What ties together cocaine in Arkansas, an assassinated Vince Foster, Systematics banking software, NSA codes diverted to the Israelis, hidden accounts at Pittsburgh's Mellon Bank, Iraq-bound technology from Westinghouse and Kennametal (perhaps smuggled or escorted by Wackenhut security), and bipartisan political payola?
One common thread concerns a global money-laundering operation run out of Lima, Peru.
Just as two banks will not be sufficient to form an efficient foreign exchange market, neither can a couple of isolated institutions effectively launder money. Therefore anyone with large amounts of "dirty" money to process must ultimately intersect with the global market for the flow of laundered cash. A principal reason has to do with layering.
Classical money laundering involves three stages: placement, layering, and integration. Placement is getting cash into the system. This usually involves a friendly banker who doesn't fill out reporting forms. Layering is a chain of transactions (these are often interbank transactions) at least one of which needs to be invisible in order to effectively break the monetary trail. Integration is getting the "clean" money back to the original owner. This may take many forms, including offshore "loans" which are never repaid.
Here is a thumbnail sketch of some of the money-laundering inter- connections among the various subjects of discussion that have arisen in this series of Internet posts.
1. Cocaine smuggled through Mena, Arkansas and elsewhere (including, currently, the cross-border flow from Canada and Mexico) generates huge cash profits which must be laundered.
I first learned of the Arkansas drug-related laundry around 1983, about three years after it had gone into operation. Nicolas Ardito- Barletta was then a World Bank economist, but one who would shortly become President of Panama (prior to General Noriega). Nicolas' brother took my class on international financial markets at the Wharton School of the University of Pennsylvania, and afterward wrote his advanced study project paper on Panama as an international banking center under my supervision. The paper focused on the economic incentives offered by the Panamanian banking system. But privately we discussed the obvious demand for banking services generated by the intercontinental cocaine trade. The Arkansas laundry was well-known to Panamanian bankers.
2. Prohibitions on the export of weapons or advanced technology similarly creates a profit opportunity for those willing to subvert that prohibition. So another source of demand for laundering services comes from smuggled nuclear technology, nuclear fuel, and arms shipments.
Pittsburgh--whose environs encompass Kennametal, parts of Westinghouse, and Mellon Bank--was a focal point for the latter operation. Kennametal machine tools and Westinghouse nose cones were shipped up the St. Lawrence to Montreal for forwarding to Iraq. (Parts of the story of the arming of Iraq may be found in Alan Friedman's Spider's Web; other parts may be found in Time, "A Matter of Honor", June 21, 1993. There is still much more untold.)
Has Westinghouse just been indicted for price-fixing? What about Kennametal? Does some of the evidence involve the Mellon Bank money-laundering operation? Has the money-laundering operation formerly run through Mellon Bank now been moved to New York?
In the event the exchange involves arms for oil, the oil must be brokered, sold, and the cash transferred to the relevant party. The commodity divisions of investment banks are often involved in this part of the transaction (a number of examples along this line involve the defunct Drexel Burnham Lambert, one of my former software clients).
3. Prohibitions on the sharing of "classified" information create a profit opportunity for those willing to sell restricted information. This is commonly known as "espionage", and those who commit it--like Jonathan Pollard, Aldrich Ames, and Vince Foster--often end up in prison or dead or both.
In this case the amount of money involved is often small. Concealment is important, nevertheless, so the payoff--if not in cash--often occurs through channels otherwise used for the laundry.
Foster received deposits in offshore accounts for selling nuclear codes. He was paid via covert channels. So also--one suspects-- were the hit men who took him out.
(The fact that Robert Goetzman used the royal "we" in "we did Foster" on the day of Foster's death--in Debra von Trapp's account--does not prove to me that he was actually involved in the hit, even if the conversation occurred exactly as related. After all, there are probably many people who would like to enhance their prestige by claiming credit for the Foster assassination. But the timing of the conversation would indicate Goetzman knew about it at approximately the time it occurred. Did he have advance knowledge of the hit? Does he even now know the identity of the contract agents involved?)
4. The Cabazon Indian nation comes into the story because, being a sovereign nation, it was a way to avoid export restrictions and to develop new weapons technology. It was also one of the sites where Michael Riconosciuto helped create a backdoor version of the PROMIS software. Even those sources who tell me that Riconosciuto "lies a lot" confirm that he worked on the PROMIS software to develop a mechanism for covert telecommunications access.
The PROMIS software enters the story in three ways: it is a mechanism for tracking people, a mechanism for tracking money, and a useful tool for managing a global laundry.
5. The early 1980s mandate to track terrorists (a "terrorist" being defined as anyone who does things normally reserved for government agencies) involved tracking the money and tracking the people. PROMIS was designed to track people. It was especially useful in tracking spies and other outsiders, the natural users of the parallel monetary system, the global laundry. Sales of the PROMIS software to security organization around the world were made by Earl Brian, recently indicted in California and, reportedly, also Canada (along with the noted alleged con artist, Ari Ben-Menasche).
6. The PROMIS software was modified to track money, and sold to bank back-offices across the country and around the world by a Little Rock company called Systematics (now Alltel Information Services). The telecommunications backdoor in the software was intended by the NSA to be used to spy on bank transactions in real time. But there were also other possibilities, soon apparent to enterprising souls.
If you run the back offices of banks, then you are in a position to make--and keep track of--covert transfers through the "backdoor" mechanism of PROMIS. That is, such transfers could take place in such a way that one would not leave an audit trail, and in such a way that the funds would never show up in the ordinary accounting reports. That is, the same software was an excellent way to manage the global laundry.
7. Despite the distributed nature of the software-controlled back-office operation, the laundry in the U.S. has been mostly concentrated in a couple of dozen financial institutions.
How could this escape the scrutiny of the Federal Reserve? The answer is: Through complicity at a very high level. What does Alan Greenspan have to say about all this? (Did you get the letter?)
8. But the back-door created a massive security hole in the operation of banking cash-management and wire-transfer services. Banks had gone out and purchased a software vault with a massive steel door on the front, but a secret entrance and exit to be used by enterprising thieves.
Did Alltel Information Services recently hire four more law firms to represent it in the inevitable lawsuits to come?
Is this why Ross Perot is getting into the banking software business?
Swiss Bank Corp. recently acquired a 24.9 percent stake in Perot Systems Corp., which will form a new division called Perot Systems Global Financial Services to run the bank's computer operations. Perot Systems in turn is taking a 40 percent stake in Systor, a Swiss Bank Corp. subsidiary that provides banking software.
Meanwhile, a 28-year-old Vladimir "Vova" Levin of St. Peterburg, Russia, was recently reported to have, in connection with some others, penetrated Citicorp's cash management services in New York, and transferred more than $10 million to banks in six other countries (including Switzerland and Israel). Although the hackers were caught, due to excessive greed, a hefty $400,000 was not recovered.
How were they able to bypass Citibank's security procedures? "Is there a mole in Citibank?" a Wall Street Journal headline recently asked. A more perceptive headline would have asked, "Is there a hole in Citibank software?" Some people think the hackers utilized the PROMIS system backdoor (the "Greek" method).
Some people who are totally devoid of expertise in banking tech- nology have questioned the ability of a group of (possibly CIA) "Fifth Column" hackers to clean out accounts in Switzerland using a computer, whether Cray or otherwise. Well, duuuuuh, let's see, a Russian graduate student with modest equipment accomplished the same thing from St. Petersburg using the Russian phone system. Just think of what he might have been able to do if he had had some advantages . . .
Others wonder why Swiss banks haven't been publicly screaming about a missing billion or two. Well, their computers thought the transfers were duly authorized. Do you really expect the banks to worry about making restitution? (We are not dealing with pissant ATM theft here.) Secondly, Switzerland houses much of the world's flight capital. Wonder what would happen to a lot of it, if Swiss banks admitted to a hacker vulnerability?
But not to worry. Anyone can get his money back by identifying the amount, the account number, and signing a sworn statement that the account in question belongs to him . . .
Finally, others question the ability of anyone to saunter through the Mossad's files. Why? You might not even need a computer. If you think much of the U.S. government is for sale, you should take a good look at Israel's. And, at any rate, the Mossad is currently a third-rate intelligence organization in chaos. Hardly a fortress on a hill.
[to be continued]