Money Laundering Alert
August, 2001
Pharmaceutical firm pays big penalty for trading with drug lord's front

A MAJOR U.S. PHARMACEUTICAL company, American Home Products, which produces such household names as Advil, Centrum, Robitussin, and Chap Stick, has paid a $ 2.5 million penalty imposed by the U.S. Treasury Department's Office of Foreign Assets Control for dealings with so-called "Specially Designated Narcotics Traffickers," a category of persons and entities with whom U.S. persons are prohibited from conducting transactions. OFAC says AHP carried on commercial transactions with Colombian companies that were controlled by Colombian drug lords, Gilberto and Miguel Rodriguez Orejuela. It is the largest penalty ever imposed by OFAC, which enforces regulations prohibiting transactions with a wide range of "designated" persons, entities and countries, including those with whom the U.S. has political disputes, such as Cuba and Libya.

OFAC a money laundering player since 1995
Since 1995, OFAC has become an important player in the money laundering arena because the sanctions it enforces also cover the finances and transactions of drug traffickers and terrorists. Failure to block transactions by or for an SDNT, could expose an institution to prosecution for money laundering because SDNTs are deemed to be linked to drug trafficking, a "specified unlawful activity" under the money laundering law (Title 18, USC Sec. 1956(c)(7)). There have been several money laundering prosecutions that began as OFAC regulatory enforcement actions.

AHP surprised by OFAC probe
American Home Products, which is based in New Jersey, says it was caught by surprise three years ago when it learned of OFAC's investigation, a company spokesman told Money Laundering Alert. The company says it did not know of the existence of OFAC's SDNT program. "The scope of the U.S. regulations were not fully understood by our personnel," said AHP spokesman Lowell Weiner. "Since that time, we have dedicated considerable resources toward compliance."

Colombian drug store chain targeted
In its announcement on July 12, OFAC said AHP, through two subsidiaries, Wyeth-Ayerst International and Whitehall International, had business transactions with a Colombian drug store chain, Drogas la Rebaja, and affiliated businesses. The chain, which also operated as Copservir, was included in OFAC's list of Specially Designated Narcotics Traffickers, or SDNTs, in October 1995. OFAC alleges that Drogas la Rebaja and its affiliates are owned and controlled by the Rodriguez Orejuelas. AHP spokesman, Weiner, said the company did not know of the Colombian company's involvement with the drug cartels during the sales that occurred between 1995 and 1997. "These were well-established distribution companies that sold prescriptions and other over-the-counter products," he said. "Of course, we immediately suspended any dealings with the companies and our settlement with the government takes into account our cooperation and future compliance."

List names 10 cartel leaders
Since inception of the SDNT program in October 1995, OFAC has issued and augmented 12 lists, which currently consists of 10 Colombian drug cartel leaders, 231 businesses and 337 individuals, OFAC says. The SDNT program was launched by Executive Order 12978 by former President Clinton and prohibits U.S. persons and businesses, including financial institutions, from conducting transactions with the businesses and individuals said by OFAC to be associated with the drug cartels (MLA, Nov. 1995).

Software filters not exoneration
Many financial institutions and businesses use "OFAC filters" to screen transactions. The filters are software that monitors incoming and outgoing transactions. If the software fails to block a prohibited transaction, the institution is liable -- not the software maker.

Drug Kingpin Law
Under the 1999 Foreign Narcotics Kingpin Designation Act, foreign persons designated under the Kingpin Act are referred to as SDNTKs, or "Specially Designated Narcotics Trafficking Kingpins" to differentiate them from the SDNTs. Under the act, U.S. persons are prohibited from engaging in any transaction or dealing in property or interests in property of SDNTKs. These prohibitions affect trade transactions as well as accounts, securities and other assets.

Corporate criminal fines for violations of the Kingpin Act range up to $ 10 million, while those for individuals range up to $ 5 million and 30 years in prison.

Warning from OFAC chief
"Engaging in any unauthorized transaction with an SDNT is a violation of U.S. law and all United States persons should be cautioned accordingly," said OFAC director Richard Newcomb in a statement.

Tulsa World
June 30, 2001 Saturday
Firms charged in embargo violation
BYLINE: DAVID HARPER

Two affiliated companies have agreed to plead guilty to violating a trade embargo by transporting oil field processing equipment parts from Houston through the United Kingdom and into Iran, according to signed plea agreements filed Friday in U.S. District Court in Tulsa.

BS&B Process Systems Inc., headquartered in Houston, and Black, Sivalls & Bryson of the United Kingdom both agree to pay $500,000 in financial penalties for violating the International Emergency Economic Powers Act in April 1996. The British company has agreed to a $448,000 criminal fine plus $52,000 to settle civil proceedings. The Houston company will pay a $414,000 criminal fine and $86,000 for civil claims. The companies will pay 10 percent of their criminal fines each year for 10 years, although half of the 10th year's payment will be forgiven.

The International Emergency Economic Powers Act provides that the president, upon a declaration of a national emergency, has the authority to issue embargoes. Such an embargo has been issued against Iran because of its activities against the United States and its interests.

Failure to obtain proper authorization from the Office of Foreign Assets and Controls for the export of goods to Iran constitutes a violation of the Export Administration Regulations issued by the Department of Commerce and other regulations.

Bill Wiseman, a consultant for the holding company that owns both defendant companies, said Friday evening that the sales in question took place only in April 1996 and were for a modest amount of money, far less than the amount the companies have agreed to pay as punishment. The plea agreements characterize the companies' actions as "deliberate indifference," but Wiseman said the export activity was "a very expensive mistake. We're just glad to have this behind us."

Although the matter appears to be wrapped up, Tulsa federal judges have been reluctant in recent years to accept plea deals with pre-arranged sentences. For the time being, U.S. District Judge Sven Erik Holmes has been assigned the case against the Houston company, while U.S. Chief District Judge Terry Kern has drawn the other case.

Still, these pleas may be accepted because the statutory maximum fines in each case are $500,000, which is the total amount the companies have already agreed to pay.

Although there appears to be little connection in the case to Tulsa, Wiseman said some records for BS&B Process Systems were kept in Tulsa and that some accounting services were done here, as well.

Search warrants were executed in March 1998 at BS&B Process Systems offices in Houston and Tulsa.