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Digging Into Dirty Gold Across the Americas

COLOMBIA / 7 APR 2021 BY KATIE JONES EN

Illegal gold mining is devastating South America's jungles, destroying large swaths of forest and flooding rivers with toxic mercury at an alarming rate.

Criminal groups once dedicated to drug trafficking are cashing in on the transnational trade in dirty gold, as the mineral's price has soared far above that of cocaine. Gold illegally sourced from mining sites deep in the Peruvian jungle passes from middleman to middleman before reaching legal industrial refineries and unknowing consumers in the United States.

Four reporters -- Kyra Gurney**, Nick Nehamas, Jay Weaver and Jim Wyss -- dove into this trade in their recently published book, "Dirty Gold." They follow the story of Juan Pablo Granda, Samer Barrage and Renato Rodriguez, who worked for NTR Metals, the Miami-based subsidiary of Elemetal, one of the United States’ largest gold trading companies.

In 2017, Granda, Barrage and Rodriguez pleaded guilty to conspiracy to commit money laundering after purchasing billions of dollars of illicit gold from Latin America and the Caribbean. Through dealing with middlemen across South America, they built a $3.6 billion business in metals trading, mostly illegal Peruvian gold mined in the Amazon rainforest.

InSight Crime sat down with Gurney and Nehamas to discuss the case of the "three amigos," dig into what fuels the thriving trade and discover how dirty gold smuggled out of Peru is cleaned, ready to be used and sold on by unknowing companies in consumer products.

*This interview transcript was edited for brevity and clarity.

InSight Crime (IC): The case of Granda, Barrage and Rodriguez's dealings in dirty gold made headlines across the Americas. You and your co-authors were the first to publicly identify the “three amigos.” What sparked the investigation?

Nick Nehamas (NN): "Dirty Gold" started when our colleague, Jay Weaver, who covers federal courts, got a tip about a 30-page criminal complaint that laid out this vast money laundering scheme. Most federal court documents are pretty dry. This one was packed with detail about how America's importation of gold for consumer products enabled money laundering by drug dealers, led to the destruction of rainforests, the poisoning of the environment and Indigenous people with mercury and political corruption. Jay read this document and realized that there was a project here - a big project that the Miami Herald was in a great place to do, because we have so much expertise covering Latin America.

The four of us decided that this was not just a Miami story. It was a local story, a Miami story, a national story and a business story. It was an international story, a crime story and an environment story. It just had so many different facets that we needed a big team of reporters to tell it and also three editors, which is unusual. We had three separate editors on this project because we needed so many different kinds of expertise.

IC: There are a whole host of actors involved in making the transnational illegal gold trade flow, including the artisanal miner illegally extracting gold in Peru, the middlemen laundering it and corrupt brokers buying it on behalf of legal gold refineries all over the world. As "Dirty Gold" shows, in some cases, brokers working at legal gold refineries do whatever it takes to get a competitive edge over other companies, even if that means overlooking where gold is sourced from, despite checks in place. What has pushed brokers like Granda, Barrage and Rodriguez to move into dirty gold?

Kyra Gurney (KG): I think for these three, they were really ambitious people. They wanted to make a lot of money. I think that is part of it. I also think that, before this case came out, what they were doing was perceived as something where there were not a lot of risks. I don't think they ever thought they were going to see the inside of a jail cell. I think after this case, it put the whole industry on notice that federal prosecutors will go after people who buy illegal gold.

SEE ALSO: Soaring Gold Prices During Pandemic Fuel Peru’s Illegal Mining

IC: How much has changed since the "three amigos" were caught?

NN: This case brought a huge amount of scrutiny to an industry that most Americans knew very little about. One of the biggest gold refineries in the world -- Republic Metals -- is located in a small city just to the west of Miami. After this case, banks got very nervous about financing gold companies. Republic Metals actually went bankrupt and was acquired by a Japanese competitor. We saw the amount of gold coming into Miami decline quickly. Another big competitor of NTR Metals, Kaloti Metals, also went out of business.

At the same time, a lot of gold is still coming into the United States. China and India are actually larger gold markets than the United States in terms of demand. From Latin America, this gold started to go there and to countries like Switzerland and the United Arab Emirates instead of the United States, because there's nobody in those countries doing what the federal prosecutors did here.

The coronavirus pandemic has changed things again, because so many of the big multinational mines had to slow down or shut down because they couldn't have so many workers in one place. This has created a rush, again, of illegal miners going into the jungle. Gold prices now are higher even than they were at the time we write about in the book because of the recession associated with the pandemic. And now, you have leaders like President Jair Bolsonaro in Brazil, who have opened up the rainforest not just to illegal mining, but to timber and cattle ranching as well. So, the pandemic has meant that dirty gold is maybe even a bigger problem than ever.

IC: Would you say those working in the illegal gold trade -- from those financing it at the top to small-scale artisanal miners -- have changed during the pandemic? Have new actors or groups entered?

KG: I'm not sure if it will have changed so much as I just think any time there is some sort of huge financial crisis, like the pandemic has brought on, you see a lot more people who are desperately poor going into illegal mining and informal mining because it is sometimes really the only way to make a living, in some parts of Peru and Colombia.

NN: I do think there is a sense of whack-a-mole here in terms of regulation. We see so much more illegal gold mining in Brazil or Venezuela now, supported in large part by the government and armed groups. If there is scrutiny in Peru, the mining shifts to somewhere else. It's always going to happen. Wherever there is gold, it's going to pop up again and again.

IC: We have seen gold illegally sourced across Latin America being used to launder drug money. We also increasingly see organized criminal groups once dedicated to drug trafficking moving into illegal gold mining and other environmental crimes. How would you characterize the nexus between drug trafficking and the illegal gold trade?

NN: The drug trafficking nexus is fascinating. Essentially, these drug traffickers make money from selling cocaine and then they need to get it into the system. So, they either pretend that they are selling gold, they buy a mine that's not actually producing gold, and they claim that the money they're making is coming from this mine.

What we learned from this case is that some of these drug traffickers now see gold as a much safer and more profitable industry. If you are caught, with a briefcase of cocaine at Miami International Airport, you are in big trouble. If you are caught with a briefcase of gold, you can produce easily forged papers that say it's legal. And the profit margins are better.

There are estimates from both Colombia and Peru suggesting that illegal gold mining is now a bigger industry than drug trafficking. It is not like there is one criminal who does drug trafficking and one criminal who oversees prostitution and one criminal who does arms smuggling. These are organized criminal groups that have their fingers in every pie. They move into the one that is the most profitable and safest. Right now, that is illegal gold mining.

IC: How have drug trafficking organizations restructured, then, in response to the profitability and relative "safety" of illegal gold mining? Based on your findings, do drug trafficking groups now have wings dedicated to the illegal gold trade? Who runs that side of things?

KG: I do think, in general, it's your guy or girl who is involved in money laundering who would be the one to oversee the illegal gold operations. What you will often see is that criminal groups in Colombia, for example, will buy the title for a mine that is no longer actually producing gold. But nobody from the Colombian government is going to check to see whether that mine is actually producing gold. That person is then able to take all this money from narcotics trading, invest it in gold and claim that the gold that they sell came from this mine. I don't know for sure, but my sense is that the person overseeing that purchase of the title and so forth would be the person normally involved in the money laundering part of the activity.

NN: I could give you an example from our series about the Sinaloa Cartel, where one branch of the organization would sell drugs in the United States, and the profits would then be handed to a small group of guys in the Midwest. They would buy gold with the cocaine money and then drive to South Florida to sell the gold to a pawn shop. Then the money would be wired back to Mexico to the Sinaloa Cartel. In that instance, there were employees of this criminal organization whose job was simply to pick up drug money, buy gold, sell it and wire the money back to Mexico. That was their job.

IC: And do drug trafficking groups controlling Peru's illegal gold trade, for example, have any direct communication or involvement with legal, industrial refineries? Or is this chain based exclusively on the interactions of middlemen?

NN: There is a huge amount of separation in the gold supply chain, which is very opaque. That is how you have illegally mined gold making its way to American Fortune 500 companies. Those companies have very little way of knowing if the gold was illegally sourced, even with the strictest compliance programs. If you have middlemen on the ground in Peru able to falsify, bribe customs officials, bribe mining officials and get false papers, there is very little way for an Apple or a Tiffany to pierce the veil of that supply chain.

SEE ALSO: Destroy, Rinse, Repeat – Peru’s Illegal Mining Struggles in Áncash

The more the gold changes hands on its way from an illegal jungle mine to a refinery in the United States, the better it is for these criminal groups. They want the gold to be sold from a miner to a small aggregator [aggregator is a term used to describe these middlemen] to a larger aggregator, then to a major gold dealer like Peter Ferrari, the nickname of Pedro David Pérez Miranda, a major character in the book, then to a company like NTR and then to a Fortune 500 company. There are a lot of efforts to increase transparency in the supply chain so that gold goes directly from a legal, titled mine to its ultimate refiner and then to a company that makes consumer products.

IC: As you note in the book, in 2007 Miami imported 27 tons of gold, worth around $436 million. Why is the city such a hub for gold, which in many cases is illegally sourced?

NN: Miami is the closest port of entry to Latin America. It is a financial capital for Latin America. There are so many businesses that have major Latin American operations that have their US headquarters in Miami, or major US offices in Miami. There is so much cultural overlap that Miami has really become a financial capital for Latin America, and a trade and logistics capital too. It is not that there is a reason for the illegal gold to come into Miami specifically. It's just that much of this gold is coming to Miami, and a good chunk of it is illegal.

IC: In the book you detail the different ways in which Peruvian authorities have responded to dirty gold flowing out of the nation, from legislative changes to raids on illegal mining sites to plain ignorance. How successful have such responses been in combatting the nation’s trade in dirty gold? What are the main obstacles authorities face today?

KG: Even when you saw the Peruvian government really try to crack down on illegal mining, illegal gold was just smuggled across the border into neighboring countries and then exported from those countries as if it had been mined there.

I think another major obstacle is that a lot of these miners are not really people who are trying to get into crime. They are just trying to make a living and they operate in this informal area, this gray area. Some governments, like in Peru and Colombia, have really tried to find ways to bring them into the formal economy so they can get access to formal financing and safer methods of mining, but it is a really difficult process. A lot of times these mining regions are in areas where the government doesn't have a lot of control or a big state presence.

IC: A central theme of the book is the role corruption plays in the trade, at each step of the way. From the illegal extraction of dirty gold to its commercialization, where are the greatest risks of corruption that facilitate this trade?

NN: It runs through every level of government. You have police paid to look the other way. You have mining officials giving out titles. But it's not all corruption. There are just a lot of these agencies that are completely overstretched. They may not have the resources to actually go and see if a mine is producing gold or producing as much gold as the paperwork says. At the same time, we do know there are bribes paid, especially to customs officials, in order to get the paperwork to get the gold out of the country. Government officials look the other way and protect the industry.

And you have American businesses being infiltrated by this kind of corruption. The "three amigos" that we write about knew what was happening and they decided to falsify documents and make sure their bosses weren't asking questions. Illegal mining tends to corrupt everything, from the Earth to consumers who end up unwittingly buying this gold. We're all part of a really destructive, massive criminal economy. And many of us have no idea that we support it.

*This interview transcript was edited for brevity and clarity.
**Kyra Gurney worked previously as an investigator with InSight Crime.

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