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Banco Popular's Political Ties Cushion Blow From Case

by Iván Román


February 2, 2003
Copyright © 2003 ORLANDO SENTINEL. All rights reserved. 

SAN JUAN, Puerto Rico -- It wasn't just the gym bags or paper sacks full of millions of dollars in small bills to be deposited into questionable bank accounts that shocked legislators and the public the most.

Perplexed lawmakers reeled in disbelief when they learned that a branch manager at Banco Popular de Puerto Rico, one of the island's largest and most reputable financial institutions, requested additional armored-truck runs just for that client and no red flags went up.

It turns out that from 1995 to 1998, now-convicted money launderer Roberto Ferrario Pozzi had fed the accounts with $28.3 million in drug money.

The transactions at three branches by three shady clients seemed so brazen that bank officials took the extremely unusual step of admitting they violated the Banking Secrecy Act and agreed to pay the U.S. Treasury Department a $21.6 million fine -- one of the largest of its kind -- to avoid criminal prosecution.

Economists and some politicians, focused on other scandals such as that of a former House speaker convicted on corruption charges that same day, seemed to give little importance to the unprecedented agreement announced Jan. 16. For the threat of an indictment to go away, Banco Popular has a year to put all detection and reporting systems in place.

Opposition lawmakers say that because Gov. Sila Calderón is a major stockholder, this institution that's also part of the island's social fabric is being treated with kid gloves. Bank President Richard Carrión's ties to Calderón's Popular Democratic Party are well known, and the bank continues to get millions of dollars in government contracts every year.

"We just can't leave it the way it is. People aren't that stupid," said Rep. Iris Miriam Ruiz of the pro-statehood New Progressive Party as she filed a House resolution to investigate the bank. "People call in to the radio stations wanting to know why the government doesn't do anything."

Local officials said they'd look into it, but warned that anything they found would likely be forwarded to federal agencies monitoring the deal. After top bank officials arrived to lobby at the Capitol, Senate resolutions calling for a probe into the matter were halted and watered down.

That was until they caught so much heat last weekend from critics warning of a cover-up that the full Senate took the unusual step Monday of unanimously approving resolutions presented by the minority they usually tend to ignore.

There was plenty of outrage to go around but experts in money laundering said people should hardly be surprised. Although no one knows for sure, some estimate that $300 billion is laundered worldwide every year and Puerto Rico, a major springboard for drug traffic into the United States from Latin America and the Caribbean, is not immune.

Traffickers who tried to smuggle cash in decades past now use bank accounts, money orders, wire transfers and, more recently, even life insurance policies to clean dirty money and send it abroad. Banks are the most heavily regulated, but problems persist.

"The institutions have to make the effort because any account can be used," said Leo Morales, associate special agent in charge of U.S. Customs in Puerto Rico. "It's always surprising, though, in institutions that one would think would have the mechanisms to avoid it."

They are hardly alone. Broadway National Bank in Manhattan pleaded guilty last November to failing to report $123 million in suspicious deposits. Runners regularly dropped off duffel bags crammed with hundreds of thousands of dollars in small bills. A judge fined the bank $4 million.

An international banker moved more than $500 million in just eight months through Valley National Bank on New York City's Madison Avenue to Brazil and black market currency exchanges in Latin America, officials said. The bank was not charged in the indictments last June, but customs officials seized $15.8 million from certain accounts.

Some experts don't like that double standard. Federal officials crack down hard on Latin American-based banks, the experts said, while letting larger, U.S.-based institutions off the hook for similar transgressions by their employees.

"The Banco Popular case is yesterday's news. They have been doing everything they've been asked to do, yet prosecutors let bigger institutions get away with murder," said Charles Intriago, publisher of Money Laundering Alert newsletter, a leading authority on the subject. "That's outrageous."

Iván Román is the Sentinel's San Juan bureau chief. He can be reached at or 787-729-9071.

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