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Price Waterhouse Allegedly Bought Laundered Money

Banking: Prosecutors seize $156,607 of funds Colombian branch is said to have obtained on black market. Firm says no U.S. laws were broken.

May 29, 1998|DAVID ROSENZWEIG | TIMES STAFF WRITER

Executives at Price Waterhouse in Colombia bought $545,000 in laundered U.S. dollars on the black market, apparently aware that the money came from drug sales, according to a government affidavit obtained by The Times.

Federal prosecutors have seized $156,607 of that amount from a Price Waterhouse account at the Bank of Boston International branch in New York to which the laundered money was allegedly wired.

The seizure is an outgrowth of Operation Casablanca, a three-year sting operation by the U.S. Customs Service that resulted in indictments last week of more than 100 people, including 28 Mexican and Venezuelan bankers, and three major Mexican banks.

The affidavit's disclosures represent an acute embarrassment for Price Water-house's American branch, which has taken a leading role in warning the business world about international money laundering.

The U.S. attorney's office in Los Angeles, which is prosecuting the case, refused Thursday to comment on the affidavit naming Price Waterhouse or say whether the organization's Colombian affiliate is under criminal investigation.

In New York, a spokesman for the global accounting and consulting organization, also declined to discuss the affidavit but read a statement that said:

"We are confident that the Price Waterhouse member firm in Colombia was not involved in money laundering and did not engage in any activity that violated U.S. laws. Discussions are currently underway with the U.S. attorney's office and the U.S. Customs Service, and we are confident that the matter will be resolved favorably."

According to the government affidavit, however, Price Waterhouse executives in Bogota "knew they were breaking Colombian law and had reason to believe the U.S. dollars received were likely proceeds from drug sales in the United States."

Customs Service agents were drawn into the Price Waterhouse transactions late last year during the height of their investigation into money laundering by Latin American drug cartels.

Operating out of a storefront in Santa Fe Springs since 1995, the agents had passed themselves off as money launderers, offering their services to money brokers for the Cali, Colombia, and Juarez, Mexico, drug cartels.

At the direction of the brokers, they would pick up large amounts of drug money throughout the United States, launder it through bank accounts in Los Angeles and wire the proceeds to designated recipients.

In Colombia, the drug cartels face a special problem. The government assesses a stiff tax on all wire transfers of foreign currency into the country. Enter the money brokers. They bring together the narcotics traffickers who have dollars in the United States with Colombian businesses that will provide Colombian pesos in exchange for U.S. dollars purchased at a discount.

That, apparently, is what happened in the case of the Price Waterhouse's operation in Colombia, according to the affidavit drafted by U.S. Customs agent Anne Littleton.

In one exchange, she said, Price Waterhouse issued 29 separate checks drawn on its peso account at Banco de Credito in Bogota in exchange for $300,000 that was wired in two installments to the Colombian affiliate's account at the Bank of Boston International in New York.

In a second exchange cited in the affidavit, Price Waterhouse's Colombian affiliate wrote 19 peso-denominated checks and the money broker arranged for $245,000 to be sent to the same New York bank account.

The money was wired to the account by the undercover customs agents in Los Angeles in four installments of varying amounts, according to instructions that Price Waterhouse gave to the black-market money broker in Colombia, the affidavit said.

Whether those allegations are supported by sufficient hard evidence to warrant criminal prosecution under U.S. money laundering law is not clear.

Legal sources contacted Thursday said prosecutors must prove that a defendant acted with knowledge or willful blindness about the source of the funds.

The sources noted that the affidavit was part of a civil forfeiture action in which the requirements of proof are less demanding than exist in criminal cases.

Also, a Customs Service informant, as opposed to a sworn agent, appears to have had the only direct contact with officials at the Price Waterhouse office in Colombia.

The Price Waterhouse spokesman in New York took pains Thursday to note that the Colombian affiliate is an independent partnership that bears the organization name but operates independently of its American counterpart.

He said the Bogota office has 19 partners, a staff of 350 and reported revenues of $25 million last year.

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