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Two Police Agencies Built a Money-Laundering Machine

Officers spent money during an undercover sting operation from a pool of funds that was never examined by federal investigators.

(Image: Money counting via Shutterstock)

For a police force in a small community of oceanfront condominiums and elegant boutiques, the plan was ambitious: a sting operation to take on some of the nation’s most dangerous drug organizations.

In need of a partner, Bal Harbour police reached across the state to an agency on the edge of the Everglades: the sheriff’s office of Glades County.

Posing as money launderers, the two became unlikely allies in a task force that took in more than $55.6 million from drug cartels and other criminal groups, while traveling across the country on dozens of first-class and business flights and frequently staying at luxury hotels.

By the time it ended in late 2012, the Tri-County Task Force made no arrests or major drug seizures, leaving those duties to federal agents.

For their role, the police laundered the money through hundreds of bank accounts – taking at least $1.7 million for themselves for brokering the deals- then returned the rest to the same criminal groups selling drugs in US cities.

Three years after the task force ended, confidential records show officers withdrew hundreds of thousands in cash with no records to show where the money went.

“They were like bank robbers with badges,” said Dennis Fitzgerald, an attorney and former Drug Enforcement Administration agent who taught undercover tactics for the US State Department. “It had no law enforcement objective. The objective was to make money.”

For nearly three years, the undercover officers and their informants – some using fake identities – struck deals with the drug organizations, charging them commissions to launder their money in what became the largest state undercover operation in decades, records show.

Along the way, the task force spent tens of thousands on trips to Las Vegas and San Juan, and purchased expensive items like Mac computers and FN P90 submachine guns.

The 12-member task force drew the attention of the Department of Justice three years ago in an investigation that found Bal Harbour misspent money from seizing cars and cash to pay for police salaries, leading to the resignation of Police Chief Tom Hunker in 2013.

But an investigation by the Miami Herald found officers spent far more money during the undercover sting operation from an entirely different pool of funds that was never examined by federal investigators.

Two months after the Herald began its examination, Bal Harbour ordered the first ever audit of the millions that once flowed into undercover accounts at SunTrust Bank in Bal Harbour during the laundering sting from 2010 through 2012.

Money on the Table

Mark Overton, a veteran Miami law enforcement commander hired as Bal Harbour police chief last year, said auditors are still trying to track the money placed in accounts at the bank just a block from police headquarters. The total amount recovered: $245,000.

Under state law, police are allowed to set up sting operations to take on the scourge of drugs and money laundering in Florida. In their roles, police are even permitted to charge the criminal groups a commission, like any money launderer, and keep the money for evidence.

But at every step, the officers turned the undercover unit into an unchecked ATM for their task force and informants, with little attention to making their own arrests as they collected drug cash in places as far away as San Juan and New York.

The Miami Herald gained unprecedented access to the confidential records of the undercover investigation, reviewing thousands of records including cash pickup reports, emails, DEA reports, bank statements and wire transfers for millions of dollars. The inquiry found:

  • Police routinely withdrew cash – thousands at a time – totaling $1.3 million from undercover bank accounts, but to this day there are no records to show where the money was spent. “In all my years of law enforcement, I’ve never seen anything like it,” Chief Overton said.
  • Bal Harbour officials say they cannot find receipts for hundreds of thousands in expenses, including five-star hotel bookings, dinners that ran up to $1,000 and scores of purchases like laptops, iPads, electronic money counters, flower deliveries and even iTunes downloads.
  • While posing as launderers, police delivered nearly $20 million to storefront businesses in Miami-Dade to launder the money for drug groups – gathering critical evidence against the business owners – yet took no action against them. Years later, the businesses are still open, some still suspected by federal agents of laundering for the cartels.

In addition to the Herald’s findings, auditors hired by Bal Harbour have found even more transactions that have raised troubling questions among village administrators, prompting them to widen the scope of their own inquiry.

After gaining access to reams of bank documents, auditors discovered the task force took in millions more dollars than what it reported, possibly for additional laundering deals with criminal networks, according to confidential sources.

So far, examiners have found that cash deposits were made totaling $28 million in SunTrust that do not appear anywhere in the records created by the police. Just the amount of money turned up “is shocking,” said Overton, in light of police duties to mark such large sums.

Overton, 52, declined to comment on details of the audit, but said it was “turning up more questions than answers. The fact that there are no records makes it very difficult to answer any questions.”

For more than a quarter century, local police have carried out undercover laundering stings to win the confidence of criminals, mostly under the direction of prosecutors with help from the DEA.

Though the Tri-County Task Force worked with the DEA, the unit was not overseen by prosecutors, nor did it operate with strict financial controls, including yearly audits.

In 2012, top leaders of the DEA ordered the unit to seek special permission from state prosecutors before the undercover cops continued to fly outside Florida to carry out deals with criminal groups with the help of federal agents, according to emails obtained by the Herald.

But the task force continued to pick up millions in drug money without approval, jetting into cities like Chicago and New York and meeting with the money couriers in quiet neighborhood and strip center parking lots, task force records show.

One veteran Miami criminal lawyer said the Justice Department should have questioned much earlier why a task force from two small communities with no money-laundering problems was flying across the country to collect cash belonging to drug cartels. In 2012, the task force’s final year, Bal Harbour reported just one violent crime – an aggravated assault – in the village of 2,500 people.

“Bal Harbour is this beautiful town that has absolutely no crime, and it’s investigating money laundering?” asked Robert Amsel. “I’m not even sure they need a police department. Why do they need machine guns? It’s outrageous.”

Defending the Objective

Hunker, 64, a veteran commander who spent years as a narcotics officer in Miami Beach, said the millions in deals his agents reached with criminal groups were all properly documented, and the money detailed in records.

As the former police chief of Bal Harbour, he said he was not involved in the day-to-day decisions of the unit, but his officers would have followed a routine: tracking the money.

He disputed the findings that an additional $28 million was raked in by the task force. “There’s no way,” he said. “I know the numbers.”

As far as the task force not making any arrests, Hunker said the goal was to infiltrate the drug networks by posing as money launderers – a classic undercover tactic – then pass the intelligence to federal agents.

He said Bal Harbour became involved in the operation “because we had the snitches,” referring to informants he had worked with over the years with ties to criminal groups. “It’s no different than Crime Stoppers. If you get information about a murder in Chicago, aren’t you going to call police and tell them about it?”

A former commander of South Florida IMPACT – another undercover unit – Hunker said the information his officers passed on to federal agents when picking up drug cash in other cities led to numerous arrests and the seizure of large quantities of heroin and cocaine. A task force report in 2012 said the arrests topped 200.

“We’re not doing this just for the money,” Hunker said. “We’re doing this because it’s an alternative way to stop drug trafficking.”

However, agents at DEA headquarters said they could not confirm arrest figures or drug seizures that came from tips from the Tri-County Task Force, which, despite its name, never involved officers from more than two counties.

“There were arrests, we can say that, but there’s no way we can validate those numbers. We have no idea what they are basing those numbers on,” said Rusty Payne, a DEA spokesman.

The task force did not document the names of the 200 people who were arrested.

One former DEA supervisor said the task force helped his team with cases that sparked arrests and raids for drugs and cash in Atlanta. “They would come to us and say, we have this opportunity, here’s a target that’s operating in your area of responsibility. We would evaluate that target,” said Richard Crock, now retired from the agency.

He said he could not recall the number of arrests and no longer has access to records, but said his agents achieved “significant results” with the Florida cops.

The Tri-County Task Force was launched at a time law enforcement agencies across Florida were looking to boost their budgets during one of the state’s toughest economic periods. The foreclosure crisis took a toll on property values, prompting a plunge in home prices in nearly every county.

Because of a relationship between Hunker and Tommy O’Keefe, a former Miami-Dade officer working for Glades County, the two sides agreed to launch an investigation to tap into a program called Equitable Sharing. Under the plan, local police can claim seized property – cash, cars, boats – in federal court and then share the proceeds with the Justice Department.

Hunker had spent years cultivating ties to confidential informants who could break into the network of the drug cartels.

For Glades, one of the poorest counties in Florida, its involvement was simple: It needed the money. “We had to find a revenue stream,” said Duane Pottorff, chief of law enforcement for Glades. “It allowed us to have resources we wouldn’t normally have.”

With just 18 deputies, Glades had a limited staff to devote to the task force, but it agreed to play a critical role: Sheriff Stuart Whiddon had the power under Florida law to deputize people from outside his agency.

By swearing in two retired officers living in New York, Paul Christensen and Fidel Devivo, the task force could bring in new cases from the north, where Mexican drug cartels were reaping millions.

Fitzgerald, the former DEA agent who wrote a textbook on undercover stings, said the move to deputize people so far from home was driven by a law enforcement model that’s built on generating income. Neither officer had ever worked in Florida. “It was strictly for the money,” he said. Christensen and Devivo could not be reached. Sheriff Whiddon declined to be interviewed.

The Counting House

The task force set up shop in in a beige trailer with tinted windows across from the Bal Harbour village offices, and within days, members began reaching criminal groups in a string of deals that would soon rival any undercover operation in the nation in the amount of dollars brought in.

A review of confidential task force records, bank wire instructions and emails shows the unit was striking two deals a week on average, and sometimes jetting into two states on the same day.

The first took place in February 2010 in Houston, where two sergeants picked up a red suitcase stuffed with cash – $460,458 – with the help of DEA agents, and then flew back to Bal Harbour with the money.

After returning to the trailer, they carried out what became a ritual: counting and photographing the bundles, then driving them down the street to SunTrust, where police opened accounts under shell company names.

A week later, the next pickup was in San Juan – a container filled with $499,860 – and another one five days later in Houston for hundreds of thousands. In nearly every deal, the police took their cut off the top – about 3 percent – in a pool of money that would soon reach hundreds of thousands.

The money came in different containers, including a Gucci gift box, a Chicago Bears T-shirt, a tortilla box and a JanSport backpack. In a leafy neighborhood in Queens, NY, in 2010, officers picked up $152,740 delivered by a woman pushing a baby stroller, reports stated.

After every pickup, the task force would also get its instructions from money brokers working with the criminal groups about where to send the drug cash to launder.

Hundreds of times, the orders would be to wire the money into the bank accounts of Miami export shops and storefronts – some of the businesses secretly helping to hide the drug cash, records and interviews show.

While the officers were creating records for some deals, another trend was unfolding that would not be discovered until recently by auditors.

For months at a time, officers swept into cities to pick up cash for laundering deals but did not report the money coming in. At least 30 times, they deposited hundreds of thousands in the bank and even wired the money to storefront businesses to launder, sources said.

In the first three months of 2012, officers moved $1.1 million into banks and businesses to conceal the drug cash for the criminal groups, but never documented their actions.

They did it again from June to August of the same year: flying across the country, according to travel records, followed by massive amounts of cash placed in their accounts at SunTrust in deals that topped $1.4 million.

The task force says it carried out 235 deals with drug groups during the three years it operated, but auditors have turned up dozens more cases never reported, totaling $28 million, confidential sources said.

The creation of records is one of the most critical duties of a task force, because agents are empowered to break the law and launder money through US banks to snare criminals, said former DEA agents. Perhaps the more pressing issue: How much the officers kept for their commission. At 3 percent of the total, it would have been in the hundreds of thousands of dollars.

“It’s as bad as anything I have ever heard in my career,” said Michael Levine, a former DEA agent who once conducted internal affairs investigations for his agency. “You have to document every dollar. Every email. Every phone call. It’s infuriating.”

With the number of pickups rising, so did expenses for a unit that was traveling most of the time outside Florida, records show.

Instead of paying for the operation from police budgets, the task force turned to the drug cash – evidence money that was only supposed to be spent with a court order, according to legal experts.

Without court approval, officers charged airfare, hotels, food and rental cars to the commissions reaped by the task force for laundering the cash.

They flew nearly 40 times on first-class or business premium flights. They stayed at places like the Bellagio in Las Vegas and the Rincon Beach Resort in Puerto Rico, charging tens of thousands for the trips. They dined at restaurants like Morton’s in North Miami Beach and the Chop House in Chicago.

The officers flew to Las Vegas for training school in 2010, staying at the Mandalay Bay Resort & Casino, charging $9,410 in hotel expenses, and at home they spent $2,094 for scattered bookings at the One Bal Harbour, now a Ritz-Carlton. They spent $25,000 on weapons and $100,000 in laptops and other electronics.

They also began withdrawing large amounts of cash from the bank – at least a dozen times without filing any documents to show how the money was spent. In all, the Herald found that officers took out $547,000. In addition, auditors have turned up more money withdrawn: $800,000, with no supporting records.

“They would have sent me to prison,” said Bill Gately, a former US Customs agent who supervised the largest undercover operations in his agency’s history. “Every dime we generated was approved by auditors. You can’t just spend it.”

By the end of 2011, the task force members were juggling major deals, sometimes several a week.

Officers found they needed to move quickly or the criminals would turn to others to launder the money. “Things were moving so fast. They were going from nickle-and-dime to million-dollar deals,” said Pottorff of Glades County.

In three years, Bal Harbour police overtime doubled, with six officers charging $558,000 for duties that included collecting the drug cash and counting it in the trailer, a task that could take hours at a time. In one year, 2012, Sgt. Paul Deitado, the task force team leader, racked up 933 hours, boosting his regular pay by 76 percent to $153,394.

Jerry Speziale, a former agent who served on a DEA task force, said the number of deals was alarming because it did not appear the task force was taking the time to investigate its own cases. One cash pickup can propel agents to spend months on a single case until the criminal organization is infiltrated.

Speziale said most task forces need to manage themselves so they stop the pickups and focus on the endgame: arrests. “You have to start focusing on the investigations,” he said. “You can’t just do pickup after pickup after pickup. You can’t just be driven by the money. How else are you going to infiltrate and dismantle a trafficking group?”

Emails obtained by the Herald show the unit was passing along information to DEA agents in Atlanta and New York to investigate cases, arrest drug suspects and seize their cash. But in three years, it made no arrests of its own.

The rule of any undercover unit is to seize far more money from criminal groups than what a task force launders and returns to the streets.

But that didn’t happen. The task force passed on tips that led to federal agents seizing nearly $30 million from criminal groups in 2010 and 2011, records show. But during that same period, it laundered $50 million – far more than what was taken off the streets.

While the officers were striking deals, another practice was taking place that was creating potential dangers for other agents outside the task force.

In early 2010, the officers began sending millions to banks overseas in countries like Panama and China in laundering deals without alerting the DEA, creating potential hazards for other agents who may have been zeroing in on the same targets, said Justice Department reports.

Hunker, who denied the claims, said the only money he knew that was sent overseas was to pay informants for steering deals to the cops, but that he was not aware of every wire. The Herald found 138 payments totaling nearly $7 million into accounts of people and businesses.

Levine, the former DEA internal affairs agent, said the task force would have been breaking the law unless it received permission from the federal government. “You could be jeopardizing the life of an undercover agent,” he said. “It goes against every standard of training.”

Outside Scrutiny

Not until Justice Department examiners came to Bal Harbour to conduct a routine inquiry into the police program for seizing property and cash did the task force come under the scrutiny of an outside agency.

In early 2012, the Office of Inspector General began combing through the records of the Bal Harbour police’s participation in the seizure program that allows the police to share money with the Justice Department.

What dominated their attention, however, were the money-laundering activities. Twice, agent Matthew McCloskey tried to probe into the operation – even questioning the legal right of a task force to work outside Florida. But for several months, he could not get key questions answered, according to emails.

“The main question never addressed was the number of money-laundering transactions,” wrote McCloskey that summer in an Aug. 10 email to Deitado, the team leader. In an earlier question to Deitado, he asked: “Under whose authorization has Bal Harbour received to launder drug proceeds?”

With heated concerns, the DEA imposed a new rule: Brian M. McKnight, financial operations chief, said the task force would now need a signed letter from the Miami-Dade state attorney or the state attorney general to keep picking up drug cash with the help of the DEA, according to a Sept. 14, 2012, email.

However, no such permission was granted, said spokespersons from both offices.

With millions of dollars at stake, Chief Hunker reached out to Amos Rojas Jr., a supervisor with the Miami-Dade state attorney’s office. “Amos,” he wrote five days after the new rules were imposed, “Let me know on this!”

But it’s not clear what action Rojas took, if any, to help the Tri-County Task Force. Now US marshal for South Florida, Rojas declined to be interviewed.

Two days after Hunker sent the email, the task force flew to Chicago to get another bundle – $99,030 – with help from Immigration and Customs Enforcement agents and the Cook County Sheriff’s Office.

Still lacking approval, officers returned to New York in October to pick up $498,000 with help from DEA agents, records show. Before the month was over, officers returned to New York five more times to pick up nearly $700,000.

Rusty Payne, the spokesman for DEA, said members of his agency worked with the task force to finish “the investigations that had already been underway” in New York and could not pull out until those cases were finished. Mia Ro, a spokeswoman for the Miami DEA, said her office stopped working with the task force in September 2012 when it failed to produce a letter from state prosecutors.

Stinging Report

The Justice Department wrote a scathing report the next month, criticizing Bal Harbour village for using seized cash to pay for salaries of two task force members. As for the money-laundering operation, the DOJ found sweeping deficiencies, including poor record keeping, no money-laundering arrests and operating the task force without any oversight by prosecutors.

Although federal agents noted the millions flowing into the task force’s bank accounts were never audited, the DOJ never did its own audit, either.

Under questioning by the DOJ, task force members said the total amount they laundered was $56 million, but records now being examined by auditors show the number was far higher – possibly $83 million, with no records to account for the difference.

“It’s troubling,” said Jorge Gonzalez, the Bal Harbour village manager who was hired after the task force disbanded. “It was all done completely outside of the sunshine.”

Shortly after the task force disbanded three years ago, the FBI began a probe of the police force in 2013, including the money-laundering operation. The investigation ended last year when the local office of the FBI said prosecutors determined the case did “not appear to be a violation within the FBI’s jurisdiction,” wrote George L. Piro, special agent in charge, in a letter. At no time did the FBI conduct an audit of the task force finances, records show.

Levine, former investigator for the DEA’s Office of Professional Responsibility, said the lack of an audit by the FBI “was like finding a dead body, and then not taking fingerprints, blood spatter, DNA and all the other forensics you do. It’s unbelievable.”

Overton said he asked the FBI last month to review the most current audit results, but said the examination by Bal Harbour will not conclude for several months. The next step: questioning members of the unit, including Hunker.

Most commanders are no longer on the force: Hunker resigned under pressure in 2013 after the DOJ inquiry. Capt. Greg Roye resigned last year after Overton was hired as chief. Roye, 49, declined to be interviewed. Deitado, 43, who did not respond to interview requests, resigned in October.

Other members still in the department, Sgt. Edwin Vargas, Detective Hector Gonzalez, and Officer Paul Eppler declined to be interviewed. Sgt. Alejandro Alvarez resigned in 2013 and could not be reached.

In the meantime, Overton has returned the police to their primary mission: patrolling the oceanfront community. The department’s foray into the world of money laundering “wasn’t within the realm of reason,” he said.

Fitzgerald, the retired DEA agent, said ultimately his former agency bears a share of the responsibility for allowing Bal Harbour officers into places thousands of miles from their small Florida town and helping them pick up cash.

“It’s just unbelievable. It couldn’t have gone on without the complicity of the DEA,” he said, adding the agency never stopped to vet the amount of money Bal Harbour had actually laundered for criminals. “They couldn’t have been flying around the country picking up cash without the DEA.”

He said until the millions taken in by the task force are accounted for, questions will abound over how much was laundered and how much was spent. “It’s follow the money. Follow the money,” said Fitzgerald. “It’s one of the oldest sayings in investigative work.”

Miami Herald staff writer Daniel Chang contributed to this report.

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