by both the Office of the Comptroller of the Currency and the Federal Reserve "for her lack of understanding of AML risks or controls" according to the Senate report. Indeed, OCC stated that Burak had "not regularly attended key committee or compliance department meetings" and had failed to keep herself and other bank executives "fully informed about issues and risks within the BSA/AML compliance program."

But if the task at hand was to keep AML staff to a "flat headcount" and not make waves with pesky audits that might force compliance with trivial matters such as legal requirements under the Bank Secrecy Act, well you get the picture! Senate investigators learned however, that BSA compliance issues were legion and what they found was just a tad troubling:

The identified problems included a once massive backlog of over 17,000 alerts identifying possible suspicious activity that had yet to be reviewed; ineffective methods for identifying suspicious activity; a failure to file timely Suspicious Activity Reports with U.S. law enforcement; a failure to conduct any due diligence to assess the risks of HSBC affiliates before opening correspondent accounts for them; a 3-year failure by HBUS, from mid-2006 to mid-2009, to conduct any AML monitoring of $15 billion [£9.53bn] in bulk cash transactions with those same HSBC affiliates, despite the risks associated with large cash transactions; poor procedures for assigning country and client risk ratings; a failure to monitor $60 trillion [£38.14tn] in annual wire transfer activity by customers domiciled in countries rated by HBUS as lower risk; inadequate and unqualified AML staffing; inadequate AML resources; and AML leadership problems.

But wait, there's more!

After Wind's dismissal, the HNAH board hired Lesley Midzain to fill the posts of Compliance head and AML director. But as Senate investigators revealed, "Ms. Midzain had no professional experience and little familiarity with US AML laws." Indeed, in December 2008 "HNAH's regulator, the Federal Reserve, provided a negative critique of Ms. Midzain's management of the bank's AML program."

According to Senate staff, the Federal Reserve complained that "Ms. Midzain did 'not possess the technical knowledge or industry experience to continue as the BSA/AML officer'." It noted that she "was interviewed by OCC examiners from another team and they supported the conclusion of the OCC resident staff that Midzain's knowledge and experience with BSA/AML risk is not commensurate to HNAH's BSA/AML high risk profile, especially when compared to other large national banks."

As a result of these rather pointed criticisms, Midzain was removed from the AML post and HBUS hired a new director, Wyndham Clark, a former US Treasury official. According to the Senate report, Clark "was required to report to Curt Cunningham, an HBUS Compliance official who freely admitted having no AML expertise, and through him to Ms. Midzain, whom the OCC had also found to lack AML expertise."

Call it a small world.

It soon became clear to Clark that although the bank had an "extremely high risk business model from AML perspective," as director he was "granted only limited authority to the AML director to remedy problems." According to a memorandum sent by Clark to his boss Curt Cunningham, he complained that "AML Director has the responsibility for AML compliance, but very little control over its success."

If one were a "conspiracy buff" one might even argue this was precisely as intended.

Senate investigators revealed that as he continued his work, "Clark grew increasingly concerned that the bank was not effectively addressing its AML problems. In February 2010, Mr. Clark met with the Audit Committee of the HNAH board of directors and informed the committee that he had never seen a bank with as high of an AML risk profile as HBUS."

In May 2010, he wrote to a more senior compliance officer: "With every passing day I become more concerned...if that's even possible."

Less than a year after taking the thankless job, in July 2010 Clark quit. He wrote HSBC Group Compliance chief David Bagley that he had neither the authority nor the support from senior managers needed to do his job. He told Bagley in no uncertain terms:

[T]he bank has not provided me the proper authority or reporting structure that is necessary for the responsibility and liability that this position holds, thereby impairing my ability to direct and manage the AML program effectively. This has resulted in most of the critical decisions in Compliance and AML being made by senior Management who have minimal expertise in compliance, AML or our regulatory environment, or for that matter, knowledge of the bank (HBUS) where most of our AML risk resides. Until we appoint senior compliance management that have the requisite knowledge and skills in these areas, reduce our current reliance on consultants to fill our knowledge gap, and provide the AML Director appropriate authority, we will continue to have limited credibility with the regulators.

According to the DPA, despite the risks associated with HSBC's highly-profitable Banknotes business, used and abused by all manner of shady customers, "from 2006 to 2009, Banknotes' AML compliance consisted of one, or at times two, compliance officers."

In 2006, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) issued an Advisory warning that "US law enforcement has observed a dramatic increase in the smuggling of bulk cash proceeds from the sale of narcotics and other criminal activities from the United States into Mexico. Once the US currency is in Mexico, numerous layered transactions may be used to disguise its origins, after which it may be returned directly to the United States or further transshipped to or through other jurisdictions."

What was HSBC's response? The Justice Department informed us that despite the FinCEN notification "Banknotes stopped regular monthly monitoring of transactions for HSBC Group Affiliates, including HSBC Mexico, in July 2006."

And despite multiple notifications from government regulators, the bank accelerated their shady purchases: "Banknotes purchased approximately $7 billion [£4.51bn] in US currency from Mexico each year, with nearly half of that amount supplied by HSBC Mexico. From July 2006 to December 2008, Banknotes purchased over $9.4 [£6.06bn] billion in physical US dollars from HSBC Mexico, including over $4.1 billion [£2.64bn] in 2008 alone."

As a result of these rather willful "lapses" by senior executives, the Justice Department's "Statement of Facts" cited HSBC's,

a. Failure to obtain or maintain due diligence or KYC information on HSBC Group Affiliates, including HSBC Mexico; b. Failure to adequately monitor over $200 trillion [£126.9tn] in wire transfers between 2006 and 2009 from customers located in countries that HSBC Bank USA classified as "standard" or "medium" risk, including over $670 billion [£425.1bn] in wire transfers from HSBC Mexico; c. Failure to adequately monitor billions of dollars in purchases of physical US dollars ("banknotes") between July 2006 and July 2009 from HSBC Group Affiliates, including over $9.4 billion [£5.96bn] from HSBC Mexico; and d. Failure to provide adequate staffing and other resources to maintain an effective AML program.

Yet in the face of evidence that laundering drug money was anything but a mistake, Judge Gleeson was told that DOJ's decision not to criminally prosecute senior HSBC executives was predicated on the fiction that the $1.9 billion settlement's "strict conditions, and the unprecedented forfeiture and penalties imposed, [will] serve as a significant deterrent against future similar conduct."

Never mind the lack of evidence that DPA's are a "deterrent" to financial crimes. Indeed, a 2009 study by the US Government Accountability Office (GAO) concluded "that the Department of Justice (DOJ) lacked performance measures to assess how Deferred Prosecution Agreements (DPA) and Non-Prosecution Agreements (NPA) contribute to its efforts to combat corporate crime."

Well, if the Justice Department lacked "metrics" as to whether or not their agreements with corporate criminals act as a deterrent to future crimes, were there other considerations behind the sweetheart deals forged between the Criminal Division, HSBC and other banks?

You bet there were and it's worth recalling statements by former UNODC director Antonio Maria Costa in this regard. In 2009, Costa told The Observer that "he has seen evidence that the proceeds of organised crime were 'the only liquid investment capital' available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result."

Costa said that "in many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor."

"Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities... There were signs that some banks were rescued that way." Although Costa declined to identify the banks involved because it would not be "appropriate," he told The Observer that "money is now a part of the official system and had been effectively laundered."

"That was the moment [last year] when the system was basically paralysed because of the unwillingness of banks to lend money to one another," Costa averred. "The progressive liquidisation to the system and the progressive improvement by some banks of their share values [has meant that] the problem [of illegal money] has become much less serious than it was."

In other words, as illegal cash propped up the banks while the crisis was being sorted out, at the expense of the working class mind you, the financial pirates responsible for the capitalist meltdown have become even larger, thanks to taxpayer bailouts, in effect holding the economy hostage as they became "too big" to either "fail or jail."

As Matt Taibbi observed in Rolling Stone, "At HSBC, the bank did more than avert its eyes to a few shady transactions. It repeatedly defied government orders as it made a conscious, years-long effort to completely stop discriminating between illegitimate and legitimate money. And when it somehow talked the U.S. government into crafting a settlement over these offenses with the lunatic aim of preserving the bank's license, it succeeded, finally, in making crime mainstream."

What we are dealing with here is nothing less than a perverse economic system thoroughly criminalized by its elites; a bizarro world as Michel Chossudovsky pointed out where "war criminals legitimately occupy positions of authority, which enable them to decide 'who are the criminals', when in fact they are the criminals."

Wrist Slap for 'Too Big to Fail or Jail' JPMorgan Chase

With money laundering "lapses" and CEO mea culpas all the rage on Wall Street and the City of London, you would think that Hope and Change™ grifter Barack Obama's Justice and Treasury Departments would want to send a strong message to banksters who break the law.

You'd be wrong of course.

'There's Nothing to See Here…'

While the financial press is all aflutter over news that JPMorgan Chase (JPMC) CEO Jamie Dimon had his annual pay package cut by 50 percent, from $23 million (£14.5m) to $11.5 million (£7.25m) over $6.2 billion (£3.91bn) in losses in the risky derivatives market, you'd almost believe that Dimon was lining up for food stamps or hunting down mittens to stave off New York's bone-chilling winter.

Despite allusions to what are euphemistically called "bad bets" by JPMC trader Bruno Iksil, the so-called "London Whale" on the hook for proverbial "shitty deals" that cost shareholders billions, Bloomberg News reported that JPMC's "fourth-quarter profit rose 53 percent, beating analysts' estimates as mortgage revenue more than doubled on record-low interest rates and government incentives."

Incentives? Now there's a polite word for a megabank with more than $2.3 trillion (£1.45tn) in assets handed some $600 billion (£378.24bn) in TARP funds, which included Federal Reserve engineered deals for their buy-out of Bear Stearns and Washington Mutual that wiped out shareholder equity as the capitalist system threatened to implode in 2008.

Adding to the sleaze factor, it emerged in 2011 that JPMC had wrongfully overcharged thousands of military families on their mortgages, including active duty personnel serving in Afghanistan. As a result of a class-action lawsuit, the bank was forced to admit they had illegally overcharged 6,000 active duty military personnel, had seized the homes of 18 military families and then paid out $27 million (£17.05m) in compensation. At a shareholder's meeting later that year Dimon "apologized" for the "error" and lending chief David Lowman fell on his sword as he was shown the door.

Talk about stand-up guys!

And never mind, as Rolling Stone's Matt Taibbi pointed out, "at the same moment that leading banks were taking trillions in secret loans from the Fed, top officials at those firms were buying up stock in their companies, privy to insider info that was not available to the public at large."

While drug-tainted Citigroup's former CEO Vikram Pandit "bought nearly $7 million in Citi stock in November 2008, just as his firm was secretly taking out $99.5 billion in Fed loans," that other paragon of banking virtue, Jamie Dimon, who "respects" the JPMC board's decision to slice his pay in half "bought more than $11 million in Chase stock in early 2009, at a time when his firm was receiving as much as $60 billion in secret Fed loans."

Such "stock purchases by America's top bankers," Taibbi wrote, "raise serious questions of insider trading." Yet not a single bankster has been seriously investigated let alone held to account, by the Justice Department.

How sweet a year was it for JPMorgan Chase? Pretty sweet by all accounts.

Overall, Bloomberg reported, "revenue increased 10 percent to $23.7 billion [£14.96bn] from $21.5 billion [£13.57bn] in the fourth quarter of 2011. Annual revenue was $97 billion [£61.23bn], down from $97.2 billion [£61.35bn] the prior year." This included investment banking fees which jumped 54 percent to $1.7 billion (£1.07bn) and revenue in the commercial banking sector which rose to $1.75 billion (£1.1bn). And with the formation of a new housing bubble due to taxpayer-subsidized record low interest rates, JPMC's profits in the mortgage writing mill rose to $418 million (£263.5m) in 2012, compared to losses which topped $263 million (£165.8m) a year earlier.

But far from being a sign that the economic black hole opened by 2008's financial collapse has contracted, there's bad news on the horizon for distressed homeowners and taxpayers who will be forced to pay the piper for the next round of predatory loans.

As analyst Mike Whitney recently pointed out in CounterPunch a new rule defining a "qualified mortgage" by the US Consumer Financial Protection Bureau "creates vast new opportunities for the nation's biggest banks to engage in predatory lending practices with impunity."

According to Whitney, while the financial press have described the rule "as an attempt to protect borrowers from the risky types of loans that caused the financial crisis, the opposite is true. The real purpose of the rule is to provide legal protection for the banks from homeowner lawsuits, and to lay the groundwork for more reckless lending that could inflate another housing bubble."

"In other words," Whitney noted, "the rule was designed to serve the interests of the banks and the banks alone. This is why bankers everywhere are celebrating the final draft."

Never mind that leading financial institutions were forced to cough up $25 billion (£15.76bn) in a settlement with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve over shady foreclosure practices and wrongful homeowner evictions that ruined millions of lives.

JPMC's $2 billion (£1.26bn) portion of the settlement, which included "a one-time pretax charge [write down] of $700 million [£441.77m] in the fourth quarter to cover the costs associated with [the] settlement" according to Bloomberg, was a pittance compared to the trillions of dollars in assets controlled by the bank.

'A Trillion Here, a Trillion There…'

But as bad as these gift horses are, they pale in comparison with federal government inaction when it comes to policing financial predators who inflate their balance sheets with laundered drug money and loot derived from terrorist financing and organized crime.

As Yury Fedotov, the Executive Director of the United Nations Office on Drugs and Crime (UNODC), pointed out in that agency's 2011 report, Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Organized Crime: "Prior to this report, perhaps the most widely quoted figure for the extent of money laundering was the IMF's 'consensus range' of between 2-5 per cent of global GDP, made public in 1998. A study-of-studies, or meta-analysis, conducted for this report, suggests that all criminal proceeds are likely to have amounted to some 3.6 per cent of GDP (2.3-5.5 per cent) or around US$2.1 trillion in 2009."

The UNODC research team averred: "If only flows related to drug trafficking and other transnational organized crime activities were considered, related proceeds would have been equivalent to around US$650 billion per year in the first decade of the new millennium, equivalent to 1.5% of global GDP or US$870 billion in 2009 assuming that the proportions remained unchanged. The funds available for laundering through the financial system would have been equivalent to some 1% of global GDP or US$580 billion in 2009."

However you slice these grim estimates, it should be obvious that banks have every incentive to remain key players in the transnational narcotics complex and will continue to do so thanks to the federal government.

Last week, the Office of the Comptroller of the Currency (OCC) released their cease-and-desist order against JPMC.

Unlike other drug money laundering banks such as Wells Fargo-owned Wachovia Bank, which agreed to a mere $160 million (£100.86m) settlement in 2010 in a deferred prosecution agreement (DPA) after admitting to laundering upwards of $368 billion (£231.99bn) for Colombian and Mexican drug cartels or the recent $1.9 billion (£1.2bn) DPA with Britain's HSBC global financial empire, the OCC's consent order didn't even impose a fine on JPMC for money laundering "lapses."

Now that's juice!

Though short on details the order however, is a damning indictment of JPMC "indiscretions" when it comes to drug and other criminal money laundering. Keep in mind this is an institution that was slapped with an $88.3 million (£55.66m) fine less than 18 months ago for shipping a ton of gold bullion to Iran in breach of harsh Treasury Department sanctions. (I neither endorse nor support draconian sanctions imposed by the imperialists on the Islamic Republic, my purpose here is to point out the double standards which would land the average citizen in the slammer under "material support" statutes for trading with Iran). The January 2013 Consent Order stated although the Comptroller found serious "flaws" in their accounting practices, "the Bank neither admits nor denies" the following:

(1) The OCC's examination findings establish that the Bank has deficiencies in its BSA/AML [Bank Secrecy Act/anti-money laundering] compliance program. These deficiencies have resulted in the failure to correct a previously reported problem and a BSA/AML compliance program violation under 12 U.S.C. § 1818(s) and its implementing regulation, 12 C.F.R. § 21.21 (BSA Compliance Program). In addition, the Bank has violated 12 C.F.R. § 21.11 (Suspicious Activity Report Filings).

(2) The Bank has failed to adopt and implement a compliance program that adequately covers the required BSA/AML program elements due to an inadequate system of internal controls, and ineffective independent testing. The Bank did not develop adequate due diligence on customers, particularly in the Commercial and Business Banking Unit, a repeat problem, and failed to file all necessary Suspicious Activity Reports ("SARs") related to suspicious customer activity.

(3) The Bank failed to correct previously identified systemic weaknesses in the adequacy of customer due diligence and the effectiveness of monitoring in light of the customers' cash activity and business type, constituting a deficiency in its BSA/AML compliance program and resulting in a violation of 12 U.S.C. § 1818(s)(3)(B).

Wait a minute, if these were "previously identified systemic weaknesses" and if JPMC "failed to adopt and implement a compliance program" that would shield the American financial system from a tsunami of drug-tainted cash annually washing through the economy, especially "in light of the customers' cash activity and business type," why then has OCC issued another toothless Consent Order rather than forcing the bank to comply with the law? Accordingly, federal regulators charge:

(4) Some of the critical deficiencies in the elements of the Bank's BSA/AML compliance program, resulting in a violation of 12 U.S.C. § 1818(s)(3)(A) and 12 C.F.R. § 21.21, include the following:

(a) The Bank has an inadequate system of internal controls and independent testing.
(b) The Bank has less than satisfactory risk assessment processes that do not provide an adequate foundation for management's efforts to identify, manage, and control risk.
(c) The Bank has systemic deficiencies in its transaction monitoring systems, due diligence processes, risk management, and quality assurance programs.
(d) The Bank does not have enterprise-wide policies and procedures to ensure that foreign branch suspicious activity involving customers of other bank branches is effectively communicated to other affected branch locations and applicable AML operations staff. The Bank also does not have enterprise-wide policies and procedures to ensure that on a risk basis, customer transactions at foreign branch locations can be assessed, aggregated, and monitored.
(e) The Bank has significant shortcomings in SAR decision-making protocols and an ineffective method for ensuring that referrals and alerts are properly documented, tracked, and resolved.

(5) The Bank failed to identify significant volumes of suspicious activity and file the required SARs concerning suspicious customer activities, in violation of 12 C.F.R. § 21.11. In some of these cases, the Bank self-identified the issues and is engaged in remediation.

(6) The Bank's internal controls, including filtering processes and independent testing, with respect to Office of Foreign Asset Control ("OFAC") compliance are inadequate.

How large were the "significant volumes" of "suspicious activity" alluded to opaquely? Where did they originate? Who were the "suspicious customers" and why did JPMC not have "enterprise-wide policies and procedures" after being previously ordered to do so to ensure that said "suspicious customers" at foreign bank branches didn't include drug lords or terrorist financiers? All of these are unanswered questions for which the Obama administration should be held to account.

In fact, according to OCC's own regulations, 12 C.F.R. § 21.21 clearly states that the federal government "requires every national bank to have a written, board approved program that is reasonably designed to assure and monitor compliance with the BSA."

At a minimum, an anti-money laundering program "must" (this is not optional): "1. provide for a system of internal controls to assure ongoing compliance; 2. provide for independent testing for compliance; 3. designate an individual responsible for coordinating and monitoring day-to-day compliance; and 4. provide training for appropriate personnel. In addition, the implementing regulation for section 326 of the PATRIOT Act requires that every bank adopt a customer identification program identification program as part of its BSA compliance program."

Keep in mind that Wachovia and HSBC under terms of their DPA's were forced to admit that illegal transactions "ignored the money laundering risks associated with doing business with certain Mexican customers and failed to implement a BSA/AML program that was adequate to monitor suspicious transactions from Mexico."

Furthermore, those risks were compounded, wilfully in this writer's opinion, in order to inflate bank balance sheets with drug money, through their failure to correct "systemic deficiencies in its transaction monitoring systems, due diligence processes, risk management, and quality assurance programs."

On every level, JPMorgan Chase failed to comply with existing rules and regulations that have earned penny-ante offenders terms in federal prison.

In fact, just last week Los Angeles-based "G&A; Check Cashing, its manager, Karen Gasparian, and its compliance officer, Humberto Sanchez" were sentenced by US Judge John Walker to stiff prison terms, The Wall Street Journal reported. For violating the Bank Secrecy Act, Gasparian was "ordered to prison for five years and Sanchez for eight months."

Are you kidding me! The Journal averred, "While it is common for banks to face scrutiny from the U.S. for complying with the Bank Secrecy Act, it is rare for authorities to pursue check-cashing businesses for anti-money laundering compliance issues, as they are often used by the poor, who may not have the funds to maintain a bank account."

In full clown-car mode, Assistant Attorney General Lanny Breuer, Obama's chieftain over at the Justice Department's Criminal Division, who last month refused to file criminal charges against drug-money laundering banksters at HSBC said in a statement: "Karen Gasparian, Humberto Sanchez and their company G&A; Check Cashing purposefully thwarted the Bank Secrecy Act, making it easier for others to use G&A; to commit illegal activity. They knew they were required to report transactions over $10,000, but deliberately failed to do so."

Although the OCC Consent Order does not spell out who benefited from JPMC's "systemic weaknesses" when it came to lax drug money laundering controls, the suspicion persists that somewhere fugitive billionaire drug lord Chapo Guzmán is smiling as he enlarges his stable of thoroughbreds.

(Image courtesy of Daniel Hopsicker's MadCow Morning News)

HSBC Caught in New Drug Money Laundering Scandal

While HSBC's Canary Wharf masters are back-peddling furiously over charges that they gave a leg up to terrorist financiers and drug traffickers as a recent U.S. Senate report charged, new evidence emerged that its business as usual for the multinational banking giant founded by Hong Kong-based British opium merchants.

Earlier this month, The Independent reported that French police had "intercepted one of the dozens of 'go-fast' cars which transport cannabis at high speed from Spain to Paris. The seizure--banal in itself--unravelled an extraordinary network of drug-trafficking, money-laundering, fraud and tax evasion which sprawled over the invisible barrier which separates Paris from the city's poor, multiracial suburbs."

The bank embroiled in this latest scandal? Why HSBC, of course!

According to reporter John Lichfield, "bank notes handed by clients to street drug dealers in the suburbs were ending up, French and Swiss investigators discovered, in the safes of seemingly law-abiding, well-heeled citizens in the French capital."

But that's not the only place where crisp bundles of cash were turning up.

"A trio of Moroccan brothers, including a prominent fund manager in Geneva, are alleged to have concocted an elaborate scheme to launder money by balancing two illegal flows of cash," The Independent averred.

At the center of this multimillion euro money laundering spider's web were: Meyer El-Maleh, the managing director of the fund management firm GPF SA, and brothers Mardoché El-Maleh, the alleged bagman of the cannabis-for-cash scheme and Nessim El-Maleh, a fund management specialist with the Swiss private banking arm of HSBC, HSBC Private Bank (Suisse) S.A.

The Independent reported that the trio "are suspected of handling up to €12m (£9.6m) in cash in the past seven months (and far more over the past four years). Assets seized by the police include €2m in cash, gold ingots, art treasures and guns."

"The HSBC bank has confirmed that its employee was involved in the affair," Swiss Info disclosed, "but says that it has been 'cooperating actively with the authorities about this over the past few months'. The Swiss newspaper Le Temps reports that GPF SA is about to dismiss the other brother."

Talk about closing the barn door after the horses have escaped!

Among the well-heeled perps arrested by authorities on charges of "conspiracy to launder money and association with criminals" was Florence Lamblin, a prominent Green Party politician and deputy mayor of the 13th arrondissement in Paris.

Her arrest was all the more ironic considering that fake "left" Greens are currently in coalition with François Hollande's pro-austerity "Socialist" government. Lamblin and her coalition partners had run on a platform demanding tougher action against (wait for it) international money laundering!

When Lamblin's home was raided "police discovered €400,000 (SFr484,000) in low-value notes" in safes belonging to the "progressive" politician, Swiss Info averred.

In the wake of her arrest, Lamblin was forced to resign although she denied "any involvement" in the drug smuggling scheme.

Her lawyer, Jérôme Boursican told AFP "she had held 350,000 euros from a family legacy in a Swiss account."

"If anything, my client may be guilty of tax fraud, over the transfer back to France of a sum of €350,000 from a family inheritance which was placed in a Swiss bank account in 1920," Boursican explained.

The attorney told France 24 that he would ask a judge "to dismiss the case against his client 'as soon as possible' and blamed her involvement on a 'judicial error'."

The "error" of getting caught perhaps?

Despite Lamblin's professed innocence, Swiss Info reported that "the sums involved are huge." French police have charged that "the sum involved in the money laundering is about €40 million, while French Interior Minister Manuel Valls says that the drug smuggling must have brought in about €100 million."

As preliminary reports suggest it appears that Lamblin was keen on keeping more than the environment "green."

A typical money laundering "placement" scheme, "cannabis profits leaving France were 'swapped' for assets hidden in Switzerland which tax cheats or business fraudsters wished to repatriate," The Independent reported.

"The risky job of smuggling drug-trafficking proceeds over the Franco-Swiss border was avoided," Lichfield wrote. "Instead, the drugs cash was handed over in plastic bags to Parisians who had hidden Swiss accounts."

"The same sums were debited from their banks in Geneva and sent on a complex route through shell companies in London and offshore tax havens to purchase assets for the drug barons in Morocco, Dubai or Spain. A commission was allegedly paid on both transactions," The Independent averred.

Referred to as "layering," the transfer of funds took place through a series of opaque financial transactions that camouflaged their illegal origins. In the case of our well-heeled Parisians, drug profits were swapped through bank-to-bank and bulk cash transfers via private banks in Geneva, one of which was owned by HSBC.

As Senate investigators disclosed, "Bulk cash shipments typically use common carriers ... to ship U.S. dollars by air, land, or sea. Shipments have gone via airplanes, armored trucks, ships, and railroads."

"Shippers," Senate staff averred, "may be 'currency originators,' such as businesses that generate cash from sales of goods or services; or 'intermediaries' that gather currency from originators or other intermediaries to form large shipments. Intermediaries are typically central banks, commercial banks, money service businesses, or their agents."

Eschewing armored cars, airplanes or ships, the "originators" of these illegal cash flows preferred ubiquitous black plastic trash bags and "go-fast" limousines as the method of choice for bulk cash transfers. It would certainly cut down on shipping costs as the loot moved "offshore" and entered the shadow world of private banking!

As financial researcher James S. Henry pointed out in The Price of Offshore Revisited: "The term 'offshore' refers not so much to the actual physical location of private assets or liabilities, but to nominal, hyper-portable, multi-jurisdictional, often quite temporary locations of networks of legal and quasi-legal entities and arrangements that manage and control private wealth--always in the interests of those who manage it, supposedly in the interests of its beneficial owners, and often in indifference or outright defiance of the interests and laws of multiple nation states."

"A painting or a bank account may be located inside Switzerland's borders," Henry wrote, "but the all-important legal structure that owns it--typically that asset would be owned by an anonymous offshore company in one jurisdiction, which is in turn owned by a trust in another jurisdiction, whose trustees are in yet another jurisdiction (and that is one of the simplest offshore structures)--is likely to be fragmented in many pieces around the globe."

Given Switzerland's strict bank secrecy laws, we do not know, and Senate investigators did not disclose, how many billions of dollars were hidden for HSBC's private banking clients in Geneva, where it originated or whether or not occult wealth shielded from scrutiny was derived from organized criminal activities.

In July however, when the Senate pointed a finger directly at HSBC over anti-money laundering "lapses," The Bureau of Investigative Journalism revealed that "British clients of an HSBC-owned private Swiss bank that is the focus of a major HM Revenue & Customs investigation are alleged to have evaded tax by an amount likely to exceed £200m."

Lord Stephen Green, Baron of Hurstpierpoint and current Minister of Trade and Investment in David Cameron's Conservative government, was previously HSBC's chief executive and the chairman and director of HSBC Private Banking Holdings (Suisse) N.A. for ten years.

During Green's tenure, journalist Nick Mathiason disclosed that "the sums allegedly evaded by Britons using HSBC's Swiss bank are massive. HMRC told the Bureau 'the early indications are that the amounts are significant'."

According to Mathiason, in 2010 the HMRC "received data smuggled out of HSBC by a former bank IT worker, now under arrest in Spain and facing possible extradition to Switzerland, that contained details of 6,000 UK-linked individuals, companies and trusts. Two senior tax investigators who both worked at HMRC told the Bureau the average amount evaded in the 6,000 accounts is likely to range between £33,000 and £50,000."

While the sums involved in the Parisian money laundering and drugs scandal may be chump change in comparison to the trillions of dollars in illicit drug money that enters the system each year as a result of "normal business relations" between global drug cartels and the international financial system as the United Nations Office on Drugs and Crime (UNODC) revealed last year, it does demonstrate the utterly corrupt nature of the system as a whole.

Indeed, seeming ideological foes are joined at the hip when it comes to fleecing the working class and imposing austerity and privatization schemes that profit their real constituents--the global class of financial parasites who "win" regardless of which party of hucksters gain power.

As Henry observed, "private elites ... had accumulated $7.3 to $9.3 trillion of unrecorded offshore wealth in 2010, conservatively estimated, even while many of their public sectors were borrowing themselves into bankruptcy, enduring agonizing 'structural adjustment' and low growth, and holding fire sales of public assets."

Public sector thefts that enrich the shareholders and officers of corrupt institutions like HSBC.

Although settlement talks between U.S. regulatory agencies and HSBC has forced the bank to set aside at least $700m (£441m) to meet the cost of any fines, it is highly unlikely that officials at the bank will be criminally charged.

Currently negotiating with the Justice Department, the Federal Reserve and the Office of the Comptroller of the Currency over serious allegations that the bank conducted a multiyear, multibillion dollar business with terrorist financiers and global drug cartels, the price tag may balloon even higher.

"HSBC's $700 million set-aside, if paid, would constitute the largest U.S. settlement reached over such allegations, topping the $619 million in penalties and forfeitures paid in June by ING Groep NV, the biggest Dutch financial-services company," Bloomberg News reported.

According to The New York Times, "federal authorities think HSBC could end up paying at least $1 billion. The bank itself said 'it is possible that the amounts when finally determined could be higher, possibly significantly higher'."

A spokesperson for HSBC however, told the Times this "case is not about HSBC complicity in money laundering. Rather, it's about lax compliance standards that fell short of regulators' expectations and our expectations, and we are absolutely committed to remedying what went wrong and learning from it'."

But as Rowan Bosworth-Davies, a former financial crimes specialist with London's Metropolitan Police observed: "You don't launder this volume of money by accident, because somewhere along the line, your systems and controls for preventing money laundering just 'broke down'! You do it because you work in a bank which is willing to flout every rule in the book and engage in layer upon layer of criminal conduct if the money is right! You do it because your management structure is defined by a criminogenic determination to amplify the anomic environment within which you operate and in which you expect your staff to co-operate."

For their part, Swiss bankers are scrambling to put as much daylight as possible between themselves, the Paris money laundering scandal and HSBC.

Bernard Droux, the chairman of the Geneva Financial Center foundation, an umbrella group of independent banks and wealth managers told Swiss Info: "We were surprised that it should still be possible to do this today. This is a practice that has been forbidden by law for more than 20 years."

But as with other recent examples of financial skullduggery, Droux reverted to form and claimed "You can never rule out the possibility of black sheep in any profession. No international centre is totally protected from this kind of thing."

He hastened to add that Switzerland was at the "forefront" of the international fight against drug money.

However, Droux's "black sheep" brush-off was undercut by a recent Bloomberg Businessweek report. We were informed that "Swiss private banks are looking for footholds in Latin America as the lower fees and higher interest rates offered by local wealth managers deter the region's super-rich from traveling to Geneva and Zurich."

This "changing relationship," Bloomberg reported, began "in the 19th century when Swiss banks guarded the fortunes of plantation owners and mining magnates. UBS AG (UBSN), Credit Suisse Group AG (CSGN) and other Swiss banks are being forced to seek acquisitions as Latin America’s $3.5 trillion wealth management market is set to grow by more than half by 2016, according to Boston Consulting Group."

"'People are becoming richer and richer,' said Gustavo Raitzin, head of Latin America for Julius Baer Group Ltd. (BAER). 'An emerging consumer class wants to make liquid investments and they need private banks and wealth managers'."

It is worth recalling in this context that Julius Baer's Cayman Islands division, as the whistleblowing web site WikiLeaks revealed, was instrumental in squirreling away "several million dollars" of funds controlled by late Mexican Army General Mario Acosta Chaparro and his wife, Silvia, through a shell company known as Symac Investments.

Acosta, who served time in prison for his ties to the late drug trafficking kingpin Amado Carrillo Fuentes, the self-styled "Lord of the Heavens" who ran the Juárez Cartel, was killed in May when an assassin fired three rounds from a a 9mm revolver into his head.

The secret-spilling web site averred: "With the assistance of Julius Baer, Mr Chaparro was able to invest several millions of USD in Symac with all the secrecy which the Caymans allowed and to draw out some $12,000 a month."

Who else might be in need of "private banks and wealth managers" employed by the likes of HSBC and Julius Baer to make such "liquid investments" possible with no questions asked?

Paging Chapo Guzmán, white courtesy telephone!

(Image courtesy of Daniel Hopsicker's MadCow Morning News)

Teflon President? Noose Tightens Around Uribe as Former Death Squad Leaders Spill the Beans

Last month's capture of Colombian drug lord Daniel "El Loco" Barrera by Venezuelan police was hailed as a "victory" in the "War on Drugs."

Barrera, accused of smuggling some 900 tons of cocaine into Europe and the U.S. throughout his infamous career, was described by Colombian President Juan Manuel Santos, who announced the arrest on national television, as "the last of the great capos."

But what of the "capo" who enjoyed high office, is wined and dined by U.S. corporations and conservative think-tanks, owns vast tracks of land, is a "visiting scholar" at a prominent American university (Georgetown) and now sits on the Board of Directors of Rupert Murdoch's News Corporation?

When will they be brought to ground?

A Family Affair

To clarify the questions above, one need look no further than the kid-gloves approach taken by the media when it comes to former Colombian President, the U.S. "Presidential Medal of Freedom" recipient Álvaro Uribe.

Accused by human rights organizations over his role in the forced disappearance of thousands of Colombians during two terms in office (2002-2010), Uribe may still land in the dock as a result of ongoing investigations by Colombia's Supreme Court into official corruption, drug trafficking and mass murder.

Recent arrests by Colombian authorities and revelations by the president's former allies however, are beginning to draw a circle around Uribe and the U.S. secret state in some of the hemisphere's worst human rights abuses of previous decades.

As the net tightens, members of the president's own family are sharply focused in the cross-hairs of investigators. Back in June, Antifascist Calling reported on the arrest of Ana Maria Uribe Cifuentes and her mother, Dolly Cifuentes Villa on drug trafficking and money laundering charges. The U.S Treasury Department froze their assets last year.

Accused by the Justice Department of having trafficked some 30 tons of cocaine into the U.S. as business partners of Sinaloa Cartel boss Joaquín "El Chapo" Guzmán, the women, members of the Cifuentes Villa crime family led by Dolly's brother, Jorge Milton Cifuentes Villa, are prominent members of Colombia's jet-setting narco-bourgeoisie.

According to the Justice Department, the investigation revealed that "the Cifuentes Villa drug trafficking organization was using sophisticated drug trafficking routes to distribute multi-ton cocaine loads from Colombia through Central America, for ultimate distribution in Mexico and the United States." In 2009, some 8.3 tons of cocaine which the family were attempting to export to Mexico were seized by law enforcement officials in Ecuador.

Federal prosecutors charged that the Cifuentes Villa family owns or controls 15 companies operating in Colombia, Mexico and Ecuador involved in a variety of ventures that supported their narcotrafficking enterprise.

Among the firms targeted were Linea Aerea Pueblos Amazonicos S.A.S., a newly-created airline operating in eastern Colombia, Red Mundial Inmobiliaria, S.A. de C.V., a real estate company located near Mexico City, along with Gestores del Ecuador Gestorum S.A., a consulting firm located in Quito, Ecuador.

It is also worth noting that the Cifuentes Villa organization, as the Center of Public Integrity reported, have also profited from illegal mining operations that traffic rare-earth minerals destined for the world market.

Accordingly, the Cifuentes Villa clan employed the same smuggling routes that trafficked cocaine to move precious metallic ores such as coltan and tungsten, used by the communications industry and weapons manufacturers, onto the international market. When the Treasury Department placed family members onto its drug kingpin list they identified their mining fronts as "a money-laundering operation in support of a cocaine-smuggling enterprise."

While U.S. media were mesmerized by the extradition of Sandra Ávila Beltrán, whom the press had dubbed "La Reina del Pacífico" (The Queen of the Pacific), over her lavish lifestyle and family ties to legendary Mexican drug lord Miguel Ángel Félix Gallardo, onetime godfather of the Guadalajara Cartel, Uribe's relatives inexplicably "disappeared" from "court records and authorities were unable to pinpoint the pair's whereabouts," Colombia Reports informed us.

Imagine that.

For his part, the former president denied allegations leveled against his brother Jaime, who died in 2001, and claimed that unnamed "criminals," who conducted "business" from his brother's car phone had cloned it. He also "denied any knowledge of his brother's relationship with Cifuentes or the existence of his niece, despite a birth certificate that was uncovered proving Jaime Uribe was her father," Colombia Reports averred.

What Uribe continues to gloss over however, is the inconvenient fact that brother Jaime had been arrested and interrogated by the Colombian Army after investigators recorded calls \made from his phone to none other than Pablo Escobar, the Nuevo Arco Iris political research center in Bogotá disclosed.

Among the unanswered questions surrounding these recent arrests, investigative journalist Daniel Hopsicker wondered: "Did Álvaro Uribe okay the loading of 3.6 tons of cocaine at an airport he controlled in Rio Negro Colombia onto a 'former' CIA Gulfstream (N987SA) jet from St. Petersburg Florida that crashed in the Yucatan in 2007?"

That fateful crash eventually led to the deferred prosecution agreement between the U.S. federal government and Wachovia Bank, fined $160 million for laundering some $378 billion for Mexico's Sinaloa Cartel, "business associates" of the Cifuentes Villa clan.

More pointedly Hopsicker asked: "Why did two successive U.S. Administrations lavish billions of dollars to stop drug trafficking on a President of Colombia who was himself involved in the drug trade?"

As the investigative net is drawn around the family of the former president, another Uribe brother, Santiago, "is facing a criminal investigation for the alleged founding and leading of a paramilitary group," Colombia Reports disclosed.

Investigations into that group, the notorious death squad the 12 Apostles, again surfaced when The Washington Post revealed that a former police chief, Juan Carlos Meneses, charged that Santiago "led a fearsome paramilitary group in the 1990s ... that killed petty thieves, guerrilla sympathizers and suspected subversives."

Meneses, who fled to Venezuela with his family, disclosed that the "group's hit men trained at La Carolina, where the Uribe family ran an agro-business in the early 1990s." For services rendered, Meneses told the Post "he received a monthly payment of about $2,000 delivered by Santiago Uribe."

The former police official said he came forward "because associates in the security services warned him he would soon be killed for knowing too much."

"The revelations," according to the Post, "threaten to renew a criminal investigation against Santiago Uribe and raise new questions about the president's past in a region where private militias funded with drug-trafficking proceeds and supported by cattlemen wreaked havoc in the 1990s. The disclosures could prove uncomfortable to the United States, which has long seen Uribe as a trusted caretaker of American money in the fight against armed groups and the cocaine trade."

"Uncomfortable" perhaps, but not surprising given the U.S. track record in support of drug-trafficking death squads, especially those which advanced corporate America's geopolitical interests throughout Latin America.

"Meneses," the Post averred, "is the first close collaborator of the 12 Apostles to speak publicly about the group's inner workings. His declarations are also the most extensive recounting by a security services official of how Colombia's militarized police and its army worked in tandem with death squads in one community--a model that investigators of the paramilitary movement say was duplicated nationwide."

For his part, the former president accused human rights' activists who have leveled charges against his family "of being guerrilla stooges who disseminate false accusations against his government."

However, Nobel Peace Prize laureate, Adolfo Pérez Esquivel, who was present when Meneses recounted his story during a taped interview in Buenos Aires, told the Post that the former police chief "'incriminates himself and also the brother of the president who managed the paramilitary group, but also President Uribe'."

Interestingly enough, Uribe's appointment to News Corp's board came while the former president is under investigation for illegally wiretapping human rights activists, journalists, Supreme Court justices and opposition politicians.

His former chief of staff is currently in jail awaiting trial on criminal wiretapping charges and his former secret police chief, Maria Pilar Hurtado, fled Colombia and sought asylum in Panama before similar charges could be filed against her.

And with two more senators now under investigation for suspected ties to paramilitary death squads Colombia Reports averred, Uribe's teflon armor is slowly being chipped away.

Parapolitical Scandal

If, as Voltaire once said, "the history of the great events of this world are scarcely more than the history of crime," what of the powerful actors who have looted entire nations and did so while serving the interests of their imperialist overlords?

Dubbed the "parapolitical scandal" by Colombian media, the investigation was set in motion when leftist opposition politician, Clara López Obregón, formally denounced and provided evidence in 2005 to the Supreme Court of links between drug trafficking organizations, the military/intelligence apparatus, right-wing death squads and members of Congress, including prominent officials of Álvaro Uribe's then-governing coalition.

That investigation gathered steam when a laptop was seized by authorities in 2006 from Rodrigo Tovar Pupo, alias Jorge 40, a leader of the Northern Bloc of the Autodefensas Unidas de Colombia (United Self-Defense Forces of Colombia, or AUC).

The origins of the AUC can be traced to the take-down of the Medellín Cartel and murder of "cocaine king" Pablo Escobar by rival drug organizations, principally the Cali Cartel run by the Rodríguez Orejuela brothers, who were provided logistical support and firepower by the CIA and U.S. Delta Force commandos to eliminate the competition.

An umbrella group comprised of far-right militants and drug capos aligned with Colombia's ruling class, the AUC and splinter groups such as the Águilas Negras, or Black Eagles, and the Ejército Revolucionario Popular Antiterrorista Colombiano (Popular Revolutionary Anti-Terrorist Army of Colombia, ERPAC), derive the bulk of their income from drug trafficking as they wage war against the leftist Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, or FARC), trade unionists and land reform activists.

Readers will recall that during the 1980s both the Medellín and Cali cartels were given a leg up by the Reagan administration's CIA as funds derived from the drug trade were diverted to the Nicaraguan Contras as part of the administration's anti-Communist crusade in Central America.

In fact, as the Agency was forced to admit in the wake of "suicided" journalist Gary Webb's "Dark Alliance" investigation, the CIA and Reagan's Justice Department agreed to a Memorandum of Understanding that handed their dope-dealing Contra assets get-out-of-jail-free cards.

As political fallout from the latest "War on Drugs" scandal--the "gun walking" Fast and Furious affair that put thousands of high-powered weapons into the hands of cartel killers in Mexico--hovers like a radioactive cloud over the Justice Department, the old watchword of the 1980s, "drugs in, guns out," is all the more timely.

And like the Contras, the AUC were more than simply an enforcement arm of Colombia's narco-elites; they served as an unofficial though deadly instrument, to preserve the status quo. For Washington policy makers, this meant continued access by U.S. petroleum corporations, mining and agro-business interests to Colombia's vast wealth. If thousands of tons of cocaine entered the United States as the price for stamping out "leftist subversion," then so be it.

Along with incriminating evidence that linked Tovar's gang to 550 murders, it later emerged that Tovar was a close political associate of Jorge Noguera, the former head of DAS, the Departamento Administrativo de Seguridad (Administrative Department of Security), the Colombian equivalent of the CIA.

Noguera's links to Tovar came to light when his deputy, Rafael García Torres, DAS's former chief of Information Technologies, was arrested and charged by Supreme Court investigators of accepting bribes from right-wing sicarios (assassins) and drug traffickers in exchange for erasing their criminal histories, along with those of the Cifuentes Villa clan, from the state intelligence database.

In his testimony, García charged that Noguera, a Uribe crony, collaborated with Tovar's Northern Bloc in a coordinated move by the AUC to support local, regional and national candidates for office who supported their hardline against the left.

More recently, the not-so-hidden hand of the United States emerged.

The Washington Post reported that "American cash, equipment and training, supplied to elite units of the Colombian intelligence service over the past decade to help smash cocaine-trafficking rings, were used to carry out spying operations and smear campaigns against Supreme Court justices, Uribe's political opponents and civil society groups."

Post reporters Karen DeYoung and Claudia J. Duque disclosed that despite billions of dollars of aid supplied by U.S. taxpayers under Plan Colombia, "the DAS under Uribe emphasized political targets over insurgents and drug lords."

In fact, Colombia prosecutors told the Post that the "Uribe government wanted to 'neutralize' the Supreme Court because its investigative magistrates were unraveling ties between presidential allies in the Colombian congress and drug-trafficking paramilitary groups."

Based on "thousands of pages of DAS documents and the testimony of nine top former DAS officials, the prosecutors say the agency was directed by the president's office to collect the banking records of magistrates, follow their families, bug their offices and analyze their court rulings."

These black operations however, were not the work of a few proverbial "bad apples" but were a direct result of projects designed by the CIA.

"Some of those charged or under investigation have described the importance of U.S. intelligence resources and guidance," the Post disclosed, "and say they regularly briefed embassy 'liaison' officials on their intelligence-gathering activities."

"'We were organized through the American Embassy,' said William Romero, who ran the DAS's network of informants and oversaw infiltration of the Supreme Court. Like many of the top DAS officials in jail or facing charges, he received CIA training. Some were given scholarships to complete coursework on intelligence-gathering at American universities."

As with the previous Clinton and Bush regimes, the Obama administration vociferously denies any knowledge of corrupt practices by Colombian officials and in fact, "anti-drug" programs such as Plan Colombia "are viewed as so successful that it has become a model for strategy in Afghanistan," the Post reported.

By 2012 however, some 139 members of Congress were under investigation; five governors and 32 lawmakers, including President Uribe's cousin, Mario Uribe Escobar, a former President of Congress, were convicted of paramilitary ties and subsequently jailed.

In late August, former Colombian senator Jorge Visbal, a Uribe ally, "was charged with the promoting and financing of paramilitary groups, held responsible for tens of thousands of human rights violations," Colombia Reports disclosed.

"Former AUC leader Salvatore Mancuso testified before Colombian prosecutors that Visbal had an 'identical ideology' to the extreme-right paramilitaries and, on behalf of the cattle ranchers, brought 'information and suggestions' to meetings with paramilitary leaders to secure the expansion of paramilitary power in the north of Colombia."

Mancuso, who took over the AUC when Israeli-trained narcotrafficker and death-squad führer Carlos Castaño "disappeared" in 2004, said during recent court proceedings that Uribe was aware that the organization supported his campaign for president in 2002 "economically and logistically," according to Colombia Reports.

Prior to his arrest, the human rights organization Equipo Nizkor reported that Mancuso, the son of Italian immigrants, along with being an AUC "godfather," was also a member of the 'Ndrangheta, "the powerful Calabrian mafia which according to Italian police, exceeds the Sicilian Cosa Nostra in both strength and size."

In fact, when Italian anti-Mafia prosecutor Nicola Gratteri flew to Bogotá to investigate the 'Ndrangheta's Colombian drugs network, Gratteri was told by Mancuso he had spied on him the entire time.

"I was in the center of Bogotá, with lots of security protecting me. I didn't know that all the armored cars that I could see around my hotel belonged to Mancuso," Gratteri told The Daily Beast. "He told me his protection consisted of 600 men! Not even the U.S. President has such an escort. Can you imagine how much money he had?"

Mancuso claimed Uribe was aware of the AUC's backing. "There were previous meetings with members of Álvaro Uribe's campaign, including those delegates that asked us to decrease military operations because it was affecting the campaign and image of the candidate," Mancuso said.

During those same proceedings, another former AUC leader, Jorge Ivan Laverde, alias "El Iguano," said that "no evidence exists of these financial transactions because the groups burned all of their paramilitary records before they demobilized."

Rather conveniently, one might say.

"According to El Iguano," Colombia Reports disclosed, "the support of the ex-president all began when the righthand man of AUC creator Carlos Castaño called all groups to give them the order that they must support the Uribe campaign and spend money where necessary."

The former president denounced these claims and said he would launch "a criminal complaint against the former paramilitary for libel."

However, former Congressman Miguel Alfonso de la Espriella, who was part of Uribe's coalition government and later sentenced for ties to the AUC, told prosecutors in September that Uribe "knew he was receiving support from paramilitary groups during his 2002 election campaign," Colombia Reports disclosed last month.

The now-disgraced politician said that Uribe "never objected" to meeting with the AUC-backed politicians, but "simply maintained a prudent silence."

In a recent interview, de la Espriella told El Espectador that the AUC had donated some $134 thousand to Uribe's 2002 presidential campaign.

The former senator told the paper that Mancuso said "our participation in the self defense forces was to seek a deal with his [Uribe's] government. He [Uribe] did not explicitly reject this possibility or the support. What he did say was that we wait and if he got elected we would talk again."

More recently, Uribe's jailed ex-security chief, Mauricio Santoyo Velasco, accused of illegally ordering driftnet surveillance over electronic communications and the forced disappearance of human rights workers in Medellín, "is willing to officially testify against his old boss and other senior officials," according to Colombia Reports.

Santoyo is presently jailed in the U.S. for collaborating with the AUC and "previously acknowledged accepting bribes from paramilitary members in exchange for giving them information about police operations being carried out against them."

According to "highly credible sources" cited by Colombia Reports, Santoyo "is willing to implicate the ex-president and other top officials," in exchange for a "reduced sentence."

Although U.S. prosecutors previously said that the Santoyo case was the "tip of the iceberg" and an opposition senator accused the former president of bringing "a criminal apparatus" to the presidential palace in 2002, the current director of Colombia's National Police, General José Roberto León Riaño, denied that the U.S. is investigating anyone other than Santoyo.

"Yesterday I personally interviewed the toughest prosecutor of the United States on the matter of drug trafficking, Neil MacBride, who is running the case against [retired general Mauricio] Santoyo," Colombia Reports averred. "He indicated: 'there are bad apples in every institution, Santoyo is an apple that acted on his own, but that can't affect the whole organization'."

While evidence has yet to emerge that Uribe met with Mancuso as the former AUC chief testified, ubiquitous "facts on the ground" in the form of thousands of tons of exported dope, forced "disappearances" and the mass murder of peasants and left-wing activists tell a different tale and point to official complicity amongst Colombian elites and their U.S. "drug war" sponsors.

Back to the Future: U.S. Complicity and Cover-Up

The sordid history of collaboration between Colombian elites, drug gangs, the military and right-wing death squads was known for years by U.S. secret state agencies and federal prosecutors but was covered-up in the interest of "national security."

In declassified documents published by the National Security Archive in 2004, we learned that then Senator "Álvaro Uribe Vélez of Colombia was a 'close personal friend of Pablo Escobar' who was 'dedicated to collaboration with the Medellín [drug] cartel at high government levels,' according to a 1991 intelligence report from U.S. Defense Intelligence Agency (DIA) officials in Colombia."

Researcher Michael Evans revealed that the "newly-declassified report, dated 23 September 1991, is a numbered list of 'the more important Colombian narco-traffickers contracted by the Colombian narcotic cartels for security, transportation, distribution, collection and enforcement of narcotics operations'."

The former president, a "key U.S. partner in the drug war" and a major recipient of billions of dollars of taxpayer-supplied funds for Plan Colombia, "was linked to a business involved in narcotics activities in the United States" and "has worked for the Medellín cartel."

Evans disclosed that "The document is marked 'CONFIDENTIAL NOFORN WNINTEL,' indicating that its disclosure could reasonably be expected to damage national security, that its content was based on intelligence sources and methods, and that it should not be shared with foreign nationals."

One cannot help but ask: whose "national security" was threatened by the disclosure? Certainly not that of thousands of Colombian citizens murdered by drug-linked paramilitary gangsters or the hundreds of thousands of "drug war" victims incarcerated in American gulags for drug use or low-level sales.

"Uribe," the Archive informed us, was "the 82nd name on the list," and appeared "on the same page as Escobar and Fidel Castaño, who went on to form the country's major paramilitary army, a State Department-designated terrorist group now engaged in peace negotiations with the Uribe government. Written in March 1991 while Escobar was still a fugitive, the report was forwarded to Washington several months after his surrender to Colombian authorities in June 1991."

"Most of those on the list are well-known drug traffickers or assassins associated with the Medellín cartel," Evans averred. "Others listed include ex-president of Panama Manuel Noriega [and] Iran-contra arms dealer Adnan Khashoggi."

Four years later in another release of previously classified documents, the Archive revealed that "U.S. espionage operations targeting top Colombian government officials in 1993 provided key evidence linking the U.S.-Colombia task force charged with tracking down fugitive drug lord Pablo Escobar to one of Colombia's most notorious paramilitary chiefs."

"The documents," Evans wrote, "reveal that the U.S.-Colombia Medellín Task Force, known in Spanish as the Bloque de Búsqueda or 'Search Block,' was sharing intelligence information with Fidel Castaño, paramilitary leader of Los Pepes (Perseguidos por Pablo Escobar or 'People Persecuted by Pablo Escobar'), a clandestine terrorist organization that waged a bloody campaign against people and property associated with the reputed narcotics kingpin."

After Escobar's take-down, Los Pepes morphed into the AUC and led to a strategic realignment "between Colombian intelligence agencies, rival drug traffickers and disaffected former Escobar associates like Castaño, the godfather of a new generation of narcotics-fueled paramilitary forces that still plagues Colombia today."

"The collaboration between paramilitaries and government security forces evident in the Pepes episode is a direct precursor of today's 'para-political' scandal," said Evans. "The Pepes affair is the archetype for the pattern of collaboration between drug cartels, paramilitary warlords and Colombian security forces that developed over the next decade into one of the most dangerous threats to Colombian security and U.S. anti-narcotics programs. Evidence still concealed within secret U.S. intelligence files forms a critical part of that hidden history."

In this context, as Peter Dale Scott observed in Drugs, Oil, and War, "The true purpose of most of these campaigns has not been the hopeless ideal of eradication. It has been to alter market share: to target specific enemies and thus ensure that the drug traffic remains under the control of those traffickers who are allies of the Colombian state security apparatus and/or the CIA."

"Allies" like Álvaro Uribe.