THE OPEN MIND
Host: Richard D. Heffner
Guest: Robert M. Morgenthau, Esq.
Title: Mr. District Attorney
I’m Richard Heffner, your host on The Open Mind. And though my guest today and I didn’t start doing programs together at this table until 20 years ago, his has been a name and a reputation to conjure with in American law enforcement and for many more years than that.
Indeed, Robert M. Morgenthau was appointed United States Attorney for the premiere Southern District of New York by President John F. Kennedy, stayed there nearly a decade, then became Manhattan’s distinguished District Attorney more than a quarter century ago.
In 2001 my guest was re-elected DA once again … this time with no opposition. Of course, both pride and full disclosure lead me to note that my son and my daughter- in-law are both Assistant DA’s in the Morgenthau office.
But now, looking back to the aftermath of the horrendous September 11th, 2001 terrorist attack on the World Trade Center, we find — shockingly enough — that my guest still had to argue for cutting off funds for terror, part of the crusade against money laundering he has waged so vigorously for so many years now.
Indeed, in late October 2001, Mr. Morgenthau still felt constrained to write in an New York Times OpEd piece: “We are at a critical juncture in the fight to cut off the funding for Osama bin Laden’s Al Qaeda network and other terrorist groups… The danger is that this badly needed money-laundering legislation may be killed by potent special interests, including the American Bankers Association, that oppose it.
“They are keeping a low profile, but their tactic is to separate the money laundering provisions from others and then stall them to death.
“If that happens, the government will be deprived of a powerful weapon in this fight.”
That didn’t happen, but now I want to ask my guest how in the world this opposition to money laundering could possibly exist, given the terror around us. And when I say “opposition to money laundering”, I mean opposition to the many times the District Attorney has attempted to get legislation necessary to end it. How can you account for that Mr. District Attorney?
MORGENTHAU: Well, I mean one of the things is that money laundering is a complicated and sophisticated business. So a lot of people don’t understand it and when people don’t understand things, it’s easier to, to push them aside. But we first became aware of problems in the Middle East when we, when we prosecuted Frank Turpel who was a rouge CIA agent and was providing explosives to not only the Palestinians, but other radical elements in the Middle East.
And then, of course, with BCCI we, we came across it again. But what, what we found out was that to run these operations costs a significant amount of money. I mean early on the papers were saying this was all done on the cheap and it was only a few thousand dollars here and a few thousand dollars there. But to maintain a private army and that’s what, and that’s what bin Laden has and also to bribe the host countries and pay for their private army costs a tot of money.
And, and the best estimate that we had from Arab sources and then we developed those sources during the BCCI investigation, that it cost $35-$40 million dollars to equip those troops, to take care of their families, to buy ammunition and to take care of the network throughout Europe and the Middle East and the United States. So, you can’t keep that kind of money in shoe boxes.
You’ve got to use the banking system, and that’s why I thought this legislation was so important because we had a, we had some transparency in what’s going on. That’s a kind of a fancy word, but in other words … openness, you had to know who the people were that were contributing and how they were moving their money. Because there are a lot of so-called respectable Saudi leaders who were supporting bin Laden. Perhaps out of fear, “stay out of Saudi Arabia and we’ll give you money”. Perhaps other motives. But if this was going to be exposed, the people were going to know who the ones were that were contributing, I thought that in itself would cut off a significant amount of money. And then if you could cut his funds by 50%, instead of raising $35 – $40 million dollars a year, $15 – $20. That in itself would have a major impact because although he’s got a lot of fanatics with him, probably the bulk of his troops in the Taliban are mercenaries. They don’t get paid, they’re not going to stay with him. So that’s why exposing the whole financial set up was extremely important.
HEFFNER: But who could possibly disagree with that?
MORGENTHAU: Well, I mean it’s a … there are two groups of people that could disagree. One, those who benefit by off-shore … I mean there’s $80 billion dollars on deposit in the Cayman Islands. $80 billion dollars.
MORGENTHAU: I’m sorry … $800 billion dollars … $800 billion dollars.
HEFFNER: On that tiny island?
MORGENTHAU: On that tiny island with 35,000 people. And that is two and one-half times as much as is on deposit in all the banks in New York City. And it’s been growing about $70I$80 billion dollars a year. So pretty soon, if you want to cash your pay check, you’re going to have to go down to the Cayman Islands
MORGENTHAU: … to get the dollars. And why is it there? It’s there because for tax evasion, and tax avoidance. So that there are all those people and they can have lobbying groups that are getting their money out of the Caymans and nobody knows who they are, and they can talk about, you know, invasion of privacy and all kinds of arguments. And we don’t know who they are and who’s supporting them. The other group, of course, are people who make their money by getting deposits and then lending it out.
HEFFNER: You mean bankers?
HEFFNER: Our bankers.
MORGENTHAU: Our bankers. I mean I remember back a few years when we were serving subpoenas on one of the major banks to get records involving drug trafficking. And he asked me to come over and have coffee and see if we could work something out, so we were serving so many subpoenas. And I saw all these people, mostly men, walking by wearing gold goal posts, and I said to him, “you know, are these the people who won the football pool? What is this?”. And he said, “No, those are the people who made their goal on deposits this past money.” So you’re assigned a quota, maybe it’s five million dollars and if you get that … mean that goal, then you get to wear a gold goal post and you’re boss sees that you’re one of the producers.
HEFFNER: No matter what the source?
MORGENTHAU: Unfortunately, the fewer questions asked, the more likely they get the deposits. And that’s one of things that this legislation does. It requires banks to know their depositors. It will prevent banks from acting as correspondent for so-called “shell banks”, just a bank that some body sits down on their computer and organizes it. Caymans advertise on their website, we have 600 banks chartered here”, this is the Cayman Islands speaking, “600 banks chartered here” and 100 actually have a physical presence. So that means 500 are just named plates, but if they get a …open an account with an American bank, then people can run money through that shell bank and through the American bank and nobody knows who they are. So, that’s why its. important to find out, and to require the banks to find out who the customers are.
HEFFNER: Now in late October through 2001, six weeks after the bombings six weeks after the destruction of the World Trade Center, you had to write that OpEd piece in the New York Times. Legislation still had not accomplished what you wanted accomplished. Why … you, you talk about what the interest of the bank, of a particular bank or many banks may be What was the reason that there was this delay in the Congress of the United States?
MORGENTHAU: Well, the Senate was fully on board and there was an element in the House was opposed. Fortunately, Senator Sarbanes who’s the Chairman of the Senate Banking, Senator Levin, who’s the Chairman of the Permanent Sub-Committee on investigations dug in their heels and said “No Bill is going to pass on terrorism unless it contains anti-money laundering provisions” And they prevailed.
HEFFNER: Where was the opposition from?
MORGENTHAU: The opposition was from a group in the House, the House of Representatives And I don’t want to characterize it, but…because you know when, when you’re successful then you say, “Listen everything’s okay.” But it, it… this group in the House, it stalled this legislation for almost two years actually.
HEFFNER: Well, now you say, “stalled for almost two years.” It took bin Laden then, it took the World Trade Center then to accomplish what you had been trying to accomplish for much longer than two years.
MORGENTHAU: Yes, that’s right. That’s absolutely right. But I think … you know I think it’s already having an impact. I think that when people know that they’re financial support of terrorism is going to be disclosed, that’s going to have an impact and that’s going to cut off some of the purse strings. And I wouldn’t be surprised if some of these, you know, desertions and people leaving is because they’re not being paid, or they don’t think they’re going to be paid.
HEFFNER: What was the rationale … I, I understand what you say about “in victory, being magnanimous”, don’t go after the birds who were opposing the legislation you know we needed. But what was their rationale? What were the arguments offered to oppose the legislation that you needed.
HEFFNER: Free speech?
HEFFNER: “Let us do what we want?”
MORGENTHAU: Invasion of privacy, or you want to find out about people’s source of income. But I mean my position is that and the people who supported the Bill is that people who have offshore accounts are not entitled to any greater degree of privacy than American Citizens. Nor are they entitled to pay less than…in taxes…than mandated by law, by the Congress of the United States. I mean some people said, “Well this was a move to raise taxes.” That people were afraid of tax competition, that was absolutely…
I mean I don’t enjoy paying my taxes. But it makes me mad as hell, frankly, to know that there are a lot of people out there that are not paying any taxes, while you and I and everybody else who has a job is paying their taxes. So it’s a question of fairness, as well as a question of discouraging illegal use.
We ran a sting operation, and actually our offices were in the World Trade Center … we ran a money management firm, and we were collecting … and this was this summer and we closed that operation down largely in the end of August, but we got we were in building number 2 and we got taken out along with everybody else.
But what we found was, we would take cash and then send it, through the banking system to places that the drug dealers want to send it. And we sent it to over 300 banks and organizations around the world, so we got a pretty good list of, of the banks, and other brokerage firms that were taking money. But there was one that caught my eye, particularly, because it turned to be a very large insurance company and a subsidiary of a very large insurance company and it had a well known mutual fund advisor, well-known American one as part of their company. And so, what you could do, was you could send cash, and it was chartered in one of the offshore jurisdictions, you could send your money and then you could, you could invest in American mutual funds. And one of the things they, they bragged about is that you don’t pay any taxes. And their brochure, and this was a big outfit, and their brochure saying “we look for customers who are international players and expatriates.” A nice way of we looking for … we’re offering our services to people who don’t want to pay their taxes.
HEFFNER: You know, I know that yours is the most distinguished District Attorney office in the United States. I don’t say that because of my son and daughter in-law … everyone knows that Morgenthau’s Manhattan DA’s office is … and yet the question has come up so many times … why is that Morgenthau has to pursue these matters that seem to be national … on a national scale, rather than the Federal government and I have the opportunity now to put the question to you. Why?
MORGENTHAU: Well, I think one of the advantages that we have is that we’re immune to political pressures. I mean I remember when we, when we tried to subpoena a senior Saudi official who was also a Director of BCCI. But to get him to come over here we had to go through Justice Department, State Department, American Embassy in Riyadh to have them serve the subpoena. And the word came back American Embassy, State Department, Justice Department to us … “No such person can be located in Riyadh the capital of Saudi Arabia.” About three weeks later this Sheik’s lawyer came in to see me, a very distinguished lawyer and said, “I would like free passage from my client to go to the Mayo Clinic. He has a problem that he wants the Mayo Clinic to examine and I’d like an understanding that he will not be arrested when he comes to go to the Mayo Clinic.” And he said, “You know, he wouldn’t steal money,” he said, “he worth about $350 to $400 million dollars, he has a palace that covers a square block in Riyadh, he supports the finest museum in Riyadh which covers two square blocks, he has a palace almost as big in, in Cairo and he has another smaller palace in Casablanca.”
HEFFNER: He’s what we call “well off”.
MORGENTHAU: So … I said to him, “that very interesting.” I said, “Can you explain to me why the American Embassy in Riyadh couldn’t locate him?”. Ah, he thought for about 15 seconds and he, he’s from Oklahoma, and he said, “Well, it’s kinda like the Sheriffs in Oklahoma … you know sometimes they’re not a diligent as they ought to be.” But all I’m … I mean the bottom line is here, the American government, for its own political reasons, United States government did not want us to serve a subpoena on this prominent Saudi.
HEFFNER: I gather when you say “political reasons”, this is a … another way of saying policy reasons
MORGENTHAU: Right. Not Democrat, Republican … because it’s the same problem under Democrat and Republican administrations. Yeah, policy. Policy reasons. I mean could give you a whole bunch of those examples, some of them quite, quite amusing. So that, but we have that advantage because, you know, the Federal government can say, “You know, we can’t control that crazy guy up there in New York”. Whereas if it’s a United States Attorney, you know, they can say, “Hey, that’s forbidden.” I mean they will not let … Justice Department won’t let United States Attorney serve subpoenas on any foreign account without getting the approval of the Justice Department. That’s why Jefferson had a good, a good idea when he provided for the independence of State and local authorities, subject, of course, to overwhelming national interest.
HEFFNER: Do you find it that you frequently thumb your nose at Washington?
MORGENTHAU: Oh, I would never to that.
HEFFNER: Put it another way. Any way you want. Do you find yourself in that kind of conflict very often?
MORGENTHAU: From time to time. Particularly when we start looking at international transactions. But I think even though if we’re not successful, I think it’s important because it lets people know that somebody’s looking at illegal transactions. I mean we’ve just recently done a case against a fund called the Evergreen Fund. Where they took investors, mostly in Southeastern states of over $200 million dollars. They told them, you know, you’ll pay … their alleged headquarters were in Nassau in the Bahamas … they said you’ll pay no US taxes, we guarantee you a return of 10% to 15% a year. And they took a lot of money from a lot of, you know, gullible people. And we, we went down there and we were able to come back without getting arrested, with 44 boxes of records. And then one of the principals was here in New York who stole $30 million and we and we got an indictment against him. And we, we have him still in jail because he could flee with the money he took. So that those kind of things go on quite frequently. And I mean our objective is to make people feel safe in investing in, in American securities. And it’s also we want people to feel safe in investing in New York. And that’s important to the economy of the city and the state and of the nation.
HEFFNER: Now, are you going to find that the legislation that was recently passed and that you wanted so much and that bin Laden helped you obtain … are you going to find that that works for you in terms of Mafia and other international activities?
MORGENTHAU: It’s going to help the Federal government more than its going to help state and local authorities. But that’s good. I mean if, if we had had our “druthers” there would have been provisions in there to enable state and local prosecutors to get some of these records. But the important thing is it helps the United States in a very significant way. And we’ll, we’ll tag along. It does not help us as much as it helps the Federal government.
HEFFNER: Now I know, we just have a few minutes left, that after the World Trade Center matter of September 11th, there was a lot in the press about … not necessarily conflict, though that too, but failure to exchange information between the Federal authorities and New York City authorities … the police and the FBI. Is that a problem that you face, too?
MORGENTHAU: I mean I think it’s, it’s a problem that law enforcement faces throughout the country. I mean you may have seen that the Police Commissioner of Baltimore said, you know, “there are 650,000 state and local police officers and they’re 11, 500 FBI agents. You know, they gotta tell us who they’re looking for and, and we can help in an significant want.” And the Mayor here has said, you know, the FBI has got to be more forthcoming with its information. And, not that the FB job is, is a simple one, it’s a very difficult one these days, but there’s legislation pending now which will authorize more sharing of information. And that’s important.
HEFFNER: You say, legislation pending”, but isn’t this a cultural matter … the culture of the FBI, going back to J. Edgar Hoover.
MORGENTHAU: It’s both. But, but I mean they can… they can point to provisions … the law which justifies not sharing. So, it, it … I think some legislation will be, will be helpful. I mean I have a, you know, high regard for the new Director of the FBI … Muller, and I’ve talked to him several times and I’m sure that, you know, that he wants to work with local law enforcement. It’s going to take a little time to work it out.
HEFFNER: In about a minute remaining, you were just re-elected. You’re going to be District Attorney forever … what is the area, now, that you’re going to consider most important to focus upon?
MORGENTHAU: Well, I mean there are two areas. Number one, you know, we’ve got to help root out terrorist cells that are here in New York. And even though that’s the primary Federal responsibility, it’s also our responsibility. And the second is, we want to keep people living in New York and we want to keep business in New York, so we’re going to put a lot of effort into the drug traffic, which is still the major source of crime in New York City.
HEFFNER: When you were here last time we talked about the drug traffic. You were very optimistic at that time that we were going to lick this problem. Are you still?
MORGENTHAU: Yes, and it’s much better now. I mean murders in Manhattan are down by 85% since I’ve been the District Attorney. Where we were number one in the city, we’re now number four in terms of numbers of murders, so … yes, I am optimistic, but you, you know, you can’t sit back and congratulate yourself. You, you’ve got to keep plugging.
HEFFNER: Bob Morgenthau I can’t imagine you ever sitting back and just congratulating yourself. Thank you again for joining me on The Open Mind.
MORGENTHAU: Thank you for asking me.
HEFFNER: And thanks, too, to you in the audience. I hope you join us again next time. If you would like a transcript of today’s program, please send four dollars in check or money order to: The Open Mind, P. 0. Box 7977, F.D.R. Station, New York, New York 10150
Meanwhile, as an old friend used to say, “Good night and good luck”. N.B. Every effort has been made to ensure the accuracy of this transcript. It may not, however, be a verbatim copy of the program.