Party Vibe

August 2002

http://www.dea.gov/pubs/intel/02026/02026.html

Overview

In 2001, 80 percent of Southeast Asian (SEA) opium and heroin was produced in Burma; and Southeast Asia and Southwest Asia accounted for 93 percent of the opium produced in the world. The other 7 percent was produced in South America (Colombia) and Mexico. Although high-purity SEA heroin is still available in the eastern United States, which has the nation’s highest concentration of heroin users, it had dominated that market during the late 1980s and early 1990s. Since then, however, heroin from South America has become the most widely available type in the East. In the West, Mexican heroin has been and continues to be the predominanttype available. Although no significant seizures of SEA heroin have been made in the United States in recent years, numerous SEA heroin seizures have occurred in both Australia and Canada.

Southeast Asian (ethnic Chinese) drug traffickers are known to engage in complex conspiratorial limited partnerships for the purpose of accomplishing specific goals. After the goals are met, the partnerships are dissolved. The objective of these partnerships may be one drug transaction, a series of transactions, or a specific smuggling venture, involving a number of original conspirators as well as a number of shareholders or investors. At other times, limited partnerships are formed for no reason other than the traffickers need each other’s services.

An investor in a Southeast Asian heroin smuggling partnership pays for a specific number of shares or heroin units (each unit is 700 grams). He also pays a transportation fee, a selling fee, and a remittance fee for returning the proceeds back to Southeast Asia. The investor will receive a set amount of the profits for his initial investment. The investor will at least double his money in a short period of time, while taking very little risk.

This brief describes a hypothetical scenario of six individuals who form a limited partnership to complete a SEA heroin smuggling venture to New York.

The Roles of the Partners in the Conspiracy

Conspirator #1 Is the Originator of the Partnership. He knows that money can be made by obtaining pure heroin at the refinery-level price of, for example, between US$3,000 to US$4,000 per 700-gram unit. This same unit of heroin—a unit of heroin with purity of between 85 and 90 percent—would sell in New York at a wholesale price of between US$60,000 and US$65,000. He brings together other individuals with money and connections to help him make a large amount of money in a relatively short period of time. After this smuggling venture is concluded, the first conspirator, most likely, will no longer be involved with the other five associates; the other associates now have direct access to each other and can put together future ventures without him. The first conspirator may take his proceeds from this venture and find others to form another limited partnership. Conspirator #1 is the only partner who has no opportunity to cheat the others in this venture.

Conspirator #2 Has Access to Heroin. The second conspirator knows high-level traffickers (possibly relatives) or associates who have access to heroin at the refinery level. If he does not personally know, or have direct access to a refinery, he may go through an associate who is a sales representative for a particular heroin organization. At this point, Conspirator #2 may gain more profit by skimming an amount off the price of each unit purchased; that is, he purchases the heroin for a certain price and quotes a higher price to the remaining conspirators. By skimming money off the cost of each unit, the second conspirator may acquire additional units of the entire shipment. Conspirator #2 can also negotiate the profit margin the original shareholders will receive. If the second conspirator does not divulge his source of supply (SOS) to the others, his usefulness has not been diminished and he remains a valuable component to any future smuggling conspiracies.

As part of the agreement to furnish heroin to the original group of six, the SOS may want to be included in the smuggling venture. For this inclusion, he may sell the heroin to the group at a lower-than-wholesale price. The SOS may be willing to become a partner with the second conspirator and a shareholder in the entire shipment. This silent partner could become the largest shareholder in the smuggling venture, unbeknownst to the others in the original group.

Conspirator #3 Has Access to Money. The third conspirator knows an individual or individuals with access to large amounts of money. He quietly advertises that he is looking for anyone willing to invest money with him, and tells them that they can double their money in a relatively short period of time (3 to 4 months). The third conspirator, like the second conspirator, accepts silent partners who are unknown to the other five, and he may also negotiate the profit margin of each shareholder. The third conspirator may well be one of the largest share holders of the original six conspirators. The role of Conspirator #3 is important only if the other five conspirators do not have the capital for the necessary business expenses to undertake the smuggling venture.

Frequently the investor in a drug smuggling conspiracy does not know, or want to know, the details of how his money is used; he does not know that his money is invested in an illegal smuggling venture.

Conspirator #4 Has Knowledge of a Proven Smuggling Method. The fourth conspirator knows a proven method of smuggling heroin to New York from Southeast Asia. This method may include commercial air cargo, commercial maritime cargo, merchant seaman, and/or couriers. The most successful method for shipping heroin in amounts over 25 kilograms is by containerized maritime cargo due to the sheer volume of containerized maritime cargo that enters the United States each day. Canada, Mexico, and countries in Asia, especially China, export large amounts of commercial cargo into the United States and Canada on a monthly basis. The vast amount of cargo imported from China alone provides an excellent opportunity to conceal contraband. Conspirator #4 may have set up a system of bogus export companies in Southeast Asia that send commodities to bogus import companies in thetates or Canada. These companies may exist for the sole purpose of smuggling heroin into the United States and exporting money (proceeds) back to Southeast Asia.

If the fourth conspirator does not have a system of companies, he may have an associate (facilitator) who will smuggle the entire shipment into the United States for a set fee. This facilitator will be paid between US$5,000 and US$10,000 per unit of heroin. If, for example, there were 200 units in the shipment, the facilitator could receive as much as US$2 million. However, all expenses involved in establishing front companies, arranging transportation, and any other business expenses incurred in getting the shipment to New York and the broker are borne by the facilitator. The facilitator is paid in cash, or in units of heroin, or in a combination of both cash and heroin, depending on the agreement with Conspirator #4. The facilitator is a silent partner with the fourth conspirator. The fourth conspirator and the facilitator should be the only individuals who know precisely how the heroin will be smuggled, the exact date of departure from Southeast Asia, and the exact date of arrival in New York. The fewer people who know any details of the smuggling method, the greater the chance for success. The fourth conspirator is vital to any smuggling venture.

Conspirator #5 Has Knowledge of a Heroin Distributor.The fifth conspirator knows ethnic Chinese traffickers in the United States who will agree to purchase heroin for resale in New York. These traffickers may or may not be known to the other conspirators. These ethnic Chinese brokers are willing to purchase SEA heroin #4 for between US$60,000 and US$65,000 per unit, for example, delivered in New York. They will then sell the pure heroin #4 for as little as US$70,000 to US$80,000 per unit. This heroin will be sold within 1 to 3 days of delivery, most likely in less than 24 hours. The approved market price per unit in New York is the determining factor for all profits realized by the original six conspirators and their silent partners.

NOTE: The Chinese broker in New York need only know the fourth conspirator if he (the fourth conspirator) has a SOS and the capital to finance a smuggling operation. The broker could realize an even larger profit of more than US$30,000 per unit if he (the broker) also had the method to smuggle the heroin into the United States. If the broker has the capital, as well as the SOS and the smuggling method, he could sell the heroin for as little as US$55,000 to US$60,000 per unit, not the higher price of US$80,000. In essence, the broker’s profit margin could be higher by selling the heroin at a cheaper price.

Conspirator #6 Has Contacts for Remitting the Proceeds to Southeast Asia. The sixth conspirator may be the actual money facilitator or an associate of the money facilitator. He receives the agreed-upon price for the shipment of heroin at the time of delivery by whatever arrangements were made between the conspirators and the broker. Arrangements are made to pay the facilitator within 1 to 3 days in order to remain in the good graces of this valuable member of the partnership. The sixth conspirator has the knowledge and the contacts for remitting money back to Southeast Asia, possibly through the Chinese Underground Banking System (CUBS), commercial banking system, or by smuggling money via courier or containerized cargo.

The amount remitted to Southeast Asia is determined in advance and forwarded to one account or numerous accounts at banks in Southeast Asia. The money may also be deposited into accounts in the United States, and ultimately sent to Bangkok. Many times, banking institutions in Singapore or Hong Kong are utilized to remit proceeds to Bangkok. Jewelry stores, gold shops, and travel agencies are also favored businesses for laundering money. The amount of money deposited will vary based upon the number of shares (units) held by each of the original conspirators. Each conspirator with silent partners must remit funds to those partners’ accounts as originally agreed. For his services, the remitter will receive an agreed upon percentage of the total amount of funds remitted to Southeast Asia.

The Chinese Underground Banking System

The CUBS is utilized by ethnic Chinese criminals to avoid the commercial banking system when drug-related proceeds are being laundered. This relatively unregulated but organized banking system (based upon family and business associations) makes it very difficult to trace a specific monetary transaction. Minimal records are maintained; the system relies instead on the trust that exists in these largely familial organizations. In essence, the underground banker is given money and the name and phone number of the receiver in Southeast Asia. The sender is given a receipt, which has no legal authority, but serves only as a reminder that CUBS has the sender’s money. Once the money is transferred to Southeast Asia, the receipt is presented and the money is retrieved, minus a nominal fee.

Conclusions

The scenario described in this brief depicts one drug smuggling venture involving six conspirators who form a limited partnership with each other and, at the same time, sometimes individually with hidden silent partners. On many occasions, when law enforcement officials intervene by seizing the heroin, the most significant members of the group are not immediately identified. For example, if a shipment of heroin containing 486 units of heroin is seized, an arrested conspirator might state that the investors held the following shares in the shipment:

Looking at the above chart, it appears that Conspirators #2 and #3 are the major traffickers in this heroin smuggling venture. However, these individuals could possibly have less than 10 shares apiece, and their hidden silent partners (known only to them) are in fact the most significant individuals involved in the conspiracy. These silent partners have the most to gain and also the most to lose in this venture.

Smuggling ventures by a SEA limited partnership can easily be accomplished in less than 4 months, from an initial meeting or negotiations in Bangkok, to the delivery of the heroin, to the broker in New York. This same scenario could also be accomplished in the manner described above, except the importation of contraband would be via Canada, with the delivery made in Canada or the heroin could be smuggled across the border into the United States in smaller loads.

If anything goes wrong for whatever reason, and the smuggling venture is not successful, all six original conspirators are in danger of harm, not only from each other, but also from the silent investors, who are usually powerful people—extremely violent and/or very wealthy.

There are opportunities throughout the chain of events for money to be made by cheating the other partners. All is well if the smuggling venture is successful; however, if the heroin is seized at some point, it is not unusual for conspirators to be killed for their suspected involvement in the seizure.

This report was prepared by the DEA Intelligence Division, International Strategic Support Section, Europe/Asia/Africa Unit. This report reflects information received prior to April 2002.