Source: New York Times Author: Larry Rohter Contact: Pubdate: Sunday, January 18, 1998 CARTELS MAY USE GOLD TO LAUNDER PROFITS GEORGETOWN, Guyana -- An airline pilot was arrested after the suitcase he was taking aboard a plane he was about to fly was found to contain 155 pounds of gold. Eight businessmen are facing charges that they smuggled more than a ton of gold to the United States, and rumors abound that a list of other offenders has been compiled. In mid-1995, American officials told the authorities here of a sharp surge in the amount of Guyanese gold being declared to U.S. Customs in Miami and in New York, whose metropolitan area is home to some 100,000 Guyanese immigrants. A result has been a still-unfolding scandal that suggests that Colombian and Bolivian drug cartels have found yet another way to launder their profits: through exports from this small, dirt-poor South American country. "If this were just about the smuggling of gold, the United States wouldn't be interested," said Edward Shields, director general of the Guyana Gold and Diamond Miners' Association. "The Guyanese government is being pressured because of America's concerns that finances derived from these operations are being used for other ends." As Guyanese authorities and gold miners tell it, drug dealers buy gold from local prospectors and assayers, who agree to smuggle it for them to the United States. The bulk of the money from sales there and in Europe or India is then deposited in cartel-controlled bank accounts, with the Guyanese middleman keeping 15 or 20 percent. Guyanese officials have estimated that at least a quarter of the country's total gold production between 1990 and 1995, or some 100,000 ounces with a market value of more than $35 million, may have been smuggled out. It is not a violation of American law for Americans or foreigners to take large amounts of gold into the United States so long as they declare the market value to customs officials on entry. For the United States to have alerted Guyana to the traffic, and since then to have cooperated in additional, still unspecified, ways, is therefore unusual. "Any time you have vast quantities of any product going from one country to another, you have the possibility of money laundering," an American official explained. The Guyana Gold and Diamond Miners' Association, which represents prospectors and dealers, challenges the laundering explanation, suggesting that Guyanese businessmen may simply have bought the gold in Brazil or Venezuela. It notes that American records indicate large amounts of gold are also imported from nearby Trinidad, a country with no production of its own. Nevertheless, gold smuggling has a long history in this former British colony. During the 1980s, in particular, Guyanese prospectors considered it a point of honor to evade government controls, which required them to sell their production to the Guyana Gold Board, the government agency that regulates sales. The board set a price, calculated in the weak local currency, that was half that of the international market and well below the prospectors' production costs. Nowadays, the board pays the going market rate to registered prospectors and that has led declared production to quadruple. But smuggling continues, officials and miners agree, in large part because some prospectors resent having to pay a 7 percent royalty to the Gold Board as well as taxes on whatever mining income they declare. In recent months, the price of gold has dropped sharply, to less than $300 an ounce. But that decline is unlikely to deter any Guyanese prospectors and gold dealers who are working with the drug cartels, said Joseph de Agrella, a former gold smuggler who until recently was a member of the Gold Board. "The money launderers here are not looking for a profit from the sale of gold," he said. "They're just looking to bring money into the United States, and as long as they keep getting their 20 percent cut, they're going to be satisfied." Guyanese miners argue that the best way to fight the combination of low prices and smuggling would be to remove, or at least temporarily suspend, the royalty payment. "Otherwise, a lot of operators are not going to be able to remain open during 1998," said Stanislaus Jardine, president of the gold miners' association. On the Essequibo River, where powerful dredges suck muck from the river hoping to find bits of yellow nuggets and dust, the same complaint is echoed. "This whole year, we have taken a lot of punches and suffered a lot," said Lenny Parsram, a dredge operator who like most of his fellow workers earns not a fixed salary but a percentage of whatever his boss makes. But President Janet Jagan said she saw no need to change the current policy. "How can you allow your natural resources to be extracted without anything going to the Treasury?" she asked in an interview just before the Dec. 15 election in which she won a five-year term. "That's nonsense." "They have been doing well," she said of gold miners. "They'll get over it." Copyright 1998 The New York Times Company