The Making of a Money Launderer
Jun. 16, 2017
JACKSONVILLE, Fla. (AP) — Three friends piled into a rented Ford in Jacksonville and drove to California to buy 110 pounds of marijuana. On their way back, they were pulled over for a minor traffic infraction by the Nevada Highway Patrol. It was a K9 unit. The dog found the drugs.
If the story had ended there, it might have had the makings of a summer movie. But things took a much darker turn.
As the car was being searched, 22-year-old Devin Peterson jumped into an unlocked police SUV and sped away. Minutes later, he would pull over to the side of the road about 30 miles east of Reno and use the shotgun from the police car to take his own life.
This was more than a wayward road trip turned tragic. The drug buy had been unwittingly financed by federal agents trying to sniff out a suspected money-laundering ring who had pinned their hopes to a low-level street hustler. He had blindsided them and taken off with their money.
"None of this would have happened if the government wouldn't have funded this trip," said Chris Magliano, Devin's best friend who was there in the car that day. "We wouldn't be sitting here talking about Devin being dead, or me being on house arrest."
For months, the IRS had been funneling hundreds of thousands of dollars in cash to Manuel "Alex" Rodriguez, who boasted to an undercover agent about his connections to a vast criminal network.
Magliano said he still can't figure out why federal agents believed Rodriguez.
The IRS's Criminal Investigation Division gave Rodriguez $700,000 in cash. But he was not the advanced criminal he made himself out to be. The money ended up in the bank accounts of Rodriguez's friends and relatives. They wired it overseas.
"Mr. Rodriguez was a virus," said Jesse Dreicer, a lawyer who repesented another defendant in the case and one of only two attorneys to refuse a plea deal and go to trial.
The IRS was essentially funneling cash to an unsophisticated criminal, Dreicer said, just so he could go out and recruit even less sophisticated criminals.
In the end, eight people were charged. None escaped punishment, but only two went to prision.
"At the hands of the government, a lot of otherwise good people who would not have committed crimes got sucked into this net," Dreicer said. "I would expect that investigations normally go in the opposite direction."
The IRS, in announcing the conclusion of the case, called it "an important victory for the American public."
In March 2012, an agent named Chad Cooper approached a used car lot on Atlantic Boulevard. Working undercover, Cooper said he wanted to do a cash deal with Hedar Khlaf, the owner of Capitol Motors. No paperwork.
Khlaf was wary. He wanted nothing to do with Cooper, according to Khlaf's attorney, Mitch Stone.
Agents shifted their efforts to Rodriguez, who went to high school with Khlaf.
Khlaf disputes his relationship to Rodriguez. Stone said Rodriguez had been fired from his job at the used-car lot and was acting on his own when he represented himself as a go-between between the agent and his former boss.
Rodriguez told a very different story at trial. Enlisted as a middle man, Rodriguez was told to figure out whether Cooper, who had been representing himself as an ecstasy dealer needing a way to launder his proceeds, was actually a cop.
Michael Rounsville, a former Jacksonville Sheriff's Office patrolman, worked security at the Aqua Nightclub owned by Khlaf. Rodriguez said he told Rounsville to enter Cooper's name into a national crime database. Nothing suspicious came up.
"And that's when (Khlaf) told me pretty much that he want me to go ahead and help him out with this guy," Rodriguez said at trial. "And I agreed to it."
In dealing with agent Cooper, Rodriguez said he was laundering money through Khlaf, according to Stone, who heard their recorded conversations.
"Had they checked his story more thoroughly, they would have realized that he was lying to them about how the money was being laundered," Stone said. "There was clearly no evidence supporting what Rodriguez was telling them."
Take, for example, Dubai.
In the conversation Khlaf had with Cooper at the onset of the investigation, he had made an offhand remark that some people avoided taxes by shipping cars to Dubai, according to Stone. In a later recorded conversation, Cooper asked Rodriguez if they were doing that at Capitol Motors, Stone said. Rodriguez, he added, was quick to fuel Cooper's intrigue.
But what Rodriguez was saying wasn't true, Stone said, and the agents working the case should have known that.
"How would you do that without having any paper trail through Customs, through Port?" he said. "It was clearly a lie that could have been checked."
The first cash drop came in late July.
Cooper went to a massage parlor owned by Rodriguez and his girlfriend, Mollie Bass, to deliver $100,000 in cash.
Rodriguez took the money. He found friends and acquaintances willing to deposit some of the cash into their bank accounts. Then, he had them wire it to overseas accounts provided by Cooper.
But he was running out of people willing to help him out.
"It was a nightmare," Rodriguez said at trial.
More money would be coming. After needing nearly two months to complete the first drop, Rodriguez got $200,000 about a month later. He received another $200,000 the month after that.
In the course of laundering the money, Rodriguez turned to people close to him, including his girlfriend, Bass, and her mother, Diane Harrison.
Rodriguez also had a wife. At a point of desperation, he used her bank account to wire some of the money.
"I was in a time crunch," Rodriguez explained at trial. "I had to get the money there."
All told, the federal government would give Rodriguez $700,000. The last $200,000 was never recovered.
Dreicer, the attorney, said it was highly unusual for so much money to flow to a suspected criminal network in a money-laundering investigation. It was especially strange, he said, given how unsophisticated Rodriguez was.
"We never got straight answers in the course of our investigation as to why so much money was given, and what steps and precautions were taken," Dreicer said.
When his legal team requested photographs of the money and its serial numbers, they learned the government hadn't documented any of it.
Rodriguez was flailing by the time he met Cooper to get the last $200,000.
"I couldn't keep up with that amount of money coming in and trying to find people to do this," Rodriguez said during his trial. "So I was just kind of struggling."
That was when he decided to do something drastic.
In the winter of 2013, Chris Magliano and Devin Peterson were both down on their luck.
Peterson had just lost his job and broken up with his girlfriend. Magliano was living out of his car after getting stuck with a lease and going broke.
Magliano said it was then that Rodriguez swooped in. He planned to drive to California and buy a trunkload of pot. If the two of them went along, he said, they'd each get $10,000 when they got back to Jacksonville.
"What kind of person could say no to that?" Magliano said. "Basically, Alex is the biggest manipulator that I've ever met. He knows how to touch your low points."
The cross-country trip was especially risky for Peterson, who was on probation. He was facing years in prison if he violated the terms of his agreement.
When Rodriguez showed up with duffle bags of money he talked a big game, Magliano said; Rodriguez said the cash came from the "godfathers of the mafia he had worked with."
"He said they gave him that money because he'd been doing so good," Magliano said.
The fact that agents gave so much money to someone who was not a major money launderer surprised Jimmy Gurulé, a University of Notre Dame law school professor and former federal prosecutor who worked closely with the IRS's Criminal Investigation Division when he was an undersecretary for enforcement at the U.S. Treasury Department.
Agents should have had independent corrobation and evidence that they were infiltrating a criminal network, he said.
"One would expect there would be strong, compelling evidence in order to assume and undertake this kind of risk," Gurulé said. "The fact that it turns out this wasn't the case raises questions about the quality of the investigation."
Carol Szcezpanik, a former senior IRS attorney who advised the Criminal Investigation Division, said she was not surprised that agents would go after someone like Rodriguez. She was surprised, however, that they got the money to do it.
"They obviously were pleading their case really well," Szcezpanik said, "and they must have been showing some evidence."
The plan was never to drive the marijuana to Florida.
Magliano said they wanted to put their purchase in an 18-wheeler and have it driven back. But they had been in California longer they had hoped, he said, and Rodriguez was getting impatient.
They were eastbound on Interstate 80 when Rodriguez was pulled over for following too close to the vehicle in front of him. It was a Monday just before 4 p.m.
Dashcam video captured the encounter: Rodriguez said they had been gambling in Reno.
After a routine 15-minute traffic stop, the officer hands Rodriguez his license back and tells him to take it easy. He sits back on the hood of his cruiser. Rodriguez is just about to open the driver's door when the officer calls him back.
"Hey man, I want to ask you something," the officer says. "Do you have anything illegal inside the car today?"
Rodriguez doesn't consent to a search. The officer runs his K9 around the car. The dog alerts to the drugs inside. The officer tries again to convince Rodriguez to let him search the car, but gets nowhere. He has to drive to the courthouse to get a warrant. The video ends.
When the officer finally got his warrant and returned to search the vehicle, Magliano, Peterson, Rodriguez, and Bass — who had met them in California — were huddled next to a running police SUV. Another officer had left the door open and the heater on for them as a courtesy, Magliano said.
Magliano recalled Peterson saying to him, "Let's jump in the car and take it."
He said no. "We'll get in more trouble, and probably get shot," Magliano remembered saying.
"And then he just did it, out of nowhere," Magliano said. "I've never seen anybody move that fast."
Before Magliano knew it, gravel churned up by spinning tires was hitting his face.
Officers pursuing Peterson were able to shoot out his tires. He used the shotgun inside to carjack Marie Coates, who was heading east on 80 in a Pontiac Grand Prix.
Peterson crashed the stolen car and turned the shotgun on himself.
A couple nights earlier, Magliano and Peterson had been on FaceTime with a friend, talking about they would do if they got pulled over. They even raised the possibility of stealing a police car.
"We were talking just like movie crap," Magliano said. "The whole, 'Steal the cop car and ride out into the sunset,' but it was just talk."
Looking back, Magliano makes sense of it this way: Peterson was facing serious time, and he didn't want to go to prison.
"The one thing he always said was that he was too pretty for jail," Magliano said. "I think him taking that decision that day when we were standing out there . I wish I would have grabbed him. I don't know, man. It happened so fast."
Peterson's family declined to speak on the record. But his closest family members, who raised him but did not have legal custody, wanted to make something clear: They had no idea that government money had lured their loved one to California.
After the arrests, federal agents from Jacksonville flew to Nevada and took control of the case. They turned it into a prosecution.
Dreicer, the defense attorney, said his investigation showed that federal agents had been taken completely off guard by the California drug run.
"The guys in Jacksonville that were running this investigation didn't know where their money was, didn't know their money was being used to buy drugs, and just learned they were out in Nevada after they were pulled over," he said.
Rodriguez became the government's star witness as the case moved toward trial in federal court.
Khlaf, who agents had initially targeted, pleaded only to a failure to file a single tax form on one transaction. He was sentenced to a year and a day in prison.
Rodriguez pleaded guilty to conspiracy to commit money laundering. He received three years and five months in prison, about a third of what the minimum sentence would typically call for. Federal sentencing guidelines allow for major reductions of time served in exchange for cooperation on a prosecution.
Nobody else received time in prison. In the end, the government named eight defendants, most of them associates of Rodriguez — including his girlfriend's mother. Two, including Ronsville, went to trial. Both were convicted.
U.S. attorneys who worked the case could not provide a total cost of the investigation and prosecution.
Jeremy Lasnetski, a criminal defense attorney who represented former police officer Rounsville, described the investigation and prosecution as a massive waste of taxpayer dollars that led nowhere.
Federal agents didn't get a wiretap on Rodriguez's phone, he said. They did not have him wear a wire to get recorded conversations with anyone else involved. They never checked what Lasnetksi described as Rodriguez's "amorphous allegations with little to no detail."
"They appeared to skim the surface of Rodriguez's statements for fear of what they might find beneath," he said.
Frank Prieto, a Miami criminal defense attorney who represented Magliano, said he never saw any evidence tying Rodriguez to a criminal money-laundering ring.
"It was basically the government creating the entire crime," Prieto said. "That's really what it was."