Brazil’s money laundering scandal from hell
With no one eager to talk about the revelations, the question is what will ex-president Lula do about it
By PEPE ESCOBAR JULY 23, 2020
See no evil? Former Brazilian president Luis Inacio Lula da Silva reacts during an event focused on global unions at the Geneva Press Club on March 6 in Geneva. Photo: AFP / Fabrice Coffrini
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.
Former Brazilian minister of justice and public security Sergio Moro is seen on a laptop’s screen as he speaks during a video interview with AFP from Curitiba, Parana state, Brazil, on July 6. Photo: AFP / Mauro Pimentel
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.
With no one eager to talk about the revelations, the question is what will ex-president Lula do about it
By PEPE ESCOBAR JULY 23, 2020
See no evil? Former Brazilian president Luis Inacio Lula da Silva reacts during an event focused on global unions at the Geneva Press Club on March 6 in Geneva. Photo: AFP / Fabrice Coffrini
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.
Former Brazilian minister of justice and public security Sergio Moro is seen on a laptop’s screen as he speaks during a video interview with AFP from Curitiba, Parana state, Brazil, on July 6. Photo: AFP / Mauro Pimentel
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.
