Global Policy Forum

By Miren Gutiérrez*

Operation Malocchio ('evil eye') as it was called, was "one of the biggest" anti-money laundering operations ever launched in Italy, says former prosecutor Giovanni Salvi who was in charge of the investigation together with his colleague Pietro Saviotti and investigating judge Otello Lupacchini. Investigation began in 1996 into hundreds of millions of dollars in proceeds from the smuggling of 900kg cocaine out of Latin America. By 1997 the network was set to 'import' 5,000 kg of cocaine and buy a bank in Belize, according to a report by Espresso magazine in Italy.

Operation Malocchio was launched after Italian authorities carried out "an information exchange with the U.S. FBI," said a report issued in 2001 by the anti-mafia investigative unit (DIA) of the Italian ministry of interior. The aim was "dismantling a complex crime group involved in the trafficking of significant consignments of cocaine coming from South America, as well as in money laundering and in the re-investment of huge capital through international financial channels."

The probe led to several arrests in 1998. In 2001, 15 people were convicted for laundering money from narco trafficking, including kingpin Fausto Pellegrinetti. But he escaped and is still a fugitive. Appeals against the sentence were rejected. Accomplices in Panama, and also in Brazil and Belize (a tiny Central American nation with a population of 273,000 bordering Guatemala and Mexico) had a prominent role in the money laundering and re-investment scheme, according to documents seized by the Italian police.

In October 1997 Italian authorities asked Interpol in Panama for information that could link three suspect telephone numbers with well-known Panamanian politician Alfredo Oranges. Oranges was then a serious contender for presidential candidacy in the 1998 elections from the Revolutionary Democratic Party (PRD). Interpol Panama confirmed that the numbers belonged to Oranges.

The Financial Analysis Unit (UAF) in Panama then discovered that money from outside the country was being transferred regularly to and from the local bank accounts of the company Clark's Investment Corp. Oranges was authorised to sign documents on behalf of Clark's Investment, the UAF said. This corporation "has served as bridge for a series of banking transfers that cross several countries without an apparent motive or commercial activity justifying them," said the UAF. Some of the transfers were higher than a million dollars.

Edwin Arias Castillo, a Clark's Investment executive and Oranges' associate, was also treasurer in another corporation France Mistral, S.A., where Lillo Rosario Lauricella -- kingpin Pellegrinetti's right hand in Latin America -- was vice-president, the UAF noted. "Vast amounts of money from outside were deposited through Panamanian corporations in local bank accounts, where they would stay for a couple of days and later were transferred to a bank in another country," Jorge Mottley, former head of Interpol Panama told IPS in a telephone interview. Mottley had joined investigation of the Panamanian ramifications of the case.

The Italian investigation was revealed at a press conference in 1998 by President Ernesto Pérez Balladares, Oranges' rival in the PRD. As Oranges protested in Panama, in Rome judge Lupacchini ordered the preventive arrest of 58 people including Oranges as alleged members of a criminal network engaged in narco trafficking and money laundering. Italian authorities said in the arrest warrant that the criminal network had deposited 250 million dollars in Panama.

Then Panamanian attorney-general José Antonio Sossa sent special anti-drugs prosecutor Rosendo Miranda to Italy in October 1998. Miranda dispatched a facsimile from Rome stating that the Italian authorities had evidence linking the money in transit through Panama with the narco trafficking operation, says Mottley. Several documents seized by the Italian authorities indicated that Lauricella had contributed to Oranges' presidential campaign. Oranges later admitted this.

Mottley says Miranda took back a request from Italian authorities to freeze the funds linked to Oranges and to interview him in the presence of a representative of the Italian prosecutor. "Nothing of the sort happened," he adds. Inexplicably, attorney-general Sossa concluded there was no evidence against Oranges.

In 1999 Panamanian daily La Prensa published an interview with Oranges in which he admitted that he had been meeting for years with Lauricella, who he said was interested in the casino business. Oranges said he did not know Lauricella's background, and could not possibly have investigated all his associates. According to Panamanian migration authorities, Lauricella seems to have lived in Panama from July 1996 to February 1998. Lauricella declared himself a "gardener" living in the not exactly cheap Hotel El Panamá.

Meanwhile in Rome the order to arrest Oranges was cancelled. "As the person who put together the case, I am sure there was enough evidence (to investigate Oranges)...more than enough," says Salvi now. "As a matter of fact we asked the judge for a warrant, and it was granted by the investigative judge (Lupacchini). But the Tribunale del Riesame (court of re-examination) decided differently." That was due to what court officials called a "technicality".

Marco Lillo, a journalist from Espresso who has written about the case says the Italian authorities were only interested in the Italian suspects. "And as you can imagine, the reactions (from other countries to the requests sent by the Italian authorities) were not very enthusiastic."

Before matters reached the court of appeal in Italy, investigation progressed with the help of information provided by Lauricella, who became a "cooperating witness". Operation Malocchio now revealed that the proceeds from narco trafficking were invested in several businesses, from the import of exotic fruits from Santo Domingo (in the Dominican Republic in the Caribbean) to the installation of thousands of slot machines in Brazil.

In 2000, Lauricella -- the cooperating witness who had been the link between the gang and its Latin American ventures and on whose statements the investigation was based -- was convicted but vanished, says Luca Armeni, deputy chief of the DIA. "When you have a trial as difficult as this money laundering case, you need two things: good documents and good cooperating witnesses," says Salvi. Lauricella, he said, "revealed himself not to be a good witness when he disappeared."

Lauricella went into hiding under a false identity, and in 2002 was shot dead outside a casino in Caracas. It was difficult to identify his body because of the multiple facial surgeries he had undergone, according to a report in Espresso in November last year. The local fallout of the case was not investigated either in Panama or in Belize, but in Brazil the case led to an investigation that is still continuing.

The Italian DIA sent the Brazilian authorities information provided by Lauricella. Some of this information was made public last month by the Instituto Brasileiro Giovanni Falcone (IBGF) set up to fight organised crime (it takes its name from magistrate Giovanni Falcone assassinated by the mafia in 1992.) "The introduction in Sao Paulo and Rio de Janeiro of slot machines served as a tool to launder money produced by international narco trafficking," the IBGF said. "In a first delivery, according to DIA, 35,000 machines were sent to Brazil."

A statement from the public ministry of Paran* in Brazil says "the accusation...has been revived in 2004 in a new inquest on money laundering" linked with gaming. In Panama, Mottley found himself stripped of his position in 2000, three years after the case landed on his desk. Sossa accused him of unlawfully passing classified information to Italian authorities. Mottley was exonerated later.

Oranges filed three lawsuits, one before the Panamanian Supreme Court against the Panamanian state, a second before the Human Rights Commission of the Organisation of the American Status (OAS), also against the Republic of Panama, and the third before the Office of the High Commissioner for Human Rights of the United Nations against the Republic of Italy. Only the first continues today. The suit was admitted in February 2004.

Oranges is demanding 48 million dollars from the Panamanian state as compensation for losing his nomination as presidential candidate.

Since Mottley left Interpol in 2000, Operation Malocchio was forgotten in Panama -- until now. Sossa's controversial mandate as attorney-general ended in January this year, and that has triggered a re-evaluation of his role. Mottley, now acting in a private capacity, sued him in January for corruption, calumny, providing false testimony, not complying with his duty as civil servant, and for other crimes against the public administration of justice.

IPS tried to talk with Sossa; the phone calls were abruptly cut. Oranges spoke through his Panamanian lawyer Luis Vásquez to La Prensa, and reiterated his claims of innocence. Mottley says that in at least one other prominent instance Sossa had refused to investigate strong evidence of wrongdoing.

Starting in 1996, Panama had received several requests from authorities in the United States, Germany and Chile to investigate Marc M. Harris, a U.S. financier based in Panama. Some of the requests indicated that Harris appeared to be providing financial services to convicted narco traffickers. La Prensa published documents proving this, and also that fraudsters and money launderers were among Harris's clients. Only, it was double deception: Harris refused to return their money, and the clients could not resort to the authorities they were avoiding in the first place.

A U.S. Senate report issued in 2001 said Harris had been behind a number of international banking, investment and securities frauds. Harris fled to Nicaragua, but was expelled in 2003 and brought to justice in Miami. On May 21 last year he was sentenced to 17 years in prison and ordered to pay a 26 million dollar fine following conviction on 16 counts of money laundering, tax evasion and conspiracy to defraud the U.S. government.

La Prensa also reported Sossa's failure to investigate Harris. The attorney-general brought criminal defamation charges against several of the daily's journalists. He was unsuccessful. Some of the charges were rejected by the judge and others just expired..

The commission for the prevention, control and eradication of drugs, narco trafficking and money laundering of the Panamanian parliament had earlier requested investigation of Sossa's role by a special prosecutor in the Malocchio and Harris cases in 2000.

The prosecutor, Alma Montenegro de Fletcher, who also has left office recently, exonerated Sossa the same year. But in her final statement she indicated that the attorney-general had neglected his duty and showed "unacceptable" conduct in a civil servant.

About the Author: Miren Gutiérrez is IPS Editor in Chief. Formerly Business Editor at La Prensa, she was part of the paper's investigative unit. This article was written with the cooperation of Mónica Palm, editor at La Prensa in Panama.