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interview: greg passic

 

photo of greg passic

Passic is a retired special agent for the DEA. He is a former chief of financial investigations for DEA, specializing in money laundering issues. He is currently a consultant for the National Drug Intelligence Center in Pennsylvania. This is the edited transcript of an interview conducted in 2000.
How did you get into this business of being a narc?

I was working for the Salt Lake County sheriff's office, going to night school. My dad was a sheriff in Utah, in a small community of 20,000 people. And there was a drug problem. He went to the Bureau of Narcotics and Dangerous Drug School in Phoenix, Arizona, to learn more about how you do undercover work, pay informants, how you do something about drugs. He came back from that school, and he said, "I think you ought to go into the Bureau of Narcotics." And I said, "Why? Why the Bureau of Narcotics? I thought you wanted me to be an FBI agent." And he said, "Take it from me, the drug problem's going to get a lot bigger, because we are seeing it grow right here on a little local level. We can't get a handle on it. And the federal government is going to have to jump into this problem big time. I think you're going to see opportunities to work overseas." You see, he knew my personality. He knew I was more fit to be a narcotics agent . . . And two years later I'm sitting in a hotel in Istanbul doing an undercover deal looking across at this Turkish trafficker--saying, "You know, Dad, you're probably right." It wasn't the worst thing that happened to me. It opened the doors to the overseas aspect of drug enforcement. I spent 15 years over there. I had a chance to actually work on some of the biggest drug trafficking organizations, in the world. The Turkish part of the French Connection.

You were overseas in the French Connection and the Turks?

Yes. We were part of the Nixon drug war. We thought this was great. The BNDD hired 1,600 agents in 1969 through 1971, and went from 400 to 2,000. And in 1971, part of Nixon's drug war was to shut off the French Connection. The source of supply for the opium and morphine base was Turkey. So the game plan was pretty simple back in those days. The Bureau of Narcotics and Dangerous Drugs sat down. Working with the administration, they came up with a plan where we would give $55 million in foreign aid to the Turkish government to stop the production of opium--the raw product. Take the opium out of the conduit into the French laboratories that fed New York's heroin problem. Part of that deal was that they would allow undercover agents into Turkey to monitor the success of that program. So I was one of five undercover guys that went to Istanbul to basically buy morphine base, to see how much was available.


passic in the 70s

Passic with drug money.
And it worked?

Yes, it sure did. It shut that system down. It changed the way the French were involved in the business, the way the Turks were. It opened the door for the Italians. They stepped in, and then round two was the "pizza connection." But at least we pushed them around. Did we win the war? In my opinion, I don't know. But I know we won the battles on many occasions. And to the DEA agents that were out there, we didn't care if we won the war or not--as long as we won the battle. We were personally challenged by a trafficking group that would pop up someplace. The pizza connection--the Italians. Colombian cartels. Cali. And we considered that battle to be the battle of the day, the effort of the day. That was the most important thing to us. We didn't really think long range down the road, as long as that trafficking group wasn't operating after we were finished with it.

Thirty years ago, drug enforcement was pretty centralized. What happened, and why?

When I came on the job, the only other federal agency that was involved was Customs. Treasury guys. And we were pretty much like the same animal, pretty aggressive. Therefore, there were a lot of arguments, disagreements, overlap. In fact, the DEA was created in 1973 to end this intra-US-government drug war. They figured the war of all wars was over. Customs, BNDD, and the other peripheral intelligence agencies were brought together, so now we would have a unified agency addressing the problem. . . .

Why is it so important to follow the money [in order to stop drug dealers]?

If you want to cause disruption, if you want to remove their ability to conduct business. . . you got to go after the money. It's the lifeblood of the organization. It's why they do this. They don't sell drugs because they enjoy selling cocaine or producing speed or growing marijuana. They do it for the profit motive. So if you want to cause disruption, if you want to remove their ability to conduct business--and today's trafficking groups do resemble major multi-national businesses in many ways--you got to go after the money. We learned that early on in 1989, 1990, when we first plugged into the Medellin cartel's bank accounts, and to the Escobar and Gacha accounts. In the first instance, we seized over $100 million of Gacha's money. He and Escobar had no idea how we were doing it. They panicked. They assumed that we had informants inside the organization. There was a cleansing.

There was in-fighting, distrust. In this atmosphere of not being able to trust each other, the cash flow dried up almost immediately. Escobar was a billionaire in assets and land holdings in Colombia--Gacha, too. These guys were actually cash-poor for about a three-week period. Gacha was participating in a load of 200 keys of coke--which was nothing for this guy--on the north coast of Colombia. He was spotted by a Colombian police informant who identified him, and let DEA and the Colombian police know about it. He and six of his associates were killed in a shootout with the police, trying to put a load of dope on a boat. The only reason he was out of his safe haven was because of the financial stress that took place during those seizures.

So we at the DEA headquarters at the time took a step back and said, "Maybe if we want to go after the Colombian big boys, the approach would be the money side of the house." Twenty tons of coke in California or fifteen tons in Mexico--it didn't seem to cause a panic. They didn't seem to care. They seemed to be able to produce more than we could seize obviously. But when we would make a seizure on the money side, there was retribution--bloodletting, mistrust. They were knocked off balance. I think this was the first time DEA really decided to come up with an approach that went outside of DEA and included FBI customs, IRS, and the intelligence community to launch an attack on the financial side. It kind of encouraged us to open the doors or build those bridges to those agencies and pull them in.

How important is this drug money, say, to the economy of Colombia?

Ironically, right now it hurts, I think, more than it helps. Initially, I think the infusion of capital from any source is great. It creates jobs, buys products. From a pure economic sense, an infusion of capital is good for any country. But after a while, if it's on the dark side, what you create are systems that are outside of the formal channel. You can't be taxed. You destroy jobs. If it's cheaper to buy washing machines in Miami, or Aruba, or Panama, by buying black market drug dollars, why do you want to by an appliance produced in Colombia? You don't want to. The Colombian tobacco industry is belly up. Five thousand jobs gone. Nobody buys Colombian cigarettes anymore. They can buy black market American cigarettes a lot cheaper. There was the realization that our drug money actually was hurting Colombia's economy, that it was funding the extremist groups, the purchases of weapons and the other bad things that go along with it. Colombia and the United States finally came to the agreement two years ago to really do something about the drug money. It was something that, five years ago, you really couldn't talk about without really angering someone.

It's like the evolution of trafficking organizations that you've seen. Take a look at Escobar. He starts out as a Robin Hood. Steals cars. Robs people. All of a sudden, he gets a little bit of wealth. He becomes respectable, runs for political office in Colombia. Builds soccer stadiums. All of a sudden, now he's a respected person in this community. And then he wants to expand his authority outside of Medellin. He tries to get involved in Colombian politics in Bogota. There's resistance. The next thing, he's in an all-out war with the government. And then you have the implosion. That's the last step of the trafficking group, if you let it go long enough. Under the old system, we had a boss who doesn't mind being a kingpin. People honored him and his stature in trafficking. The last stage of that is implosion. They tend to kill themselves--the competitiveness of it.

Isn't it helping US companies?

Indirectly, yes. We're selling more to Colombia. It's just reversed. The trade figures have reversed over the last ten years. There used to be a surplus in our favor with Colombia. We bought more coffee, flowers and petroleum products than we sold them. But now it's just the opposite. We sell them about $4 billion more in products than they sell us. This isn't just directly, but through their conduits in Panama, and Aruba and Venezuela. So, in some ways, we're getting some of our drug money at least back into our economy. But that's a dilemma. We've got the Fortune 500 involved in our drug money-laundering process.

What do you mean?

There was a hearing, about a year and a half ago, into Colombian drug money laundering. An IRS Customs agent and myself were asked to be witnesses during that hearing, and described the Colombian black market. Customs provided a hooded witness who was a money launderer in New York. She described how she laundered money and how the banks had provided her with the ability to do it over the Internet in an e-mail system. She could just do it at home--transfer money. They asked her, "Where did you send your drug money?" And she rattled off basically the Fortune 500. It started from A and went through Z. "You sent it to all of these American companies?" "Yes. That's where they told me to send it." It was kind of a tough pill for them to swallow at the time, because they didn't understand it. It was like, "How could she make these allegations that we're laundering drug money?" And it was, "You're not laundering drug money, guys. Your companies are selling products to people--to distributors, to wholesalers--that accept drug money. In other words, you got washers and dryers. You sell to Bob's Washer and Dryer in Miami. If you noticed last year, his sales went up from 50 to 5,000 units. Well, those washers and dryers didn't stay in Miami. They were smuggled into Colombia. And Bob--if you go take a look at his books--Bob was paid in $10 million in cash, and third-party checks from a lot of transfers from people who weren't his customers. I hate to tell you this, but you do have a responsibility to help. You can't just say, "Hey, we're not laundering the money. We're selling the products. And we're getting paid in dollars. What's bad about that?"" Nothing's bad about that unless it facilitates drug money laundering.

So when I say "Fortune 500," I just use that term loosely. But in essence, any company that sells large amounts of their product into the Latin American market and receives payment from third-party instruments is receiving drug money.

There was a time, 30 years ago, when they didn't need to launder their money. How have things changed? When did they start having to go through this kind of process?

In my first coke case in Colorado, we were buying ounces in Denver. Then we bought our way up the chain source of supply to Los Angeles. We got a kilo. Then we rolled him, and one of the guys ended up going down to Peru to buy five kilos. Colombia wasn't even involved in the cocaine business--the north Colombians were your marijuana traffickers back in the mid-1970s. . . . Then they began to see how much cocaine was worth, how valuable it was, and what Americans were willing to pay for it. Then Colombia started sending up a kilo or two within their marijuana loads. In fact, they were forcing cocaine down the throats of their distributors. In Miami, if you picked up 100 keys of marijuana, you had to take a key of coke. And they said, "Move the coke or you can't come back and buy more marijuana."

So this distribution system that was set up to distribute marijuana was using an economic principle back in the late 1970s, early 1980s. They've got the distribution system. Throw the new product line in there. And then force the buyer--your customer--to buy the new product, or you can't come back and get more marijuana. And it worked. It spread cocaine. And finally, it was interesting because the Cali cartel actually had the connections to Bolivia and Peru. Medellin was buying their cocaine from Cali to begin with, because they were closer to the source. It was only after Medellin decided that there's so much money to be made in the coke side of the business that Escobar, Gacha , and the Ochoas decided to move into coke. The problem they had was that Cali, at that time, actually controlled the main conduit into New York, and that was what Medellin needed. They needed to have the smuggling vehicle.

Then crack comes in. In the end, who made money from crack?

The Colombians made the most money. There were organizations in New York and Washington where you saw local traffickers become very wealthy. But they were vulnerable. They didn't stay around for a long time--maybe a couple of years. . . . The Colombians learned that, with our crack epidemic, the proceeds went up. With the proceeds going up, the interest in the wholesale market became stronger.

But was crack developed as part of that strategy of retraction in developing this other market?

No. I think crack was just market-driven. It was easy to ingest. A lot of the yuppies were having problems with their noses falling off. And it was like, maybe this is something that isn't quite as dangerous. But it sure was just as addictive, if not more addictive. All of a sudden, boom, the market spiked. The profits spiked, and it grew. We saw the organizations grow. We saw their wealth grow as a result of it.

So the Colombians made more money because a lot more powdered cocaine was being sold in the States?

Yes. In some ways, it was actually easier for them. On their airdrops, a brick of cocaine lost value if it was broken up. If it was in any way fractured, instead of bringing $20,000 in New York, you could only get $15,000. Crack is basically cocaine base. It was a powder. So you could actually throw kilos of powder in the gunnysack out the back of airplane. It didn't matter if it got tossed around or broken up. So as far as being able to smuggle, it was easier for them, and the profits were still just as high, if not higher.

How important has forfeiture been as a tool in this war?

It's getting bad. When I first started in 1971, we had the only forfeiture laws on the books. If a local police officer had a drug case and wanted to seize and forfeit a car--back then basically, that's all it was. Cars. To get money, we had to take it through the federal system, and then we would give it back to them. What we gained through that was a summary of the case. Who was the bad guy? How did he work? Who'd he buy from? In the mid-1980s, when asset forfeiture really took off, it became competitive. Then you had law enforcement groups that were basically focusing on the asset more than the trafficker or the dope. The asset was something that they could roll back into their efforts, and they didn't need to use the federal government. We didn't have to--DEA wasn't the repository or magnet that it had been back in 1973.

So, in one way, it was good, because more people were brought on line to fight cocaine trafficking. They were self-funded. The taxpayer didn't have to pay for the effort. The downside was that we lost that ability to get that intelligence in the one system, to where we could have a strategic overview of how the bad guy was operating outside the country. You had to go out and you had to re-establish lines that, before, were natural. They would come into your office and share that with you.

How dependent have some of the law enforcement groups become on the money and assets from those forfeitures?

Some are self-funded--they're totally dependent on the assets. That's not necessarily bad. Once again, the taxpayers aren't paying for it, but the bad guy's paying for it. But that shouldn't be the primary reason that you're involved in the process. In some ways, we developed an approach to the Colombians that was almost like a system of taxation, as a multi-billion-dollar industry that was thriving. And we were able to tax it by taking assets away from it, which we would roll back into the law enforcement effort. But the system still survived.

I think that caused the US government to look at, "Well, what are we doing about the system? We're having successes. We're winning battles left and right. We're making record seizures. We're having disruptions. We're filling the jails. But the system's still intact. Why don't we come up with a systematic approach to take that down and stop it? To totally incapacitate its ability to transfer funds out of the US, instead of just taking what we can from it. Let's see if we can find the neck and strangle it."

And that's what I think you've seen evolve just in the last couple of years. You've seen Treasury and Justice actually sit down and say, "We want to take on the system. We want the agencies to recognize that the system of money laundering itself in Colombia. The integration of the drug monies with US commerce needs to be tackled. We need to stop it. We need to shut it down. What we called success in the past--grabbing a billion dollars from it--they were great battles, and they were successful battles. And sometimes they were fought at great costs by DEA guys that gave their lives for that. But we owe them more--we need to stop the system. We need to find out what makes it operate." . . . I'm not saying we need to shut down international commerce. I'm just saying people who trade in commerce and accept drug money have got to stop doing it, flat out.

In the last few weeks, we talked to a few traffickers in prison in Colombia. They said that money laundering was not something they even thought about in the early days.

No. They didn't even know what the laws were. In the late 1970s and early 1980s, when the Colombians actually started moving in the coke market, we started seeing larger deposits of cash by individual Colombians at the bank. There were more frequent reports of Colombians just marching into banks. In fact, south Florida real estate spiked, I think they estimated about five percent, because Colombians were buying property in south Florida, villas, racehorses--anything of value. The money was just flying into south Florida. And there were no laws regulating how much they could deposit and what they could buy. But then the Treasury laws kicked in. The Bank Secrecy Act and other restrictions on how much cash you could put into banks, and the reporting requirements kicked in. Then we started the evolution of no more marching down to the corner bank and dumping a million, two million dollars in the system. That stopped. You don't have that anymore. Cash deposits are just about non-existent... . .

How much better off are we in the overall war on drugs, now that we have more accurate investigations with money?

Major organizations are not as big as they used to be. You don't have a group in Colombia that actually can rewrite a constitution or influence a presidential election--or basically hold hostage an entire government process. You had that back in 1990, 1991, 1992. But now the money flow into the political system was exposed, the dangers of it were exposed. Not just what DEA did but what the other agencies did, and what the Colombians did--bringing that out into the sunlight and exposing it. And the news media played a tremendous role in throwing some sunlight on what impact drug money has on a democracy, on the way a government works. We've all played a role in it. I think we've all realized that there needs to be a continued focus on the money side of a dope business if you want to take on the big guys.

A US taxpayer could ask, "Why spend all this money if all we're winning is battles, and not the war?"

I agree with them. A DEA agent's job was pretty simple. The taxpayer paid me to do my job in taking out the criminal. The bigger the criminal, the more challenging it was, the harder it was, but the more gratifying in the end. But I think that we all kind of mature in the process of that. At the end of it, we ask ourselves those questions. We still have a system intact today. We have a problem that's grown in many ways. Maybe we should use some of our energies and resources, like some of the retired guys out of the law enforcement agencies. Maybe we need to sit down and brainstorm, kick this around, and come up with some new ideas. The law enforcement guys were always looked at as the knuckle-draggers who go out and lock up the guy in jail, and take his dope and money away. But some of the more creative ideas I think that I've seen in my career in the government come from just the rank-and-file agents who came up with an idea. The bad guy is a challenge. But I think I'm better than he is, right? If I put my best creative ideas to task, I can take him down.

Who won the drug war?

I don't think the war is over yet. But if we back off of it and say, "We lost. We got our butts kicked," . . . that affects our chances of success down the road. That's why I don't like to measure it as won or lost. I like to measure it as, "Am I still engaged? Are we still engaged? Have we still got the resolve to do something about it?" And that's why I say we're winning, because we haven't thrown up the flag yet. When the flag goes up, then I guess you can decide who wins or loses. . . .

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