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37–178—PDF 2006

S. HRG. 109–959

BREAKING THE METHAMPHETAMINE SUPPLY

CHAIN: LAW ENFORCEMENT CHALLENGES

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

SEPTEMBER 12, 2006

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman, Committee

on Finance ............................................................................................................ 1

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 2

Lott, Hon. Trent, a U.S. Senator from Mississippi ............................................... 4

WITNESSES

Springer, Lt. Dan, commander, Missouri River Drug Task Force, Bozeman,

MT ......................................................................................................................... 5

Venne, Carl, Crow tribal chairman; Tribal Leaders Council chairman; and

advisory member, Montana Meth Project, Crow Agency, MT .......................... 6

McCullough, Sean, special agent in charge, Iowa Division of Narcotics Enforcement, Des Moines, IA .................................................................................. 8

Rannazzisi, Joseph T., Deputy Assistant Administrator, Office of Diversion

Control, Drug Enforcement Administration, Washington, DC; accompanied

by Robert T. Patton, Section Chief, Mexico-Central America Section, Office

of Financial Operations, Drug Enforcement Administration, Arlington, VA .. 16

Passic, Gregory, Director, Office of Drug Interdiction, U.S. Customs and Border Protection, Washington, DC ......................................................................... 18

Martin, C. Andre ́, Director, Operations Policy and Support, IRS Criminal

Investigation, Washington, DC ........................................................................... 19

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

Opening statement ........................................................................................... 2

Prepared statement .......................................................................................... 33

Grassley, Hon. Charles E.:

Opening statement ........................................................................................... 1

Prepared statement .......................................................................................... 36

Lott, Hon. Trent:

Opening statement ........................................................................................... 4

Martin, C. Andre ́:

Testimony .......................................................................................................... 19

Prepared statement .......................................................................................... 37

Responses to questions from committee members ......................................... 44

McCullough, Sean:

Testimony .......................................................................................................... 8

Prepared statement .......................................................................................... 47

Responses to questions from committee members ......................................... 55

Passic, Gregory:

Testimony .......................................................................................................... 18

Prepared statement .......................................................................................... 57

Responses to questions from committee members ......................................... 61

Rannazzisi, Joseph T.:

Testimony .......................................................................................................... 16

Prepared statement .......................................................................................... 66

Springer, Lt. Dan:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 79

Responses to questions from committee members ......................................... 81

Venne, Carl:

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 82

(1)

BREAKING THE METHAMPHETAMINE SUPPLY

CHAIN: LAW ENFORCEMENT CHALLENGES

TUESDAY, SEPTEMBER 12, 2006

U.S. SENATE,

COMMITTEE ON FINANCE,

Washington, DC.

The hearing was convened, pursuant to notice, at 10:04 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Present: Senators Baucus and Lott.

OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. Thanks to everybody for coming this morning.

And particularly we have had panelists come from Iowa and Montana, which is a long ways away, Montana obviously much further

away than Iowa. You have come to share your insights into this

growing epidemic of methamphetamine use across the country. We

thank you very much.

It is no longer a secret that methamphetamine abuse and the

disastrous effects of its manufacture have reached crisis levels in

many areas of the country, and I’ll quote from a survey by the National Association of Counties, released in July, that found ‘‘county

law enforcement officials across 44 States reported that methamphetamine remains the number-one drug problem in this country,’’ with 48 percent of their counties reporting that meth is the

primary drug problem. This was more than the number who reported cocaine, marijuana, and heroin all combined.

Whereas methamphetamine production and use may once have

been geographically limited, this survey, as well as other reports,

indicates that it appears to be moving steadily into most of the

country.

I am encouraged by Congress’s recognition of the need to control

this crisis. Earlier this year, Congress passed the Combat Meth

Act, which limits sale of meth precursor drugs like pseudoephedrine, and mandates that a log be kept of each sale.

A number of States have already enacted similar restrictions on

the availability of meth precursor drugs, and this appears to have

made a very major impact on the number of small toxic labs in

those States, as well as indicated by the great decrease in the number of local lab seizures in most of those States that have such

laws.

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It is reasonable to expect a comparable reduction of the number

of small toxic labs in all the States when the Federal legislation becomes effective September 30, this month.

The challenges before us, however, are not reduced because of

this legislation. They are still very substantial. One of the results

of a decrease in small toxic meth labs in those States that have restricted access to precursor products has been, sadly, an increase

in the importation of meth by large, sophisticated drug cartels

based primarily in Mexico.

These smuggling organizations import a purer version of meth,

employ smuggling techniques that are difficult to uncover and

track, and are now operating in most parts of the country. They are

also engaged in repatriating large amounts of money in their home

bases, laundering it through a variety of methods, and often

through legitimate business channels.

The Drug Enforcement Administration estimates that the illegal money laundering drug trade is almost $50 billion a year. It is also

believed that a large portion of that money is smuggled out of the

country in bulk across our borders.

Under these new circumstances, it is clear that a priority has to

be placed on cooperation between the numerous Federal agencies

that are engaged in combatting the meth traffic, and, of course,

State and local law enforcement agencies that are on the ground

in our local communities.

So our hearing today is about this issue. We will be hearing testimony from State and local officials deeply engaged in the effort to

close down meth traffickers, and from Federal officials equally

deeply engaged in the effort at the Federal level.

We not only want to hear about their efforts at their respective

levels and what we in Congress might do to help, but also about

their cooperation and what we can do to help that cooperation more

effectively.

I would call on Senator Baucus for two reasons now. One, to give

any opening comments he has, and also to introduce the two constituents he has here and should introduce.

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Well, thank you very much, Mr. Chairman.

Methamphetamine is a personal fight for me. I have seen it firsthand. I am mentoring a couple of kids in schools who come from

dysfunctional families, because a mother or a father is on methamphetamine. It is a big cause for me to stamp out, as much as

possible, methamphetamine, certainly in our State of Montana, and

in the country.

More than 4 out of 10 Montana teens report that meth is easy

to get. I ask for a show of hands at high school assemblies and middle schools, and it is astounding, the number of hands that go up

when I ask, can you get meth or do you know somebody who is on

meth? It is astoundingly high. Those 4 out of 10 teens report that

meth is easy to get, second only to marijuana.

Montana police officers tell me that meth is their number-one

law enforcement problem. Methamphetamine is the number-one illegal drug problem for nearly half of the counties in the United

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States. Nationwide, nearly 4 in 10 local law enforcement agencies

have identified meth as the drug that poses the greatest threat to

their area.

In April, this committee held a hearing on the effects of meth on

the child welfare system and how it is hurting kids and parents

alike. In July, the Senate passed the Improving Outcomes for Children Affected by Meth Act of 2006, and that is a bill which includes

provisions to enhance the safety of children affected by meth abuse

and addiction.

We reauthorized the Promoting Safe and Stable Families program. That bill targets an available $40 million—that is an increase—in mandatory funding for meth-related services that include family treatment. Two-thirds of the children who come into

the child welfare system in Montana come in because meth has destroyed their families.

We are working to help protect children and protect families

from the dangers of meth. Today we will focus on a new angle, that

is, how to break the meth supply chain through law enforcement.

We are working on the problem. We now have improved law enforcement techniques and measures to monitor the chemicals that

are used to make meth. One example is the Combat Meth Act of

2005, which I am proud to have co-sponsored.

That Act requires that medicines containing pseudoephedrine be

relocated behind the counter, and that law establishes a pharmacy

log book registry for purchases of these cold products.

In our State of Montana, we passed this law earlier. We passed

it in July of 2005. The Yellowstone County Drug Task Force told

me that this makes a difference, it is helping. Now it is very difficult for small, mom-and-pop meth producers to obtain the chemicals that can be used to produce meth.

As a result, the meth production in Montana and elsewhere in

our country appears to be decreasing. That is not to say that meth

demand is decreasing. Demand is still, I am told, about as high as

it was before these laws were passed to put the precursors behind

the counter.

But production of meth in Mexico, largely in super-labs controlled by drug trafficking organizations, has picked up. The biggest link in the meth supply chain is now at the southwest border.

It is now estimated that 80 percent of meth consumed in the

United States originates in Mexico and is smuggled into the

country.

Today we will examine where to put our resources to most effectively break the meth supply chain. We will hear from Lt. Dan

Springer, commander of the Missouri River Drug Task Force,

headquartered in Bozeman.

We are proud that you are here, Dan. I am proud of the work

the task force is doing. Investigations in Bozeman are critical to

stem the tide of national and international drug organizations that

are preying on Montanans.

That task force and others around the country need the dollars

to fight meth. They need the resources. They need the resources to

locate and clean up the labs, and the resources to put criminals

making and dealing with meth behind bars where they belong.

4

I am eager to hear from Lt. Springer about changing meth hot

spots and the challenges that law enforcement officers now face.

Carl Venne, welcome. Chairman Venne is the chairman of the

Crow Nation in Montana, and an advisory council member of the

Montana Meth Project. Chairman Venne will be testifying here

today on meth abuse as it particularly affects reservations, and it

is devastating.

I look forward to hearing Chairman Venne’s perspective on tribal

efforts and tribal strategies to combat meth, as well as meth law

enforcement resources for reservations.

Education, prevention, and treatment are vital. Our law enforcement officers are stepping up to meet the challenge, and I am doing

all I can to help out. I very much look forward to our testimony

today.

We have to break the meth supply chain. Let us do so for the

health and safety of Montanans, and all Americans. Thank you, all

three of you, very, very much for taking the time and effort to come

and, jointly together, help us out to solve this problem.

Thank you.

[The prepared statement of Senator Baucus appears in the appendix.]

The CHAIRMAN. Yes. Before I introduce the panel, I will call on

Senator Lott.

OPENING STATEMENT OF HON. TRENT LOTT,

A U.S. SENATOR FROM MISSISSIPPI

Senator LOTT. Mr. Chairman, I will be very brief. I just want to

thank you for following through on the legislation we passed earlier

and to look at the continuing and even growing problem and try

to find ways to break this chain of supply.

I think to have the local panel of people dealing with it where

it really happens, and then of course the Federal panel, will be extremely interesting and helpful. I am glad we did get the Combat

Meth Act done.

I think it is appropriate we follow up and see what is happening,

how is it working, how are the local officials dealing with it. So,

I am looking forward to reviewing the testimony of the witnesses.

Thank you, Mr. Chairman.

The CHAIRMAN. Yes. And thank you, Senator Lott. Thank you,

Senator Baucus. Senator Baucus introduced two of the first panel,

so joining Lt. Springer and Chairman Venne is a constituent of

mine, a person who has had experience both at the State level and

at the local level in the issue of combatting drugs.

Once before we called Sean McCullough before us to testify three

or 4 years ago. We enjoyed his testimony then. He has moved up

the ladder now to be special agent in charge of the Iowa Division

of Narcotics Enforcement, so he is going to share testimony.

We thank you all for coming, and particularly thank you, Sean,

for your coming out here from Iowa to testify before me once again.

So we will start with Lt. Springer, then Chairman Venne, then

Special Agent McCullough.

Lt. Springer? By the way, if you have longer statements than the

5 minutes that you were allotted, they will be included in the

5

record as you submit them. So whatever you want to say now, you

can say it any way you want to.

Lt. Springer?

STATEMENT OF LT. DAN SPRINGER, COMMANDER,

MISSOURI RIVER DRUG TASK FORCE, BOZEMAN, MT

Lt. SPRINGER. Good morning, Mr. Chairman, Senator Baucus,

and members of the committee. It is my great pleasure to be here

today.

In 1992, the Missouri River Drug Task Force was established in

Montana as a regionally proactive enforcement response designed

to aggressively combat the increasing effects of dangerous drug use

and distribution occurring within seven specific jurisdictions of concern.

The Missouri River Drug Task Force has nine full-time investigators and covers an area of approximately 17,000 square miles; New

Jersey, Connecticut, and Massachusetts combined do not equal the

size of our jurisdiction. Financial allocations received from the

Byrne Memorial Grant served as the fiscal catalyst behind the jurisdictional alignment.

Operating beneath this collaborative investigation premise, the

Missouri River Drug Task Force investigations, in conjunction with

Federal, State, and local authorities, have been instrumental in the

identification, disruption, and dismantling of drug trafficking organizations.

Narcotics officers across the country are facing multiple challenges regarding methamphetamine. The largest challenge is the

fight itself. We are working with decreased funding, limited resources, a growing epidemic, and vicious drug-related crimes.

Forty-two percent of law enforcement agencies recognize methamphetamine as the number-one drug concern within their jurisdiction, and there is no close second. When I started as a patrol

deputy 10 years go, it was extremely rare to find even personal use

methamphetamine on the street. Today it is not only common, but

it is the norm, and often in larger quantities than personal use.

Meth hit our area like a freight train, and we have seen nothing

but a steady increase in the supply and the demand over the last

10 years. If your area has not been hit by this epidemic, be very

thankful, but prepare yourselves for something that you have never

seen before.

With this increase in drug activity, there has been an increase

in crime. However, the primary funding source of the Missouri

River Drug Task Force, the Byrne Memorial Grant, has decreased

by 62 percent over the past 5 years.

Due to significant cuts in Federal funding, the number of investigators needed to combat this epidemic has stagnated to a point

where we are just maintaining rather than conducting proactive,

hard-hitting investigations.

The advantage of the Byrne Memorial Grant has been the ability

to use the money in multiple ways. The Byrne Grant allows us to

use the money for salaries, overtime, vehicles, drug buy money, informant payments, and many other areas.

I would ask for a consistent and stable form of funding that does

not keep agencies hanging in the balance from year to year. A

6

funding source of this nature would allow for extended planning

and extended expectations.

The Montana State legislature has recently passed precursor

laws, limiting access to items used in the making of methamphetamine. These laws have apparently been highly effective, and we

have seen a dramatic decrease in the number of mom-and-pop

meth labs. However, we have seen a dramatic increase in the importation of methamphetamine.

The meth imported to Montana is primarily coming from Washington, Oregon, California, Utah, and Idaho, and eventually Mexico. The super-labs of Mexico supply the majority of the meth for

the United States. The factories that make pseudoephedrine are

now shipping pseudoephedrine to Mexico in extremely large quantities.

Directly linking meth to other crimes is not easy to do. Very few

defendants admit to committing the crime, let alone committing

that crime while using meth, or in an attempt to purchase meth.

One thing we do know is, meth is no longer the cheap drug used

only by those who cannot afford other drugs.

In our area, meth is currently twice the price of cocaine. With

the increase in price and the addictive nature of this drug, the pursuit of methamphetamine has increasingly become a criminal motive for violent and weapons-related criminal acts.

Through my very small window of the world, I see individuals

getting killed over drugs. I see people losing family members to

drugs. I see family members and friends being torn apart by these

drugs. But, most importantly, I see the productive citizens of our

communities becoming victims of crime due to drugs, and primarily

methamphetamine.

Money alone cannot solve the methamphetamine issue in Montana. However, without a sustainable source of financial support,

the success and momentum of these historically complex and effective efforts will inevitably falter.

Local enforcement efforts are arguably the first and last line of

defense in the war on methamphetamine. And, while our communities cannot afford to lose the battle, the Missouri River Drug

Task Force cannot afford to wage the war alone. Thank you for

your time.

The CHAIRMAN. Thank you, Lt. Springer.

[The prepared statement of Lt. Springer appears in the appendix.]

The CHAIRMAN. Now, Chairman Venne?

STATEMENT OF CARL VENNE, CROW TRIBAL CHAIRMAN; TRIBAL LEADERS COUNCIL CHAIRMAN; AND ADVISORY MEMBER,

MONTANA METH PROJECT, CROW AGENCY, MT

Mr. VENNE. Mr. Chairman, good morning. Honorable committee

members, it is an honor for me to provide testimony today on very

important issues for the Crow people, and for all Native American

populations. I thank you for this opportunity.

The Crow reservation is about 2.5 million acres, about the size

of Rhode Island. It is one of the poorest counties in the whole

United States, according to the last census. Meth use on our reservation is at epidemic stages, not only on my reservation, but all

7

the reservations in Montana. I am also the chairman of the Tribal

Leaders Council, and we have discussed this quite a bit.

One of the biggest problems we have in controlling meth is, we

have three different jurisdictions on Indian reservations. We have

our local BIA, the FBI, and the county. None of them are working

together to fight this problem.

If you look at the whole picture and what is going on in America

today and how we are fighting the war in Iraq, you know the bullets in Iraq do not say, you are Indian or you are a non-Indian.

That is the way I look at law enforcement in Indian country. We

are all constituents of you Senators from America. We are all constituents of the government of the State of Montana.

Why do we not fight this together with our resources instead of

saying, because this is a reservation line we cannot cross it, we do

not have jurisdiction? No longer can we act that way. We are all

Americans in fighting this, I call it the devil.

What it is doing to our younger kids today—you know, there is

an increase of suicides, increase in major crimes. But yet, when I

approach the DEA or the FBI, they say, well, we want to get the

big guys, so they do not look at what is going on within the reservations. We should be able to do that, not saying, because I am

the FBI, I go for the big guys in Mexico and the cartels and stuff.

What is their jurisdiction in Indian tribes? What are the jurisdictions of the local county sheriffs when they should be doing something? We are taxpayers of that county, so they need to provide

services to our tribe. Those are the kinds of things Indian tribes

are up against today.

We talk about meth labs. We had a meth lab. You know, we have

a housing shortage. When you go in and knock down a house, how

do we replace it? The insurance will not cover that type of stuff.

There are a lot of things.

Take the social problems that it is creating. What type of prevention programs do we have in our local schools? None. What control

do we have? None. We need to work together by building bridges,

not burning them, between communities and between races.

I think those are the types of things I am looking at as a tribal

leader in Indian country and what we are faced with today. It is

very important that we realize one thing: we are all Americans. We

need to fight everything together. That is how important it is to me

and my people.

My people live in poverty. Our annual income is only $6,000 to

$7,000 a year. We need to do something today. No longer can I

stand by as an Indian leader and not talk about these things. I

need to let you know: you need to help me. We need to come together as a country. Too much has divided us because of politics,

but today I beg you people to help us in Indian country. Thank you.

The CHAIRMAN. Thank you, Chairman Venne.

[The prepared statement of Mr. Venne appears in the appendix.]

The CHAIRMAN. Now, Special Agent McCullough?

8

STATEMENT OF SEAN McCULLOUGH, SPECIAL AGENT IN

CHARGE, IOWA DIVISION OF NARCOTICS ENFORCEMENT,

DES MOINES, IA

Mr. MCCULLOUGH. Mr. Chairman, committee members, I have

been involved in drug enforcement in Iowa on the State level for

the past 17 years. Since the early 1990s, Iowa has been plagued

by methamphetamine. Methamphetamine could be found in Iowa

before the 1990s, but not in large quantities like we had after 1990.

The majority of methamphetamine at that time was imported

from Mexico and the southeast region of the United States. The

people in Iowa, those involved in methamphetamine, soon found

that it was easy to manufacture methamphetamine on their own,

and then they did not have to deal with the dangers of the organized crime groups that were involved in the importation of methamphetamine.

We then saw a rise in meth labs in Iowa. Processing these labs

was very time-consuming and expensive for law enforcement. Then

law enforcement found themselves fighting methamphetamine on

two fronts, the methamphetamine manufacturing in clandestine

labs, and the meth imported into our State.

In 1993, my agency, the Division of Narcotics Enforcement, or

DNE, seized two methamphetamine labs. Each year following 1993,

meth labs in Iowa grew to epidemic proportions. By the year 2004,

Iowa law enforcement officials seized over 1,500 meth labs in Iowa.

In 2004, the DEA recorded that Iowa had the third highest number of methamphetamine laboratories. Approximately 97 percent of

these meth labs seized in Iowa produced only 1-gram to 1- or 2-

ounce quantities of methamphetamine.

The Iowa law enforcement agencies found ourselves spending 80

percent of our resources on 20 percent of the meth problem. We

then wanted to reduce the number of meth labs in our State so we

could concentrate our efforts and resources towards the importation

of meth into our State.

In May of 2005, Iowa passed one of the Nation’s strongest nonprescription pseudoephedrine laws. This law restricted the sale of

pseudoephedrine, which is a main ingredient in the illegal manufacture of methamphetamine. The law had an immediate and significant impact on the methamphetamine manufacturing problem

in Iowa.

Law enforcement’s purpose behind the law was to reduce the

number of meth labs which were taking up the resources, allowing

the agencies to dedicate their efforts towards reducing the amount

of imported meth brought in by these organized crime groups.

Since the law was enacted in May of last year, methamphetamine

laboratories in Iowa have declined 72 percent.

In 2004, the University of Iowa hospitals and clinics spent ap- proximately $2.7 million to treat patients with methamphetaminerelated injuries. In 2005, after Iowa passed the pseudoephedrine

law, University of Iowa hospitals and clinics spent a little over

$200,000 on methamphetamine laboratory-related injuries. This

equals a savings of approximately $2.5 million.

Iowa’s pseudoephedrine law has also caused a reduction in total

methamphetamine laboratory costs, which involve the costs of the

personnel, salaries, clean-up, and so forth. After the law was

9

passed, costs dropped to approximately $1.5 million, and before

that it was $2.5 million. These figures equal a savings of a little

over $1 million.

Even though Iowa’s clandestine methamphetamine laboratory

seizures have declined, drug trafficking organizations continue to

dominate the State’s illicit trade. Most of the methamphetamine in

Iowa is coming across the southwest border from Mexico.

Along with increased seizures of methamphetamine in Iowa from

imported meth, the drug purity rate has also increased. This pure

form of methamphetamine is also known as crystal methamphetamine. The purity rate in Iowa in 2002 was approximately 27 percent. In 2004, it rose to approximately 54 percent pure methamphetamine.

Law enforcement in Iowa continues to work proactively against

those individuals and groups involved in trafficking methamphetamine into Iowa. I think Iowa is lucky in that all the agencies get

along together, local, State, and Federal. We all work together to

combat the problem, and I think that is what is important and key

to addressing the methamphetamine problem.

The methamphetamine problem is transient, it is moving. It is

spreading across our country, and the key is that we all work together to fight the problem and continue the dialogue that we

share here today to find answers. Thank you.

The CHAIRMAN. Yes. Thank you, Sean.

[The prepared statement of Mr. McCullough appears in the appendix.]

The CHAIRMAN. I think I am going to lead in with my first question where you left off, because it is my guess that most drug investigations begin at the local level with the arrest or seizure of drugs.

So this cooperation that you referred to in Iowa—I am going to

ask several questions, but they all lead to the same general discussion. So, rather than going question by question, I will just lay

these out and let you deal with them. Maybe Lt. Springer would

want to join in, too, from his experience.

Explain how meth cases you initiate are adopted at the Federal

level or with Federal agencies. How and when, for instance, do

DEA and others get involved? Do you know what criteria they use,

and why, to get involved?

What is your involvement at your level after an initial arrest or

seizure? More specifically, do you continue to be involved after the

case is taken up by Federal officials, and do you get feedback on

cases that are adopted by Federal law enforcement?

Mr. MCCULLOUGH. In Iowa, most of the cases are initiated by my

agency or local law enforcement agencies’ drug task forces that

work together. We usually initiate the investigation, work up the

case, and, if it looks like it has a nexus into the Federal system—

and those variables are the criminal history of the people involved

in trafficking the drugs, the drug quantities, if there is an interstate nexus to the case—if some of those factors exist, we then contact usually the Drug Enforcement Administration, which we have

a very good working relationship with.

I think their issue is, there are just not very many DEA agents

in Iowa, so their resources are limited. Usually we work the investigation up, contact the DEA to see if they are interested in workVerDate 11-MAY-2000 14:56 Sep 06, 2007 Jkt 095484 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 37178.000 SFIN1 PsN: SFIN1
10

ing with us on the investigation, and then we go ahead and work

it. We do have several—in fact, I think the figure is seven—DNE

agents assigned to DEA task forces throughout the State also,

which helps.

The CHAIRMAN. So you are involved pretty much throughout the

entire case then, but mostly because of the lack of the number of

Federal people to help you to carry it on.

Mr. MCCULLOUGH. Yes. DEA has limited resources in Iowa, not

enough agents.

The CHAIRMAN. Sure.

Mr. MCCULLOUGH. We usually work up the cases. Also, at DNE

we are fortunate that we have agents spread throughout the State,

in both the metro areas and the rural areas, and the DEA agents

are housed out of the——

The CHAIRMAN. Have you had a different experience, Lt. Springer?

Lt. SPRINGER. It is a fairly similar experience. It is kind of like

throwing darts. You start on the outside, and eventually you will

hit a bulls-eye and take a case beyond the local or State level and

up into the Federal level.

What we see, though, is we do not have a DEA agent within 160

miles of our task force, so what will happen with our cases, in

starting the case, you never know if it is going to go Federal until

you are kind of into the case a little ways.

At some point it looks like it may be going, so you call the DEA—

for us it is down in Billings—and get their authorization. They

have the title 21 authority that we do not have to take a case to

a Federal level. We get their, kind of, permission, they sort of sign

off on it, at which point we run the case. So, we basically become

the Federal agent running the case.

At some point when we finish the case, if it gets outside of our

State or goes down to California, we will certainly pass that off to

an agent somewhere else. But if it stays within our State or somewhere nearby, we will continue with it. At some point, we will call

the DEA agent and they will then run it up through the U.S. Attorney’s Office.

The problem is you will inevitably lose something in the translation because they are not there from the ground level and all the

way through the case; they are getting a briefing of the case, at

which point then they are trying to explain it to the Attorney’s Office. So, it is difficult that way.

We have had great relationships with the DEA. Most recently,

the IRS—Senator Baucus has helped us with that—has assigned

some agents to help us when need be, and currently they are helping us right now.

The CHAIRMAN. By implication, I think you answered my next

concern. That is if, as a member of a task force, you are treated

as an equal partner. Do you have access to the same information

and intelligence that the Federal agency does? I assume the answer

to that is yes, because you supply that information.

Lt. SPRINGER. If you ask, yes. We supply the information when

it is our case. Now, there are times where cases are coming——

11

The CHAIRMAN. Well then, if it comes from the top down, are you

treated equally with access to all the information that the Federal

agency has?

Lt. SPRINGER. Most of the time. It depends on the relationship

between the agent and the investigators. We have very good relationships, so they will end up talking to each other all the time.

If that relationship is not there, then there may be an issue.

The CHAIRMAN. Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

Dan, what do you need to do an even better job? You talked

about Byrne money being cut, for example. I know we had to struggle with HIDTA money and other resources. But just the basic

question. When you and your colleagues get together and say, this

is what we really need if we are going to get these guys, what do

you need?

Lt. SPRINGER. Bodies. The only way work gets done is by people

beating the street, and that takes money, and getting money that

can be used in multiple ways. A lot of times, like HIDTA, money

and things are very specific for training and overtime and those

issues.

But salaries, support staff salaries, drug buy money, all these

things—which have been beneficial with the Byrne Grant—that is

what has been the most effective for us.

The other thing we need is a Federal agent locally, a DEA agent

locally. Bozeman, obviously, has become a growing town. Helena is

becoming a growing town. Right now, Bozeman has no title 21 authority outside of two FBI agents, but they are working mostly

homeland security at this point.

So I would say, at this point, we need bodies. As bodies increase,

then equipment becomes more of an issue, and those things. But

we need the people on the street, at the local level.

Senator BAUCUS. All right.

Now, just being reasonable here, what percent increase in resources will this Byrne Memorial money, or whatever, without asking for the moon, will get the job done?

Lt. SPRINGER. The decrease of 62 percent in the last 5 years,

even getting a third of that back would help us add another investigator to our task force, or two. I certainly understand there are

fiscal problems everywhere and everyone has their own issues, but

getting back to where we were would be a significant help.

We have been backtracking for the last 5 years. If we can just

kind of get us back up even to where we were a few years ago, it

would be beneficial, 20 percent, 30 percent.

Senator BAUCUS. And how many Federal personnel are there,

whether DEA, FBI, or whatnot, available in Montana so you can

federalize the case?

Lt. SPRINGER. I am sorry. How many Federal agents?

Senator BAUCUS. How many Federal agents are there in Montana?

Lt. SPRINGER. I do not know the total number, but there is ICE,

there is ATF, there is DEA.

Senator BAUCUS. But are they responsible for and assigned to

take drug cases?

12

Lt. SPRINGER. I believe there are probably six to eight DEA

agents in the State of Montana. I may be off on those numbers. I

know there are six out of Billings, and I believe there are a couple

up in Great Falls, and maybe in Missoula. Now, like I said, for the

most part we deal strictly with Billings.

Senator BAUCUS. Now, how important is it to federalize? I ask

because, when I talk to some people at home, they tell me that

some of these pushers know that, if it is a State system only, they

will get a deferred sentence or they will not get put in jail, there

is not enough room in the jails, and so forth.

But if it is federalized, then the accused starts to get serious and

starts to cooperate a little more, particularly in trying to go up the

chain and trying to find the next higher level of people.

Lt. SPRINGER. The criminals do not like being charged Federally,

and they know that they will be going to prison. They spend, I

think, 95 percent of their sentence, versus quite a bit less at the

State system.

If they know they are going to the State system, chances are they

are not going to help us. But the Federal system, they know they

are going away for a long time and they will help us significantly.

Senator BAUCUS. Is that true in Iowa, too, Mr. McCullough?

Mr. MCCULLOUGH. Yes, it is. The drug traffickers do not want

the case to go to the Federal level. Usually they receive a lot more

time Federally than they do in State court. I believe Iowa ranks

43rd, too, in the number of Federal agents.

Senator BAUCUS. All right.

Chairman Venne, the unique problems of the reservation, it

seemed, listening to you, relate to inadequate coordination among

law enforcement agencies. To what degree is that the problem? To

what degree is it insufficient resources? Just generally, again, the

same question I asked Lt. Springer. What do we need to do on reservations? What do we need?

Mr. VENNE. Well, if you look at our reservation, it is about the

size of Rhode Island, and some nights there is only one officer patrolling the whole reservation. The Bureau of Indian Affairs is the

one who handles all law enforcement on the reservation.

We have a total amount of 14 officers and 2 investigators. That

is probably half of what they need. I looked at some statistics

where they are supposed to have 23 officers and four investigators,

when they cannot meet the funding of it. Then probably they need

a lot of training, surveillance equipment, prevention efforts, and alternative sentencing.

I think the part you are talking about, the different sentences,

that is very important. They need to be harsh. They need to be

going to Federal court instead of State court.

Senator BAUCUS. So what does it take, to use this awful word,

to federalize on reservations? Does BIA involvement necessarily——

Mr. VENNE. Mostly all our drug cases go to the BIA, then on up

to Federal court or some local things we are taking care of.

Senator BAUCUS. All right.

Mr. VENNE. So the biggest thing is, we started a Safe Trails Task

Force with DEA, FBI, and the Colstrip Sheriff’s Department to put

a team together with both the northern Cheyenne and the Crow

13

Tribe, putting a team together and starting to fight this meth problem that we have.

Senator BAUCUS. One more question, Mr. Chairman.

If there are insufficient resources in law enforcement personnel,

say, in our States, Montana, Iowa, or other rural States, how well

is that known among drug pushers? Do they, therefore, say, hey,

there is not a lot of FBI, not a lot of Federals in Montana someplace, so that is where we are going to go? I mean, is that an issue

or not an issue? Anybody can address that.

Mr. MCCULLOUGH. I do not think they are cognizant of it. When

I talk to some of these people, they mainly say, hey, I just thought

I was never going to get caught. I just do not think they think

about it. They are involved in the methamphetamine trade, making

money. They just think it is never going to happen to them. I do

not think they actually sit down and think about the Federal issue.

Senator BAUCUS. Lt. Springer?

Lt. SPRINGER. What they like to do, in Montana they know they

can make a lot of money. They are doubling their money out of

Spokane, buying an ounce for half the price that they can sell it

for in Montana. So that is what is driving them into Montana: the

price, the demand.

Senator BAUCUS. I was stunned to hear you say it was twice the

cost of cocaine. That must be a change.

Lt. SPRINGER. It is a change. We did not see cocaine a year ago.

We are starting to see quite a bit more cocaine. The price was so

much lower, I think that it ended up as kind of a simple economics

course for them.

Senator BAUCUS. All right.

But you need resources. You need dollars, you need people, basically.

Lt. SPRINGER. We need bodies. Yes, sir.

Senator BAUCUS. Both State and Federal. Thank you very much.

Mr. Chairman, I think it is an outrage. It is an outrage that

Byrne Memorial funds have been cut as much as they have. Those

grants go a long, long ways to fight. Money for drug law enforcement makes a huge difference, and we just have to find some way

to do that.

The CHAIRMAN. And I hear that from every level of law enforcement in my State as well. Yes.

Sean, I assume that your agents are trained to investigate and

gather information with a goal of breaking down larger criminal organizations other than just local users or dealers and trying to

move that information to getting people higher up in the chain.

I assume that your agents then collect data and interview suspects, keeping in mind they can get higher-ups in the drug trafficking. If you collect such intelligence, and I assume you do, what

happens to it?

Mr. MCCULLOUGH. That goes to our Intelligence Bureau for the

Iowa Department of Public Safety. They house all the intelligence

information for DPS, and then they keep that in Des Moines and

they try to forward that on to other task forces around the State.

The CHAIRMAN. If you just do it within the State of Iowa, though,

that information does not move to Federal officials to make use of

it?

14

Mr. MCCULLOUGH. It does. One of the vehicles is through

HIDTA. We send our intelligence information down to our HIDTA,

which is headquartered out of Kansas City, then that information

gets funneled out.

The CHAIRMAN. And do you feel that it is effectively used, the information that you send?

Mr. MCCULLOUGH. I think so. It is getting better. We had a

meeting last week about this issue in Kansas City at the HIDTA

office, about intelligence sharing and putting more information out

to other areas of the Nation. I think it is working and it is getting

better.

To go back to something we talked about earlier, with DEA, we

do know a lot of their intelligence information from our people assigned to the DEA task forces. So, information flow is both ways,

from our agency and from DEA, through our designated task force

officers at the DEA.

The CHAIRMAN. And Chairman Venne, you spoke about the complications due to sovereignty. Do you know if there have been efforts, other than the August 22, 2006 agreement that you spoke

about, either through formal Memoranda of Understanding or informal agreements through which tribes work together with nontribal law enforcement to combat the meth problem occurring in

tribal communities?

Mr. VENNE. I do not know if there are any other ones, but that

is the only one in Montana right now.

The CHAIRMAN. And it is obviously too soon to know if it is working.

Mr. VENNE. Yes, it is too soon.

The CHAIRMAN. Chairman Venne, you spoke about the lack of exchange of information or intelligence. Do you have suggestions of

what can be done to help improve that situation?

Mr. VENNE. Yes, I do. All of us have to realize, usually they talk

about, well, we do not have jurisdiction here or we do not have jurisdiction there. All it takes is people to step up to the plate, create

agreements between agencies or governments to handle this problem. To me, that is fairly simple. It is a matter of people just stepping up to the plate, wanting to do something.

The CHAIRMAN. So one of your main criticisms is that there is

a lack of willingness to do that?

Mr. VENNE. Yes.

The CHAIRMAN. And is that something that you sense all over the

country, or just between law enforcement agencies and tribes?

Mr. VENNE. It is between, probably, law enforcement agencies,

the different law enforcement agencies we have in the State. People

like to protect their own little areas and be the boss of that.

The CHAIRMAN. Yes. We run into that all the time.

Senator BAUCUS. Yes. It never happens here.

Mr. VENNE. That is the problem.

The CHAIRMAN. Yes. All right.

Well, I am done asking questions. We did not have all of our

members here today, so you may get questions from other members

for answer in writing. We would appreciate your cooperation on

that. Thank you all.

Senator BAUCUS. One more, Mr. Chairman.

15

The CHAIRMAN. Sure. You can have more time.

Senator BAUCUS. Chairman Venne, can you tell us a little bit

about the Seven Hills Healing Center, and how is that working?

Mr. VENNE. That is working excellent. What we did was, a year

and a half ago, in 1 week, we had six deaths, all related to alcohol

and drug use. I finally said, we have to do something. The tribe

owns a ranch of about 28,000 acres out by the mountains, so we

developed this program.

It is a culture program, in what we, as Indians, believe in, the

different types of religious practices we do. We bring our people

and show them, to let them appreciate who they are and where

they are from, and to educate them in the Crow way of life. We

have been doing that for the past year and a half. We have been

very successful. We probably have a 70-percent success rate out of

that. We take women and men. We alternate them, though.

It is not that great of a building and ranch stuff, but we have

been doing a lot of fixing up on our own and trying to get that

going, bringing them back to what we believe in as people. It is

working out pretty well, Senator.

Senator BAUCUS. This is kind of a wild idea, it just occurred to

me. There is a warrior culture in Native Americans, that is, when

a warrior falls, the warrior is honored and a lot of tribal songs are

sung to warriors.

Mr. VENNE. Sure.

Senator BAUCUS. Fallen warriors. The thought is, if somehow we

could convert that so warriors are also fighting meth like they are

fighting other armies, fighting other enemies. I do not know if that

is possible or if it makes any sense, but it was just a thought that

occurred to me.

Mr. VENNE. We have been attacking it just like that. We go on

long marches and walks with our young kids in school, starting

prevention-type projects in our schools against meth. They need to

know that we support them as an administration and we do care

for them and participate in what they do.

Senator BAUCUS. What works best in preventing or lowering

teenaged suicides? How much of that is meth-related, dysfunctional

families, and whatnot?

Mr. VENNE. Usually on my reservation there are no suicides. In

the last year, we have had five suicides because of meth. A prime

example is, three of them walked straight into a moving train.

Things like that are happening.

But I think it takes the community working together with everybody to really put a stop to it, and prevention-type programs. I

think the community is the answer.

Senator BAUCUS. All right. Thank you very much. I deeply appreciate the time you have taken to come here and help out. It means

a lot to all of us. Thank you.

The CHAIRMAN. I thank you as well. If you want to stay, you are

welcome to stay.

I would call the second panel now. I am going to introduce the

second panel as they come, so please come, all of you.

We have Joseph T. Rannazzisi, Deputy Assistant Administrator,

Office of Diversion Control, Drug Enforcement Administration; Mr.

Robert Patton, Chief, Mexico-Central American Section, Office of

16

Financial Operations, DEA. Mr. Patton will not make a statement,

but is here to answer any questions that may arise about DEA’s

financial investigations.

We have Gregory Passic, Director of the Office of Drug Interdiction, U.S. Customs and Border Protection; and, finally, Mr. Andre ́

Martin, Director, Operations Policy and Support, of the IRS Criminal Investigation Division.

I have introduced you in the same order that I will call on you

to testify. So we will wait until you get ready, Mr. Rannazzisi, then

we will start with you.

Also, for all of you, your statements, if they are longer than your

5 minutes, will be included in the record as you submit them.

STATEMENT OF JOSEPH T. RANNAZZISI, DEPUTY ASSISTANT

ADMINISTRATOR, OFFICE OF DIVERSION CONTROL, DRUG

ENFORCEMENT ADMINISTRATION, WASHINGTON, DC; ACCOMPANIED BY ROBERT T. PATTON, SECTION CHIEF,

MEXICO-CENTRAL AMERICA SECTION, OFFICE OF FINANCIAL OPERATIONS, DRUG ENFORCEMENT ADMINISTRATION,

ARLINGTON, VA

Mr. RANNAZZISI. Thank you, sir, and good morning. Chairman

Grassley, Ranking Member Baucus, distinguished members of the

committee, on behalf of DEA’s Administrator, Karen P. Tandy,

thank you for the opportunity to testify here today regarding DEA’s

efforts to break the methamphetamine supply chain.

I am joined by Mr. Robert Patton of DEA’s Office of Financial Investigations, who will respond to any questions regarding our financial investigations related to methamphetamine.

Methamphetamine poses a significant threat to the United

States. Through our law enforcement partnerships across the country and around the world, DEA is actively engaged in attacking

criminal organizations responsible for trafficking methamphetamine, the precursors utilized in its production, and their illicit

proceeds.

DEA’s efforts to address the methamphetamine drug problem

have been ongoing for decades. Methamphetamine production requires no specialized skill or training, and its recipes are readily

available on the Internet. Its precursor chemicals also have been

historically easy to obtain and inexpensive to purchase.

The unique nature of this synthetic drug warrants a targeted response. In 2006, the Administration released the Synthetic Drug

Strategy, which provides a framework for DEA and contributing

agencies to continue ongoing efforts and to chart new milestones in

achieving domestic and international progress against methamphetamine and other synthetic drugs.

Methamphetamine consumed in the U.S. originates from two

principal sources. Most methamphetamine found in the U.S. is produced by Mexico- or California-based traffickers whose organizations control super-labs. Current data suggest that roughly 80 percent of the methamphetamine consumed in the U.S. comes from

these large labs, which are increasingly found in Mexico.

When we talk about super-labs, those are labs that produce approximately 10 pounds or more of methamphetamine in a 24-hour

production cycle.

17

The second source of methamphetamine is small toxic labs, or

STLs, which produce relatively small amounts of methamphetamine and are generally not affiliated with major trafficking organizations. It is estimated that these labs are responsible for approximately 20 percent of the methamphetamine consumed in the

United States.

In response, DEA is taking its fight to the organizations responsible for this menace. We have initiated successful investigations

that have disrupted and dismantled significant methamphetamine

trafficking organizations and have also taken an active role in

fighting the diversion of ephedrine and pseudoephedrine through

both enforcement operations and international agreements.

It is noteworthy that law enforcement efforts have been aided by

both State and Federal legislation. As you well know, the Combat

Methamphetamine Epidemic Act of 2005 has provided additional

tools to enhance our efforts, both domestically and internationally.

DEA’s efforts, coupled with these legislative tools, have already

resulted in a substantial reduction in the amount of precursor

chemicals entering the United States. DEA has also stepped up its

efforts to focus on the financial side of drug trafficking organizations.

Our financial enforcement strategy is mission-driven, focusing on

the flow of money back to international sources of drug supply.

There is little doubt that the sole reason people sell drugs is for

financial gain; therefore, attacking the financial infrastructures of

traffickers plays a key role in our enforcement strategy.

Our objective is to identify and halt the flow of drug proceeds by

focusing on bulk currency smuggling and the remission of drug

money through U.S. wire transfers. DEA works closely with our

other law enforcement counterparts to address these initiatives.

DEA has mandated that all drug investigations include a financial

investigation component, which our financial investigations teams

help carry out.

A key element in combatting methamphetamine is international

cooperation, particularly in the area of precursor chemical control.

DEA and DOJ have facilitated and played a leadership role in several recent meetings of the international community.

These meetings, such as the National Methamphetamine Chemical Initiative Strategy Conference, where the Attorney General

announced several new anti-methamphetamine initiatives, have

helped increase awareness around the world and resulted in agreements to monitor and track key precursor chemicals. Several nations, most notably Mexico, also have taken independent steps to

control methamphetamine precursors.

DEA will continue to fight methamphetamine on all fronts by

targeting both the trafficking organizations and the financial proceeds they generate. We are fully committed to meeting this international threat by working in a cooperative effort with other agencies and nations.

Chairman Grassley, Ranking Member Baucus, and members, I

thank you again for this opportunity to testify. I would be happy

to answer any questions you may have. Thank you.

The CHAIRMAN. Thank you.

18

[The prepared statement of Mr. Rannazzisi appears in the appendix.]

The CHAIRMAN. Now, Mr. Passic?

STATEMENT OF GREGORY PASSIC, DIRECTOR, OFFICE OF

DRUG INTERDICTION, U.S. CUSTOMS AND BORDER PROTECTION, WASHINGTON, DC

Mr. PASSIC. Chairman Grassley and Ranking Member Baucus,

thank you for your personal attention to this. I know, by talking

to your staffs, you really want to do something about this problem.

I sense that this is a very busy committee, and for you to take

this on, I laud you for your efforts. I hope that what we can present

today will move in the direction of your challenge.

I could not help but be moved by the prior panel about how devastating methamphetamine is in their communities. In my humble

opinion this is a weapon of mass destruction introduced from Mexican criminal organizations into this country, and as such demands

that we in Customs and Border Protection pay attention to it and

team up with the members sitting here at this table to do something about it.

We were looking at two specific areas that we think we can challenge and meet that contribution that you are looking for. The first

one is along the border, along the line. The southwest border is responsible for 80 percent of the meth and other drugs that enter

this country. It is a tough challenge. We will be adding 6,000 to

8,000 Border Patrol Agents along that border.

As the Border Patrol Agents and National Guard are deployed,

we have noticed a shift into the ports of entry, so we cannot ignore

that. We have to have better technology. We have to have an increased effort also at vehicles smuggling traps and individuals entering the country through the ports.

To do that, we need DEA’s help. We have to not only seize more

meth on its way to the U.S. market, but we have to make smart

seizures. A seizure of outbound currency or drugs coming in is significant in that we might deny funds to trafficking groups and

meth from hitting the street, but more importantly, we feel that is

a starting point for an investigation. We feel we need to couple

with DEA’s active meth investigations, if they share their data

with us—and there is every indication they are doing that.

We have a team coming in tomorrow from Los Angeles, DEA

agents and analysts, who are going to be meeting with our people

to talk about precursor controls directly to include sharing our systems with them. And if we can couple the gears in the government

machinery, we go way beyond cooperation—this thing requires collaboration.

It requires teaming in a fashion that we have never done before.

As other members of your panel mentioned earlier, we can do a

better job of coordinating and teaming that effort.

Smart interdiction also allows us to provide to DEA evidence in

drug conspiracies. If they have wire taps, informants, or undercover operations running into meth groups and we can make a seizure from one of those couriers, that is added value to DEA’s attempts to arrest and prosecute major traffickers. It also provides

19

leads that go back into Mexico, where we have to have impact on

the Mexican organizations that are the root of the problem.

The second area we in Customs and Border Protection are concentrating on is the control of precursors. We are working very

closely with DEA to identify companies, brokers, and transshippers

that are sending ephedrine and pseudoephedrine to and through

the United States, primarily to those laboratories mentioned before

in Mexico, the super-labs.

This challenge also involves engaging the Mexican authorities,

and we laud DEA’s efforts to build that task force down in Mexico,

because we feel, until we are able to impact the super-labs and the

principals that are engaged in those, that our impact will be somewhat limited.

We also feel that by denying precursors to the super-labs, that

we can impact their ability to produce high-quality methamphetamine that is introduced into the United States now.

My written statement actually goes into specifics of the game

plan. I also met with your staffs. We are looking forward to working with them to continue to be challenged and really do something

about this problem. Thank you for the opportunity of being here.

The CHAIRMAN. Thank you.

[The prepared statement of Mr. Passic appears in the appendix.]

The CHAIRMAN. Now, Mr. Martin?

Mr. MARTIN. Good morning.

The CHAIRMAN. Good morning.

STATEMENT OF C. ANDRE ́ MARTIN, DIRECTOR, OPERATIONS

POLICY AND SUPPORT, IRS CRIMINAL INVESTIGATION,

WASHINGTON, DC

Mr. MARTIN. Chairman Grassley, Ranking Member Baucus, and

members of the committee, I appreciate the opportunity to appear

before you today to discuss the Internal Revenue Service Criminal

Investigation Division’s role in combatting money laundering and

narcotics trafficking.

These are serious national problems that erode our economy and

destroy thousands of lives each year. The mission of the Internal

Revenue Service Criminal Investigation Division is to serve the

American public by investigating potential criminal violations of

the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system, in compliance with

the law.

This includes the investigation of complex tax and money laundering cases, covering a broad range of crimes, from tax evasions,

to corporate fraud, to sophisticated narcotics trafficking organizations.

Our approximately 2,800 criminal investigators are in demand

throughout the law enforcement community because of our unique

financial investigative skills. The Attorney General recently communicated to IRS Commissioner Everson, ‘‘The agents of the Internal Revenue Service Criminal Investigation are among the most

important resources we can bring to bear in connection with the

complex financial investigations that are critical to our success.’’

Our core mission at IRS is tax administration. Our country depends on a sound tax system. This fact was reinforced by Judge

20

William Webster, who was commissioned by the IRS in response to

concerns raised by this committee in 1998, to direct an independent

review of IRS CI.

Judge Webster concluded that we suffered from a mission drift

away from investigating core mission tax cases. He specifically attributed demands placed on CI by other law enforcement entities

to participate in narcotics investigations as a primary cause of the

drift away from the investigation of criminal violations of the Internal Revenue Code and those financial crimes that have a nexus to

tax enforcement.

He correctly pointed out that IRS CI must investigate tax violations arising out of title 26 of the U.S. Code because no other Federal law enforcement agency has the authority or responsibility, or

similar mission.

At the same time that CI has sharpened its focus on tax investigations, we have carefully monitored our narcotics work to ensure

we are focusing our scarce resources on those narcotics cases that

bring the most value to the government’s counter-drug efforts. With

the tax gap estimated at over $300 billion, CI’s focus on tax investigations must remain our top priority.

As part of the larger law enforcement community, we recognize

that IRS CI’s role is broader than tax administration. We contribute our efforts in many areas, including money laundering,

counter-terrorism, and public corruption.

Tracing the money is often the key to conviction and to disgorging assets. In fact, we view money laundering violations as tax

evasion in progress because the offenders are essentially trying to

hide their dirty money from the government.

We recognize that drug trafficking organizations are motivated

by greed, money, and assets. Therefore, the objective of our narcotics program is to dismantle and/or disrupt the highest level narcotics organizations, as designated by the Department of Justice,

through the Organized Crime Drug Enforcement Task Force program, or OCDETF.

Some of our OCDETF efforts include cases such as Operation

North Star, Operation Brain Drain, Operation Snow Globe, and

Operation Ice Storm.

While our narcotics program does not focus on specific types of

illegal drugs, it does conform to the qualitative framework established by the OCDETF program. It places emphasis on conducting

financial investigations of each case, with an aim toward the elimination of the drug organization’s infrastructure and permanently

removing their profits.

In conclusion, regardless of the type of drug threat, whether it’s

methamphetamine, cocaine, heroin, or marijuana, IRS CI will continue to support this effort by strategically targeting and dismantling the financial infrastructure of the most significant drug trafficking organizations.

The women and men of IRS CI carry on an 87-year tradition of

solving financial crimes by following the money trail, and we do

that in a spirit of cooperation with all of our law enforcement partners.

21

Mr. Chairman, I thank you for this opportunity to appear before

this distinguished committee, and I would be happy to answer any

questions you and Senator Baucus may have.

[The prepared statement of Mr. Martin appears in the appendix.]

The CHAIRMAN. All right. To any and all of you on this first question. We get reports about increasing amounts of drug seizures and

we get other reports about decreasing numbers, not going up, so we

do not really know where we are.

So could you clarify whether seizures of meth at the southwest

border are increasing or decreasing? Could you explain why there

may be differing reports about seizures at the border? Lastly, is

there an effort being made to have a uniform standard of reporting

or collecting this information?

Mr. PASSIC. We have noticed an increase of 11 percent at the

ports of entry, and a slight decrease, actually, between the ports of

entry with our Border Patrol people.

The reason that we have two different statistics or numbers is

that, the old system had a threshold on the amount of drugs that

could be issued a Federal identification number by EPIC, and if

you did not meet the threshold, your smaller seizures did not get

into the system. That has been rectified. Our people now can put

in all of our seizures along the border, regardless of the amount.

The other thing is, DEA was collecting seizure data from State

and local task forces along the border, in other words, meth shipments that had already made it across our line, so that made the

numbers different.

But hopefully our people are being trained how to do input into

the new EPIC system out there, and the next time we are up here,

hopefully we can say that thing has been fixed.

The CHAIRMAN. Does anybody else want to add to that?

Mr. RANNAZZISI. If I may just add, sir, I think we have learned

our lesson from the clandestine lab seizure system. A couple of

years ago, people were looking at the lab seizure system and they

noticed a dramatic drop. That was not a drop because there was

a lack of lab seizures, it was a drop because of reporting. The reporting was consistently late. It is just a problem.

Right now, we are looking at clandestine lab numbers from 2005.

We could definitely say that, in 2005, we had approximately 12,500

incidents. We cannot look at the 2006 numbers because those numbers change every day.

It is a lack of timely reporting as well, and I think that is why

the numbers fluctuate. We think it is premature to talk about any

numbers until well towards the end of the year or into the following year.

The CHAIRMAN. Is there an effort to bring some uniformity?

Mr. RANNAZZISI. Well, it is difficult. With the lab seizure system,

there is no requirement to.

The CHAIRMAN. I guess my question, though, as I look back at

it, was more directed towards smuggling across the southwest border than the clandestine labs that you are speaking about.

Mr. PASSIC. Yes. I think that has been addressed.

The CHAIRMAN. All right.

22

Mr. PASSIC. The DEA came up with the fix, and we have agreed

that that is the best place to do it. We are working with the people

out at EPIC to implement that.

The CHAIRMAN. All right.

On another question, Mr. Rannazzisi, I am referring to Mr.

McCullough’s statement how finding a decreasing number of small

toxic labs has enabled the people in Iowa to be more proactive in

initiating cases involving smuggling by sophisticated drug organizations.

What criteria would the DEA use to become involved in cases

that may be initiated at the State level, using Mr. McCullough as

an example, but not necessarily commenting on what he said?

Generally, what is the criteria that DEA uses in placing agents

and resources in different cities and areas? How often is this placement of resources reevaluated and redistributed?

Mr. RANNAZZISI. Let me answer the last question first. I think

we go through a regular assessment of our resources, where our

personnel are deployed, and we measure that as compared to the

drug threat. As an agency, we have a finite number of resources.

Manpower is our most significant resource. We have to go and concentrate where the major drug threats are.

If you will remember, we go after the larger organizations. We

try to go after the organizations that are putting the most methamphetamine out on the street nationwide, the ones that are multijurisdictional and international in scope. That does not mean that

we do not assist State and local agencies.

The CHAIRMAN. Well, he did not criticize you.

Mr. RANNAZZISI. No, no. And I understand that. But we built our

reputation on working with State and local agencies. Our task force

program has been operational since the early 1970s, and we are

proud of that fact.

As a task force group supervisor, we would look at every case

that the State and local agency would bring to us and we would

work them. Obviously there are no criteria. It’s just what the supervisor and the case agent who reviews the case, where they think

they can take the case with their State and local counterparts. So

there are really no criteria involved.

The CHAIRMAN. Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

I am concerned about the precursors and the countries that manufacture them, and what is being done to stop the precursors that

are manufactured to be used for methamphetamine.

Could you name the major suppliers, either countries or companies, of precursors that are used for meth, that is, for illegal purposes?

Mr. RANNAZZISI. Well, if you are looking at ephedrine and

pseudoephedrine, in India there are probably, I would say, seven

to nine manufacturing operations that produce pseudoephedrine or

ephedrine. I do not have their names handy, but obviously there

is Lahore, India, Malladi, a lot of the large ones.

Senator BAUCUS. So India is a major source?

Mr. RANNAZZISI. Yes. India is a large source.

The CHAIRMAN. And those are companies——

23

* The Federal Commission for the Protection Against Sanitary Risk.

Mr. RANNAZZISI. That manufacture pseudoephedrine and ephedrine.

The CHAIRMAN. But they are companies that have sprung up in

India? They are not companies from America that went over there,

or have any relationship to companies that are multinational, or

anything like that?

Mr. RANNAZZISI. No. Well, I am sure at least one or two of those

companies might have a U.S. component in the United States, but

for the most part, yes, they are Indian corporations.

The CHAIRMAN. All right. Go ahead.

Mr. RANNAZZISI. They are all legitimate.

Senator BAUCUS. Sure.

Mr. RANNAZZISI. I mean, these are legitimate companies.

Senator BAUCUS. They are legitimate companies, but I suspect

they have an idea, when they make a big shipment to Mexico, what

it is going to be used for.

Mr. RANNAZZISI. Well, yes and no. If I could continue on the

other countries, I will get back to it.

Senator BAUCUS. Sure.

Mr. RANNAZZISI. Germany. Their largest producer is BASF Germany. Then China. It is a little more problematic in China because

we are not sure how many companies produce in China. But that

is the third largest. Out of the three largest, they are a very large

producer of pseudoephedrine and ephedrine.

Senator BAUCUS. Are there any producers in Mexico?

Mr. RANNAZZISI. No.

Senator BAUCUS. So it is all imported into Mexico?

Mr. RANNAZZISI. Yes, sir. And just to say that, well, why can

India not just tell us where the pseudoephedrine is going in Mexico, it is not that easy.

Senator BAUCUS. Yes.

Mr. RANNAZZISI. The traffickers adapt to chemical control regulations. They are not going to ship right into Mexico, especially since

COFEPRIS,* the Mexican regulatory authority, has cut import limits to 70 metric tons from 150 metric tons previous to year 2005.

It does not go into Mexico, it goes into Africa, Central and South

America, Europe. It goes through a system of brokers. It is not

being shipped. Somewhere along the transportation line, the transit line, it is diverted out of that line and into the hands of smugglers who smuggle it in.

Senator BAUCUS. So what is the answer here? I mean, better

data? More data? More reporting of shipments of goods, especially

precursors?

Mr. RANNAZZISI. That is the question we ask all the time. I think

the answer is, better cooperation with our international counterparts.

Now, the International Narcotics Control Board, Precursor Unit,

basically controls all of the chemicals trafficked throughout the

world. They do that under the authority of the 1988 Vienna Convention. The INCB, and recently the Commission on Narcotic

Drugs, the CND, passed a resolution that now is basically encourVerDate 11-MAY-2000 14:56 Sep 06, 2007 Jkt 095484 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 37178.000 SFIN1 PsN: SFIN1
24

aging countries to report all shipments of precursor chemicals to

the INCB.

Now, before, tablet shipments, pharmaceutical preparations,

were not reportable. They could ship out millions and millions of

tablets and they did not have to be reported to the INCB.

Senator BAUCUS. Now, did these companies in India have to report?

Mr. RANNAZZISI. They did not, but India has. India started reporting, I believe, late in 2005, early in 2006, and they started reporting all tablets.

Senator BAUCUS. Then why does that not stop Indian manufacturing of precursors going to Mexican meth labs?

Mr. RANNAZZISI. Because India will export tablets to a broker,

say, in Europe or in Africa. Once it gets to that broker, we have

lost it out of the chain.

Senator BAUCUS. What about the organization you mentioned.

Should there not be reporting there, too, that is, to a broker?

Mr. RANNAZZISI. Yes. Well, yes. If it is a legitimate organization

operating under the rules of the country that it is operating in, absolutely. But what we find is, down the chain, some companies are

just illegitimate, they are shell companies that trick the regulatory

boards in that country into agreeing to allow the shipment or the

import to occur.

Senator BAUCUS. So, if you could wave a magic wand, you are

the man to solve this thing, what would you do? You have carte

blanche. Whatever you say, you are the man.

Mr. RANNAZZISI. Well, what I would require is all countries to

abide by the 1988 convention and the CND resolution that everybody signed onto in March of 2006.

Senator BAUCUS. And what does it take to get those countries to

comply?

Mr. RANNAZZISI. Well, since it is a voluntary compliance they

could sign on, but the fact is, when it comes time to do the reporting, it becomes diplomatic. A lot of diplomatic efforts need to be exercised in order to do this.

Senator BAUCUS. Yes. I see my time is almost up. Very briefly,

Mr. Chairman.

Mr. Martin, so what tools do you have for solving this part of the

tax gap?

Mr. MARTIN. Well, you had mentioned earlier, or asked, and I

know the first panel talked about this, but in terms of how we get

involved with State and local law enforcement, that vehicle, for the

most part, is through the auspices of the grand jury, so we are

talking about U.S. Attorneys’ offices.

Being able to get formally into the game with State and local law

enforcement, for us, the vehicle has been the U.S. Attorney’s office.

We take our cue from them, and also our partnerships with DEA,

for the most part, when you are talking about the narcotics program.

Once we are able to get the intelligence, because I know we are

talking about a resources issue here, a concern, particularly out in

Bozeman, is we are going to take whatever information is given us,

whether that be from State and local law enforcement, directly

from the U.S. Attorney’s Office, or from other Federal law enforceVerDate 11-MAY-2000 14:56 Sep 06, 2007 Jkt 095484 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 37178.000 SFIN1 PsN: SFIN1
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ment agencies—for instance, DEA—and we are going to evaluate

that against the OCDETF standards. Again, similar for us with

limited resources, we are looking to focus in on the most significant

drug trafficking organizations.

If the intelligence that we evaluate takes us in that direction,

then we will be prepared to commit resources, and we have, to significant narcotics investigations, and that includes methamphetamine investigations.

Senator BAUCUS. The same question. What needs to be done?

Again, Mr. Martin, you are the man again. How are you going to

find the money? What do you need to find the money?

Mr. MARTIN. At whatever level Congress wants us to be involved

in addressing this problem——

Senator BAUCUS. No. We want you to solve it. You are supposed

to tell us what you would need, what you would do, or tell the executive, whatever. Based on what you know, what is the best and

most efficient way to have an efficient money trail to crack down

and catch these guys?

Mr. MARTIN. You have to have resources involved.

Senator BAUCUS. You want more resources then.

Mr. MARTIN. You have to have resources in order to be able to

do it. We have the expertise. That is there. So whatever resources——

Senator BAUCUS. Resources where?

Mr. MARTIN. We have 30 field offices across the country. And just

to put it in perspective for you, as far as our resource commitment

to the narcotics program, if you go back to 1996, at that time we

committed about 22 percent of our Special Agent resources at that

time to the narcotics program.

Fast forward to fiscal year 2006, right now. We are right at

about 9 percent commitment of our resources to the narcotics program. That has been driven, between 1996 and now, by whatever

we have been budgeted, and we work from that vantage point.

Senator BAUCUS. Thank you very much. I went way over my

time. Thank you very much.

The CHAIRMAN. I want to follow on with something Senator Baucus brought up. I suppose it is because of some of the things you

said, Mr. Rannazzisi. That is, I would like to get kind of a corporation’s attitude towards our efforts.

Now, you have made it very clear that it is difficult once it leaves

corporate manufacturing, that it could go through all sorts of shenanigans to avoid finding out that it is going to Mexico. But I

would be interested in knowing—for instance, let us use BASF as

one, because we all know that company.

Either your agency or an agency in Europe goes to them on this

problem and says, we want some help on where these precursors

go because some of them are going to be used for methamphetamine. Do they have a healthy attitude towards helping us?

Mr. RANNAZZISI. Absolutely. BASF, we work very closely with.

The CHAIRMAN. All right.

Mr. RANNAZZISI. While we do see product that potentially is from

BASF, it is not a lot. Again, a lot of times when we see bulk precursor, it is difficult to determine the origin of that bulk precursor.

But I can tell you that the European authorities and BASF U.S.

26

have been very cooperative in dealing with our issues and our investigations without any problem.

The problem is, again, we could only act on the information that

is available to us in the international community. The INCB has

a system set up to monitor all chemicals that are trafficked internationally.

The INCB stops shipments probably on a weekly basis. The

INCB is stopping shipments. They have that authority to tell a

competent authority, say in India, we do not think this shipment

can go through. We cannot verify on the other end if the company

is legitimate or not. They do that. But like everyone else, the INCB

has resources that are stretched, and they cannot catch everything.

The CHAIRMAN. On another issue—and again, to you—would it

be fair for me to assume, even though we have passed these good

State laws, and now the Federal law that is going into effect—

which you could not say for the Federal law yet, but at least for

the State laws—that that probably has not affected the workload

of the DEA much at all? It probably has affected the workload of

local and State law enforcement people, but probably has not

changed your workload at all.

Mr. RANNAZZISI. Well, not necessarily. We do have active lab

teams. But in States like Oklahoma, Iowa, Oregon, Missouri, and

Kansas, States that have passed that Schedule 5 or Schedule 5-

type legislation, Illinois, those States that do have lab teams, we

are looking at the fact that those lab teams are not as active because the lab numbers have dropped considerably.

So what we are doing now is, instead of those lab teams going

back to work in general drug investigations, we have now told

them to focus their efforts on meth organizations. If you are not

looking for labs because the labs just are not there any more, you

had better be looking at meth organizations, large organizational

targeting.

The CHAIRMAN. All right. So those funds that would have gone

for lab clean-up now can be used for further law enforcement.

Mr. RANNAZZISI. Well, yes. The funds that are available right

now—I do not know if you are familiar with the container program,

but we are using some of those funds to fund these container programs, these hazardous waste container programs, that started in

Kentucky, and now we have expanded it to four or five other

States, and we will continue to expand.

That helps States so the officers are not on the lab sites for long

periods of time. They can do the clean-up at the lab site, move it

to a container program, and then a hazardous waste contractor will

come and clean up the container rather than at the lab site.

The CHAIRMAN. Also, what is the level of cooperation between

Customs and Border Protection and the Drug Enforcement Administration, and do you share intelligence with Customs and Border

Protection? What is the basis for sharing information protocols, for

instance?

Mr. RANNAZZISI. Well, I can tell you that our relationship with

CBP is probably the best it has ever been. We have a couple of

joint projects working right now. We share information on a regular basis. We are in the process of creating—and Greg could tell

27

you better because he is more hands-on with this—a port program

that really is going to be a dynamic program.

Do you want to add?

Mr. PASSIC. Yes. As I mentioned before, this thing requires collaboration. Cooperation does not work. We have to have all the intelligence that DEA has, and any other agencies, on license plates

from vehicles that are potential couriers, money movers, individuals. We have to be able to get that to the front line somehow if

our interdiction on outbound cash and meth coming back is going

to be effective.

They have to trust us, if they are going to give us that type of

detailed information from active methamphetamine cases involving

undercover agents, that we do not just hit every car that comes

back across that border and look at interdiction as being the end

game. We have to do that in cooperation with them, which means

we have to co-locate our resources with DEA offices and task forces

along that border, and we also have to have DEA analysts and diversion investigators located with our port people. All of that is

going on right now. We are very pleased with the cooperation and

the candid sharing that we have received from DEA.

The CHAIRMAN. Well, now is that cooperation based on Memoranda of Understanding? Do they exist? Do they explain the protocols? If so, do you seem to have avoided confusion and ensured

safety?

Mr. PASSIC. No, it does not involve a protocol and an MOU.

The CHAIRMAN. It is very informal, is what you are saying.

Mr. PASSIC. It involves the good will of agents on both sides of

that aisle that want to do something about this. The exchange of

information goes way beyond what either one of us is required by

MOU to do, and we prefer to keep it that way. We see ourselves

as working as an integrated team, not as one agency sharing something with another.

The CHAIRMAN. Well, then let me ask my staff something.

[Pause.]

The CHAIRMAN. This would be to all of you. Would you describe

the level of interaction between your agency and the Office of National Drug Control Policy, if any?

Mr. RANNAZZISI. I personally have almost daily contact with

ONDCP. As a policy arm, we are continually discussing different

issues. They sit on the Methamphetamine Task Force and, with the

Department of Justice and HHS, form the Synthetic Drug Interagency Working Group that establishes policy and actually put out

the Synthetic Drug Strategy.

The CHAIRMAN. So that would be an example of guidance that

you see from them?

Mr. RANNAZZISI. Policy guidance. Yes. Again, policy is developed

with agencies such as CBP and DEA getting together with DOJ

and looking at issues and developing policy. It is not just one agency.

The CHAIRMAN. Do they provide any assistance in coordinating

with other agencies on narcotics-related issues?

Mr. RANNAZZISI. Yes. Absolutely. Yes. That is absolutely correct.

The CHAIRMAN. Do any of the other two witnesses have anything

to add to that?

28

Mr. MARTIN. At the IRS, we do have one Grade 15 analyst who

is assigned to the staff at ONDCP here in Washington, DC.

Mr. PASSIC. We participate in the same working groups that

DEA does, basically.

The CHAIRMAN. All right.

In regard to bulk cash smuggling, it is my understanding it is

on the rise on the southwest border. How is your agency addressing

the rise of this form of money laundering, and how are you working

together with other agencies to approach this evolving problem?

Mr. PATTON. If I may, Mr. Chairman.

The CHAIRMAN. You sure can.

Mr. PATTON. Yes. From DEA’s standpoint, we have initiated a

number of strategic initiatives, such as our bulk currency initiative,

whereby we ask our agents to work directly with the 700,000 State

and local counterparts and other Federal counterparts throughout

the Nation when a bulk currency seizure is made along the Nation’s highways or on the Nation’s jetways, and so on, where we try

to share the intelligence from that seizure.

For example, cell phone information or scraps of paper with information in the perpetrator’s pockets, or other information related

to that seizure, we try to tie that back to existing investigations,

either to where the money may be going or to where the money

may be coming from.

We have other initiatives, such as our concealed trap initiative,

our National trucking initiative, and our money trail initiative,

where we try to tie financial investigations into different investigations where we are attacking the command-and-control structure of

the drug trafficking organizations utilizing their communications

systems. So, we are proceeding and realizing that bulk currency

smuggling is the main threat pertaining to methamphetamine distribution.

The CHAIRMAN. Mr. Martin, obviously your agency, through

criminal investigators, has a great deal of expertise, so I was kind

of wondering how it is being called upon.

What percentage of your agents are working on these types of

cases? Are there requests for assistance that you have turned down

due to the lack of manpower? Then I will have a follow-up.

Mr. MARTIN. Unfortunately, we have had to turn down investigations across the country. The criteria that we have tried to use,

again, is to evaluate the information and assess whether or not it

rises to the level of what we call an OCDETF-quality type investigation. If it does, then we commit resources to that investigation.

For fiscal year 2006, we have a goal of between 9 and 11 percent

of our direct investigation time that we will commit to the narcotics

program, including OCDETF investigations. But once we are in, we

are focused in a number of different respects with different initiatives, including the bulk currency initiative.

We do have initiatives in six field offices where we are taking on

a similar approach. It is not just enough to seize with regard to

bulk currency stops. As a matter of fact, it is particularly important, with State and local law enforcement, particularly State

troopers, we rely so much on them with these initiatives because

they are in the position to actually make the stops, and not just

with regard to cash, but also the intelligence. We cannot say

29

enough how important it is to take the intelligence and run with

that.

So we are particularly interested in getting that kind of information through the six initiatives we started about a year ago, and

we are going to continue that focus with the bulk currency initiative as well.

We have other initiatives, such as Suspicious Activity Report

(SAR) review teams. We have about 80 SAR review teams around

the country. Again, they are focused on analyzing information

under the Bank Secrecy Act.

That is particularly important in terms of enabling us to be able

to follow the money, if you will, through our analytical work,

through working with other law enforcement agencies, again, including State and local.

The CHAIRMAN. Are you in any way, through your agency, able

to help train law enforcement agencies in dealing with these issues

as well?

Mr. MARTIN. Absolutely. That is something we have been very

committed to. We have 30 field offices around the country. The relationship part of it is something that we focus on.

However we are able to provide resources, we put on financial investigation training for State and local law enforcement. We have

done that in a number of our field offices around the country, and

we will continue to do that. We consider that to be very important.

That includes our SAR review teams. They have an outreach

component. That outreach component means that you pull in the

financial and regulatory community, as well as State and local law

enforcement, to work together on issues that are common in that

particular geographical area for SAR review teams.

The CHAIRMAN. We have spent all of our time—I think most of

the time—referring to Mexico as being the source of entry into this

country. Do we have to be concerned about any other countries getting product from that country into this country, or maybe the

meth being made in another country transshipped into the United

States through Mexico?

In other words, are there other countries out there other than

Mexico where this is being manufactured that are a real problem?

If they are not a real problem, then do not worry about it.

Mr. RANNAZZISI. Yes. In this region, Mexico would be a primarysource country for the United States. There are manufacturing operations in Canada, but it is very small for methamphetamine.

The Far East. Many countries in the Far East produce huge

amounts of methamphetamine, but it is for consumption in the Far

East. We rarely see methamphetamine, the Yabba tablets or methamphetamine, from Far East countries in the U.S. or domestically.

The CHAIRMAN. In my State, at my town meetings, the perception of constituents that bring up the issue of illegal immigrants

would also most likely associate it as a source of methamphetamine

getting into the United States and into our State. Is that a correct

perception that my constituents might have, or not correct?

Mr. RANNAZZISI. I think that whenever you have a transient population, migrant workers, you will have traffickers that basically

blend into the community and distribute. The problem is, trafVerDate 11-MAY-2000 14:56 Sep 06, 2007 Jkt 095484 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 37178.000 SFIN1 PsN: SFIN1
30

fickers hide very well and adapt to whatever community they are

in.

The CHAIRMAN. So, illegal or legal, it does not make much difference? In other words, it is not a case of the sophistication of the

cartel that they would be more apt to use legal people coming into

the country as opposed to illegal people coming into the country as

a source of trafficking.

Mr. RANNAZZISI. As couriers.

The CHAIRMAN. Yes. Couriers.

Mr. RANNAZZISI. Or transportation routes. Both legal and illegal.

The CHAIRMAN. Just so long as they get it in the country, it does

not matter.

Mr. RANNAZZISI. Yes. And since they are using established trafficking routes for cocaine and heroin, they are using the same

couriers.

Mr. PASSIC. Mr. Chairman, if I might offer this from our perspective: illegal drug traffickers in this country are definitely a problem. Both the Mexican and Colombian organizations deploy workers in the form of traditional cells, very similar to intelligence cells.

They are hired for a specific purpose. They are deployed for a

specific purpose. They provide that service to the trafficking organization and will return, often to Mexico or Colombia, once law enforcement heats them up or their tour of duty has ended.

We have seen recent shifts in drug smuggling patterns based on

the priority put on the southwest border, where the Mexican organizations are looking back again at an end run around that border.

The Colombian organizations that were very comfortable in moving drug loads from Mexico, are back in the Caribbean, with significant shipments. So we want to look ahead, also. We are looking

at Colombia as a potential meth problem.

The CHAIRMAN. On another issue, to what extent are you getting

cooperation from foreign banks and nations in battling money laundering?

Mr. PATTON. Through our offices, through our Financial Investigative Team (FIT) teams, we do receive cooperation from Mexico,

through our office in Mexico City and the other related offices

throughout the country. We try to work closely and develop a rapport with the Mexican banking officials and the Mexican banking

system.

The CHAIRMAN. Well, do you feel that it is full cooperation? Is it

something you have to work at all the time or are they interested

in solving the problem as much as you are?

Mr. PATTON. Well, I mean, it is a case by case basis. But we do

believe that there are certain people there that really do believe

that they can solve the problem and will help us do so.

The CHAIRMAN. Are there any banks in Mexico that you know

are in cahoots with drug trafficking and the cartels?

Mr. PATTON. No, sir, I do not.

The CHAIRMAN. I think I have asked all my questions. You have

been very cooperative, and I appreciate it very much. I have a closing statement that I want to put in the record.

31

[The prepared statement of Senator Grassley appears in the appendix.]

The CHAIRMAN. The hearing is adjourned. Thank you all very

much for your cooperation.

[Whereupon, at 11:41 a.m., the hearing was concluded.]

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