New York Times
WASHINGTON, Jan. 25 - The federal government has seized control of 43 oil wells in northwestern Pennsylvania that it says were financed with drug money laundered by a Florida marijuana smuggler in the 1970's, officials said Tuesday.
The federal government has never before taken control of oil wells as part of a money laundering investigation, said officials with the Department of Homeland Security, which ran the investigation.
Drug cartels and financiers of terrorism have been known to hide their assets in a wide variety of ways, including commercial real estate, insurance policies, gold and diamonds, but the officials said this case was the first in which they had found evidence of oil wells being used to launder money. The federal government now becomes the temporary owner of the wells, which are in the Allegheny National Forest in a region that in the 1860's became the country's first major oil producer.
The investigation stems from the 1981 drug smuggling conviction of Paul E. Hindelang, who ran one of the country's biggest marijuana smuggling operations from Florida in the 1970's. After serving time in prison, Mr. Hindelang went on to a successful business career in California and built Pacific Coin into one of the country's biggest pay-phone operators. Many of his business associates were unaware of his criminal past until it resurfaced in 1998, when he agreed to forfeit $50 million in drug assets that the authorities said he had stashed away in overseas accounts years earlier.
But federal investigators believed that many millions of dollars remained hidden even after the $50 million was seized, and their inquiries have led them to locales around the world in search of the money.
"Through a lot of years of work, a lot of evidence, and a lot of agents' time, we've been able to trace the money from the Channel Islands, to Monaco, to Switzerland and now to these oil fields in Pennsylvania," said Cynthia Keuthan, an investigator with the Department of Homeland Security's immigration and customs enforcement bureau in Miami.
Ms. Keuthan said the mineral rights to the 43 oil wells on 1,100 acres in the Allegheny National Forest were bought in 1988 for about $800,000 that was provided by a Monaco business tied to Mr. Hindelang. In 1980, investigators said in court documents, Mr. Hindelang had turned over control of his drug proceeds to a Latin American intermediary, Tomas Batalla Esquivel, and that money in turn was used to finance some $13 million in business operations in Monaco. Investigators said they believed that Shaboom Oil Company, the American firm that owned the wells, was established in 1988 with the express purpose of laundering the drug money from Monaco.
The federal government secured a court order in Miami last February to seize the property, which is in the Cherry Run area of the forest. But it did not take control of the 43 oil wells, and the mineral rights for the entire 1,100 acres in the national forest, until Friday, when it removed Shaboom Oil as owner. The company had been leasing the wells to a private operator for about $3,000 to $5,000 a month, federal officials said.
The oil wells are worth about $1 million, federal officials estimated. The Department of Homeland Security will own and continue leasing the wells for the time being, but it plans to do a full assessment of the property's value and then auction it off, officials said.
As part of its latest actions in the Hindelang case, the department also seized an additional $5.5 million in assets from bank accounts and business interests in Monaco and elsewhere, bringing the total assets recovered in the investigation to $70 million.
No criminal charges have been brought in the money laundering investigation, and officials said that George Basch, a Phoenix businessman who was chief executive officer of Shaboom Oil, was cooperating in the investigation.
Mr. Basch declined to comment on the specifics of the case.
"How did this information even get out?" Mr. Basch said when asked about the seizure of the oil wells and accusations that the property was bought with laundered drug money. "I have absolutely no information about any of that. I was removed as the officer of Shaboom, and I really have no comment beyond that."
A lawyer for Mr. Hindelang in Los Angeles also said he was unaware that the government had seized the Pennsylvania oil wells and declined further comment.