A chronicle of reprisal, cronyism and corruption
in the U.S. Customs Service
By Bill Conroy
The 1999 cyber-fi movie “The Matrix” includes a pivotal scene in which the lead character, Neo, is given a choice between waking up in his bed and continuing on with his life as it has always been, or staying in “Wonderland” and seeing just “how deep the rabbit hole goes.”
That scene goes a long way in explaining my experience in digging into the “wonderland” that is the U.S. Customs Service. After more than two years spent falling into the “rabbit hole,” I still don’t know how deep it goes, but I can no longer pretend that the rabbit hole doesn’t exist.
Customs’ historical charge has been to safeguard the integrity of the U.S. border. The federal agency has been tasked with enforcing hundreds of U.S. laws and international agreements related to trade, commerce, drug interdiction and national security. Each year, Customs officials collect billions of dollars from import duties and other fees, and process millions of land, air and sea passengers.
The U.S. agency can trace its roots back to 1789—making it the nation’s first federal law-enforcement agency. Customs carried out its vast mission as part of the U.S. Treasury Department from 1875 through 2002. However, that all changed with the enactment of legislation in late November 2002 that created the Department of Homeland Security (DHS).
In the new department, Customs operates as part of the Directorate of Border and Transportation Security. Within the directorate, oversight of Customs’ operations falls under the purview of two bureaus: the Bureau of Customs and Border Protection (C.B.P) and the Bureau of Immigration and Customs Enforcement (I.C.E). Customs inspectors and canine enforcement officers are under the direction of C.B.P while Customs’ investigative, intelligence, air and marine operations are under the supervision of I.C.E.
Some 22 agency puzzle pieces have been brought together to form the Department of Homeland Security. However, blending the diverse cultures of these various federal agencies—and their nearly 200,000 employees—into a cohesive operation is likely to take years.
As a result, it is useful to pay attention to the cultures of the affected agencies, as it may offer insight into what the future holds for the nation in terms of homeland security. To that end, this book is an exploration of the culture of one of those agencies: the U.S. Customs Service.
The genesis of this book was a series of investigative stories I wrote for publication from the fall of 2000 through the end of 2002 that detailed disclosures of alleged mismanagement and corruption within U.S. Customs.
Because events are still playing out as this book goes to press, by the time you read these pages, there will undoubtedly have been new developments—particularly in relation to DHS as well as the litigation outlined in the book. But the purpose of the book is not to provide a definitive history of the U.S. Customs Service. Rather my intention is to peer through the veil of spin cloaking a complex and important government agency. This book should be thought of as a looking glass that can offer you a glimpse of the darker regions of a centuries-old federal law-enforcement agency that has now been plugged into a new super department charged with protecting the security of the United States.
This book is not written from the perspective of a journalist working inside the Beltway. I live in San Antonio, a couple of hours by car from Mexico. In addition, the primary sources for this book are not power brokers working the Washington, D.C., political scene. Rather, they are a diverse group of individuals who are spread across the country serving on the front lines of law enforcement—many assigned to key field positions along this nation’s borders.
Along with reviewing stacks of legal filings, internal Customs documents, congressional testimony and other public records for the investigation that led to this book, I also interviewed dozens of individuals, many of them whistle blowers—including current and former Customs supervisors, inspectors, intelligence officers and investigative agents. The book explores corruption allegations affecting Customs’ operations in Texas, Louisiana, Arizona, California, New York—and beyond, into the very heart of the nation’s capital.
Sources within Customs came out of the woodwork as I dug into this project, with each tip leading to new contacts that helped drive the investigation. I had to deal with many sources on background or on a not-for-attribution basis. They feared, I felt legitimately, retaliation if exposed. Still, in those cases, I secured documentation or additional sourcing to support any allegations. On more than one occasion, that documentation showed up in my mailbox anonymously.
The allegations raised by these whistle blowers boil down to an assertion that Customs is operated through a “good-ol’-boy” system of management that has perpetuated a culture of reprisal, cronyism and corruption.
The story of the U.S. Customs Service that is drawn out in the pages to follow is ongoing—even as Customs is being rebranded as part of the Department of Homeland Security. To come anywhere near a conclusion, many more journalists will have to jump into the rabbit hole. But if you’re interested in one writer’s view from inside that rabbit hole, read on. I promise nothing more than the facts—and the truth as far as I can see it.
1
Investigation Derailed
You’re in your car, waiting, late for an appointment, as the long train in front of you snakes its way over a stretch of urban railroad track in a bustling city neighborhood.
The train is hauling the goods that fuel the global economy: hoppers packed with coal and fertilizer, flatcars stacked with lumber and machinery, and pressurized tanker cars full of hazardous chemicals like chlorine, sulfuric acid and liquid oxygen.
Suddenly, out of the corner of your eye, you glimpse a blinding light, followed instantaneously by a deafening BOOM! In the next moment, a pall-like cloud of fire, poisonous fumes and smoke rips through the neighborhood, snuffing out thousands of lives.
The above movie-like scenario, unfortunately, could easily cross the line into reality today, tomorrow, or at some other future trigger moment in the high-stakes war on terrorism, according to a former federal agent who claims the government has gone to great lengths to keep a lid on her story.
Former U.S. Customs Service Special Agent Darlene Fitzgerald contends that our nation’s railroads are the perfect tools for delivering destruction to our doorsteps. Fitzgerald came to this conclusion in the late 1990's while working as a federal agent on an investigation into a major drug-smuggling operation in Southern California. The smugglers, she discovered, were using rail cars to move tons of dope from Mexico into the United States.
However, Fitzgerald alleges that the investigation was “torpedoed” by the brass at Customs, without explanation. She suspects the investigation was shut down because of corruption within the federal agency.
The dope Fitzgerald had uncovered was being delivered as part of an operation run by the Arellano-Felix Mexican drug cartel; the drugs (tons of pot and coke) were being shipped across the border from a rail yard in Guadalajara, Mexico, a yard Fitzgerald claims was controlled by the cartel. The rail cars moved into the United States unchecked, and then along rail routes up the West Coast—where the dope was to be retrieved by cartel operatives and sold for millions of dollars on the streets of America.
Fitzgerald, along with U.S. Customs Special Agent Sandy Nunn, a former Customs inspector named John Carman, and several other federal agents, decided to blow the whistle on the torpedoed operation, hoping to get someone within Customs or the FBI to investigate why it was shut down. Fitzgerald also says the whistle blowers have a far more serious concern.
If the cartel could smuggle tons of drugs via railroad, why not guns and munitions? And, even more frightening, she says, is the prospect that terrorists might tap into the cartel’s system to smuggle in weapons of mass destruction.
Fitzgerald says she and her fellow agents went to the FBI in the spring of 1999 to report their concerns. She also contacted the U.S. Office of Special Counsel, which is an independent federal agency charged with investigating governmental misconduct.
“I have additional information concerning potential corruption that far outweighs anything in the attached affidavits/letters,” Fitzgerald wrote in a May 10, 1999, letter to the U.S. Office of Special Counsel. “This information is something that I am very afraid of revealing to anyone in this agency (Customs). I feel that this information may very well place my life in jeopardy. I wish very much to report this to an agent in your agency, but only with my attorney present.”
Fitzgerald and Nunn allege that after they began blowing the whistle on the torpedoed investigation, their lives were turned upside-down due to the retaliation and emotional abuse they were subjected to by their supervisors. That abuse, Nunn claims in a statement she submitted to Congress, included “unrelenting retaliation, adverse actions against us, false accusations of wrongdoing, frivolous Internal Affairs investigations, surveillance's, threats against us, (and) slander of our reputations in the workplace.”
In one case, Nunn alleges in the congressional statement, a fellow Customs agent involved in seeking to expose the corruption, Ruben Sandoval, “woke up and found two surveillance cameras mounted on light poles on his street pointed directly at his residence.”
“I was shocked and still am at how our civil rights were so blatantly violated by management officials within one of the top federal law enforcement agencies in the United States merely because we stood up and told the truth,” Nunn adds.
Both Fitzgerald and Nunn decided to resign from their jobs in the fall of 1999 and to go public with their allegations—after no action was taken by the FBI or the other federal agencies to which they reported their concerns.
Testimony
Fitzgerald and Nunn submitted written statements summarizing their experiences to the Senate Governmental Affairs Subcommittee on International Security, Proliferation and Federal Services. Nunn’s statement was actually submitted in July 2001, nearly two months prior to the September 11 terrorists attacks on New York City and Washington, D.C.
Following is an excerpt from Nunn’s statement.
From 1998 through the latter part of 1999 … Darlene (Fitzgerald) began intense work on a major narcotics investigation involving railway tanker car shipments of tons of narcotics coming into the United States from Mexico. Darlene, a highly competent and successful agent as well as my friend, had successfully tied these tanker car shipments of drugs to the Arellano-Felix drug cartel (aka the Tijuana cartel) in Mexico.
This case was the first of its kind and magnitude in the United States. It was so significant that the Acting Commissioner of Customs called her personally to congratulate her for a job well done after her first seizure of approximately 6 tons of narcotics.However, shortly thereafter, Darlene’s efforts were undermined when Customs management began ordering her to shut down the case and cease and desist any further investigation.As a seasoned agent who had served as the case agent for what was described in 1991 as the “second largest money laundering case in U.S. history,” I understood major investigations and felt strongly that there were serious issues of corruption beginning to emerge, particularly when Darlene determined that several of the tanker cars, which had clearly been suspicious, were released contrary to her direction, not just once, but over a hundred times, by an unknown Customs official.These tanker cars, which had been documented as being empty, were showing as being about 5-9 tons overweight. Based on my experience dealing with narcotics smuggling, it is my professional opinion that those released tanker cars were very likely smuggling either narcotics or possibly something more sinister, such as firearms or potential tools for use by terrorist groups within the United States.As a special agent dealing with arms and technology smuggling cases, I even pulled up Darlene’s case files through the Customs computer, as I along with Darlene had received information from a source that there might be a connection to arms smuggling. I was subsequently placed under Internal Affairs investigation by my immediate supervisor … for doing the job I had been paid to do.After further investigation, Darlene determined that over the past several months, well over 100 of these tanker cars with similar weight characteristics and so forth had passed into the commerce of the United States undetected by inspection and investigators. What was in those tanker cars remains a mystery.
But the fact remains that someone within Customs was clearly permitting this to happen without checking these tanker cars as required by proper Customs procedure….
In Fitzgerald’s congressional statement, submitted in September 2001, after the 9/11 terror attacks, she lays out specifically how rail cars could be used in a future terrorist attack. In particular, she points to the ease with which these cars could be moved from a rail yard in Mexico and into the U.S. rail system, without ever being inspected.
Railroad officials confirm that their employees do not actually open up every rail car to ensure that what is listed on the shipping manifest is actually inside the cars.
In particular, Fitzgerald says the government needs to focus on rail tanker cars, which she says can be put under pressure, filled with volatile chemicals or bio-terror agents, rigged with explosives and detonated remotely like giant “pipebombs.”
... These (rail) cars are rarely inspected, and the smugglers are aware of that,” Fitzgerald said in her congressional statement. “... These (rail) tanker cars are the perfect instruments for a terrorist attack against the U.S. ... As the result of our investigation into the (drug-smuggling) case, we identified just how easy it would be to do this. The terrorist would simply lease/sublease a tanker car—even more easily accomplished south of the U.S. border—and pay cash to set up an account with any of the major railroads.
“Once a person has set up an account (easily accomplished with a fake ID and front company all declaring a location south of the border), all one has to do is to ‘front-end pay’ for the movement of any tanker cars, and they can be moved anywhere in the country with extreme ease. This movement can be directed remotely via the Internet or telephone.
“...These tanker cars are the metal cylindrical-shaped cars that carry anything from hazardous materials, to oil, to gasoline, all flammable….
Cracks in the system
Clearly, the U.S. government’s preoccupation with stemming a terrorist threat from abroad seems to come at the expense of focusing attention on the problem inside its borders. Neo-conservative elements of the U.S. power structure could be accused of having a vested interest in promoting the foreign terror threat in order to bolster their Pax Americana agenda.
Such a political strategy could prove deadly in the future, however. The Oklahoma City bombing drives that point home, as does the alleged plot uncovered in East Texas in 2003 that involved right-wing extremists concealing a stash of weapons and the ingredients for a highly lethal sodium cyanide bomb.
Still, Fitzgerald’s warnings can’t be discarded out of hand. Government corruption in both the United States and abroad, coupled with the merciless pecuniary preoccupation of drug syndicates, creates opportunity for a dedicated extremist foe – whether that group has foreign or domestic roots.
For example, Algerian Ahmed Ressam, a convicted terrorist, testified in a trial in New York in the summer of 2001 that terror training camps in Afghanistan included instruction on how to sabotage infrastructure targets, such as power plants, airports, military installations, large corporations and “railroads.”
Fitzgerald, in her congressional statement, asserts that the U.S. railroad system is vulnerable to being compromised from abroad. In particular, she claims that pressurized rail tankers are not being systematically checked by Customs as they cross the border.
That claim is backed up by sources within Customs who explain that there are thousands of rail cars crossing the Mexican and Canadian borders daily and inadequate resources to thoroughly check each one.
In the wake of the 9/11 terror attacks, Customs did begin installing gamma-ray imaging devices at border crossings to scan incoming rail cars. However, these devices, similar to airport scanning systems, are not foolproof – a fact that is only magnified when operator error or corruption is factored into the equation.
Further, in the case of pressurized tanker cars, special hazardous materials teams need to be called in to complete thorough inspections, an expensive and time-consuming process.
John Carman, a former uniformed officer with the U.S. Secret Service as well as a former U.S. Customs Inspector, agrees with that analysis as well.
Carman says he was among the first people within Customs to identify the rail car smuggling problem, and, along with Nunn, Fitzgerald and others, has been instrumental in blowing the whistle on the lack of attention to the issue.
“If I can smuggle drugs on these rail cars, I can smuggle anything,” Carman explains. “Customs simply does not have enough time or people to inspect all of these rail cars. If one or more of these rail cars (loaded with explosives or biological agents) got through, it could do a lot of damage.”
That fact is underscored, Fitzgerald adds, by the vastness of this nation’s rail system.
“Now consider the fact that one can simply remotely send these giant instruments of death, simultaneously, to any one of thousands of rails spurs, virtually undetected,” Fitzgerald pointed out in the statement she provided to the Senate subcommittee. “... Now add to this the fact that once this is done, the perpetrators will be extremely difficult to trace and no suicide bombers are needed.”
Fitzgerald says rail spurs are located near major buildings throughout the country.
She adds an even more terrifying scenario: what if one or more explosive-laden rail tanker cars were to be detonated in a major urban rail yard—where hundreds of other loaded rail cars are located?
“These tanker cars in general carry a plethora of hazardous material,” Fitzgerald says. “If one or more is blown up in a rail yard, it could start a devastating chain reaction.”
Supporting Documents:
Letter from Darlene Fitzgerald(signing as Darlene Catalan) to the US Office of Special Counsel claiming federal whistleblower status (May 10, 1999)
Darlene Fitzgerald’s statement to the US Senate hearings (September 18, 2001)
Sandy Nunn’s statement to the US Senate hearings (July 27, 2001)
2
The Belly of the Snake
Moving drugs across the border is only one facet of the smuggling game. An equally important component is collecting the money on the drug sales.
Drug traffickers must convert, or launder, black-market cash—often in the form of small bills—into “legitimate currency” in order to perpetuate their operations and maintain their power. As a result, federal law enforcement officials say rapid cash movement among accounts or large cash surpluses in the economy can be a sign of money laundering activity.
It’s not enough simply to say that a transaction or account appears suspicious, though; you have to prove that the money was obtained illegally. That is no easy task, especially once the money has made its way through the belly of the snake to the tail end of the money laundering process.
Traffickers are most vulnerable, then, prior to the funds reaching the banking system.
However, Federal law enforcement officials say that the vastness of the U.S./Mexico border makes it very difficult to intercept shipments of U.S. currency from drug sales that are being transported across the border to be laundered through the Mexican banking system. Once the profits of the drug trade make it across the border to Mexico, drug syndicates have a variety of options available to them for converting it into “clean” money. For example, drug traffickers may choose to wire money from a Mexican bank to a U.S. bank, or deliver the cash back to the United States in deposits small enough to avoid kicking in currency transaction reporting requirements—a practice known as “smurfing.”
In order to stop money laundering, you have to plug all the holes in the financial system because, like water, traffickers will always find the place in the system with least resistance.
“We lost the war years ago,” says one executive with a bank located along the Texas/Mexico border. “The only way to solve the problem is to legalize the damn stuff, because we can’t spend enough money to stop it.”
The banker, who asked not to be identified, went on to explain that the United States has a 2,000-mile border with Mexico “and if we stacked all the legal crossing points side-by-side, they might stretch five miles, and that’s where all our law enforcement is concentrated.”
“So how can we stop it?” he asks. “If the big money in the drug trade wants to get into the system, it will find a way…. We ought to legalize the stuff and tax it.”
Playing with money
A small bank in Roma, Texas, offers a case example of how vast sums of money can be moved through the banking systems on both sides of the U.S./Mexican border with few clues as to the sources or ultimate destinations of that money.
Although a large movement of cash through the banking system is not in itself proof that money laundering is occurring, such activity can be a red flag to regulators and law enforcement officials. One means of tracking these cash movements is through an analysis of foreign-deposit account activity.
The Roma lender crossed into red-flag territory in the international banking game in the mid-1990's. The lender—Citizens State Bank – had about $9.3 million in foreign deposits at year end 1995, according to federal banking data. Three months later, that figure had dropped to $151,000. Through the balance of 1996, the lender’s foreign deposits never topped $600,000.
In other words, over a three-month period, at least $9 million in deposits were moved out of the coffers of the bank.
Foreign deposit accounts are perfectly legal and essential to conducting international commerce. According to industry experts, the accounts at Texas banks, for example, are primarily held by Mexican lenders and facilitate the currency exchange (pesos to dollars and vice versa) that is essential to conducting trade and commerce with Mexico.
Roberto A. Salinas, spokesman for the Roma bank, says the source of the foreign deposits at Citizens State Bank was a branch of a Mexican bank located just across the border from Roma in the town of Miguel Aleman, Mexico.
Roma is located along the U.S./Mexico border midway between Brownsville and Laredo. A suspension bridge over the Rio Grande River links Roma with Miguel Aleman.
“We never understood why they were letting it (the deposits) sit in a checking account here,” Salinas says. “They made deposits daily by armored car … and later wired the money to a main account in New York.”
There is no indication that Citizens State Bank did anything improper in handling the deposits from the Mexican bank. In fact, Salinas says the bank filed currency transaction reports almost daily during the period the money was being deposited.
The Mexican bank delivering the deposits to Citizens State Bank was a branch of Bancomer, Mexico’s second largest lender at the time. Manuel Garcia, an executive with Bancomer who oversaw the Miguel Aleman branch and eight other branches in northern Mexico in the mid 1990's, says the amount of money in the account at the Roma bank actually rose to $11 million before it was wired to an account at Chase Manhattan Bank in New York in late February 1996. The Bancomer branch in Miguel Aleman had total deposits of $5.3 million as of the end of February, Garcia says.
The money in the Roma account had built up over seven months due to an error on the part of Bancomer’s treasury department, Garcia explains.
“It was an oversight,” Garcia adds. “We did not realize the $11 million was there.”
Garcia was unable to provide information on the number of account holders who controlled the $11 million. Garcia stresses, though, that $11 million is not a lot of money, considering that it had accumulated over seven months in a border region that is heavily reliant on cash-based commerce.
According to a number of Mexican and U.S. observers familiar with the stretch of border near Roma and Miguel Aleman, the area has earned a reputation as a drug trafficking corridor. Garcia, too, says he is aware that drug traffickers are active in the area.
“We read about it in the (Mexican) news,” he says. “... Drug dealing in this area—there is a problem with it.”
Garcia could not say where the $11 million went after it was transferred to the account at Chase Manhattan. Officials with the New York bank declined to comment on the matter, but there is no indication that Chase did anything but conduct a normal business transaction in relation to the wire transfer.
Foreign banks use Chase and other New York money-center banks to settle their accounts, which means it’s likely the $11 million was transferred elsewhere after it cleared through the account at Chase, according to industry insiders.
Red flag
Regardless of the reason, $11 million is a lot of money to move from a small bank in Mexico to a small bank along the Texas border and then through the U.S. banking system and onto some undisclosed point. But then, as one banking industry observer puts it, “It’s not a crime to be rich.”
However, the anonymous nature of cash does make highly liquid accounts vulnerable to manipulation. Criminals seek out such conduits to camouflage money laundering activity.
Stemming the flow of black-market dollars through these highly liquid banking accounts is a nearly impossible task absent human intelligence. That reality spawned a major undercover sting in the late 1990's called Operation Casablanca.
The three-year undercover investigation culminated in the spring of 1998 with the arrest of more than 100 alleged money launderers and indictments against three Mexican banks. In March 1999, two of those banks, Bancomer S.A. and Banca Serfin S.A., pled guilty to one count each of money laundering—agreeing to civil forfeitures of $9.4 million and $4.2 million, respectively. The banks also agreed to pay a criminal fine of $500,000 each, according to information released by the U.S. Department of Justice. Confia S.A., the third bank, agreed to a civil forfeiture of $12.2 million; criminal charges against the lender were dismissed.
Operation Casablanca, which was the first major U.S. money laundering investigation aimed at foreign lenders, was led by senior Customs Agent William F. Gately.
By all appearances, a major money-laundering snake had been snared. But appearances may have been the very concern that led to Operation Casablanca being cut off at the knees.
According to Gately, the undercover operation suffered an early death. The operation was shut down in 1998, he told the media, after evidence surfaced that implicated high-level Mexican military officials in the drug trade—including Mexico’s Secretary of Defense at the time, General Enrique Cervantes.
If Operation Casablanca was digging up information on entangling alliances between the Mexican government and drug traffickers, it would not be the first time. It also would not be the first time that the U.S. government failed to aggressively pursue such alleged corruption.
According to Charles A. Intriago, publisher of the Miami-based Money Laundering Alert and a former federal prosecutor in Miami, the U.S. government also dropped the ball in a high-profile case involving a former Mexican deputy attorney general, Mario Ruiz Massieu.
A U.S. jury in the mid-1990's found that nearly $8 million of the money deposited by Ruiz Massieu at Texas Commerce Bank (T.C.B) in Houston came from Mexican drug lords who were seeking protection from prosecution in Mexico.
“The U.S. government is also open to scrutiny in the case since it took no action on the Ruiz Massieu account despite receiving more than 50 (currency transaction) forms from T.C.B and Ruiz Massieu’s cash courier about the massive flow of currency into the account,” Intriago’s Money Laundering Alert reported in April 1997.
U.S. law enforcement officials “only took action on the case after the Mexican government reported its suspicions about Ruiz Massieu in March 1995,” more than 14 months after Massieu’s activity began, the Money Laundering Alert reported.
Ruiz Massieu, who served as Mexico’s deputy attorney general from 1993 to 1994, died in 1999 in an apparent suicide at his home in New Jersey. He was facing money laundering charges in the United States at the time.
Ruiz Massieu’s death spared Mexican and U.S. officials the embarrassment of having the corruption that allegedly plagued the presidency of Carlos Salinas de Gortari—under whom Ruiz Massieu served—laid out in open court.
Parallel paths
The death of Operation Casablanca in 1998 likewise spared the Mexican and U.S. governments the international embarrassment of having a spotlight put on the suspected ties between the Mexican military and drug traffickers. The operation was short-circuited, according to public statements made by Gately, out of fear that it would damage U.S. relations with its southern neighbor. And it didn’t help that Mexican General Cervantes had been billed by the U.S. officials as the United States’ partner in the war on drugs.
John Hensley
In any event, Gately later turned the media spotlight on his boss, John Hensley, who headed Customs’ Los Angeles field office at the time of Casablanca. In an April 16, 2000, broadcast of the CBS news show “60 Minutes,” Customs Commissioner Raymond Kelly said Casablanca was shut down because media leaks were jeopardizing the operation’s undercover status, which put the lives of agents at risk. In that same broadcast, Gately accused Hensley of being one of the sources of the leaks. Although the veracity of that charge is open to debate, Hensley was in favor of bringing the operation to an end in 1998, according to sources and other media reports at the time.
Coincidentally, Hensley is accused of bringing the axe down on Fitzgerald’s railcar investigation in 1999 in Southern California. Nunn lays out the allegation in her July 2001 congressional statement:
“... Further, when pressed to reveal who was ordering this very successful case to be shut down and basically filed away, Darlene’s (Fitzgerald’s) immediate supervisor revealed in a meeting witnessed by a former federal prosecutor who is now a federal judge in the Ninth Circuit that SAC (special agent in charge in Los Angeles) John Hensley had ordered that the case be shut down.
“Ironically, Mr. Hensley had been instrumental in prematurely shutting down Operation Casablanca, the major money laundering case which made national headlines in 1998….”
Fitzgerald and Nunn produce no hard evidence to show that Hensley did anything improper or illegal with respect to Casablanca or the railcar investigation. What would have motivated him to take the actions alleged by Nunn, Gately and others is not clear.
In addition, at least one Customs insider takes issue with Gately’s version of what happened to Operation Casablanca, contending that the information he had implicating Mexican General Cervantes was little more than hearsay. The insider also points out that Casablanca actually was extended five months beyond its original shut-down date of year-end 1997.
A source familiar with the railcar investigation, who asked not to be identified, also questions Fitzgerald’s and Nunn’s charges that their operation was torpedoed. The source says it was simply another case and that the former agents’ allegations were investigated by Customs but not substantiated.
The truth in those cases may never be fully known. But one thing that is clear is that Hensley’s name is a common factor in each. Several sources describe Hensley as “well-connected” and as a real “political” player. His career path demonstrates that he has made friends in high places.
Hensley, who spent 29 years with Customs, held the number two spot in the federal agency in the early 1990's, serving as assistant commissioner of enforcement. He finished his Customs career in the late 1990's, leaving his job as special agent in charge of Customs’ Los Angeles field office to move into the private sector. After serving from 1999-2000 as director of the western operations of Investigative Group International Inc., Hensley accepted Gov. Gray Davis’ appointment to the chairman post at the California Gambling Control Commission. The commission is charged with overseeing and regulating all gaming operations in the state.
In his role as chairman of the gambling-control commission, Hensley again found himself surrounded by storm clouds. In October 2002, the state-sponsored commission and members of the California Nations Indian Gaming Association (C.N.I.G.A) became embroiled in a controversy over the management of a trust fund that is used as a revenue-sharing vehicle for Indian tribes in California. C.N.I.G.A is a nonprofit group comprised of representatives from 76 tribal governments.
“California Nations Indian Gaming Association is demanding a legislative audit of the Revenue Sharing Trust Fund that was established by the tribal-state compacts for gaming tribes to share revenues with non-gaming tribes and those with very limited gaming,” states an October 22, 2002, press release issued by C.N.I.G.A. “The California Gambling Control Commission, which has fiduciary responsibility for dispersing monies from the Indian Gaming Revenue Sharing Trust Fund account, said in August (2002) it would begin mailing out checks for approximately $188,000 to each of the 75 eligible tribes. None of the tribes have received their checks.”
The controversy even prompted two tribes involved in gambling in California to file a joint lawsuit in federal court in October 2002 against the state of California. The litigation, filed by the Pechanga and San Manuel bands of Mission Indians, accuses California of allegedly violating the terms of the tribal-state gambling pact.
Carol Klimas, a spokeswoman for the San Manuel band, says one of the claims raised in the litigation centers on the revenue-sharing trust fund, which is managed by the California Gambling Control Commission chaired by Hensley.
“A major claim (in the lawsuit) revolves around the state’s distribution of Revenue Sharing Trust Fund fees to tribes that have limited or no gaming,” states a news release issued by the San Manuel band. “According to the tribes, the state has failed to manage and distribute millions of dollars set aside by successful gaming tribes, including Pechanga and San Manuel, to the poorest tribes as required by the compact.”
One source familiar with the controversy—who asked not to be named—claims that the state gambling commission was simply exercising prudent financial management of the revenue-sharing fund by initially keeping the reins on payouts to assure that the fund would not go into a deficit mode. In any event, the breach-of-contract case filed by the two tribes never made it to trial as it was dismissed by the judge in May 2003.
Hensley declined to comment on Casablanca, the railcar investigation and the California gambling commission controversy when contacted in early December 2002 in California. About a month later, Hensley told Gov. Gray Davis that he planned to step down from the California Gambling Conrol Commission, according to media reports.
Former Customs Agent Fitzgerald, though, did not mince words in an interview discussing her assessment of the links between the outcome of Operation Casablanca and her ill-fated rail car case.
“My rail car case was torpedoed and Operation Casablanca was torpedoed by the same group of people,” Fitzgerald alleges. “... That should have been investigated.”
Fitzgerald’s September 2001 congressional statement asserts further that “for all the allegations that many have made repeated attempts to get someone to investigate, the result has been that only whistle blowers have been placed under investigation.”
“I was completely undermined repeatedly in my efforts to continue this large … rail operation,” Fitzgerald continues. “My help was pulled, my surveillance was pulled, and I was subjected to one frivolous Internal Affairs investigation after another.
“... I also reported documented proof of special agents taking heroin evidence home overnight, and then lying about it under oath in depositions…. The list of corruption, violations of Customs’ policies, etc., etc., goes on and on. Yet, only the honest Customs employees doing their jobs and reporting this behavior have been investigated, harassed, intimidated, threatened and wrongfully disciplined.”
Fitzgerald and Nunn jointly filed a discrimination lawsuit against Customs in U.S. District Court in San Diego, Calif., in March 2001. The lawsuit alleges that they were discriminated against by Customs managers because of their gender and for participating in Equal Employment Opportunity (E.E.O) legal actions while serving as Customs agents. Among the discriminatory acts they accuse their managers of committing are withholding recognition, training opportunities, career-advancing work assignments, and promotions, as well as equipment and case support.
Nunn and Fitzgerald “endured continued discriminatory and retaliatory acts by (Customs) and its employees, which caused them and their families to suffer great mental anguish and emotional distress, as well as extreme financial hardship,” the lawsuit asserts.
They are seeking monetary damages and “that their names and reputations be cleared through publication to the law enforcement community,” according to the litigation.
Customs, for its part, claims in its answer to the lawsuit that the agency and its employees did not engage in “any wrongful or discriminatory or retaliatory conduct.”
“The employment practices of which (Fitzgerald and Nunn) complain, to the extent undertaken, were undertaken for lawful, valid reasons unrelated to (their) race, color, gender, heritage, national origin, alleged disability or protected (EEO) activities,” states Customs’ pleadings in the litigation, which was still pending in the court system as of the beginning of 2004.
Supporting Documents:
Former Customs agent Fitzgerald’s lawsuit complaint (830 kb PDF)
Custom’s answer to Fitzgerald’s lawsuit complaint (995 kb PDF)
Note: Acrobat Reader needed to view PDF documents
3
Shooting the Messenger
U.S. Customs is controlled by an entrenched “good-ol’-boy” network that goes to great lengths to protect its own interests, sources within the agency contend.
These sources – who include agents, inspectors, intelligence operatives and supervisors – assert that those who challenge the good-ol’-boy system get thrown to the sharks.
However, those who are protected by the good-ol’-boy network – or find themselves aligned with its interests – can seemingly act with impunity; or, as one Customs intelligence officer put it, “If they screw up, they move up.”
One example in which this Custom’s good-ol’-boy network, or inner circle, showed its true colors, according to some agency insiders, involves a case in South Texas that threatened to be quite embarrassing to Customs’ leadership.
At the center of the case is a Laredo-based inspector supervisor who was accused of creating false drug-seizure reports in the Treasury Enforcement Communications System (T.E.C.S). The female supervisor, who will be referred to as Ms. A, allegedly generated the phony reports by using the names and social security numbers of real Customs inspectors – making the reports read as though the inspectors had written the narratives themselves.
These false narratives, or offense reports, were purportedly generated following a joint Customs/U.S. Border Patrol operation called Triple Edge that took place in the late 1990's. According to the sources within Customs, Ms. A falsified as many as 16 drug-seizure records to embellish her record. The fabricated Customs seizure reports, the sources claim, were based loosely on actual drug seizures carried out by Border Patrol employees.
A Customs media spokesman in the agency’s Laredo office declined to comment on the allegations, other than to say that “what you’re talking about is very sensitive.”
Julie Marquez, a San Antonio, Texas-based spokeswoman for the League of United Latin American Citizens (L.U.L.A.C), a Hispanic civil rights group, obtained documentation detailing the allegations concerning Ms. A.
Marquez says the alleged drug-seizure falsifications are of particular concern because they have serious implications for defendants charged with crimes related to the seizures.
“No one should go to prison because of phony seizures,” Marquez adds.
In February 2001, L.U.L.A.C brought the charges being made against Ms. A, as well as other sensitive information, to the attention of Chief U.S. District Judge George P. Kazen of Laredo. L.U.L.A.C also asked the federal judge to “appoint a special master or impanel a grand jury to investigate serious acts of misconduct ….”
In a letter accompanying the package sent to Judge Kazen, LULAC states:
“We have enclosed documents that were filed with the (Customs) Office of Internal Affairs, which show that the matter was brought to the attention of the (Customs) Service. ... The U.S. Customs Service is involved in a cover-up of the criminal activity of the filing of false offense reports … ”
“What makes this matter even worse is the fact that individuals have been charged with criminal offenses,” L.U.L.A.C’s letter continues. “All convictions obtained by the Service or by the Border Patrol in Operation ‘Triple Edge’ are suspect. ... The U.S. Customs Inspectors whose names were used to file the false offense reports, and their careers, also are at risk. For all that is required is that those inspectors be placed under investigation by (Customs) Internal Affairs themselves and then be terminated and ... the high ranking officials will save themselves.”
In response to the package sent to him by L.U.L.A.C, Kazen wrote, “I have read your letter … and briefly reviewed the various attachments. Considering the nature of the materials, it is my judgment that the appropriate course of action is to forward them to the United States Attorney for the Southern District of Texas, Mervin Mosbacher. I have just spoken with him, and he assures me that he will give the matter his prompt and serious attention. I am sending your material to him in Houston by overnight mail.”
The Package
Included in the documentation provided to Kazen by L.U.L.A.C were several internal letters written by Customs inspectors to their supervisors as well as to Customs Internal Affairs and the U.S. Office of Special Counsel.
“These complaints of falsified seizures happened during the time period U.S. Customs inspectors at the Port of Laredo and U.S. Border (Patrol) agents worked together at the Border Patrol check points in what was known as operation Triple Edge,” states one letter penned by a Customs inspector and directed to the U.S. Office of Special Counsel. “SCI (Supervisory Customs Inspector Ms. A) apparently would periodically take the seizures made by the Border Patrol during this time period that did not relate to U.S. Customs and then would go into T.E.C.S (computer system) and generate false seizures.”
“She knowingly and illegally went into T.E.C.S and falsified seizures using the names and Social Security numbers of various Customs inspectors and canine enforcement officers,” the letter continues. “She not only used the names and Social Security numbers of the inspectors but she made the narratives read as if these government employees had written the narrative themselves. ... S.C.I (Ms. A) is still at work with badge and gun performing supervisory inspection duties.”
Another letter contained in the package sent by L.U.L.A.C to Judge Kazen contains equally shocking claims regarding Customs’ operations in Texas. Because the letter was sent anonymously, references to names have been redacted here.
Charges raised in the anonymous letter include the following:
- “Chief Inspector XX, teaching at the local Jr. college on government time. Nothing happened.”
- “YY and the ZZ contract, accepting gifts and paying out for services never rendered. Nothing happened.”
- “Supervisor AA, taking of 5 government tires, two bench seats and using the government credit card to change the tires to his personal car. Nothing happened.”
- Chief Inspector BB, drunk on duty, driving a government car while intoxicated. Nothing happened.”
- CC had a party at her house that was paid for by (a government contractor). Accepted gifts from (the government contractor) .... Nothing happened.”
- “... Director DD, investigated for associating with less than reputable Mexican customs brokers and freight forwarders with connections to narcotics dealings. Nothing happened.”
The letter concludes with, “Will send more later …..... deep esophagus!”
Norma Lacy, spokeswoman for the U.S. Attorney’s Office for the Southern District of Texas in Houston, confirmed in early March 2001 that her office did receive the package sent by L.U.L.A.C to Judge Kazen.
She said at the time that her office was reviewing the material. “If we determine the matter merits investigation, it will be referred to an investigative agency, such as the FBI or the Office of Inspector General,” Lacy said. However, efforts to determine the status of the case after that point proved fruitless.
Several sources within Customs did say that a U.S. Customs Internal Affairs investigative team visited the Laredo office about a month after the U.S. Attorney’s Office was put on notice about the Ms. A case. As part of that visit, a number of U.S. Customs inspectors were questioned about the alleged drug-seizure record falsifications.
The primary focus of the interrogations carried out by Internal Affairs agents, though, was not to investigate the charges against Ms. A, but rather to determine who gave the information to the media and L.U.L.A.C, the sources indicate.
“Internal Affairs came down here to see how much we knew and to find out who leaked the information,” says one source.
Another source adds, “Internal Affairs had two missions: damage control and finding someone to make an example out of for leaking out this information.”
The irony of the situation, according to several sources inside Customs, is that the charges against Customs supervisor Ms. A were referred to Internal Affairs initially and they failed to act on them – which is what prompted whistleblowers to talk to the media. A number of the inspectors in Laredo now fear their careers have been ruined because they blew the whistle on alleged corruption.
Through it all, Ms. A retained her position as a Customs inspector supervisor. In fact, as of February 2004, a Customs insider confirms, Ms. A was still working for the border agency.
“The inspectors who came forward did the right thing,” one source says. “This is an abuse of authority, and it’s unjust. It’s scary, because these people have the power to turn things around on you.”
The Laredo case is not the first time in which Customs Internal Affairs has been accused of pursuing the whistle blowers. Insight magazine, which ran a series of articles exposing alleged corruption within U.S. Customs in 1997, reported that a similar shoot-the-messenger strategy was employed after its exposé on Customs appeared in print.
“According to Customs employees, Internal Affairs, or IA, agents have unleashed a witch-hunt aimed at identifying the sources for the border-corruption series,” states a March 24, 1997, article in the Washington, D.C.-based magazine. “Armed with copies of Insight, agents have been questioning suspected Customs employees and taking them line-by-line through articles to see if they will slip up or confess to having revealed the degree of corruption.”
Crossing the line
Former Customs inspector John Carman – one of the whistle blowers in the rail car smuggling investigation – claims he had his own run-in with Customs’ good-ol’-boy network after refusing to look the other way when confronted with corruption.
Carman rolls out a laundry list of alleged wrongdoing that he asserts has been perpetrated by Customs employees along the California/Mexican border. Among the charges he makes – as in the Ms. A case – is that records were altered in Customs’ computer system.
Carman raises those claims in a lawsuit he filed in the summer of 2000 in federal court in San Diego. The following is from a 2001 filing in Carman’s litigation:
“... Customs personnel, including high-ranking personnel, have accepted bribes and engaged in other unethical and illegal activities, including falsifying reports, deleting suspect information from the Customs Intelligence Reporting Computer System, aiding and abetting in the facilitating and importing into the United States undocumented persons and contraband – such as narcotics.”
By way of example, Carman, in his lawsuit, charges that “high ranking officials” discouraged Customs line inspectors from searching suspect trucks. He also claims those same Customs officials “provided preferential treatment to companies with ties to drug trafficking” and provided so-called “‘Bingo Cards’ or ‘Get out of Jail Free Cards’ to drug dealers.”
“Said cards, when presented by the holder, entitled the recipient to ‘preferential treatment’ at the United States borders,” the lawsuit asserts.
In the wake of reporting the alleged corruption to his superiors – and ultimately the media – Carman claims he was harassed, retaliated against and finally fired in 1997.
“While he was an employee, (Carman) was refused promotions to which he was entitled, has had his performance evaluations changed, has had test scores reduced … was stripped of his gun and badge ….,” Carman’s lawsuit alleges.
Carman contends the retaliation even continued after he lost his job, due to his ongoing efforts to expose corruption within Customs. In the lawsuit, Carman asserts that defendant Rudy Camacho, director of the Customs Management Center in San Diego, “and others made a concerted and intentional effort to prohibit (Carman) from securing a concealed weapons permit, which was necessary to (Carman in) successfully pursuing his livelihood of becoming a California licensed private investigator.”
“On or about June 16, 1999,” the lawsuit continues, “United States Customs Officers, without basis … retaliated further against (Carman) by ordering and directing state law enforcement officers of the La Mesa Police Department … to stop (Carman’s) vehicle and detain and search him and his vehicle, which they did without probable cause….”
Court records indicate that in the wake of the traffic stop, Carman was prosecuted in state court for illegally carrying a concealed weapon. However, the state court threw out the case after finding that the police lacked reasonable suspicion for stopping Carman’s vehicle.
In his civil litigation, which was filed in federal court in June 2000, Carman alleges that his constitutional rights were violated by a host of defendants, including both U.S. Customs officials as well as local police officers. Carman is seeking monetary damages as well as a court-enforced end to the retaliation and discrimination against him.
The defendants denied Carman’s accusations in an initial answer filed in November 2000. Since that time, the judge has dismissed the U.S. Customs defendants from the lawsuit on technical legal grounds – such as the qualified immunity from prosecution granted to federal law enforcement officers.
However, two of the local police officers involved in the traffic-stop incident described by Carman remained as defendants. Carman’s case was still pending in court as of early 2004.
Regardless of the court rulings in his case, Carman maintains that Customs is the source of his problems. He argues that Customs is incapable of investigating charges of wrongdoing within the agency. He claims further that any whistleblower who attempts to stand up to the agency faces nearly insurmountable odds – given the fact that Customs has the full power and resources of the federal government at its disposal.
“Customs inspectors who have complained about corruption or unlawful practices are harassed, retaliated against, demoted, transferred, discredited and/or dismissed,” Carman asserts in his litigation. “Few inspectors are willing to reveal their names as ‘whistle blowers’ for fear of reprisals against them….”
Carman also alleges in the lawsuit that his complaints “to Internal Affairs fell on deaf ears, and the only significant action taken by the department (is) to conduct ‘damage control’ ... and to cause the termination of employment and (to) discredit employees … who address this corruption.”
Supporting Documents:
Redacted letters reporting false drug-bust narratives to Customs
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