7 Puerto Rico Banks Raided by U.S. Agents

SAN JUAN, Puerto Rico â€”  Nearly 200 federal agents raided branches of seven Puerto Rican financial institutions Thursday in what officials said was the first move in a far-ranging crackdown on widespread laundering of illicit profits from organized crime and drug trafficking.

Present and former executives of two Puerto Rican banks, four savings and loans and two branches of Citibank, a U.S.-based multinational bank, were among the 17 persons the Justice Department said were charged with conspiracy, failure to report currency transactions and other federal crimes.

The action followed 18 months of undercover work by agents in an operation code-named Tracer and conducted by a federal investigative task force called Operation Greenback-Puerto Rico. The investigation was part of an effort launched by federal agencies last year directed at organized crime groups involved in drug trade in the Florida-Caribbean area.

In court documents, undercover agents described what appeared to be a classic “sting� operation in which they approached bank officials, saying they needed to launder, or disguise, hundreds of thousands of dollars in illicit profits by sending them through legitimate financial channels.

One undercover agent portrayed himself as a drug trafficker from New Mexico seeking to launder funds from a heroin transaction in Mexico. A bank official he contacted said there would be “no problem,� that he could supply everything from a safety deposit box to a false name to hide the transaction, the agent said. The agent said he obtained bearer bonds in $50,000 denominations under the arrangement with the bank official.

Laundering Cash

According to the documents, another agent said she approached a second executive, saying she wanted to launder $135,000 in cash. The executive promptly dispatched an assistant, who returned shortly with a 91-day certificate of deposit for $135,000, the agent said.

In a statement issued in Washington, Atty. Gen. Edwin Meese III said the action was “the first of what is expected to be a series� of cases involving illegal money laundering activities within the commonwealth.

Sen. William V. Roth Jr. (R-Del.), chairman of the Senate Government Affairs investigations subcommittee, which has been hearing testimony on money laundering, said the investigation appears to have uncovered an “unbelievable� degree of corruption. “Puerto Rico appears to be virtually awash in dirty money,� he declared.

Recent Disclosures

Roth said the problems that emerged in the wake of recent disclosures of currency reporting violations by the Bank of Boston “pale in comparison to what apparently has been going on in Puerto Rico.�

Earlier this year, the Boston bank was fined $500,000 after pleading guilty to failing to report $1.2 billion in foreign currency transactions. Banks are required to report all cash transactions of more than $10,000 to the Internal Revenue Service under a 1970 law aimed at curbing laundering by organized crime and narcotics traffickers.

Ten criminal complaints and one indictment were unsealed in Puerto Rico involving charges that could result in prison terms of up to 30 years and maximum fines of more than $2 million for some of the 17 named in the allegations.

Bank President Charged

Among those charged were Raul Enrique Penagaricano-Soler, president of Caribbean Federal Savings Bank, who was accused of several offenses, including conspiracy to defraud the United States and failing to file a currency transaction report as part of a pattern of illegal activity involving more than $100,000 in transactions within 12 months.

Others named in the charges included vice presidents, branch managers and former officers of the Western Federal Savings Bank, the Bayamon Federal Savings & Loan Assn. of Puerto Rico, the Banco Financiero de Puerto Rico, Citibank, First Federal Savings Bank and Banco de Ponce.

Philip Hager reported from Washington and Barry Bearak from San Juan.