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It seems to me we have to stretch our basis of who gets clipped here. I was just wondering what you thought about it over at Ways and Means.
Mr. PICKLE. When we looked at some of their operations, we were shocked that it was so open and so flagrant in almost every form. The operator would hire young college students in a lot of instances and coach them a little bit and send them down to the banks. They would pick out the different banks. They had cased one town pretty accurately. The money launderers are so open about it that it almost got to be a way of doing things. I think the institutions looked the other way.
As far as the definition is concerned, my legislation does not try to provide a new definition of what is a financial institution. I think that is a problem. I am advised that title 31 has a broad definition of financial institutions. I would assume that would be broad enough to reach almost anyone who holds himself out as a financial institution.
It would not necessarily be limited to just a bank or a savings and loan, but anybody holding out to be a financial institution. I think the tightest definition we could get would be helpful.
Mr. McKINNEY. It was interesting, Jake. When I first came to this place 16 years ago, the definition of a financial institution was very clear. It is a mess now. It is socks, shoes, underwear and everything else. It bothers me. Every single one of these aspects from real estate through stocks is being used to launder money. These louses are not only killing our kids but they are laundering money outside the tax system. I think it is time that we get justifiably mad. Who is the enemy? Nicaragua? I believe the enemy is often right in our own country. Enough said.
I appreciate your testimony. I appreciate your bill. I will cosponsor the same.
Mr. PICKLE. Thank you.
Welcome to the Banking Committee, Mr. Pickle. We certainly appreciate your taking an interest in this very critical issue. After all, you are one of the most distinguished Members of this body and a master crafter of legislation. To find you focusing in on it is very gratifying.
Do you in your legislation make money laundering per se a crime or do you not address that aspect of it? Money laundering is a crime, it is wrong, but nobody really says that within itself it is a crime.
Mr. PICKLE. I am advised that is not the case. It would not be specifically a crime in itself.
Mr. WORTLEY. You focus in a lot on the smurfing aspects of it. Do you address anywhere in your bill the collaboration or provide for punishment of employees of banks, who knowingly participate in money laundering conspiracies?
Mr. PICKLE. Mr. Wortley, with respect to an institution, any employee within the bank who assists in that failure to file one of these CTR's is guilty of the violation and would be subject to prosecution.
Mr. WORTLEY. The way things have been happening in the marketplace is that the banks themselves have been punished, usually with a very stiff fine. Thus far, I haven't seen any employees of banks or bank officers hauled into court for their complicity in money laundering.
I was just wondering if we need to strengthen the laws in such a way that we get to individuals. It isn't just an institution that makes it happen, but some individuals within that institution, whether it is bank officers who approve organizations on the exempt list, or a teller who takes a little money under the table, for splitting deposits and so on. We never seem to convict any individuals. It is always the institution that takes the rap but never an individual.
Do you get into addressing that, Jake?
Mr. PICKLE. No, I do not, except to say that any individual who participates or causes for these reports not to be filed is guilty of the violation and ought to be prosecuted. I do not try to detail the extent of the penalty. If we don't make this thing broad enough to include both the institution and the individuals such as the smurf or the man who plans the money laundering scheme, then this operation is going to go on and on and get bigger and bigger.
Today, the percent is staggering and it is beyond belief that we have so much money that is underground. At best, it is difficult to catch the money. These money launderers are outside the law and they are trying to avoid it to begin with.
If we don't give our governmental agencies the vehicle, then I don't think we are going to put a stop to it. If we say drug trafficking is one of the worse problems in America today, and it is, then we know that drug traffickers have to have money laundered or they will not have drug trafficking. They go together, inseparably.
As far as I am concerned, the stiffer the penalty the better and I try to give the agency over which our committee had primary jurisdiction, the Internal Revenue Service, the right of seizure and forfeiture. To further penalize the money launderer, we also give the IRS the right to move in quickly. I think this will help a lot.
There is a broader bill pending before this committee and several other committees. This legislation ought to fit into other legislation in the appropriate place. This legislation goes to the heart of the matter. I am pleased that the administration has taken the initiative and said, we need to do something and we have asked you to introduce this bill, and let's get with it. I am encouraged.
Mr. WORTLEY. There is no doubt about that, that narcotic trafficking is undermining the integrity of society. I want to thank you very much for joining in the battle with the rest of us. Thank you, Mr. Pickle.
Chairman ST GERMAIN. Mr. Bartlett.
Mr. BARTLETT. Thank you, Mr. Chairman. I have no questions other than to commend my colleague from Texas for his diligence in this area. He has displayed good work on some legislation that needs to be adopted. I am pleased that he is before this committee making this presentation. I commend him for his work.
Mr. PICKLE. Thank you, Mr. Bartlett.
Chairman ST GERMAIN. At this time, the subcommittee would ask Herbert Friedberg to come to the witness table.
He will be accompanied by Mr. Ted Bandstra, Assistant U.S. Attorney, Southern District of Florida, the Department of Justice.
Mr. Friedberg, we welcome your testimony before the subcommittee and we want you to know that we appreciate your willingness to appear. Your experience as a money launderer or smurfer, as that activity is sometimes called and has just been referred to by the previous witness, will be, I am sure, most beneficial to the members of the subcommittee in our efforts to draft legislation to combat this illegal activity.
Mr. Bandstra, let me take this opportunity to thank you and the Department of Justice for your full and complete cooperation in working with committee staff to secure Mr. Friedberg as a witness before this subcommittee.
Now, I will ask my Members to listen to what I have to say at this point-Stu, David. I just welcomed Mr. Bandstra as well, and it is my understanding Mr. Friedberg may be a key witness again in an upcoming trial. We would not want to cause the Department any litigation problems in that case, so we have asked Mr. Bandstra to feel free to let us know if we are leading Mr. Friedberg into any matters that should remain confidential.
In addition, it is also my understanding that you are making yourself available to answer questions of the committee members that may be of assistance to us so that we better understand Mr. Friedberg's operation and other related matters. For that we are also grateful.
Mr. Friedberg, we will put your entire written statement in the record, without objection. We appreciate having received it ahead of time. I am informed by my very efficient staff that, having placed the testimony in the record, that you are prepared to elaborate a bit with some examples, and certainly that would be of assistance to us. So just feel free. We are here to listen. STATEMENT OF HERB FRIEDBERG, FORMER MONEY LAUN. DERER, ACCOMPANIED BY ASSISTANT U.S. ATTORNEY TED E. BANDSTRA, SOUTHERN DISTRICT OF FLORIDA, DEPARTMENT OF JUSTICE Mr. FRIEDBERG. Thank you, Mr. Chairman. Rather than read from my statement, I would like to give you the history of how I became involved in money laundering. I was a property manager for a luxury condominium in the Miami area, and in 1983, due to an injury, I had to leave that job. While working in this condominium, I had the opportunity to meet a Colombian national, Mr. Jack Behar, who was a resident of the building and had an import/export business in Miami.
I was out of work for approximately 4 months. Mr. Behar contacted me and asked me how I was earning a living not working, and I told him I wasn't, I was simply on compensation. He asked if I would care to help him out on occasion; since he was so busy with his own business, could I take some cash to banks for him at various times and pick up some cashiers checks or money orders, for which he would pay me.
Starting in January 1984, Mr. Behar would deliver sums of money to me, $15,000, $20,000, $25,000. I would be paid anywhere from $50 to $100 for converting this into cashiers checks and money orders. Specific instructions were to never make out a check for more than $9,000, always make out a check in a Latin name, a Latin name being Gonzales, Rodrigues, et cetera, and the remitter, put down any name there I chose, and we picked a property management company and we used that.
This continued from January through April 1984, and Mr. Behar made a trip to Colombia on business, came back and asked me if I would like to make a trip to California with one of his associates who worked with me at the time, with Mr. Behar, actually. Supposedly, there was $400,000 waiting in California to be picked up and either brought back to Miami or laundered in the California area. We never used the term "laundering." At that point I had no idea we were doing anything illegal, other than the fact that Mr. Behar was a businessman, and I did not know making out cashiers checks was illegal.
We went to California. All we had was a beeper number, and we arrived in California, in Los Angeles, dialed a beeper number, received a return call at our hotel, and set up an appointment with a gentleman, Hecho, went to a house in Palos Verde when Hecho called us back and gave us an address, and sitting on a table we found $200,000, not the $400,000, and this $200,000 was turned over to us without any identification other than the telephone call and the fact that here we are and here is the money.
We started working Wilshire Boulevard on a Monday morning with $200,000 in cash, and by Tuesday at 11, we had converted the $200,000 into cashiers checks. We had no California identification. We were two Florida residents. Not one bank asked us to identify ourselves, and in each institution we made out checks in the amount of $9,000, converted the entire $200,000 in 142 days never leaving Wilshire Boulevard.
When I arrived back in Miami-did you want to say something, sir?
Chairman ST ERMAIN. Oh, no, no. Mr. Torres sees how popular-see, he is from California. They must have a lot of banks on Wilshire Boulevard.
Mr. FRIEDBERG. One on every corner, sir.
When we arrived back in Miami, I found an article in the Miami Herald describing money laundering, and at that time I realized I was involved in money laundering. I immediately contacted the Federal Bureau of Investigation and they turned me over to the Internal Revenue Service, Operation Greenback, in Miami.
I met with two agents and explained exactly what I had been doing for the past 5 months, and at that point I was asked to go to work for the U.S. Government as an informant. From June 1984 through February 1985, I worked for the U.S. Government, laundering money for a number of money launderers in the Miami area, turning over the back copies of the cashiers checks or money orders and allowing the Government to build a case up against these people.
I don't know if you have any questions now. I think you pretty much have an idea of what my activities were.
Chairman ST GERMAIN. I certainly do have some questions. I just want to make sure you have had an opportunity to tell your entire story.
Mr. FRIEDBERG. I think that's about it. Chairman ST GERMAIN. Fine. [The prepared statement of Mr. Friedberg can be found in the appendix.]
Chairman ST GERMAIN. Mr. Friedberg, you say that it wasn't until you returned from California, having introduced yourself to many banks on Wilshire Boulevard, and were in Miami that you saw the article in the paper about money laundering. Tell me. When you were asked by your friend, who lived in the apartment complex that you worked in, to go to work for him and convert cash into cashiers checks using any old name that you wanted and using phony names as the remitters, and the fact that he was paying you to go from one bank to another and cautioned you to stay under $9,000, that didn't ring a bell with you? Didn't you say to him, well, how come we are using all these phony Latin names? Didn't that ever occur to you?
Mr. FRIEDBERG. Absolutely. I questioned him on a number of occasions, and Mr. Behar is a very eloquent individual. Mr. Behar had a legitimate import/export business. Mr. Behar said that he was in the money exchange business in Colombia, constantly on the phone with Colombia, 10 to 12 times a day, always knew the peso in relation to the dollar, et cetera, could always tell you, well, we are buying dollars and selling dollars and it is much easier if there is a Latin name because we do send the checks down to Colombia, and if it is in the name of a Latin, we don't have any problem, but when it's in American names, they get a little suspicious.
Chairman ST GERMAIN. Let's look at the name of the remitter. He said to use different names for remitters, phony names.
Mr. FRIEDBERG. It didn't make any difference at that point. It came from a management company. His statements really were that the problem was not here in the United States but in Colombia, and he was defrauding the Colombian authority, which is what he was saying, that they were bringing the money into Colombia not to have to pay taxes on it or to avoid problems not in the United States but in Colombia.
Chairman ST GERMAIN. Were you collecting workman's compensation?
Mr. FRIEDBERG. No, I stopped in January, sir, when I started to work for Mr. Behar. My compensation ended in January.
Chairman ST GERMAIN. Because you were no longer considered disabled or because you
Mr. FRIEDBERG. I was no longer disabled. They stopped my payments in December. Chairman ST GERMAIN. Oh. And you didn't contest that? Chairman FRIEDBERG. No, sir. Chairman ST GERMAIN. You are unusual. I used to do workman's compensation work, and very few went off voluntarily.
You said that you were not asked for any identification whatsoever when you were in California on Wilshire Boulevard?
Mr. FRIEDBERG. That is correct.