Copyright 1994 Bergen Record Corp.
NEW CARS, BIG GAINSBy CHRISTOPHER KILBOURNE
Parked in the U.S. Marshals Service’s corral of 180 confiscated cars in Edison are 13 shiny new Hondas seized in a waterfront warehouse last month just hours before they were to be shipped to Nigeria.
The gleaming finishes of the 10 Accords, two Preludes, and one Civic reflect a scheme that authorities say is as deviously clever as it is simple: After selling the drugs they have smuggled into this country, dealers launder the proceeds with cash purchases of automobiles or other products in short supply or high demand in their native countries.
The prized items -- particularly Hondas, Nissan Pathfinders, and Mercedes-Benzes -- are then shipped overseas and resold at huge markups, enabling the dealers to “double or triple their already illicit gains,” said Assistant U.S. Attorney Peter W. Gaeta.
“It’s a very cunning scheme to launder money,” said First Assistant U.S. Attorney Paul J. Fishman. “Not only does it provide a vehicle for getting the profit out of the country, it has the further advantage of being a moneymaker in itself.”
Televisions, VCRs, refrigerators, and air conditioners are among the other products of choice for drug dealers seeking to conceal and export their income, said Martin D. Ficke, assistant special agent in charge of the U.S. Customs Service’s Office of Enforcement in Newark.
Although many of the shipments from the ports of Elizabeth and Newark are destined for Nigeria and other West African nations, the ill-gotten goods also are being shipped to such countries as the Dominican Republic, Bolivia, and Colombia, Ficke said.
Authorities say this new brand of black-market capitalism has its roots in the Comprehensive Crime Control Act of 1984, which expanded the reporting requirements on bank deposits and cash transactions. Banks and businesses must now file currency transaction reports on all cash transactions of $10,000 or more, and similar reports must be filed by people taking $10,000 or more into or out of the country.
With the narrowing of traditional drug-laundering avenues, dealers hit upon the idea of both cleansing and multiplying their tainted earnings by supplying the material needs of their countrymen.
When the scheme works, it is often because the purchase and delivery of the cars and appliances is timed to coincide with the sailing dates of cargo ships, authorities say. By the time retailers file transaction reports on the purchases -- they have 15 days in which to do so -- the goods are frequently out of the country and out of the reach of federal agents.
The resale profitability of the merchandise is attributable to a combination of economic, bureaucratic, geographical, and cultural factors, including the limited number of dealerships in underdeveloped nations and the avoidance of duties and restrictions placed on legitimate importers, authorities say.
“This procedure provides a safe, effective, and profitable means by which drug proceeds are transported back to . . . drug dealers in their homeland,” said a sworn statement by Robert Palka, a special agent with the Criminal Investigation Division of the Internal Revenue Service in Newark.
Palka’s affidavit, filed in U.S. District Court in Newark, laid the groundwork for the May 6 court order seizing the 13 Nigeria-bound Hondas awaiting shipment from Maher’s Terminal in Elizabeth. The 20-year IRS veteran gave the following account:
The IRS was tipped off in April that a Nigerian named Edward Gbemudu was negotiating with P.S. Motors in Manhasset, N.Y., to buy 15 Hondas on behalf of a company called Vinz International Ltd. in Lagos. Though Gbemudu described himself as a doctor, New York State authorities had no record of anyone by that name licensed to practice medicine.
On May 5, the Customs Service alerted Palka that 13 Hondas purchased in a similar manner by individuals believed to be from West African nations such as Nigeria were about to be shipped from Port Elizabeth to Africa. Among them were six Honda Accords bought by Gbemudu for Vinz.
An investigation revealed that the cars, purchased from dealerships in Hillside, Union, and New York State, were paid for primarily with cash, much of it in bundles of $10 and $20 bills.
Several cars were purchased by Ben Odihirin, who was listed as the exporter for all the cars. An investigation of a Nigerian heroin operation in this country has linked Odihirin to a defendant indicted in that case. Authorities say Odihirin also has made wire transfers for Nigerian drug defendants.
Palka said Odihirin’s purchase of the Hondas and his history of large cash transactions despite no reported income since 1989 is “indicative of the money-laundering activities currently being utilized by Nigerian drug traffickers.” Based on those and other factors, Palka said there is probable cause to believe the 13 Hondas were bought with drug money.
The government’s confiscation of the cars was challenged last week by Gbemudu and Vinz. In papers filed in U.S. District Court in Newark, Gbemudu says he is a director of Vinz, which he describes as a “duly constituted” Nigerian corporation. The $86,000 with which he purchased the six Hondas for the company was “lawfully obtained and was not the proceeds of the instrumentalities of crime,” he says.
A hearing date has not yet been scheduled. No criminal charges have been filed. Gaeta said the investigation is continuing.
Vehicles that are forfeited to the government are distributed to federal and local law enforcement agencies, often for undercover work. Cars and merchandise that are unneeded or unsuitable are sold to wholesalers or at auction, with the proceeds going into the Asset Forfeiture Fund. The fund is used for everything from building new prisons to buying bulletproof vests.