Criminals of the World, Unite

Criminals of the World, Unite
By Laura Miller, Salon.com
April 16, 2008 | In 2003, a joint operation of British intelligence, the Bulgarian police, the U.S. Drug Enforcement Agency, Spanish police and the Bolivian Special Antitrafficking Force pulled off a bust that netted the largest amount of cocaine ever seized. The drug was hidden among blocks of medicinal clay destined for Madrid and also, authorities soon discovered, mixed into 770 boxes of powdered mashed potatoes set to be shipped to Varna, Bulgaria, via Chile. A couple of years earlier, a Colombian drug cartel (the source of the shipment) had smuggled a chemist into Bulgaria, where he trained Soviet-educated chemists to extract the coke from various seemingly innocuous substances.
For Misha Glenny, a journalist specializing in the Balkans and author of the new book "McMafia: A Journey Through the Global Criminal Underworld," the smuggling operation was a prime example of what he calls the "internationalization of organized crime," a phenomenon that has flourished over the past two decades. Estimates suggest that crime accounts for almost one-fifth of the planet's gross domestic product, he reports, and "McMafia" is a sprawling, pell-mell tour of the world's shadow economies, ranging from Russia to Israel to the Mideast, as well as India, Africa and Latin America. Glenny even makes it to western Canada, a seemingly mellow region that, due to the proliferating industry of marijuana cultivation, "is home to the largest per capita concentration of organized criminal syndicates in the world."
Of course, there are criminal syndicates and then there are criminal syndicates. The mild-mannered British Columbian pot entrepreneurs (whose livelihood, Glenny makes it clear, ought to be legalized) seem a long way from the white hot centers of international gangland like Russia and Colombia. Alas, not far enough; one of the pot smugglers Glenny interviewed felt compelled to break with his longtime business partners when they opted to make a kilo-for-kilo trade with cocaine dealers in Florida -- whose sources were no doubt some pretty scary people. Nowadays, serious crime, like serious capitalism, requires globalization. Tony Soprano-style protection rackets are old news, and generally stop at national borders. But trading in contraband goods -- be it drugs, arms, oil or human beings -- inevitably means setting up international relationships and connections. Above all, the big-time criminal needs a way to launder his loot, and there has never been a global climate more obliging for bad men who want to make dirty money look clean.
The reasons for this outrageous blossoming of so many flowers of evil are, according to Glenny, essentially twofold. "The collapse of ... the Soviet Union is the single most important event prompting the exponential growth of organized crime around the world in the past two decades," he writes. A key event in that breakdown was the bizarrely selective deregulation of the Soviet economy. The officials under Boris Yeltsin who executed this "reform," for reasons not entirely clear, liberalized the prices of everything but Russia's natural resources: oil, gas, diamonds and metals. Those lucky enough to get ahold of these commodities at the artificially low, state-mandated prices could turn around and sell them at market rate to the rest of the world. The result was the overnight creation of a generation of Russian oligarchs and "quite simply the grandest larceny in history."
Vast amounts of wealth drained out of Russia and into the pockets of these enterprising, if dodgy businessmen, who in turn deposited the money outside the country in "the biggest single flight of capital the world has ever seen." Meanwhile, the government in Russia was disintegrating, increasingly unable to provide basic services like security, let alone administer the commercial rule of law required by any market economy. So, you're a fabulously wealthy oligarch in an ever-more-Hobbesian Moscow: What do you need? Muscle, obviously, and this is where the notorious mafiya, populated by ex-cops and ex-soldiers with nothing constructive to do, became an essential part of the scene. "The police and even the KGB were clueless as to how one might enforce contract law," Glenny explains. "The protection rackets and mafiosi were not -- their central role in the new Russian economy was to ensure that contracts entered into were honored." Or else.
Glenny points out that the Russian mob was not merely a parasite on an otherwise healthy economy, the way the American mafia has been. The mafiya, he insists, was essential to the transition from socialism to capitalism, given that Russia's Western advisors seemed determined to turn the nation into "a giant petri dish of Chicago-school market economics." At the same time that the USSR was imploding, the holy doctrine of the free market and minimal government had been enshrined by Ronald Reagan, Margaret Thatcher and their disciples. The West embraced the rampant deregulation of international finance markets -- that was the other force behind the rise of global organized crime.
The West was selective in the application of its new religion, however. While pressuring post-Soviet states like Bulgaria to open their economies to foreign imports, America and Europe continued to protect their agricultural industries -- which just so happened to be the only areas in which those states could hope to compete. This inequity, combined with the U.N. sanctions imposed on Serbia, Kosovo and Montenegro in 1992, made it almost impossible to survive in the former Yugoslavia without turning to some illicit industry. Meanwhile, the supposedly intractable ethnic conflicts in the region offered no impediment to doing business if you happened to be a gangster. During the siege of Sarajevo, Bosnian Muslim warlords, for example, did deals with Serbs shelling the city, while milking "every last penny out of their compatriots by ratcheting up the price of basic foodstuffs."
All these factors conspired to make Russia, Eastern Europe and the Balkans breeding grounds for a new efflorescence of organized crime. Nevertheless, other nations that Glenny visited are even worse: A tiny breakaway province of Moldova, the self-proclaimed nation of Transnistria, is "the quintessential gangster state," funding itself by selling off stockpiles of old Soviet weaponry to anyone who can pay. "There is enough kit in Transnistria to supply an entire army," a "Western intelligence officer" told Glenny. "It is worth millions and it is deadly." The hoodlums running the place used the proceeds to build a lavish arena and sports complex for a soccer team that can't actually play under the Transnistrian flag because the rest of the world doesn't recognize that Transnistria exists.
The nouveau riche excesses of gang lords never fail to tickle Glenny, who, despite the breakneck pace of "McMafia," always has a moment to describe a fantastical garish mansion or grotesque birthday party. (One Russian oligarch threw a "Soviet nostalgia" party complete with giant portraits of Lenin and Stalin beside gyrating dancing girls in backless miniskirts.) These are, however, only the most floridly vulgar manifestations of an attitude Glenny sees as both the cause and the result of the spread of organized crime: a conscience-free consumerism that is infecting the entire planet. "When I was a student in the 1970s," he writes, "it was considered completely unacceptable among my peer group to visit a prostitute. Yet today, educated young European men think nothing of flying to Estonia or similar East European destinations on stag weekends where hiring prostitutes is all part of the fun."
Whether or not you agree that hiring a prostitute is necessarily always wrong, it's hard to see how any john could inure himself to the sufferings of a prostitute who has been kidnapped, imprisoned, beaten and terrorized into servicing 20 men a night, as was one young Moldavian woman Glenny interviewed in Israel. Tel Aviv, it turns out, is one of two major prostitution hubs in the Mideast. (The other is that paradise of unregulated economic activity, Dubai, in the United Arab Emirates.) There, in a brothel, Glenny witness a "pug-ugly" American teenager and two of his buddies give the staff a skeptical once-over. "You see them all the time," his friend explains. "Their parents pack 'em off from the Upper West Side to Israel with a book filled with the phone numbers of synagogues, rabbis, and shuls, and a wad of cash. And then the minute they get here, they head for the whorehouses."
Glenny finds this a sad descent from the socially committed Israel of decades past, the land of kibbutzim, social service idealism and prime ministers who lived in humble two-bedroom apartments (as opposed to the "huge" farm owned by Ariel Sharon). He traces the change to an influx of Russian mobsters in the 1990s. Along with the Chechens and Georgians, groups who were also forced to the "twilight periphery of the Soviet Union," Jews are overrepresented among Russia's oligarchs and gangsters. Israel (where they were entitled to a passport) offered a relatively tranquil haven, complete with banking systems designed to accommodate foreign money. But once the native-born Israelis got a load of the immigrants' sybaritic lifestyles, they wanted the same for themselves, and the ranks and ambitions of the homegrown Israeli mob swelled.
The same trickle-down story has played out in other nations, kleptocracies like Nigeria, whose ruling class simply siphons all the wealth of the world's sixth-largest oil reserve into their own pockets. Graft is so pervasive in Nigera, it has become an "ideology," as Glenny puts it. Small wonder, then, that the nation has become a breeding ground for ingenious scams. "Most Nigerians involved in crime," Glenny writes, "simply mimic the behavior of their thieving elite." Beside identity and credit card theft, the (notably nonviolent) Nigerian crime syndicates specialize in what's called "advance fee fraud," the official term for those imploring e-mails purportedly sent to you by the widow of a high-ranking African official looking for an astute American to help her withdraw $60 million or $80 million from a third-world bank. Otherwise known as 419 scams (the number refers to a section of the Nigerian penal code), these cons have even been celebrated in a hit pop song, "I Go Chop Your Dollar":
Oyinbo man [white man], I go chop your dollar, I go take your money and disappear 419 is just a game, you are the loser I am the winner.
The most spectacular victim of Nigerian advance fee fraud was not, however, a white man, but Nelson Sakaguchi, a director of Banco Noroeste in Brazil. Yes, that's right, a banker fell for one of these scams, to the tune of $191 million, skimmed off the bank's accounts via the offshore banks of the Cayman Islands. The cash was funneled to a Nigerian team led by one Chief Emmanuel Nwude, who, in a London hotel suite, managed to convince Sakaguchi that he was Paul Ogwuna, director of the Central Bank of Nigeria.
That was only the beginning: The psychic trap of the advance fee fraud is that the con man keeps asking for just a little bit more cash to cover some expense required to close the deal, and this doesn't seem like much compared to the money you've already kicked in. Good money follows bad and soon the mark (or "mugu," as the Nigerians dub the victim) is conning himself, unwilling to face the possibility that he's been had. "Sakaguchi's gullibility beggars belief," Glenny marvels, but so does much else about the case, such as the macumba priestess Sakaguchi hired to improve his luck. In the end, he wound up paying her upward of $20 million to perform rituals involving hundreds of thousands of black and white pigeons.
Easy as it is to mock a self-deluded sap like Sakaguchi, most Westerners are to some degree complicit in the criminality that Glenny describes. "Organized crime is such a rewarding industry in the Balkans," he writes, "because ordinary West Europeans spend an ever-burgeoning amount of their spare time and money sleeping with prostitutes; smoking untaxed cigarettes" -- a huge smuggling concern -- "snorting coke through fifty-euro notes up their noses; employing illegal untaxed immigrant labor on subsistence wages; stuffing their gullets with caviar; admiring ivory and sitting on teak; and purchasing the liver and kidneys of the desperately poor in the developing world." When we ignore where all this contraband comes from we, too, are kidding ourselves.
The ever intrepid Glenny follows his story from an interview with a Mumbai hit man (a perfectly congenial fellow) to a visit to a couple of shipping containers buried under the British Columbian wilderness and stuffed with the latest marijuana growing technology. He buys $6,000 worth of prohibited caviar for $175 in Kazakhstan and interviews foreign laborers living in "subhuman" conditions on the outskirts of Dubai, the money-laundering capital of the world. Occasionally, reality starts to resemble the burlesques of postmodern fiction, as when the Chechen mobsters in Russia started charging other gangs for the right to call themselves "Chechen" (thereby capitalizing on the Chechens' fearsome reputation), provided that the licensees didn't mar the brand by making empty threats. Failing to follow through would bring the dreaded wrath of the real Chechens down on the heads of the transgressors.
These episodes make for great tales, but Glenny also witnesses plenty of suffering; that Moldavian forced into prostitution saw a girl who tried to escape kneecapped and left to die in the Negev desert. He advocates some sweeping action: "If the UN is right and drugs account for 70 percent of organized criminal activity, then the legalization of drugs would administer by far the deadliest blow possible against transnational organized criminal networks." Drug money funds other criminal enterprises (including terrorism), and underground commerce represents taxes lost to the legitimate economy. He also observes that if the U.S. would crack down on offshore banking, criminal syndicates would be much harder-pressed to launder their cash; of course, so too would a lot of rich, tax-dodging Americans and corporations.
Perhaps the most radical demand in "McMafia" is for a unified global strategy to deal with what, ultimately, are border-transcending problems. Glenny isn't against globalization per se -- perhaps he thinks it's unavoidable -- but he insists that it must be done right. "For globalization to work," he writes, "the world needs to be a level playing field: the West has to stop its protectionist practices and it has to reassess its resistance to the free, or at least a freer, movement of labor. The developing world in turn needs to address the issue of corruption and the strengthening of the rule of law. This raises the awkward question of global governance and standards that might be compatible across the world."
The subprime mortgage market meltdown revealed the fact that several high-end Western financial institutions had a pretty feeble grasp on exactly where all their money was and how much they actually had. If experts like these can "lose their way in the mists of financial markets," Glenny explains, "imagine how easy it is for those who do not want to be seen to remain hidden. Globalization needs regulation, but everyone is reluctant to demand it for fear it may discriminate against them." Until then, however, all of us will be paying the hidden costs of the unfettered global free market, costs deducted from our collective humanity as well as our wallets, and in ways we are just beginning to understand.