The Drug Money Trail Leads to Citibank

by Alexander Cockburn

Unlike the money-washing, the Glass-Steagall angle has received some scrutiny in the press since business reporters reckon that the megamerger will finally kick aside this New Deal legislation. As a breed, such reporters hate the New Deal laws hindering unfettered motions of "free enterprise." Athwart the concept of competition driving down prices, they're selling the merger as somehow simplifying life for people, like Trader Joe's multiplied to infinity. Also, the head of Travelers is the modestly compensated Sanford Weill ($7,453,000 in salary and bonuses in 1997), who was prudent enough to attend several of the Clinton kaffeeklatsches in 1995 and 1996 and no doubt imparted to the Supreme Groper his hopes that marriage to Citicorp would not be blighted by pesky laws written by Depression-era bank-haters 65 years ago.

Glass-Steagall clings to the statute book despite many decades of lobbying toil by the banking and securities industries to lay it low. The 1933 act raised a wall between commercial and investment banking, preventing banks from acting as securities firms and vice versa. The way the Citicorp deal was set up, Travelers has made the matrimonial proposal, which is legal, since the Federal Reserve, headed by fearless trustbuster Alan Greenspan, can issue a five-year waiver allowing uninhibited violations of Glass-Steagall. So, for five years, the newly created Citigroup can use its lobbying prowess for assaults on Glass-Steagall, recycling some of its profits into contributions to both political parties.

This process of recycling maybe offers a clue as to why Travelers might have found Citicorp so alluring. The U.S. share of the cocaine trade alone was worth $38 billion in 1995. The total world trade in all illicit drugs is worth $400 billion, and it's plain enough that U.S. banks covertly handle a large amount of that money. In the case of Citibank, the subsidiary of Citicorp, which is itself to be cocooned in Citigroup, the money trail has actually been excavated to a certain degree, anent the escapades of Raul Salinas, a k a Mr. Ten Percent, brother of Carlos Salinas, former president of Mexico.

Citicorp's CEO, then and now, has been John Reed, a pal of the Salinas family and frequent guest of the Los Pinos presidential estate in the Salinas years. Raul's private banking representative at Citibank was one of its vice presidents based in New York, a Cuban-American called Amy Elliott. She set up an elaborate web of accounts for Raul, including an offshore company in the Caymans that allowed him to move as much as $500,000 a week into private accounts across the globe, ultimately coming to roost in Switzerland. After his arrest, she said she had no idea where Raul's money came from and indeed claimed to have been unaware that he had been in his brother's government. It was the destination of the money that concerned her, not its origins.

Her indifference did not consort comfortably with U.S. laws, which require banks to inspect carefully the background of large depositors and the possible sources of their swag. From 1992 on, there was lavish reporting in the Mexican press of how Raul had amassed his criminal fortune. His methods included shakedown of contractors, sale of access to his brother and partnerships with the Mexican and Colombian drug cartels, to whom he was known unflatteringly as "the leech." Raul's arrest did not prevent her from continuing to reap commissions for Citibank for advice to Raul's wife on how to manage her husband's millions.

Finally, in 1996, the Justice Department began a criminal investigation into Citibank's handling of Raul's money. But in its consideration of the Citicorp/Travelers merger, the Federal Reserve will not factor possible criminal conduct by one of the marriage partners into its assessment. In other words, drug billions can effortlessly flow into Citigroup without a squeak from the prime banking regulator, thus giving the green light to a company already known to flout the rules to do more flouting with no letup or hindrance.

This is the point on which Maxine Waters, U.S. representative from South Central Los Angeles, has seized. It was Waters who was the fiercest critic of the agency in the wake of Gary Webb's series in the San Jose Mercury News on relationships between the CIA, the Contras and cocaine imports into the United States. Now, she has taken on not only the CIA and the drug lords but also the international banking houses, who make money handling their business. Waters understands that these colossal financial mergers aren't good for ordinary people. It's going to be even harder for the poor to find banking services at competitive rates, and what little credit is available in poor urban areas will instead flow into the Wall Street money mart, jostling for investment opportunity with the criminal drug millions garnered by exploitation of such markets as South Central Los Angeles.