A Riggs Bank internal investigation has uncovered signs of money laundering by bank employees, including efforts in 2003 to help Argentine naval officers hide $3.8 million in cash to prevent seizure by investors after the Argentine government defaulted on bond payments.
The investigation by a small team of former Secret Service agents hired by Riggs last year also discovered that efforts by former Chilean dictator Augusto Pinochet to hide millions of dollars at Riggs go back to 1985, nearly 10 years earlier than previously known. Pinochet came to power in a 1973 coup and instituted several years of bloody repression. He resigned after a 1989 election, but he remained commander-in-chief of the armed forces until 1998.
Previous accounts have described the bank's close relationship with Pinochet and what appear to be attempts to hide his assets from federal prosecutors. But the bank's own investigation, according to sources familiar with its findings, turned up detailed information about the lengths the bank went to accommodate the former dictator, whom bank officials referred to by code names including "Red Fox" and "APU." The sources agreed to speak only on the condition that they not be identified since the investigation is continuing.
In the late 1990s, Pinochet was under house arrest in London after being indicted in Spain in 1998 on charges of crimes against humanity. The Chilean Air Force mission there contacted Robert Roane, who headed Riggs's London office, asking if the bank's corporate jet could fly nonstop from London to Chile and whether it could be available if Pinochet were released, according to the investigation. Roane passed the request on to a Riggs executive in Washington; Pinochet did not use the jet.
Although the investigation turned up no evidence that Joe L. Allbritton, Riggs's largest stockholder and its chief executive until 2001, participated in any suspicious activity involving Pinochet accounts, numerous bank officials told investigators that they thought Pinochet was a favored client and a friend of Allbritton.
Sources close to the Allbritton family, speaking on their behalf but only on condition of anonymity, said Allbritton met Pinochet twice and the two men were not friends.
The investigation so far has resulted in the firing of at least three Riggs employees, including a lawyer in the bank's general counsel office, according to sources. Evidence obtained through the investigation has been given to the FBI, the Secret Service, the Department of Justice, bank regulators, and the Bureau of Immigration and Customs Enforcement, the sources said.
The Pinochet account was closely managed by Carol Thompson, who ran the Latin American embassy and international private client business for Riggs. Thompson was also involved in the Argentine transaction, in which Riggs helped Argentine naval officers transfer $3.8 million in cash from an account to Riggs safety deposit boxes. The Argentine government feared that private investors in the country's defaulted bonds would seek a court order freezing government funds in the United States.
Two representatives from the naval mission withdrew $3.8 million from the navy's account at Riggs, stuffed the cash into two large paper bags, and deposited it in five boxes at the Riggs Dupont Circle branch on April 28, 2003.
Investigators reviewed an e-mail in which Thompson said that she had asked a Riggs lawyer for advice about the transaction and that no objections had been raised. Former Riggs National Corp. president Timothy C. Coughlin found out about it at a lunch with Thompson and the Argentine admiral the same day the transaction took place. He abruptly left the lunch, went back to the bank, and ordered the transaction reversed.
Thompson quit Riggs in 2003 and until recently was an employee of Wachovia Bank. She could not be reached for comment. A spokeswoman for Wachovia said Thompson was no longer employed there.
Among the investigation's other findings:
* Riggs paid $5,000 into a Pinochet family foundation in 1997, shortly after senior bank executives visited Pinochet in Chile to solicit his business.
* Some Riggs internal bank documents relating to Pinochet are missing from the bank's files.
* Pinochet and his family had more accounts than previously disclosed, including 10 accounts at Riggs's Miami bank and several opened by Chilean military officers described by bank executives as "fronts" for the dictator.
Riggs closed out its remaining Pinochet accounts in 2002 under pressure from the Office of the Comptroller of the Currency (OCC), but the bank was never cited for laundering any money for the general. This year, the bank was fined $25 million for failing to report suspicious transactions in Washington accounts held by the government of Equatorial Guinea and by Saudi Arabian diplomats.
The OCC has also asked other banks that held Pinochet-related accounts, including Bank of America and Citibank, for information, sources said.
Riggs in May began reconstructing its 19-year relationship with Pinochet in response to an investigation by the Senate permanent subcommittee on investigations. The subcommittee published what it called a case study on money laundering and foreign corruption, describing Riggs's relationships with Pinochet and the dictator of Equatorial Guinea.
The subsequent bank investigation found that Riggs's suspicious dealings with Pinochet were much deeper than was previously known by anyone except a small number of former private client managers in Riggs's shuttered international banking unit in Miami. It involved most members of Pinochet's family, including a son, and other members of Chilean military elite who were courted by Riggs senior bank management, including Allbritton, according to sources.
Pinochet's commonly known full name is Augusto Pinochet Ugarte, but he requested that Riggs personnel refer to him as Jose.
The first record found by investigators is of an account opened at the Miami subsidiary in 1985 under the name Jose Ramon Ugarte. Eventually, Pinochet would control, directly and indirectly, as much as $12 million at Riggs and its various subsidiaries. In all, the Riggs Miami operation had 10 accounts that were used as "conduits" for money going to Pinochet or his personal assistant.
The first suspicious transactions involving the Miami accounts that the investigation found occurred as early as 1990, when a Riggs account in the name Daniel Lopez issued a $410,000 check to a Riggs account that belonged to Augusto Pinochet and his wife, Lucia Hiriart.
In all, more than $1.3 million from the Lopez account was deposited into Pinochet's accounts at Riggs. When Riggs internal investigators withdrew the customer identity folder on Lopez from a Miami storage facility in August, the folder contained only two return U.S. Postal Service receipts for an address in Santiago, Chile. Investigators had expected to find documents revealing the identity of Daniel Lopez. Although some cursory documentation about Lopez's identity -- he was listed as "businessman" -- was discovered in September at a Riggs office in Washington, the bank was not able to positively identify Lopez until two weeks ago, when Pinochet's son Marco Antonio sent an e-mail to Riggs investigator B. J. Moravek confirming that Lopez was an alias of his father.
Thompson, Allbritton and Coughlin made numerous trips to Chile, meeting with Pinochet on several occasions and with a wide variety of Chilean government and military officials in the 1990s and as late as the spring of 2002.
Allbritton was periodically informed by Thompson about the status of Pinochet's accounts, and he was aware of them at least since the mid-1990s, according to sources close to the investigation. When the OCC forced Riggs to close Pinochet's accounts in 2002, Allbritton was so upset that he asked bank officers to prepare materials so he could make a personal call to then-Comptroller of the Currency John D. Hawke Jr. to complain, according to sources close to the bank's investigation. Apparently, Allbritton thought better of it.
"He didn't call," Hawke said yesterday from his office at Arnold & Porter, where he now practices banking law. "If he had, I would not have discussed the issue."
Allbritton could not be reached for comment. His spokesman, Paul Clark, said Allbritton wanted to register displeasure that a bank examiner could decide what kind of clients a bank had, not that Riggs had to surrender Pinochet in particular.
Mark N. Hendrix, a Riggs spokesman, said, "Riggs is committed to full compliance with laws and is attempting to cooperate fully with all ongoing investigations."