LAUNDERING DRUG MONEY?

ED BRADLEY : If you talk to some top US law enforcement officials, they'll tell you-mostly off the record-that the Clinton administration is afraid to get tough on corrupt Mexican officials who are involved in the drug trade for fear of endangering our commercial ties with Mexico, now our second-largest trading partner. Law enforcement officials cite the example of Operation Casablanca, an undercover investigation that ended two years ago and proved that some of the biggest banks in Mexico were helping the drug cartels launder drug profits.
(Footage of Bill Gately)
BRADLEY : (Voiceover) Bill Gately, the customs agent who ran Operation Casablanca, says the US government ignored what might have been a golden opportunity to follow the trail of drug corruption to the very top of the Mexican government. You felt that the Mexican government, part of it, was suspect, politically corrupt, that they would protect the drug dealers.

Mr. BILL GATELY: And there's a mountain of evidence to prove that they are politically corrupt and they do protect the drug dealers.

BRADLEY: Which is why Gately never told the Mexican government who his targets were. Casablanca was run both in Mexico and the United States and used surveillance cameras and hidden microphones to collect evidence against corrupt bankers and drug cartel members. To accomplish this, Gately needed an undercover informant to pose as a money launderer, so he recruited a Colombian who was familiar with the narcotics trade.

(Footage of surveillance tape)

BRADLEY: (Voiceover) What you're looking at is a videotape recorded by hidden cameras which the customs service planted in this Los Angeles storefront, where the informant was posing as a money launderer. On the tape the informant-he's the one we've highlighted-is meeting with corrupt Mexican bankers and cartel members. The informant had convinced them-and dozens of others-that he was a big-time operator who could set up secret bank accounts to hide drug profits.

The drug lords never figured out that he was working for you?

Mr. GATELY: Of course not.
BRADLEY: You said he had to be a good actor. He must...

Mr. GATELY: He had to be an excellent actor, because he only got one take.
(Footage of surveillance tape)

BRADLEY: (Voiceover)) At this meeting in March of '98, two Mexican bankers shocked Gately's informant by offering him a contract to hide more than $1 billion in drug profits. Even more shocking, the bankers are caught on videotape saying the money belonged to a Mexican general. When the undercover informant asked, 'Who is this general we've been talking about?'...
Unidentified Man : (Foreign language spoken)
(Footage of surveillance tape; Enrique Cervantes)

BRADLEY: (Voiceover) ...one of the bankers answers, 'From what we've been told, he's the secretary of Defense.' Mexico's secretary of Defense is Enrique Cervantes, the general the Clinton administration calls "Our partner in the war on drugs."

You say that the secretary of Defense, not by name, but by title, came up a number of times.

Mr. GATELY: That's correct. And when they first identify him by his title, that's the question the informant poses to the banker. 'Who are we talking about here?' 'We're talking about the secretary of Defense of Mexico.'
(Footage of Ray Kelly)

BRADLEY: (Voiceover) But customs Commissioner Ray Kelly insists the references to the secretary of Defense of Mexico were too vague to be credible.

Here's what you had to go on. First, you had several mentions on tape of the general by rank.

Mr. RAY KELLY (Customs Commissioner): No, by 'a general,' not by name.

BRADLEY: Right. Well, it's... Mr. KELLY: And also...

BRADLEY: No, no-but several times they said 'the minister of Defense.' Not by name but by rank.

Mr. KELLY: And they said-they said 'the secretary of state,' and they said 'the colonel,' and they said, 'the lieutenant,' and they said, 'the secretary to the secretary of State.' Those transcripts are very interesting. They lack specificity.

Mr. GATELY: It is very specific. All he has to do is read it himself. And if he has read it himself, and he says that to you, then he is distorting the truth.
(Footage of Larry Barcella; of transcript)

BRADLEY: (Voiceover) Larry Barcella, a former Justice Department prosecutor who reviewed the transcripts at our request, says the very mention of the secretary of Defense should have prompted a vigorous inquiry, no matter how many other people were mentioned.

Mr. LARRY BARCELLA: You've just identified the person's position. There isn't but one person that holds that position. You don't have to be a genius to be able to figure out who they're referring to.

BRADLEY: To find out if Cervantes was crooked, Gately had his undercover informant arrange a meeting, a conversation in Mexico with people believed to be the general's representatives, a meeting Gately planned to secretly videotape. But Gately says the top brass at customs denied his undercover informant permission to go to Mexico for the meeting. Because?

Mr. GATELY: Because it's too dangerous.
(Footage of traffic; Mexican citizens)

BRADLEY: (Voiceover) But Gately's informant already had made several more dangerous trips to Mexico to deliver laundered drug money to corrupt officials.
So why would they say, Don't go?'

Mr. GATELY: Because they didn't want it to happen. They just didn't want to do it.
(Footage of Cervantes)

BRADLEY: (Voiceover) Meanwhile, US intelligence agencies told Gately they had no evidence that General Cervantes was tied to any drug lords or wanted to launder money.

The fact is, isn't it, that you had suggestions, allegations, but no conclusive evidence about General Cervantes?

Mr. GATELY: One way you get conclusive evidence is to follow up on leads that are presented to you, such as the contract with these two representatives. They were offering us $1 billion.
(Footage of Gately; Cervantes; Ernesto Martin in surveillance tape)

BRADLEY: (Voiceover) Despite the instructions not to send his informant to Mexico, Gately was determined to find out if Mexico's secretary of Defense really wanted to launder $1 billion. So he had his informant, the one posing as a money launderer, con a cartel member, a man named Ernesto Martin, to go to the meeting in Mexico City and report back what they told him.

Mr. GATELY: He came back to us and he says, 'I met with them, the deal is real, but I-I'm recommending against getting involved in this contract because it's too dangerous.'
BRADLEY: Because what would happen?

Mr. GATELY: Well, what has happened in the past is that when the highest levels of the government are involved with the Mafia, people die. You make a mistake, people die. He didn't want to be one of those people. (Footage of Gately)

BRADLEY: (Voiceover)) Gately passed on Martin's report to his bosses in Washington, but that wasn't enough to convince them to continue the investigation of Mexico's secretary of Defense. Gately believes the Clinton administration just didn't want to antagonize a major trading partner.

Mr. GATELY: In every major briefing I attended, the concerns about economic impact and political consequences of this operation surfaced in those meetings; with the Justice Department, the Treasury Department, at lower levels within customs, it was brought up. These are prosecutors and law enforcement officials discussing economic impact and political damage. This is-this is not the purview of law enforcement.

BRADLEY: You could say unequivocally that the decision not to continue the operation and to go after these higher-ups was not the result of political pressure.

Mr. KELLY: Absolutely, it was not. Absolutely, categorically, there was no political pressure brought to bear in this investigation. None whatsoever.

(Footage of Kelly talking to Bradley)

BRADLEY: (Voiceover) Kelly says there were good reasons to shut the operation down.

Mr. KELLY : The primary reason was that lives were at stake. The lives of our customs agents were being put at risk because of the excessive numbers of leaks that occurred to the media.

(Footage of The New York Times building; ABC fag; Gately; Kelly; Barcella)

BRADLEY: (Voiceoverr) In fact, there were leaks. Reporters for The New York Times and ABC News were tipped off to the story long before Operation Casablanca ended. But Gately, Operation Casablanca's field general, says Commissioner Kelly never told him the investigation might have to be closed down because of leaks. And former prosecutor Barcella says in his 16 years working with undercover investigations, it was not unusual for reporters to get wind of clandestine operations.

Mr. BARCELLA: Simply the fact that the media is aware of aspects of an undercover operation is not, in and of itself, a reason to shut down an undercover operation.
(Footage of newspaper article)

BRADLEY: (Voiceover) In the case of Casablanca, the reporters had agreed to hold the story until the arrests were made.

Mr. BARCELLA: Most good news organizations understand that if they are premature in reporting, they not only ruin a law enforcement operation, but they may put lives in jeopardy.
BRADLEY: Do you know who was responsible for the leaks?

Mr. KELLY: I don't. I don't know who is responsible for the leaks. (Footage of John Hensley)

BRADLEY: (Voiceover) Gately says one of the leaks came from his own boss, John Hensley, who was then the head of customs in Los Angeles, and has since retired.

Mr. GATELY: An executive producer over at-at ABC News came to me and told me that John Hensley had leaked it to him.
BRADLEY: Identifying Operation Casablanca.
Mr. GATELY: Casablanca. Oh, none other.
(Footage of Kelly)

BRADLEY: (Voiceover) Gately reported that to Commissioner Kelly's top aide.

Did you take any disciplinary action against Mr. Hensley?

Mr. KELLY: No, I didn't.
(Photograph of Hensley receiving award from Kelly)

BRADLEY: (Voiceover) In fact, after Operation Casablanca ended, Commissioner Kelly presented Hensley with an award and a $20,000 bonus.

Mr. GATELY: Was he really concerned about leaks? He didn't punish anyone for leaking. He didn't hold them responsible during the leaks, after the operation was shut down, or at any other time.

(Footage of Gately; surveillance tape; CasaBlanca casino; people under arrest)

BRADLEY: (Voiceover) In May of'98, despite Gately's protests, Operation Casablanca was closed down. ABC News was on hand for Casablanca's grand finale, when they were tipped off that undercover agents had lured dozens of corrupt Mexican bankers and cartel members to a Nevada casino and arrested them for knowingly laundering drug money. In all, 168 suspects were arrested in Nevada and elsewhere. The arrests were a golden opportunity to pressure the suspects for information about government officials protecting the drug trade.

Was there any effort made to push these people, in return for a lighter sentence, to get them to give up more information?

Mr. KELLY: I'm not certain.
(Footage of court document; photograph of Martin)

BRADLEY: (Voiceover) Several top law enforcement officials tell us they were astonished that hardly any effort was made to pressure indicted suspects to testify against higher-ups in the drug cartels and the Mexican government. For instance, one of the indicted suspects was Ernesto Martin, the man Gately's informant sent to Mexico to meet with the people claiming to represent the secretary of Defense.

Mr. GATELY: Deals were made with Martin so-for his testimony against a couple of bankers. But he was never even asked what his dealings were with the representatives of the general's people in Mexico City.

BRADLEY: In the end, not one indicted suspect testified against anyone who hadn't already been arrested. The arrests-based in part on the work of undercover US agents in Mexico-triggered diplomatic protests that Operation Casablanca had violated Mexico's sovereignty.

(Footage of President Bill Clinton; Madeleine Albright; Barry McCaffrey)

Mr. GATELY: (Voiceover) There was a hue and cry, not only from the Mexican government at every level, including the president, but our own secretary of state, Madeleine Albright, our drug czar, General McCaffrey.

Both took the side of the Mexican government, also hammering the operation. So I believe that everyone thought that that meant Mexico gets a pass, 'You don't follow up on this stuff. Nobody cares. We don't want to hear about it.' So they didn't follow up on it.
(Footage of Janet Reno)

BRADLEY: (Voiceover) Attorney General Janet Reno even signed an agreement which assured Mexico that the US would never again mount an undercover operation in Mexico without first telling the Mexican government. In other words, no more Casablancas, even though the attorney general and Commissioner Kelly acknowledged that Operation Casablanca had accomplished something unprecedented in US law enforcement.

Mr. KELLY: Bill Gately did a fine job in this investigation. (Footage of document with Gately's name on it)

BRADLEY: (Voiceover)) And when it was over, Commissioner Kelly awarded Gately a merit certificate and a $10,000 bonus.

Mr. KELLY: Bill Gately was clearly a-a major mover, a motivator for the investigation.

BRADLEY: Is anyone more responsible than Gately, any one person more responsible?
Mr. KELLY: As far as I know, no.

Mr. GATELY: It is the only time that law enforcement has had an opportunity to deal directly with that kind of money and those people who protect the Mafia and the financial institutions in Mexico. It's the only time.

BRADLEY: So this was a big chance for the United States, and you're saying that US law enforcement blew it.
Mr. GATELY: They blew their biggest chance.

BRADLEY: In a letter to us, the Mexican government says the allegations against General Cervantes are unfounded and false and points to US rejections of those allegations as unsubstantiated and speculative. And even though no one has ever produced evidence that Cervantes is actually involved with narcotics, when Bill Gately became convinced that the US was not going to investigate further, he resigned from the customs service. (Announcements)