Yesterday, US authorities announced
the seizure of more than $31 million, allegedly “connected to an international money laundering scheme run by a drug trafficking organization operated by members of the Sanchez-Paredes family.”
The money was held in nine American banks, including Bank of America
(NYSE:BAC), Wells Fargo
(NYSE:WFC), and JPMorgan Chase
(NYSE:JPM), none of which have been charged with any wrongdoing. Additional funds in three Peruvian bank accounts have also been frozen.
Peruvian law enforcement authorities say the Sanchez-Paredes DTO (Drug Trafficking Organization) is “unable to prove the legal origin” of at least $52 million in revenues supposedly generated by their portfolio of companies.
You may not have heard of the Sanchez-Paredes family, but they own two large gold mining concerns that have, apparently, drifted away from their core businesses.
From the US Attorney’s Office for the Southern District of New York:
For example, the Sanchez-Paredes DTO owns two mining companies, CIA Minera Aurifera Santa Rosa SA (“Comarsa”), and CIA Minera San Simon (“San Simon”), which purport to be in the business of mining gold, but are believed to be in the business of producing cocaine. In March 2007, Peruvian authorities seized approximately 125 tons of calcium oxide, a chemical used to both mine gold and produce cocaine, that were later identified as having been purchased by Comarsa and San Simon.
But what’s really interesting is how investigators connected the dots:
Comarsa’s mining records show that on numerous occasions, the amount of calcium oxide it used did not correspond with the amounts needed to process gold. This suggests that Comarsa is not actually involved in the business of mining gold, but rather in the business of producing cocaine. Other companies managed by the Sanchez-Paredes DTO appear to be nothing more than shell companies, created for the sole purpose of laundering drug money.
Naturally, those on the receiving end of the charges maintain the multiple decades-long investigations carried out by a plethora of international agencies is all be one gigantic mix-up.
"It seems like there was a misunderstanding by the US attorney," a Comarsa executive told Reuters
. "We are complaining about this."
A Family Legacy
According to officials, the Sanchez-Paredes family has been under investigation by the Peruvian National Prosecutor’s Office since 1981, with a criminal complaint, now pending, finally filed in 2010. After “at least two members of the Sanchez-Paredes family, both of whom were in the business of supplying cocaine to drug cartels in Colombia and Mexico, were assassinated in the late 1980s and early 1990s as a result of their involvement in international narcotics trafficking,” their “sons and siblings have carried on their narcotics trafficking activities,” say officials.
It appears that these activities were -- and are -- quite the poorly-kept secret. And, as one Peru-based mining analyst and blogger
who goes by the nom de plume “Otto Rock” told me in an email, it’s “hardly new news.” “Los S-P are definitely cocaine traffickers, that's a given in the country,” he wrote. “Very good at covering tracks and bribing judiciary, though.”
In fact, the judiciary could well be in the pocket of the Sanchez-Paredes family already. As explained in a 2011 report
from the Lima office of the Konrad Adenauer Stiftung
, a foundation aimed at “promoting freedom and liberty, peace and justice,” the “institutions of the Peruvian state are…in danger of falling in the hands of the drug industry.”
Manuel Sanchez-Paredes and President Alejandro Toledo in 2006
Alarmingly Weak and Easy to Infiltrate
Described by research coordinator Philip Reiser as “alarmingly weak and easy to infiltrate,” Peru’s establishment is in danger of being “controlled” by the drug trade.
The amounts of money involved are so vast, the ups and downs of Peru’s narcotics industry shape almost all aspects of the overall economy. (They shape inter-familial relations as well: In 1987, Fidel Sanchez Alayo, the son of Manuel Sanchez Paredes, was linked to
the murder of his uncle in Mexico, where authorities discovered a cocaine lab.)
After the 1995 arrests of “important drug traffickers” in Peru, as well as “massive over-production” caused coca prices to drop, Tingo Maria, a once-booming center of Peruvian cocaine production, was on the verge of bankruptcy.
(PINK:NSANY) and Toyota
(NYSE:TM) dealerships which, according to the San Francisco Examiner
, once sold more cars than any other dealerships in Peru, closed their doors after sales ground to a complete halt.
"Coca absorbed the majority of people who are now unemployed," Ernesto Parra, head of the UN Interantional Drug Control Program in the town, told
As of 2010, roughly 15 years later, Tingo Maria is thriving once again.
From the New York Times
The resurgence of Peru’s cocaine trade is on display in Tingo María, a bustling town that suffered when coca growing plunged during the 1990s. Now legions of motorcycle taxis swarm the streets and small hotels and restaurants cater to free-spending farmers.
Nightclubs feature Peruvian bands belting out cumbia, the folk music transplanted from Colombia, with lyrics that celebrate and lament the travails of cocaleros, or coca growers.
“Cocalero, your pots are empty; cocalero, your wife is crying,” goes a passage by a local cumbia band. “But keep planting more coca, so that money will sprout.”
Plenty of money is indeed sprouting, as evidenced by yesterday’s announcement of the Sanchez-Paredes seizure.
The matter is being handled by the Asset Forfeiture Unit of the US Attorney's Office. The Drug Enforcement Administration is continuing its investigation. Assistant US Attorney Sarah E. Paul is in charge of the case.
Follow Justin Rohrlich on Twitter: @chickenalaking
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