http://www.chron.com/disp/story.mpl/headline/world/4143586.html Aug. 26, 2006, 10:36PM
South American scams funding Hezbollah? The U.S. believes so and has sent teams to tri-border area to help fight money laundering By ANDREW DOWNIE and JOHN OTIS Copyright 2006 Houston Chronicle South America Bureau CIUDAD DEL ESTE, PARAGUAY - Here in South America's busiest contraband and smuggling center, police recently raided a warehouse that could burn 1,200 counterfeit compact discs per hour. Each CD cost 25 cents to make and was sold on the street for $2 or $3. All told, said one Paraguayan official, sales of the pirated discs total $400 million annually. Clandestine CD factories are just one of myriad schemes to generate huge, under-the-table profits in Ciudad del Este. U.S. officials say some of this cash goes to Hezbollah, the Shiite militia group that Israel has spent the last month battling in southern Lebanon and which has been blacklisted as a terrorist organization by the U.S. State Department. To keep a closer watch on the tri-border region - where the frontiers of Paraguay, Brazil and Argentina converge and home to thousands of Lebanese Muslims - the Pentagon has dispatched small teams of U.S. troops to Paraguay, while the Department of Homeland Security has sent so-called "trade transparency units" to help crack down on money laundering and other financial crimes. "Substantial financing for Hezbollah is coming from the tri-border area," said Daniel Glaser, the U.S. Treasury's assistant secretary of state for terrorist financing and financial crimes. "The problem very much has not been solved." Frustrating task Since 9/11, U.S. officials have scoured the globe trying to shut down underground financial networks that support militant Islamic groups. But their efforts in Ciudad del Este show how frustrating the task can be. Scams range from contraband and cocaine smuggling to producing phony import-export invoices. Tracking the tangle of paperwork is a nightmare. Investigators say it's nearly impossible to penetrate the tight-knit Lebanese diaspora of around 30,000 that live and work in Ciudad del Este and Foz do Iguacu, just across the border in Brazil. There have been few attempts to put the smuggling center out of business because so much commerce creates jobs, and well-to-do shop owners often bribe local officials and contribute to political candidates. "If you want to win an election, it wouldn't even occur to you" to crack down on the tri-border area, said Juan Belikow, an Argentine expert on underground economies who teaches at the University of Buenos Aires. Shortage of evidence Paraguay lacks an anti-terrorism law and no one has ever been arrested here on terror charges. In the past five years, authorities have convicted only two Hezbollah financiers in the tri-border area - and, like Al Capone, they were imprisoned for tax evasion. This shortage of hard evidence linking the smuggling trade to Hezbollah-sponsored terrorism has some local officials complaining that Washington overstates the threat. "Real evidence has never been found," said Augusto Lima, the Paraguayan representative of a joint police task force, set up with Argentina and Brazil, to monitor the region. "And if we don't have real evidence, we can't accuse people." Authorities in Brazil make the same claim, even while admitting that all kinds of criminals operate in the area. Few border controls The streets of Ciudad del Este are jammed with cut-rate shopping malls and rickety stalls selling everything from fishing rods and pirated DVDs to lingerie. Foreign currencies abound. The chatter of buyers and sellers making deals in English, Spanish, Portuguese, Chinese and Arabic fill the air. With no effective passport controls between Brazil and Paraguay, tens of thousands of people stream across the Friendship Bridge connecting the two countries every day, lugging bags, boxes and backpacks filled with merchandise that is often smuggled into other countries and sold at cut-rate prices. Luis Muniagurrias, head of the government tax and intellectual property rights office in Ciudad del Este, estimated that between $12 billion and $24 billion in mostly underground commerce moves through the region each year. "This place is the Wild West of piracy and capitalism," said Larry Johnson, who was deputy director of the State Department's office on counterterrorism. "You can make enormous amounts of money. ... The question is whether it's used for terrorism." Lebanese expatriates in the triple-border area stress their support for Hezbollah - which has two Cabinet members and 14 legislators in Lebanon's national government - is not financial. "Hezbollah is a political party, so it is like saying Americans sympathize with the Democratic Party," said Mijail Meskin Bazas, Syria's Honorary Council in Ciudad del Este. "We don't send money," said a Lebanese Shiite named Ali, as he stared at a TV in a shopping mall that was tuned to an Iranian station. "God will send money to Hezbollah. Syria will send money. Iran will send money." Indeed, some terrorism experts point out that the majority of Hezbollah's financial muscle comes from Iran and Syria and contributions from South America pale by comparison. However, Argentine investigators believe that Hezbollah operatives working out of the tri-border area were responsible for the 1992 bombing of the Israeli Embassy in Buenos Aires that killed 29 people and a 1994 suicide truck-bombing that flattened a Jewish community center in the city, killing 85. In testimony in March before the Senate Armed Services Committee, Gen. Bantz Craddock, chief of the U.S. Southern Command, said the tri-border area remains "a refuge for terrorist support and fundraising activities." Businessman convicted Washington's main evidence is the 2002 conviction of Assad Ahmad Barakat, a Lebanese businessman who arrived in Paraguay in 1985 after fleeing the civil war in his homeland. The U.S. Treasury Department describes Barakat as a high-level Hezbollah financier who used his electronics wholesale store in Ciudad del Este as a cover to raise funds for the organization. Barakat was arrested for tax evasion in 2002 and is serving a 6 1/2 -year prison term in Paraguay. According to Paraguayan officials, his remittances to Hezbollah since 1995 totalled at least $50 million. U.S. Treasury officials also claim Barakat strong-armed other Lebanese shopkeepers in Ciudad del Este to make donations to Hezbollah. But tracing donations to Hezbollah's military wing is nearly impossible. For example, some donations may go to Islamic charities run by Hezbollah, which operates health and education programs in southern Lebanon. Unlike in the U.S., it is legal in Paraguay to donate money to Hezbollah's political wing. "The funds can be entirely legal until they are used in military operations," Johnson said. _____ HoustonChronicle.com -- <http://www.chron.com/> http://www.HoustonChronicle.com | Section: World <http://www.chron.com/world> This <http://www.chron.com/disp/story.mpl/headline/world/4143586.html> article is: http://www.chron.com/disp/story.mpl/headline/world/4143586.html FAIR USE NOTICE: All original content and/or articles and graphics in this message are copyrighted, unless specifically noted otherwise. All rights to these copyrighted items are reserved. Articles and graphics have been placed within for educational and discussion purposes only, in compliance with "Fair Use" criteria established in Section 107 of the Copyright Act of 1976. 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