10/23/95 MONEY-LAUNDERING IN MIAMI?

MONEY-LAUNDERING IN MIAMI?

Back in 1985, Bausch & Lomb executives noticed that many of their distributors in Miami and New York were selling to Latin American customers. So B&L set up Lamex, a new Latin American export unit near the Miami airport. It became one of the company's fastest-growing divisions: By 1990, sales hit nearly $25 million.
But many of the Miami deals were highly unusual. Latin American and Caribbean customers would arrive with up to $50,000 in cash to pay for Ray-Ban sunglasses, according to more than a half-dozen former executives. The unorthodox sales added up: In 1990, according to internal B&L documents reviewed by BUSINESS WEEK, Lamex received $5.6 million--23% of its total sales--in cash, cash equivalents, and third-party checks. Former executives say the cash transactions were well known at B&L. ``The auditors would come in and see cash lying on the table and ask, `What's that?''' says Armando Perez-Gili, a former Ray-Ban sales manager. ``I'd say, `One of our customers just paid us.''' A higher-level former manager in Rochester, N.Y., recalls questions being raised at headquarters in 1988, but nobody stopped the flow. ``There was an urgency to meet the numbers,'' he says.
SWIFT JUSTICE? Of course, there's nothing illegal about accepting cash; stiff exchange controls and high tariffs mean many Latin Americans pay cash in Miami. But federal officials say tiny warehouse operators account for most of this trade. Multinationals deal in it only rarely. ``There's a reason that people are paying a lot of cash,'' says one Internal Revenue Service investigator. ``It's an indication customers could be purchasing [with] narcotics currency.''
B&L declined to discuss Lamex, saying in a written statement that ``in an organization the size of Bausch & Lomb, there will be occasions when violations of company policy will be discovered, and we will deal with them swiftly and appropriately.'' But former managers say B&L's Miami shop took an even more dubious form of payment: checks drawn on third-party bank accounts made payable to someone else, and then endorsed over to B&L. Federal officials say such checks were commonly used to launder drug money in the late 1980s and early 1990s. Colombian money-exchange houses were used as go-betweens to launder funds for drug lords, who would provide dollar checks to the exchange houses. Although unfamiliar with the specifics of the B&L transactions and not commenting on them, Wilmer Parker, chief of the drug division in the Atlanta U.S. Attorney's office, says generally: ``If a company was accepting third-party checks not payable to itself, either they were doing so with a blind eye to whether they were aiding and abetting money-laundering, or they were doing it with knowledge of what they were doing.''
If B&L headquarters didn't seem to care much about Lamex' customers, executives in Rochester worried about another issue. After getting wind that the Lamex division might have been diverting goods back into the U.S. market did headquarters order a thorough audit. Insiders say they uncovered significant irregularities, and Lamex' general manager, Anthony Brea, and his controller resigned. Brea admits he diverted lenses through Canada, but says reports of other irregularities are ``totally incorrect.''
HIT THE TARGET. A new management team installed by Rochester spent two months combing through records. One key issue that the new managers never resolved: Did Brea follow rules requiring businesses accepting more than $10,000 in cash in a transaction to file with the IRS? Brea swears that ``in that area, B&L was very strict. We followed all the guidelines.'' But other ex-managers say the IRS forms weren't filled out until late in Brea's tenure. The new managers told buyers that ``if they wanted to pay cash, they needed to follow proper procedures,'' says one. ``We didn't see them again.''
After the cleanup, the new management team presented a report on the Miami operations to top corporate management in late 1991. They claimed that, of $24.6 million sales in 1990, just $13 million was legitimate. The rest went to questionable customers or products that were diverted back into the U.S. or Europe. Nevertheless, B&L headquarters insisted they boost 1991 sales above the prior year's. Says one high-ranking former manager: ``We were told, `The shareholders don't care where the revenues were coming from before. You have to make it up.'''
By Mark Maremont in Boston with Gail DeGeorge in Miami