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Argentina is "a mafia state," riddled by systemic corruption, where high-level impunity is the rule.

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menem with bolocco

Former Argentinean president Carlos Menem with his girlfriend, the former Miss Universe Cecilia Bolocco of Chile, Las Vegas, Jan. 12, 2001. Laura Rauch


Dirty Money, Big Banks
and the Mafia State

by Ana Simo

FEBRUARY 27, 2001. It has all the ingredients of a best-selling thriller. A fearless, crusading legislator, execution-style murders at a luxury beach resort, billions in dirty money, a nosy U.S. Senate subcommittee, a country's tottering economy, drug cartels, arms dealers, bribes, and even a golf partner of former President George Bush. It's Argentina's widening money-laundering scandal, now entering its last and most convoluted chapter.

The Mafia State
carrioThe anti-corruption crusader is 46-year old Elisa Carrió, a tough politician and mother of four who represents El Chaco, a poor, landlocked province bordering Paraguay in Argentina's north.

For the past few months, La Gorda (the Fat One), as Argentineans fondly call her, has relentlessly unearthed and exposed a complex, 10-billion dollar web of money laundering from drug and arms sales, and political corruption going back at least a decade. In the process, she has become something of a folk hero in her country.

Carrió says that Argentina is "a mafia state," riddled by systemic corruption, where high-level impunity is the rule. She has accused the country's banking and financial establishment, including members of the powerful Argentinean Bank Association, with abetting this rotten system.

She has also charged Argentina's Central Bank President, Pedro Pou, whom she calls a "delinquent," with covering up massive money-laundering. Fellow crusader Gustavo Gutiérrez, like Carrió a governing coalition legislator, has also fingered Pou.

pouThe Central Bank President, who maintains that he is innocent, blames Citibank for hiding information from him. Pou was appointed by former Argentinean President Carlos Menem (1989-1999), a friend and golfing partner of the elder Bush. Menem's administration was reputedly one of the most corrupt in recent Argentinean history.

When the administration of President Fernando de la Rúa did nothing about the scandal, in spite of the public clamor triggered by her revelations, Carrió did the unthinkable. She personally took her voluminous files to the U.S. Senate Permanent Subcommittee on Investigations. So did legislator Gutiérrez.

Murder On The Beach
The murdered investment banker was Mariano Losanovsky Perel, 56, the shady top money man for Antfactory Latin America. The company is jointly owned by the London-based venture capital firm Antfactory and Citicorp Venture Capital, a division of the New York-based Citigroup, the largest financial services company in the world. Launched last July, Antfactory Latin America announced it was going to invest $100 million in the region's fast-growing Internet industry.

Losanovsky Perel and his wife, Rosa Berta, 49, were found dead on the floor of their cabin at the exclusive Argentinean beach resort of Cariló, on February 5th. Each had taken a bullet in the back of the neck. The police said that it was "a clean and professional job" and that the killers had used a gun with a silencer, since no one in the crowded resort heard a thing. So far, there are no witnesses and no suspects.

According to the Buenos Aires daily La Nación, the killers left a message on Losanovsky Perel's laptop saying that Citigroup's failure to pay bribes in Argentina was the reason for the murders. The message read, "I am a gringo who collaborates with Citibank, dead for not paying Citigroup's bribes."

Police also found in the cabin an underlined newspaper clipping about legislator Carrió's anti-money-laundering crusade. Carrió's phone has been ringing off the hook with death threats since the double murder, and she has been placed under increased police protection. "We're beginning to eliminate the mafia state," a defiant Carrió told a television reporter the day after the murders.

Dirty Money
Investigators suspect that Losanovsky Perel may have been laundering money for high-ranking Argentinean government officials, drug cartels—or both. He and his wife were murdered shortly after the U.S. Senate Permanent Subcommittee on Investigations released a "preliminary inquiry" report that confirmed some of Carrió's charges. Lax supervision by Citibank and other U.S. banks, the report said, had allowed banks in Argentina and other countries to launder drug money. The murders could be a warning both to investigators and potential witnesses, people like Losanovsky Perel who knew too much for their own good.

de la ruaThe U.S. Senate subcommittee's preliminary report and the double murders rocked Argentina. President Fernando de la Rúa was forced to quit pretending all was well. A week after the murders, on February 13, he finally signed a decree implementing laws against money laundering, which had been languishing on his desk for a long time. His administration set up an investigative panel and asked an Argentinean federal court to launch an investigation of Citibank's operations in Argentina.

The government also asked the court to investigate Argentina's Banco República, its offshore, Bahamas-based subsidiary Federal Bank, and Mercado Abierto, a Cayman Islands-based Argentinean financial entity. All three were named in the U.S. Senate subcommittee's preliminary report, which traced a flow of drug money through Citibank into Mercado Abierto.

Banco República, which collapsed in 1999 in the midst of a financial scandal, was headed by Raúl Moneta, a crony of former Argentinean President Carlos Menem. Although he has been indicted, Moneta remains free. He is "Exhibit A" for Carrió's theory of Argentinean impunity. Moneta and Citibank were partners in CEI Citicorp Holdings, an Argentinean communications group, along with Tom Hicks, Texas Rangers owner and George W. Bush presidential campaign bankroller.

The court was also asked to investigate the "Juárez cartel," a Mexican drug ring that, according to Mexican Interpol officials, laundered about $25 million in Argentina using U.S. banks as conduits. On Sunday, investigative journalist Andrés Oppenheimer reported in La Nación that the Juárez Cartel had not only bought "mansions and businesses in Argentina and Uruguay" with this dirty money, but had also pumped more than a million dollars into the failed 1999 presidential campaign of Eduardo Duhalde, the candidate of Menem's Peronista party, using the New York branch of Citibank. Duhalde was defeated by current President de la Rúa, who ran on a clean government platform.

In Denial
In spite of their recent stirrings, the de la Rúa administration still continues to deny that money laundering and corruption are a big problem in Argentina. Announcing the President's belated moves, his spokesperson, Ricardo Ostuni, struck a defensive note. "Without ruling out that there are cases, Argentina is by no means considered a tax haven like the Cayman Islands, St. Thomas (in the U.S. Virgin Islands) or Russia," he said. "Nowadays Argentina is considered free of this scourge and, with Brazil, forms a regional bloc to combat money-laundering in Latin America," he added.

reynosoThis benign assessment is not shared by Abel Reynoso, who was U.S. Drug Enforcement Agency (DEA) regional chief in Argentina until 1999. Reynoso told Argentina's Radio Continental on February 15 that the country was "a money laundering center" and that anyone who tried to deny that fact was just "closing their eyes to the obvious." Reynoso said that "for the past decade," if not longer, there had been "money laundering in Argentina, laundering of bribe, drug traffic, and arms dealing money."

In the meantime, the country's banking and financial establishment has predictably reacted to the growing scandal by circling the wagons. A parade of Argentinean Bank Association bigwigs, former Central Bank honchos, and the like are publicly fretting about the damage to the country's image and economy that all this laundry airing could do.

They seem curiously myopic about all the good that uncovering and stomping out systemic corruption would do to Argentina's international standing, and how it could help Argentina finally become a mature, truly functioning, democratic state. A Bank Association delegation met last week with President de la Rúa to either express their concern (according to them) or to lobby for impunity for Central Bank President Pou and any other malfeasant banking biggies that may be caught in the scandal's net (if you believe the fiery legislator Carrió).

Tipping the Apple Cart
Be that as it may, the de la Rúa administration's reluctance to act in the face of a mounting scandal appears to be due to fears that acknowledging the extent of the money laundering and corruption problem, which permeates the very institutions of the state, could destabilize the country's precarious economy.

When the scandal broke, the government had just reported that the economy was beginning to emerge from a two-year recession, an assessment not shared by all analysts. Last December, Argentina was the recipient of a lavish $40 billion IMF bailout. As usual in these cases, it was prompted by fears that an Argentinean debt default would drag down the rest of the Latin American economies. Argentina is the third largest economy in the region, after Mexico and Brazil.

Argentineans are now holding their collective breath in anticipation of the full report on global money laundering, which will be released this Wednesday by the U.S. Senate Permanent Subcommittee on Investigations. The report is widely expected to "name names," and specifically detail Moneta's and Citibank's involvement. More information will come out during three days of hearings beginning on Thursday, in which executives of Citibank, J.P. Morgan Chase and Bank of America will appear before the Subcommittee.

Legislator Carrió, who recently found that all her phones had been tapped by SIDA, the Argentinean intelligence services, summed up the situation: "This is the last opportunity that our country has to build a true republic. If we do not accomplish it now, we will be governed indefinitely by mafias."

Related links:

For the U.S. Senate Permanent Subcommittee on Investigations' "preliminary inquiry" report, Correspondent Banking: A Gateway for Money Laundering. In PDF.

For the CIA Factbook overview of Argentina.

For Bush Friend Arrested for Illegal Arms Trafficking in Argentina

For Complete Coverage Americas

For Complete Coverage Bush Plus

New World
new world Our Americas. Politics, democracies, failed utopias, and the sullen heirs of colonialism: from Canada to Argentina.

Bush Plus
U.S. politics and the Bush administrationAll about the morass of U.S. politics, George W. Bush, Dems, Greens, GOPs, activists, silently irritated masses and global impact.

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