SACRAMENTO, Calif. (AP) _ Federal tax agents say they psed as narcotics traffickers and laundered more than $200,000 through a private bank here before they raided it last week, according to court documents.
In papers filed Thursday in federal court, undercover agents of the Internal Revenue Service said they laundered the money through International Commercial Bank Management of Sacramento.
They said it had established a branch in the Marshall Islands to create secret accounts and had rented space in an elaborate private vault in Reno, Nev., to store precious metals.
No criminal charges have been filed against the bank’s operators, who were identified as Lonnie Schmidt and Herbert Bates of Sacramento.
But the IRS agents said Schmidt handled cash transactions as large as $100,000 without question, and expressed no concern when told the money came from narcotics trafficking.
Last week the agents seized records, $24,000 in $100 bills and more than 400 troy ounces of silver bullion at the bank.
The investigation is part of a national probe of so-called ″warehouse banks,″ which officials say sidestep financial reports required by the government. The IRS suspects they are used by the tax protest movement and criminal elements to hide income and avoid taxes.
Federal law requires reporting of financial transactions that exceed $10,000.
Malcolm Segal, a lawyer for the Sacramento bank, said the IRS action smacked of entrapment.
In the court papers, the IRS said its investigation began last November in Denver, where undercover agents met operators of some large warehouse banks.
The IRS said the bankers believed they were representing organized crime and the funds were illegal, untaxed profits that needed to be laundered.
Using their Denver contacts, the agents said they traveled through the West meeting various warehouse banking representatives, including the Sacramento operators.
The IRS said Schmidt helped them deposit a total of $200,500 between Aug. 10 and Oct. 15.
On one occasion, an agent took Schmidt $100,000 and had it converted into cashier’s checks, and Schmidt received a $4,000 commission, the papers said.
The papers said Schmidt was told the agent was representing ″pretty bad guys,″ but Schmidt said he didn’t care where the money came from.
According to the court papers, Schmidt then asked the agent if he thought the narcotics dealers would pay 20 percent to have lhim handle their cash.
Schmidt also told agents how the company dealt in gold and silver to avoid reporting cash, and indicated his company kept precious metals in a rental vault in Reno, according to the papers.
″Schmidt stated that the company provides vaults and it is like a miniature Fort Knox with TV cameras, 24-hour security and all kinds of check- ins,″ the affidavit said.