Pablo Escobar in a Celtics hat
PART 17: One way to make an enormous fortune
In the last installment we talked about a big dumb ball of illicit billions floating around which wants things. Here’s that in action.
76ers billionaire Josh Harris, his longtime boss Leon Black, Hawks billionaire Tony Ressler, and all of the founders of Apollo Global worked at Drexel Burnham Lambert in the 1980s. They love to brag about their incredible success.
In a 2020 visit to Abu Dhabi, at a conference organized by Drexel’s founder Michael Milken, Leon Black cited a particular accomplishment of his time at Drexel: “we ended up basically owning the cable industry—probably ninety percent.” (Later, Al Gore referred to this as a “cable Cosa Nostra.”)
It was lucrative. At the core of Drexel’s cable play was the biggest cable operator in the US—TCI. It was once a humdrum local operator founded by Bob Magness and run by CEO John Malone.
But then the Drexel money started pouring in. It went so well that Malone reportedly owns more U.S. real estate than anyone, an area bigger than Rhode Island. His firm Liberty Media owns the Atlanta Braves, Formula One, and Sirius/XM.
The TCI empire grew with a firehose of investment dollars that came from … where exactly?
Drexel Burnham Lambert was something of a cult of personality around Michael Milken, who would later serve time. In Institutional Investor magazine, William Cohan writes that one of Milken’s faults was “his willingness to do business with nearly anyone, even when he had been warned against doing so.” Cohan continues:
“I think that hurt him,” says a former colleague who knows Milken well. “He was definitely operating in an over-the-counter securities market that had very few black-and-white rules. There are a lot more of them today than there were then. As a result, he put himself in a position — as he was trying to have massive market share in a variety of businesses — where he was operating in the gray. A lot of people say he tipped over the line from the gray.”
Despite a total lack of experience in commodities, in 1984, Magness—the founder of a cable company—accepted an invitation to join the board of a U.S.-based commodities trading operation called Capcom. Magness had no experience in the commodities market. That’s how the head of TCI became a director and stockholder of Capcom, one of BCCI’s U.S.-based projects.
A firehose of money passed through Capcom. The 1992 congressional report quotes Ziauddin Akbar, the head of Capcom, boasting to a federal agent "we have contracted 165,000 contracts totaling $53 billion with Drexel Burnham," and later, "we have done over $90 billion total in 1988."
Who knows if those numbers are believable. But the business ties between Capcom, TCI, and Drexel are certain.
And Capcom was in a federal indictment mentioning explosive cocaine profits of the 1980s. From a 1992 congressional report:
The indictment charged that Capcom had participated in a conspiracy to launder money and to violate federal narcotics laws. The indictment specifically charged that Capcom had used its bank and customer accounts to launder drug money for the Medellin cartel and other Latin American sources.
Illegal drugs are, in many estimates, the most lucrative industry in history. A PBS story cites estimates that in 1988 alone, Americans spent $116 billion on illegal drugs, which is about the Gross Domestic Product of Denmark. Oriana Zil and Lowell Bergman write:
Like any cash rich business, drug trafficking organizations invest in the legitimate economy of their own country and use investment advisors in financial instruments available in the international marketplace. “[For] the bad guy, from the very beginning, there is an attempt of integration [of illegitimate and legitimate money].” says DEA money-laundering expert Greg Passic. “You don't have the Swiss bank account with a $110-200 million bucks sitting in it. What you have is five, ten, 15 million dollars moving around, acquiring assets or companies. So when you do go in and try to dissect and pull the drug money out of it, it's hard because there's a lot of legitimate money in there.”
Despite rules intended to deter it, drug money enters the financial system all the time. Rajeev Syal in The Guardian, in 2009:
Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were "the only liquid investment capital" available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.
There is much skepticism about that precise number, but few doubt the real number is enormous. Author Charles Stross:
A third of a trillion dollars is a lot of money; it's enough to fund the US military invading another country halfway around the world, or a manned Mars exploration program. Obviously, there's no single Mr Big here, no Blofeld investing SPECTREs ill-gotten billions in an ambitious bid to go legit.
But one wonders whether the “organised criminals” have been investing in anything innovative. (Politicians, if they're smart.) And what the long-term consequences are going to be ...
Indulge me in a thought. Billionaire drug dealers are hands-on business people who know all about margins, prices, logistics, and creating markets. With near-infinite money, wouldn’t you guess at least some of them would want to control the companies they invested in?
Of course, regulators wouldn’t love the idea of Pablo Escobar purchasing Standard Oil. But the world of investing has many paperwork shenanigans, of course one could effectively own a business without being mentioned—so long as someone else could be the face of it, and the source of the money was fuzzed up.
There’s one problem with this: The puppet running your company would be in all the paperwork and, conceivably, could run off with the money. You’d want some really good leverage.
Robert Maxwell, Adnan Khashoggi, and Jeffrey Epstein excelled at gaining leverage over many of the most powerful people on the planet. All reportedly had sophisticated hidden cameras gathering video.
In the 1980s, billions in drug proceeds made their way through a chain of BCCI-related entities to some of the biggest banks in the world. Did they also find their way to Drexel? There’s evidence at least two BCCI-related projects—Capcom and, as discussed in an earlier post, Centrust—did business with Drexel. There may be many others. Drexel’s investors ended up controlling some of the biggest companies on earth. Often the true source of their funds was tough to sort out.
I think about this when I hear people saying, cryptically, that Drexel operated in a gray area.
Mostly, BCCI did not get in trouble. The list of investigators who didn’t stop crime there is scary—the combined forces of the Department of Justice and CIA unearthed little.
It’s a topic for another day, but the gang that couldn’t shoot straight in prosecuting BCCI was led by Robert Mueller at the Department of Justice, and attorney general Bill Barr. (In 1991, William Safire called William Barr “the Coverup General” for his role in this and other scandals, and accused Mueller of stymying the investigation.) Yes: the same two who muddied the waters of Trump’s various scandals decades later.
In a 2020 article for Foreign Policy, investigative journalist Casey Michel writes:
Even when the Department of Justice finally began probing BCCI’s financial schemes, it hardly pushed far; when the department offered a sweetheart deal to BCCI, the lead Senate investigator said it was indicative of “the power of BCCI to fix anything,” adding that Washington’s response was a “fucking outrage.”
BCCI only really came to a head thanks to the work of a crusading Senator, a U.S. Customs official in Florida, and a local prosecutor in New York. Michel continues:
The kleptocratic tools BCCI utilized are all still firmly in place. U.S. states still produce hundreds of thousands of anonymous shell companies every year. The United States still allows anonymous real estate purchases across almost all of the country. And the lawyers and PR specialists and auditors are still free to work on behalf of any clients they’d like, without any legal requirement that they check whether or not the source of their clients’ incomes stems from transnational money laundering operations. ...
For instance, after the U.S.’s Patriot Act took added anti-money laundering regulations to numerous industries highlighted in the BCCI affair, the Treasury department issued “temporary” exemptions from these new regulations for everything from real estate to private equity to escrow agents to luxury goods. Thanks to lobbying efforts of those respective industries, these “temporary” exemptions are now nearly two decades old—and have only continued to attract inflows of dirty money from every corner, every regime, and every crooked outfit that wants in.
Private equity is an interesting exemption. Apollo Global is a king of that world and, like Drexel before it, one of the best at raising money from all over the world. Former Drexel employees, especially those at Apollo, seem especially good at making the kind of money it takes to buy an NBA team.
Thank you for reading TrueHoop! Read PART 18.
PART 1: Apollo Global, deep pockets with ties to the NBA, Jeffrey Epstein, and Buzzy
PART 2: The earliest days of Sears Roebuck, the CIA, and United Fruit
PART 3: 1950s and 60s: Buzzy at Princeton, the CIA messes with mind control, Leon Black’s dad
PART 4: Beverly Hills in the 1960s, 70s, and 80s
PART 5: Buzzy the banker.
PART 6: In business with criminals
PART 7: Everyone in this story owns planes
PART 8: “The biggest crime in American history”
PART 9: “A stealth invasion of the U.S. banking industry”
PART 10: Jeffrey Epstein’s tutor
PART 11: Richard Nixon and Adnan Khashoggi
PART 12: The Dechert Report
PART 13: Nazis at the Waldorf Astoria
PART 14: Hitler’s American business friends
PART 15: Epstein teaches at private school
PART 16: The Emirates and the NBA
PART 17: Pablo Escobar in a Celtics hat
PART 18: A new kind of superrich
PART 19: The NBA goes to Abu Dhabi