Brazil’s money laundering scandal from hell
Two decades after a political earthquake, a powerful
aftershock that should be rocking Brazil apart is being met with thunderous
silence.
What is now termed “the Banestado leaks” and “CC5gate” is
straight out of vintage WikiLeaks: a list, published for the first time in
full, naming names and detailing one of the biggest corruption and money
laundering cases in the world in the past three decades.
This scandal allows for the healthy practice of what Michel
Foucault characterized as the archeology of knowledge. Without understanding
these leaks, it’s impossible to place in proper context events ranging from the
sophisticated assault by Washington on Brazil – initially via NSA spying on
President Dilma Roussef’s first term (2010-2014) – all the way to the “|Car
Wash” corruption investigation that jailed Luis Inácio Lula da Silva and opened
the way for the election of neofascist patsy Jair Bolsonaro as president.
Credit for the scoop on this George Orwell-does-hybrid-war
plotline is due, once again, to independent media. The small website Duplo
Expresso, led by young, daring, Bern-based international lawyer Romulus Maya,
first published the list.
An epic five-hour podcast assembled the three key
protagonists who denounced the scandal in the first place, back in the late
1990s, and now are able to re-analyze it: then-governor of Parana state Roberto
Requiao, federal prosecutor Celso Tres and now retired police superintendent
Jose Castilho Neto.
Previously, in another podcast, Maya and anthropologist
Piero Leirner, Brazil’s foremost analyst of hybrid war, briefed me on the
myriad political intricacies of the leaks while we discussed geopolitics in the
Global South.
The CC5 lists are here, here , and here . Let’s see what
makes them so special.
The mechanism
Way back in 1969, the Brazilian Central Bank created what
was described as a “CC5 account” to facilitate foreign companies and executives
to legally wire assets overseas. For many years the cash flow in these accounts
was not significant. Then everything changed in the 1990s – with the emergence
of a massive, complex criminal racket centered on money laundering.
The original Banestado investigation started in 1997.
Federal prosecutor Celso Tres was stunned to find that from 1991 to 1996
Brazilian currency worth no less than US$124 billion had been wired overseas.
Eventually the total for the whole life of the racket (1991-2002) ballooned to
a whopping $219 billion – placing Banestado as one of the largest money
laundering schemes in history.
Tres’s report led to a federal investigation focused in Foz
do Iguacu in southern Brazil, strategically situated right at the Tri-Border of
Brazil, Argentina and Paraguay, where local banks were laundering vast amounts
of funds through their CC5 accounts.
Here is how it worked. US dollar dealers in the black
market, linked to bank and government employees, used a vast network of bank
accounts under the names of unsuspecting smurfs and phantom companies to
launder illegal funds from public corruption, tax fraud and organized crime,
mainly through the Banco do Estado do Parana branch in Foz do Iguacu. Thus “the
Banestado case.”
The federal investigation was going nowhere until 2001, when
then-police superintendent Castilho ascertained that most of the funds were
actually landing in accounts at the Banestado branch in New York. Castilho
arrived in New York in January 2002 to turbo-charge the necessary international
money tracking.
Through a court order, Castilho and his team reviewed 137
accounts at Banestado New York, tracking $14.9 billion. In quite a few cases,
the beneficiaries’ names were the same as those of Brazilian politicians then
serving in Congress, cabinet ministers and even former presidents.
After a month in New York, Castilho was back in Brazil
carrying a hefty 400-page report. Yet, despite the overwhelming evidence he was
removed from the investigation, which was then put on hold for at least a year.
When the new Lula government took power in early 2003, Castilho was back in
business.
In April 2003, Castilho identified a particularly
interesting Chase Manhattan account named “Tucano” – the nickname of the PSDB
party led by former president Fernando Henrique Cardoso, who had been in power
before Lula and who always kept very close ties to the Clinton and Blair
political machines.
Castilho was instrumental in the setup of a parliamentary
inquiry commission over the Banestado case. But, once again, this commission
led nowhere – there was not even a vote on a final report. Most companies
involved negotiated deals with the Brazilian Internal Revenue Service and thus
ended any possibility of legal action in regard to tax evasion.
Banestado meets Car Wash
In a nutshell, the two largest political parties – Cardoso’s
neoliberal PSDB and Lula’s Workers’ Party, neither of which ever really faced
down imperial machinations and the Brazilian rentier class – actively buried an
in-depth investigation.
Moreover Lula, coming right after Cardoso, and mindful or
preserving a minimum of governability, made a strategic decision not to
investigate “Tucano” corruption, including a slew of dodgy privatizations.
New York prosecutors went so far as to prepare a special
Banestado list for Castilho with what really mattered for criminal prosecution
to go through: the full circle of the money laundering scheme, with funds first
illegally remitted out of Brazil using the CC5 accounts, next passing through
the New York branches of the Brazilian banks involved, then reaching offshore
bank accounts and trusts in tax havens (e.g., Cayman, Jersey, Switzerland) and
finally going back to Brazil as – fully laundered – “foreign investment,” for
the actual use and enjoyment of the final beneficiaries who had first removed
the not-accounted-for money from the country using the CC5 accounts.
But then Brazilian Justice Minister Marcio Thomaz Bastos,
appointed by Lula, nixed it. As superintendent Castilho metaphorically puts it,
“This deliberately prevented me from going back to Brazil with the murdered
body.”
While Castilho never got hold of this critical document, at
least two Brazilian congressmen, two senators and two federal prosecutors who
would later on rise to fame as Car Wash investigation “stars” – Vladimir Aras
and Carlos Fernando dos Santos Lima – did get it. Why and how the document –
call it the “body bag” – never found its way into the criminal proceedings back
in Brazil is an extra mystery wrapped up inside the whole enigma.
Meanwhile, there are “unconfirmed” reports (several sources
would not go on record on this) that the document might have been used for
outright extortion of the individuals, mostly billionaires, featured on the
list.
Extra sauce in the judicial sphere comes from the fact that
the provincial judge in charge of burying the Banestado case was none other
than Sergio Moro, the self-serving Elliot Ness figure who in the next decade
would rise to superstar status as the capo di tutti i capi of the massive Car
Wash investigation and subsequent justice minister under Bolsonaro.
Moro ended up resigning and is now de facto already
campaigning to be elected president in 2022.
And here we hit the toxic Banestado-Car Wash connection. Considering
what is already public domain about Moro’s modus operandi on Car Wash, as he
altered names in documents with the single-minded objective of sending Lula to
jail, the challenge now would be to prove how Moro “sold” non-convictions
related to Banestado. He had a very convenient legal excuse: With no “body”
brought back to criminal proceedings in Brazil, no one could be found guilty.
As we plunge into excruciating details, Banestado
increasingly looks and feels like the Ariadne’s thread that may reveal the
beginning of the destruction of Brazil’s sovereignty. A tale full of lessons to
be learned by the whole Global South.
Black market dollar king
Castilho, in that epic podcast, did ring alarm bells when he
referred to $17 million that had
transited in the Banestado branch in New York and then was sent to, of all
places, Pakistan. He and his team found that out only a few months after 9/11.
I’ve sent him some questions about it, and his answered, through Maya, is that
his investigators will dig it all up again, as a report did indicate the origin
of these funds.
This is the first time such information has surfaced – and
the ramifications may be explosive. We’re talking about dodgy funds, arguably
from drugs and weapons operations, leaving the Triple Border, which happens
historically to be a top site for CIA and Mossad black ops.
Financing may have been provided by the so-called king of
the black market dollars, Dario Messer, via CC5 accounts. It’s no secret that
black market operators at the Tri-Border are all connected to cocaine
trafficking via Paraguay – and also to evangelicals. That is the basis of what
Maya, Leirner and I have already described as Cocaine Evangelistan.
Messer is an indispensable cog in the recycling mechanism
built into drug trafficking. Money travels to fiscal paradises under imperial
protection, is duly laundered, and is gloriously resurrected on Wall Street and
in the City of London, with the extra bonus of the US easing some of its
current account deficit. Cue to Wall Street’s “irrational exuberance.”
What really matters is free circulation of cocaine. Why not,
hidden in the odd soya cargo, something that comes with the extra benefit of
securing the well being of agro-business. That’s a mirror image of the CIA
heroin ratline in Afghanistan that I detailed here.
Most of all, politically, Messer is the notorious missing
link to Moro. Even mainstream O Globo newspaper was forced to admit, last
November, that Messer’s shadowy businesses were “monitored” nonstop for two
decades by different US agencies out of Asuncion and Ciudad del Este in
Paraguay. Moro for his part is an asset for two different US agencies – FBI and
CIA – plus the Department of Justice.
Messer may be the joker in this convoluted plot. But then
there’s the Maltese Falcon: There’s only one Maltese Falcon, as the John Huston
classic immortalized it. And it’s
currently lying in a safe in Switzerland.
I’m referring to the original, official documents submitted
by construction giant Odebrecht to the Car Wash investigation which have been
undisputedly “manipulated,” “allegedly” by the company itself. And “maybe”, in
collusion with then-judge Moro and the prosecution team led by Deltan
Dallagnol.
Not only, possibly, for the purpose of incriminating Lula
and persons close to him, but also – crucially – deleting any mentions of
individuals who should never be brought to light. Or to justice. And, yes, you
guessed it right if you thought about the (US-backed) black market dollar king.
The first serious political impact after the release of the
Banestado leaks is that Lula’s lawyers Cristiano and Valeska Zanin have
finally, officially requested Swiss authorities to hand over the originals.
Governor Requiao, by the way, was the only Brazilian
politician to publicly ask Lula, back in February, to go for the documents in
Switzerland. It is no surprise that Requiao is the first public figure in
Brazil to now ask Lula to make all this content public once the former
President gets hold of it.
The real, not adulterated Odebrecht list of people involved
in corruption is crammed with big names – including the judiciary elite.
Confronting the two versions, Lula’s lawyers may finally be
able to demonstrate the falsification of “evidence” that led to the jailing of
Lula and also, among other developments, to the exile of Ecuador’s former
president Rafael Correa, the imprisonment of his former vice-president, Jorge
Glas, the imprisonment of Peru’s former president Ollanta Humala and wife and,
most dramatically, the suicide of Peru’s former two time president Alan Garcia.
Brazilian Patriot Act
The big political question now is not to uncover the master
manipulator who buried the Banestado scandal two decades ago.
As anthropologist Leirner detailed it, what matters is that
the leaking of the CC5 accounts focuses on the mechanism of the corrupted
Brazilian bourgeoisie, with the help of their political and judicial partners –
national and foreign – to solidify itself as a rentier class, but still always
submissive to and kept in check by “secret,” imperial files.
Banestado leaks and the CC5 accounts should be seen as a
political opening for Lula to go for broke. This is all-out (hybrid) war – and
blinking is not an option. The geopolitical and geoeconomic project of
destroying Brazil’s sovereignty and turning it into an imperial sub-colony is winning
– hands down.
A measure of the explosiveness of Banestado leaks and
CC5gate has been the reaction by assorted limited hangouts: thundering silence,
and that encompasses leftist parties and alternative, supposedly progressive
media. Mainstream media, for which former judge Moro is a sacred cow, at best
spin it as “old story,” “fake news” and even a “hoax.”
Lula is facing a fateful decision. With access to names so
far shadowed by Car Wash, he may be able to unleash a neutron bomb and pull off
a reset of the whole game – exposing a rash of Car Wash-linked Supreme Court
judges, prosecutors, district attorneys, journalists and even generals who
received funds from Odebrecht overseas.
Not to mention bring black market dollar king Messer – who
controls the fate of Moro – to the frontline. This means directly pointing a
finger at the US deep state. Not an easy decision to make.
It’s now clear that creditors of the Brazilian state were,
originally, debtors. Confronting different accounts it’s possible to square the
circle on Brazil’s legendary “fiscal imbalance” – exactly as this plague is
brought up, once again, with the intent of decimating the assets of the ailing
Brazilian state. Finance Minister Paulo Guedes, a neo-Pinochetist and Milton
Friedman cheerleader, has already warned he’ll keep selling state companies
like there’s no tomorrow.
Lula’s plan B would be to clinch some sort of deal that
would bury the whole dossier – just the way the original Banestado
investigation was buried two decades ago – to preserve the leadership of the
Workers’ Party as domesticated opposition, and without touching on the
absolutely essential issue: how Guedes is selling out Brazil.
That would be the line favored by Fernando Haddad, who lost
the presidential election to Bolsonaro in 2018 and is a sort of Brazilian
version of Michelle Bachelet, Chile’s former President. He’s an ashamed
neoliberal sacrificing everything to have yet another shot at power possibly in
2026.
Were Plan B to happen it would galvanize the wrath of trade
unions and social movements – the flesh and blood Brazilian working classes,
which are on the verge of being totally decimated by neoliberalism on steroids
and the toxic collusion of the US-inspired Brazilian version of the Patriot Act
with military schemes to profit from Cocaine Evangelistan.
And all that after Washington – successfully – nearly
destroyed national champion Petrobras, an initial objective of NSA spying.
Zanin, Lula’s lawyer, also adds – maybe too late – that the “informal
cooperation” between Washington and the Car Wash op was in fact illegal,
according to decree number 3.810/02.
What will Lula do?
As it stands, as a development of the Banestado leaks, a
first Banestado “VIP list” was gathered. It includes the current President of
the Supreme Electoral Tribunal, who also serves as a Supreme Court justice,
Luis Roberto Barroso, bankers, media tycoons and industrialists. Car Wash
prosecutor Deltan Dallagnol happens to be very close to the neoliberal Supreme
Court justice in question.
The VIP list should be read as the road map for the money
laundering practices of the Brazilian 0.01% – roughly estimated to be 20,000
families who own the close to one trillion dollar Brazilian internal debt. A
large part of those funds had been recycled back to Brazil as “foreign
investment” through the CC5 scheme back in the 1990s. And that’s exactly how
Brazil’s internal debt exploded.
Still no one knows where the Banestado-enabled torrent of
dodgy money actually landed, in detail. The “body bag” was never formally
acknowledged to have been brought back from New York and never made its way
into the criminal proceedings. Yet money laundering is almost definitely still
in progress – and thus the limitation period does not apply – so somebody,
anybody, would have to be thrown in the slammer. It doesn’t seem that will be
the case anytime soon, though.
Meanwhile, enabled by the US deep state, transnational
finance and local comprador elites – some in uniform, some in robes – the
slow-motion hybrid war coup against Brazil keeps rambling on, day by day
inching closer to full spectrum dominance.
Which bring us to the key, final question: what will Lula do
about it?
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