Harold Vilches, a 23-year-old Chilean, exported $80 million in contraband gold. As Bloomberg Businessweek details, it all started with a Google search…
In just two years he had rapidly risen in the ranks of Latin American gold smugglers. Although he was barely old enough to order a beer in Miami, he’d won a $101 million contract to supply a gold dealer in Dubai. That hadn’t exactly worked out—the Dubai company was after him for $5.2 million it says he misappropriated—but still, in a brief career he’d acquired and then resold more than 4,000 lb. of gold, according to Chilean prosecutors. U.S. investigators and Chilean prosecutors suspect almost all of it was contraband.
In the past decade and a half, global gold consumption has risen by almost 1,000 tons a year, to about 4,300 tons, according to the World Gold Council, a London-based industry group. Legal mining operations haven’t kept up with demand, so illegal mines controlled by criminal gangs, from the Amazon to central Africa, help cover the deficit, according to Verité, a nonprofit group in Amherst, Mass., that’s researched the illegal gold trade. A 2016 Verité study found that five countries in Latin America shipped 40 tons of gold from illegal mines to the U.S. in one year, almost twice the legal exports from those countries. South America’s illegal gold mines, most of them in the Amazon basin, are toxic pits in which mobs of laborers use fire hoses and mercury to extract nearly pure gold nuggets from the red earth. According to a finding by the United Nations, the industry thrives on child labor, devastates the environment, and enables prostitution at ramshackle camps around the mines. The gold moves from smuggler to smuggler, then into a network of refiners and traders, all feeding the world’s voracious demand.
Vilches, a city kid, never saw any of this, but he did grow up around gold. His father, Mario, owns a jewelry shop; his uncle Enrique, an evangelical preacher, built Joyas Barón, a chain of 18 jewelry stores. Enrique has more than once attracted the attention of the authorities. In 1998, Chilean prosecutors caught Ecuadorean smugglers with 18 ingots of gold at the airport, and they claimed to be delivering it to Enrique. (He was cleared of all criminal charges after arguing that police set him up.) In March 2015, Enrique was sentenced to five years’ probation for tax fraud by an appeals court in Santiago. Last year tax authorities filed further charges alleging that Enrique had organized an enormous accounting scam and owed an estimated $18 million in back taxes. Speaking on Chilean TV, Enrique Vilches denied all connections to his nephew’s gold smuggling. “I don’t have any commercial relationship with what’s being investigated,” he said. “[There’s] no situation that involves me, therefore I want to remain absolutely separated from this situation.”
By 15, Harold was working for his father’s business. Within a year, his dad was stuffing his backpack with up to 50 million pesos ($78,000) in cash and sending him to the bank to make deposits. In 2013, Vilches entered college at the Universidad Mayor in Santiago to study business administration. He hadn’t been there long when his father had a stroke, and he cut back his classwork to focus on the family business. If he was going to be doing that, he decided, he wanted to do more than buy and sell trinkets. He intended to make some real money, and that meant getting into the bulk gold business.
His first move was to persuade Gonzalo Farias, a metals exporter in Santiago, to take him on as a supplier. In September 2013, Vilches made his first delivery to Farias—6.6 lb. of gold legally acquired in Chile. He made several more such deliveries. But he wanted to be bigger. He went around Farias and cut a deal directly with Fujairah Gold, a Dubai-based company that Farias supplied. In June 2014, Vilches signed a contract to deliver 6,000 lb. of gold over the next 12 months to Fujairah’s head office. The contract began with 90 lb. the first month, then ratcheted up. He didn’t have the money to buy that much gold, so the company gave him access to an account holding $5.2 million. This was his big break—the contract was potentially worth more than $100 million. He stood to make $2 million to $6 million in profit.
This was beyond ambitious for Vilches—there weren’t enough available gold coins and jewelry in Chile to fill Fujairah’s orders.
So Vilches decided to become a smuggler. It was easy: He Googled gold dealers in Peru. He found Rodolfo Soria Cipriano, one of the country’s most prolific exporters, according to Peruvian newspaper El Comercial. An answer came quickly. Vilches told investigators Soria promised to set him up with all the gold he wanted if he showed up with the cash. Vilches said he didn’t ask where the gold came from. Whatever its source, he evaded export controls and moved the gold into Chile without paying taxes or duties, prosecutors say.
…
The net began to close in early 2016, when banks in Chile and Miami began filing suspicious-activity reports on Vilches’s huge cash transactions and shutting down his accounts. Then came the criminal complaint involving the Fujairah Gold contract. Finally, police arrested Vilches and seized $300,000 in cash and a small amount of gold from the bunker. Facing a multiyear jail sentence for money laundering and tax evasion, Vilches agreed to cooperate with law enforcement in both the U.S. and Chile. He also dropped out of college. Today, Vilches and NTR Metals are at the center of a sweeping criminal investigation by the U.S. Justice Department, Chile’s National Economic Prosecutor’s office, and law enforcement in Peru and Ecuador, according to Pérez, the Chilean prosecutor. Sarah Schall, a spokeswoman for the U.S. Attorney’s Office in Miami, declined to comment, citing policy against confirming or denying the existence of an investigation.
In October 2016, FBI agents and prosecutors with the U.S. Attorney’s Office in Miami traveled to Chile to interview Vilches. After becoming convinced his information was legitimate, they told him he might get immunity in the U.S. from prosecution in exchange for his sworn testimony, people with knowledge of the probe say. As Vilches spent hour after hour in interrogation, FBI agents and Chilean detectives were both fascinated and entertained. Upwards of 15 law enforcement professionals crowded into a meeting room at Santiago 1, a sprawling prison complex, and Vilches fed off the attention. He laughed and seemed to shrug off the seriousness of his situation. His confessions took on the air of a performance, according to one of the investigators present. “All you lacked was the popcorn,” he says with a laugh. FBI agent Lourdes McLoughlin, the assistant legal attaché at the U.S. embassy in Santiago, declined to comment, citing a policy of not commenting on active investigations.
In December the U.S. Attorney’s Office and FBI brought Vilches to Miami, where he told a federal grand jury that he was coached by NTR Metals Miami on how to set up his corporate structure in the U.S. to handle smuggled gold and then launder the proceeds, people familiar with the U.S. probe say. Elemetal and NTR Metals Miami didn’t respond to questions about an investigation.
…
Vilches lived large only briefly. He’s traded down to an apartment along Gran Avenida, a thoroughfare in a tough Santiago neighborhood. Because of his cooperation, he’s unlikely to face additional jail time for smuggling. He still faces multiple criminal charges, including tax evasion.
Chilean export regulations have been beefed up in the wake of the Vilches case. One gold dealer describes the new export process as similar to “being told to stand up against the wall and put your hands up.” Customs officials from Ecuador, Bolivia, and Peru have visited Chile to exchange information and compare notes. Pérez approves, but he has no illusions. If Vilches, without any particular advantages except his boldness, could get this far in the illegal gold trade, who else could? “I think there are 100 Vilcheses across Latin America,” he says. “It’s easier than it looks.”
The question is, why would powerful people around the world go to such lengths to get their hands on a yellow rock? Tradition?
via http://ift.tt/2mfZLjw Tyler Durden