HomeNewsAnalysisA Seizure, a Lawsuit and Illegal Gold from Peru

A Seizure, a Lawsuit and Illegal Gold from Peru


In January 2014, InSight Crime reported on a record seizure of suspected illegal gold in Peru. Since then, that case has snowballed; marking a turning point in the modus operandi of illegal gold exports, uncovering what authorities believe is a major criminal network, and threatening to land InSight Crime in court.

The article, a news brief based on a report in Peru's El Comercio newspaper, detailed how Peruvian authorities had seized over half a ton of gold from storage facilities in the city of Callao.

(See response to article from Kaloti Metals and Logistics.)

The seizure announced the arrival of a new era in policing the multi-billion dollar illegal gold trade in Peru, sending a message to the Peruvian companies that were moving illicit gold into legal markets that they would never again have it so easy.

The report named the six Peruvian export companies and four US and Italian companies that were set to receive the shipments. In our analysis of the seizure, we discussed how, although importers ostensibly monitored their supply chains, the proof of origin documentation provided by exporters often concealed the illicit source of the gold they were buying.

A year after the report, InSight Crime received a letter (pdf) from the lawyers of Kaloti Metals and Logistics (KML), a Miami-based gold company that is part of the Dubai-based Kaloti business group and one of the companies named in the story. Kaloti threatened to take legal action over what it called "unsubstantiated assertions" and "libelous references."

The letter stated InSight Crime had "inaccurately associated KML with illegal mining operations in Peru," and "wrongfully established that … [KML] was engaged in importing illegal gold." The letter concluded with a threat to take legal action unless all mention of Kaloti was removed from the article and InSight Crime published a letter of apology for inaccurate reporting on the front page of our website.

We did not remove the article.

This is the story of a gold seizure that changed the game for illegal mining in Peru -- and why we stand by the original story.

The Callao Seizure

In December 2013, agents from Peru's tax and customs agency, the SUNAT, seized 508 kilos of gold from a storage facility in the city of Callao.

The seizure was a culmination of government efforts to crack down on the trade. The sector had exploded when international gold prices soared, but it was becoming associated with environmental devastation, human trafficking and money laundering.

In 2012, the government overhauled the penal code, giving prosecutors new powers to directly confront a trade that previously had been classified as a minor environmental crime. While the impact was first felt at the mines themselves, by late 2013, the government was targeting the companies involved in trading and exporting the tons of illegal gold being sacked from regions such as Madre de Dios in Peru's southeast.

Ferrari became an infamous figure in Peru, spending several years in prison and standing trial for money laundering, drug trafficking and tax evasion -- and walking away free each time.

The gold seized in Callao, for instance, belonged to six Peruvian export companies, and was being prepared for air dispatch to one refinery based in Italy and three in the United States -- among them Kaloti Metals & Logistics.

InSight Crime was unable to discover which of the companies was exporting to Kaloti from this shipment. However, of the six, three companies have traded with Kaloti since 2012, according to commercially obtained export data; Minerales Rivero, CG Koenig and Giovanni Gold.

Official sources in Peru confirmed to InSight Crime that whichever of these companies was dispatching to Kaloti, there were only two possible outcomes for the gold they were preparing to send. One option is that it was permanently seized and the export company is now under investigation for money laundering. The other is that it was spirited away under the nose of the authorities after a bizarre series of events that helped investigators uncover what they now suspect is a major criminal network whose reach expands far beyond the gold trade.

A Suspicious Company

Approximately one third of the gold, belonging to five of the six exporters, was seized permanently after the exporters were unable to prove its origin. The companies and many of their executives are now under investigation for suspicion of money laundering by Peru's Financial Intelligence Unit (UIF) and the money laundering unit of the prosecutors office.

However, for the other company involved, Minerales Rivero, which has in the past supplied Kaloti, the story took an unexpected twist.

Minerales Rivero was founded in 2013 by 34-year-old Miguel Angel Rivero Perez with a capital of just 15,000 soles ($4,800). However, within six months it had exported nearly five tons of gold.

The key to its success lay not with Rivero but with the company's financial backer, his uncle Pedro Perez Miranda. Better known as "Peter Ferrari," in the 1990s Ferrari became an infamous figure in Peru, spending several years in prison and standing trial for money laundering, drug trafficking and tax evasion -- and walking away free each time.

While the authorities lost the gold, they were left with a glimpse of a powerful criminal network whose reach extended deep into state institutions.

Ferrari, according to his lawyer, finances Rivero Minerales through an investment contract. However, he is not only an investor in gold companies, but also a suspected "principal financier and trader of illegal gold, which he exports using Lima based front companies," according to a prosecutors' investigation obtained by Cuarto Poder (see video below). Although he does not yet face charges, prosecutors believe Ferrari has exported over $600 million of illegal gold.

After losing their gold in the Callao seizure, Ferrari and his allies began to flex their muscles. Representatives of Rivero flew to Callao, where they became involved in a legal tug of war for the gold; a tug of war they won after a ruling by a local judge, who was later removed from his position, and arrested on charges of corruption and ties to organized crime.

While the authorities contested the ruling, Rivero's recovery crew, which by now included police, lawyers, and prosecutors, managed to secure the gold anew. Video footage shows Miguel Rivero watching as his lawyers, escorted by police with riot shields, rush to load up a car with gold bars.

A Larger Network

The plot then took a further twist.

At the time, El Comercio noted how the lawyers and officials that helped smuggle away the gold were all connected in one way or another to one man, Rodolfo Orellana.

Orellana, who was arrested in November 2014, is allegedly the mastermind of a criminal network involved in corrupt property deals and money laundering. He is also connected to human trafficking, prostitution and drug trafficking. He has since been called to testify about his role in the Callao seizure and Peter Ferrari's gold interests.

While the authorities lost the gold, they were left with a glimpse of a powerful criminal network whose reach extended deep into state institutions.

SEE ALSO: Peru News and Profiles

"This is a case of a hidden criminal organization in Peru that had links with the Public Ministry and judicial powers, and it has now become a mega-investigation," Sergio Espinoza, deputy superintendent of the UIF, told InSight Crime. "They have this end of exporting gold, but they also have corruption, drug trafficking and various other activities."

Right of Reply

Kaloti's seized gold would already have passed through several hands as it moved from mine to warehouse. Each set of hands would have had to provide the company with documentation demonstrating its legality, says Alvaro Rodriguez, Kaloti's operational manager.

"You have a mining concession that has a contract with miners, the miners sell the material to consolidator, the consolidator exports. All along that supply chain all the documentation has to tie in together," he said.

SEE ALSO: Coverage of Mining

Even before this process begins, Rodriguez says Kaloti not only checks the companies have the appropriate licenses and registries, it also performs a background check on shareholders and key personnel. Kaloti's compliance with the legal requirements for importing gold is verified by third-party auditors, he added.

However, Rodriguez declined to comment on any specific allegations of business ties that suggest their monitoring protocols have failed to weed out suspicious suppliers.

Rodriguez did not address the company's connections to the exporters under investigation for money laundering, the ties to Peter Ferrari's front companies, or the relationship the company has with the suppliers based in the illegal mining hub of Madre de Dios that have been publicly identified as buyers of gold produced by the region's most notorious illegal mining clan.

"What I can tell you is that we have indeed followed the appropriate protocols according to international standards," said Rodriguez. "You make your best effort to verify the information that is provided, but unfortunately we don't have the capacity to have as far a reach as the local agencies that are in charge of enforcement or licensing."

So is it fair to say Kaloti may have been importing illegal gold even though it had met its legal obligations over due diligence and compliance protocols?

The Callao seizure heralded the beginnings of a new era in which exporting illegal gold will not be so easy.

"Any standards you have you always have to apply to the best of your abilities and at the end of the day they are guidelines because there are elements at play that are beyond our control," said Rodriguez.

And is it fair to say Kaloti cannot say with any certainty it was not about to import illegal gold before it was seized in Callao?

"That's part of the ongoing investigation; that hasn't been determined," he said. "The authorities are acting under what their presumptions are and there is a due process that is required for this investigation and that is what we have to respect."

But can Kaloti deny reports in the Peruvian media that the company itself is now part of the Peruvian authorities' investigations?

"They are ongoing investigations, and there is nothing that has been published as far as the authorities indicating that's the case, which is why we're a bit surprised in the manner in which certain news sources have obtained and publicized certain information that is quite frankly privileged," said Rodriguez.

Rodriguez added that Kaloti threatened to take legal action against InSight Crime because the company felt our article falsely attempted to establish Kaloti was involved in importing illegal materials. When pressed over whether the permanent seizure of the gold destined for Kaloti and the investigations in Peru imply that the company was likely about to import illegal gold even if it was unaware of it, he replied, "In the case you're asking about, that is still ongoing and that will be determined."

Rodriguez added that the original El Comerico article was based on information that was either inaccurate, mischaracterized or privileged, but would not comment on which parts of the story they took issue with. Espinoza, however, confirmed that the information regarding the companies named in the El Comericio story was accurate.

The New Game

The Callao seizure heralded the beginnings of a new era in which exporting illegal gold will not be so easy. The result, says Espinoza, was an overhaul of the methods used to smuggle illegal gold out of Peru.

"Seizures have dropped a lot, because the presumption is that they are now smuggling it across the border to Bolivia," he said.

This new modus operandi has already been exposed by investigative journalist Oscar Castillo and the news site Ojo Publico. Castillo said there had been a 4,000 percent increase in Bolivian exports from 2013 to 2014, much of it linked to Peruvian companies with suspected ties to illegal gold. His report named Kaloti, which has an office in Bolivia, as among the recipients of the suspect gold.

The evolution of export routes shows the illegal gold trade in Peru is evolving to meet the challenges of the authorities' crackdown, and no doubt will continue to do so as long as there are buyers for their black market product.

SEE ALSO: Coverage of Gold

Kaloti, meanwhile, maintains it is trying its best under difficult circumstances in both Peru and Bolivia and has at no moment shirked its supply chain monitoring obligations.

"We're just people who work here and at the end of the day we're trying to do our job correctly and appropriately according to the laws and regulations that apply to us," said Rodriguez.

However, for the UIF, foreign companies buying gold from Peru must take more responsibility.

"It is relatively easy to prove whether certain gold comes from a legal concession or not. They have the ability to prove this," said Espinoza. "The foreign buyer has the responsibility to know who he is buying from and knowing that they are not a criminal organization, they are not cutting down forests, damaging the environment, or employing children."

Kaloti Metals and Logistics responds:

Kaloti Metals & Logistics Announces Further Strengthening of Compliance Initiatives

January 5, 2016–-Miami, FL-–Kaloti Metals & Logistics (KML), a family-owned business based in Miami and operating throughout The Americas, reaffirms its commitment to conducting business in accordance with the highest ethical values.  KML continues to strengthen its robust and ample Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) program.

Internal and external company compliance personnel are dedicated to ensuring complete compliance with all applicable domestic and international laws and regulations. In addition, the Bank Secrecy Act of 1970 (BSA) and the USA PATRIOT Act of 2001 require financial institutions, including dealers in precious metals, to establish an anti-money laundering program.

KML has an established organizational AML/CFT program that is sensitive to differences in laws, regulations, procedures and practices across multiple borders while taking a proactive approach to supply chain due diligence. In doing so, KML has implemented measures based on published recommendations by the Organisation for Economic Co-operation and Development (OECD).

On December 16, 2015 a false, erroneous and libelous article was published in InSight Crime. Addressed as follows are the major untrue statements contained in the article.

  1. The article describes Kaloti Metals & Logistics as part of the Dubai-based company Kaloti Jewellery Group (KJI). This is not factual; KML is an independent, Florida-based corporation which conducts business with KJI.
  2. The article strongly implies that KML is under investigation by Peruvian authorities. This is also untrue. KML is not under investigation by Peruvian authorities, but has provided information and cooperated when requested.
  3. Despite the fact that there are six similar companies operating in Peru, the author failed to name the other international refineries that purchase precious metals in Peru. Instead, KML was solely mentioned some 21 times.
  4. During a telephone interview with the reporter, substantial background was provided by the company which the publication ignored or distorted.

"KML is acutely aware of the inherent challenges of conducting business in this industry and takes great pride in its commitment to establishing a culture of compliance throughout all of its business dealings.  KML fully supports all government authorities, both domestic and abroad, in their fight against illegal mining activities," said Awni Kaloti, Managing Director.

KML has successfully undergone independent third party compliance auditing by ACAMS certified specialists who have deemed KML to be not only fully compliant with Organisation for Economic Co-operation and Development (OECD) guidelines for Responsible Sourcing of Precious Metals but also meet all the applicable requirements of laws and regulations

Kaloti continued: "The company must protect its reputation, and does not fathom why this publication chose to engage in false reporting. KML reiterates that it only engages in business with companies that possess the appropriate documentation to conduct commercial activity at the time of transaction and that are in compliance with all legal requirements of the United States and the country of origin."

It should also be noted that, when necessary, KML has taken preemptive action to discontinue business activity with some companies based on its sown Enhanced Due Diligence (EDD) and activity-monitoring measures. As an industry leader, KML also regularly engages in dialogue with exporters and producers with the goal of promoting responsible sourcing practices.

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