Undercover Investigation Uncovers
Money Laundering

WASHINGTON - Fifteen individuals, five automobile dealerships and two insurance company agencies were charged with money laundering, cash reporting and mail fraud violations in complaints unsealed today in federal court in Manhattan.

Thirty one new cars valued at $880,700 also were seized as part of an undercover investigation into the laundering of narcotics money by car dealers and automobile insurers. They include six Mercedes Benz, six Mazdas, six Nissans, seven Acuras, five Fords and a Cadillac.

The arrests, searches, and seizures are the result of a joint undercover investigation conducted by the Office of the U. S. Attorney for the Southern District of New York, the Internal Revenue Service and the Drug Enforcement Administration, assisted by the United States Postal Inspection Service.

The investigation, code-named, "Operation Drug Wheels" revealed that employees of the automobile dealerships, with the assistance of the insurance company employees, were aiding narcotics dealers by knowingly accepting drug profits in cash for the purchase of automobiles and concealing the identity of the purchaser and the cash. According to U.S. Attorney Otto Obermaier, this is the largest investigation of its kind in the nation to date.

Four of the criminal complaints filed yesterday charged a conspiracy to commit a money laundering offense, money laundering, a conspiracy to violate the cash reporting requirements and a violation of those requirements. These complaints each allege that in the past convicted narcotics dealers purchased cars for cash from the defendants and the defendants assisted in disguising the true ownership of the vehicles -- dealers. The complaints each further allege that the automobile dealers, some with the collaboration of the insurance agencies, recently sold or attempted to sell a fleet of new cars for cash to federal undercover agents posing as narcotics dealers. In each instance, as the complaint alleges, the undercover agents spoke openly of their drug trafficking and the source of their cash.

Allegations are made that the dealers and insurance agents assisted in concealing the true ownership of the automobiles in order to protect the identity of the purported drug dealers, their customers. Each of the four criminal complaints also alleges that a search of the records maintained by the Department of the Treasury revealed that the necessary cash receipt forms were almost never filed.

The fifth complaint charges an automobile insurance agency and two individuals with committing mail fraud offenses involving the concealing of the true ownership of any of the automobiles purchased and ordered in the undercover operation.

For further information, contact Mary Ellen Luthy of the U. S. Attorney's office at (212)791-1937.

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