Black Market Billions: How Organized Retail Crime Funds Global Terrorists (Gal Zentner's Library) (18 page)

One of the main conduits for smuggling stolen merchandise is the Sindhis in western India and Panama, commonly referred to as the “Hindu brokers,” according to Johnson. “They literally have catalogs of knockoff items; you can buy everything from a coffee pot to Sony PS2 consoles. In addition to counterfeiting, these Sindhis buy and sell stolen items by acting as ‘the brokers.’ Counterfeit items come from countries such as China and Malaysia, then are sent to free trade zone countries, such as Colombia, Panama, Aruba, and Chile. In Panama there is a walled city of shops and banks in one of the largest shopping malls in the world, mostly run by these brokers, who buy, sell, and trade counterfeit and stolen merchandise.” Wholesale distributors are the merchant classes, with strong Jewish, Arab, Hindu, and Chinese contingents. About 80% of them are legitimate businesspeople representing companies such as Samsung and Nike, but the remaining 20% purchase, produce, and sell counterfeit items using names that are slightly different from legitimate brands. On one of his most recent trips to Panama, Johnson discovered “Sidney,” the counterfeit brand for “Disney.” Counterfeit PlayStations are called “Polystations.”

“This also happens with cigarettes, perfumes, and liquor. Companies don’t do much to stop it,” says Johnson. “It’s cost-prohibitive [to fight], and even if they get some counterfeit merchandise out of there, it is free advertising [for the product counterfeiters].” Johnson described how he found a 19-year-old boy working in his uncle’s store selling counterfeit coffee makers. His uncle, says Johnson, was teaching him the trade of the business.

When Family Funds Support Terrorism

Like the Sindhis, the Arabic community also has a large contingent in the Tri-Border Area. The Lebanese population makes up 90% of the city (Ciudad del Este), and the estimated size of the Lebanese community ranges from 20,000 to 30,000. The group is tight-knit, with their own schools and clubs, making it incredibly difficult to infiltrate unless you are “a member of the family.” In the bordering city of Foz do Iguacu in Brazil, most Arabic immigrants live in gated condominiums,
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making it easy for extremists to congregate, brainstorm plans of action, and execute those plans without any repercussions from their community. According to a Library of Congress study,
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al Qaeda sympathizers have been active in the Tri-Border Area for these reasons. In Argentina the Muslim population outnumbers the Jewish population by almost 500,000. The number of Jews living in Argentina totals 250,000 compared to the 700,000 to 900,000 Muslims, with nearly 80% living in Buenos Aires.

In addition to the estimated $60 million to $100 million per year the Hezbollah receives from Iran, it also gets funding from the Shi’ite Lebanese diaspora in West Africa from sources in the U.S. and the Tri-Border Area.
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Islamic money laundering in the Tri-Border Area is concealed by the common practice of the local Arab community of remitting funds to relatives in the Middle East. In late 2002, Argentine
officials linked Lebanese terrorists in the Tri-Border Area to money laundering, counterfeiting of U.S. money, and other illicit financial activities. As evidence, they cited “thousands of U.S. dollars bearing stamps from Lebanese currency exchange banks, tens of thousands of dollars in phony bills, and receipts from wire transfers made between the Tri-Border Area and the Middle East.” What’s more, Brazilian authorities have estimated that more than $6 billion a year in illegal funds are being laundered in the Tri-Border Area. According to John Moynihan, partner at BERG Associates, armored trucks loaded with laundered money leave Ciudad del Este for Fox do Iguacu, the Brazilian town on the other side of the border. Paraguay’s Finance Ministry issued an order in January of 2003 to suspend sending dollars abroad, but a report found this order was apparently not being applied to armored vans or trucks leaving the Tri-Border Area. One van known to be carrying reais and dollars was observed crossing the Friendship Bridge into Brazil on January 20, 2003.
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Islamic fundamentalist groups in the Tri-Border Area and similar areas in Latin America also send to radical Islamic groups in the Middle East between $300 million and $500 million a year in profits from drug trafficking, arms dealing, and other illegal activities, including money laundering, contraband, and product piracy.
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Hezbollah derived a substantial amount of its income from various illicit activities in the Tri-Border Area, in addition to financial support from the government of Iran. Media reports also indicated an al Qaeda presence in the Tri-Border Area as well as cooperation between Hezbollah and al Qaeda. Conventional thinking suggests the Sunni-minded al Qaeda would never collaborate with the Shi’ite-minded Hezbollah, but the reported strategic alliance was indicative of a larger collaboration.
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For example, one report suggested an Islamic terrorist summit was held in the Tri-Border Area in late 2002 to plan terrorist attacks against U.S. and Israeli diplomatic facilities in South America. In 1996, a Tri-Border Area-based terrorist plan by Hezbollah and al Qaeda intended to blow up the U.S. Embassy in Asuncion. Attacking
targets would appear to be a high priority for al Qaeda, Hezbollah, and other Islamic terrorist groups that may have a presence in the Tri-Border Area. According to the report, targets could also include hotels, tourism centers, airports, or multinational companies, especially those of Israeli, German, French, or U.S. origin.

Assad Muhammad Barakat and His “Family”

In June 2002, Brazilian authorities arrested Assad Muhammad Barakat, a 37-year-old Lebanese national. At the age of 17, Barakat emigrated from Lebanon to Paraguay with his father. Prosecutors believed he was a major player in the 1992 bombing of the Israeli embassy in Buenos Aires and the 1994 bombing of the Jewish Community Center in the Argentine capital.
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Barakat started out as a street peddler, selling trinkets and items to locals and tourists. As he built his business, he created an import-export store in the Galeria Page shopping gallery called Apollo Import Export. It was here that he accumulated most of his wealth and then started acquiring companies such as the Mundial (World) Engineering and Construction company, as well as several other properties and businesses in Paraguay, Chile, New York, and Miami. He became co-owner of the Galeria Page shortly after he started his business. Barakat was identified as the Hezbollah’s military operations chief as well as the chief fund-raising officer in the Southern Cone (the areas of South America south of the Tropic of Capricorn, encompassing Argentina, Chile, Paraguay, and Uruguay). In addition to being heavily involved in fund-raising operations in the Tri-Border Area, the U.S. State Department has identified him as being connected to the al-Gama’a al-Islamiyya (Egyptian Islamic Group).

Located in Ciudad del Este, the Galeria Page mall was described by Argentine police as the regional command post for the Hezbollah
and home to many businesses selling stolen, smuggled, or counterfeit items. Law enforcement raided a store owned by Assad Ahmad Barakat and confiscated more than 60 hours of video and CD-ROMs of military marches and attacks with explosives in various parts of the world. They also confiscated material for professional training courses for suicide bombers. Boxes were found containing financial statements totaling $250,000 in monthly transfers to the Middle East and descriptions of at least 20 recent attacks in Israel and Israeli-occupied territories. According to the U.S. Department of the Treasury, Barakat used two of his businesses, Casa Apollo and Barakat Import Export Ltda, as a cover for Hezbollah fund-raising activities. These shell companies sold stolen and counterfeit merchandise. As part of a bank fraud scheme, Barakat used Barakat Import Export Ltda to raise money for the Hezbollah in Lebanon by mortgaging the company to borrow money.

But Barakat didn’t work alone. His network included two of his brothers and several confidants who used management positions at the mall to shroud what they were really doing. His brother Hamzi Barakat was a member of the Hezbollah in the Tri-Border Area and was suspected of trafficking counterfeit U.S. dollars, arms, explosives, and stolen merchandise to fill his stores. According to a study done by the U.S. Treasury Department,
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he has owned and held the position of general manager of Casa Hamze, a store in the Galeria Page that has employed Hezbollah members and has served as a source of fund-raising for the terrorist organization. Assad Ahmad Barakat was a longstanding partner in Casa Hamze.

Hatim Ahmad Barakat was one of the only members of the Barakat network who was allowed to share information with his brother Assad Ahmad Barakat. Hatim would travel from Chile to Paraguay to raise and collect funds for the Hezbollah. He was a shareholder in two Chilean businesses believed to fund Hezbollah activities in Paraguay. Hatim acted as Assad’s primary confidant when it came to financial matters. Functioning like a first-stage venture capitalist,
Hatim not only went out to raise money, he was also deeply involved in Assad’s business dealings and finances. He offered his brother advice on how to expand the two businesses he co-owned with him, such as SDGT Casa Apollo and he offered advice on how to raise capital for additional funding. “He was known as the numbers guy,” says an FBI source on the case. “He had a photographic memory and knew every detail of what was going on within the mall and with the businesses they co-owned. Nothing would slip past him. If he were running a legitimate business, it would be a Fortune 500 company by now.”
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Muhammad Fayez Barakat, a cousin of Assad’s, played a special role in the Tri-Border Area network: He was in charge of transferring funds from South America to the Middle East. In July of 2006, Fayez collected funds on behalf of the Hezbollah Tri-Border Area by hosting black-tie dinners and fund-raisers for Hezbollah sympathizers. After the event, the money was gathered and sent back to Lebanon via a hawala. A numbers whiz, Fayez would often provide financial assistance, floating Assad millions of U.S. dollars to keep his businesses afloat when times were tough.

Sobhi Mahmoud Fayad, a “personal secretary,” was also known to be a military leader in the Tri-Border Area, a high-ranking Hezbollah member in Lebanon in the 1980s, and a weapons expert. He is said to have supported terrorist efforts in the Tri-Border Area prior to his arrest and conviction in 2003 for tax evasion. During his trial, Fayad admitted to transferring money to a Hezbollah-controlled charity in Lebanon. The name of the charity was not identified at the time.

Back in the U.S., an entirely different ORC scheme that funded terrorism was taking place. Khaled T. Safadi, Ulises Talavera, and Emilio Gonzalez-Neira of Miami, Florida were trying to figure out the best way to sell Sony PlayStation 2s (PS2s) to the Galeria Page in Paraguay. The elaborate scheme went on for almost three years before they were arrested. The men worked with Samer Mehdi, 37 years old and owner of Jomana Import Export, an electronics store in the mall. With the help of two distribution companies located in
Miami, the men were able to easily sell and move stolen Sony electronic items for profit in Paraguay with the help of Hatim Ahmad Barakat and by recruiting people from Lebanon as well as South America to join them.

Setting up fictitious trucking companies (like the fictitious distribution companies in Miami) is common practice, especially for ORC rings shipping stolen merchandise overseas. And they are usually run by contacts made through family connections. The recruiting process for the trucking industry, as well as many ORC rings, is very ethnically based. They stick to a common bond.

The fake trucking companies accept shipments from another company that ships the merchandise. After the funds have been transferred, the shipping company learns that the trucking company doesn’t exist. In a federal prosecution case in California, a company was accepting money for shipments but didn’t fulfill deliveries.

According to the indictment filed in a Dade County court on January 11, 2008, Gonzalez-Neira, under his company Jumbo Cargo, filed a falsified Shipper’s Export Declarations (SED) listing the ultimate consignee name and address for the 400 PS2s as Atlantic International, S.A., Monsenor Rodriguez y Pampliega, Ciudad del Este, Paraguay. The following day, Gonzalez-Neira fictitiously listed Dally Center (Jo) Shopping Vendome, Ciudad del Este, Paraguay as the ultimate consignee on the export documentation. A year and a half prior, Talavera provided fraudulent invoices to law enforcement corresponding to 1,000 PS2s exported on June 8, 2007 as well as 2,070 PS2s he attempted to export on August 27, 2007.
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Ninety percent of America’s non-North American trade arrives by sea in containers. Almost 25% of the American GDP, some $2.4 trillion worth, comes from international trade through imports and exports. More than $8.8 billion worth of goods is processed daily at U.S. entry points nationwide, of which $1.4 billion is processed at domestic major ports.
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The volume of U.S. international trade,
measured in terms of dollars and containers, has doubled since 1990. Depending on how well the global economy recovers, the volume could double again in the next decade, which would materially contribute to the lives and economic prosperity of this nation. Yet the border agencies do not have the resources to examine more than 2% of the cargo that comes into this country.

Illegal Entry into the U.S. Is Not Difficult—if You Have Money

“Terrorism is cheap,” says Professor Ibrahim Warde of Tufts University. “There has been a shift in the cost of terrorism post-9/11. There was a time when terrorism was state-sponsored and involved large amounts of money. In the 1970s and 1980s, the Soviet Union was a significant sponsor of terrorist organizations. With the collapse of the Soviet Union, Libya became one of the main financiers of terrorism activity. In those days, terrorist plots were very costly. This was before the Internet and social networks, which significantly dropped the price of terrorist funding, because communicating became so much easier. To fund the September 11 attacks, al Qaeda spent $500,000 over two years for 20 people to put together the terrorist plot. Later, as many financial controls were put in place, terrorists adapted to the new environment. Almost every terrorist act thereafter, including the 2005 London bombings, cost under $20,000.”
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