Imágenes de páginas

in which they are located. But the District of Columbia, in its role as the Nation's Capital, derives no such statewide benefits.

The District of Columbia, as is the case with many major cities, is a communications center, a financial center, a cultural center, and it provides a host of other diverse advantages for the region and for the Nation. While the District provides incoming nonresident workers and visitors with the amenities of a major city, it is denied the opportunity to shift much of the associated costs to many of those who may benefit from its services.

It is within this foregoing analytical structure that the Federal Government is called upon to act as the State surrogate for the Nation's Capital. Thus, the Federal payment is justified under the current status of the District of Columbia as the only city that is not part of a State.

Should the entity which is now the District of Columbia achieve statehood under the proposed legislation to establish the State of New Columbia, the economic and financial considerations of the State surrogate would not necessarily be removed. The political transformation to statehood would not inherently expand or diversify the economic base for the State of New Columbia, especially since the geographical boundaries are so constrained. Consequently, the economic underpinnings of the State surrogate rationale would be applicable with regard to the State of New Columbia and the Federal payment would continue to be justified for economic and financial reasons.

The second rationale for the annual Federal payment to the District of Columbia is based upon the concept of the Federal interest. The idea that the Federal payment to the District of Columbia is warranted due to the Federal interest refers to the expectation of the efficient and effective provision of a broad range of municipal and governmental services in the Nation's Capital.

The Federal interest, according to a study by the League of Women Voters, embraces more than simple protection or even ade quate functioning. It also describes the desire of the Congress, the Federal Government, and the people of the Nation as a whole, for a capital of which they can be proud. The concept sets a high standard for the appearance and good name of the city.

As stated, the Federal interest includes the promotion of and support for the District of Columbia as a positive model for all American cities.

Additionally, the Federal interest includes a recognition of the unique and significant demands upon the District of Columbia due to the numerous and complex transactions associated with the functioning of the Federal Government. At a minimum, there is a Federal interest in the physical infrastructure of the city; there is a Federal interest in a high level of health and sanitation services; and there is a Federal interest in the adequate provision of police, fire, and other protective services.

Moreover, the Federal interest in a high level of municipal services in and around the Nation's Capital extends beyond the support necessary for the day-to-day operations of the Federal Government and it extends to include the Federal interest in support of an atmosphere that is conducive to the conduct of a wider range of related enterprises.

These enterprises require the District to respond to a variety of differing needs and activities of the Federal Government, both domestic and international in scope. It is in the Federal interest to provide financial support for the Nation's Capital in all of these endeavors.

Under the proposed State of New Columbia the essence of the Federal interest rationale remains the same. The State of New Co lumbia would still be the lone city/State, uniquely and intimately associated with the Federal Government. It is expected that many Federal Government related activities will continue to be conducted in what is now the District of Columbia, due to its continued proximity to the enclave of Federal Government buildings. Under this scenario, an annual Federal payment to the State of New Columbia would be justified according to the Federal interest rationale.

Now, the third rationale for continued annual Federal payments is the cost of the Federal presence. The annual Federal payment has been historically justified, even prior to home rule, on the basis of the cost to the District of Columbia of the Federal presence. These costs can be classified in two ways: One, the direct costs and incremental expenses borne by the city as a result of activities related to the functioning of the Federal Government, and two, the revenues foregone due to the congressional prohibition of certain levies and taxes.

Moreover, the unique economic demands upon the District of Columbia as a separate governmental entity were more formally recognized when continuation of an annual Federal payment was authorized by the Home Rule Act. Thus, the continuation of the annual Federal payment under home rule serves to help reduce the amount of tax revenues otherwise lost due to Federal exemptions and to help defray the cost of services provided to the Federal Government by the District government.

The annual Federal payment serves to provide at least partial compensation for the myriad of services provided to the Federal Government by the District government. For instance, the general citizenry requires access to and accommodation in the Nation's Capital for recreational, educational, and professional purposes. As early as 1830, the House District Committee cited certain infrastructure expenditures for the District as necessary, not merely for the convenience of the citizens of the District, but for the citizens of the States, who may have business to transact with Congress and those officers.

The District government has repeatedly been, formally or informally, required by the Federal Government to provide specified municipal services. According to the report of the Commission on the Organization of the Government of the District of Columbia, an example is the decision by the President and the Congress to substantially increase the size of the District police force in an effort to curb crime, a decision which in this case was backed by an increase in the Federal payment.

The District has been required to take into consideration in its financial planning the various directives which promote the convenience and needs of the Federal Government. These are costly matters for which financial support by the Federal Government is justifiable according to the cost of the Federal presence rationale for the continued annual Federal payment.

This means that these costs will still be borne for the State of New Columbia and should still be compensated for under statehood.

With respect to taxation authority, the District government is significantly and adversely impacted by two kinds of federally mandated constraints upon the District's tax assessment prerogatives. These are compounded due to the lack of predictability in the Federal payment at the present time.

First, there are certain Federal and related properties and income streams that, by Federal law, are exempt from taxation by all State and local governments, including that of the District of Columbia. However,

these exemptions fall disproportionately upon the District in its role as the Nation's Capital. Second, and perhaps more importantly from a financial perspective, the government of the District of Columbia is uniquely subject to specific restrictions that circumscribe its fiscal authority and responsibility.

With respect to the first consideration, there continues to be a proliferation of charitable, educational and other organizations which may contribute to the welfare of the Nation. However, many of these organizations are exempt by Federal law from paying either property taxes or income taxes to help compensate for the various services and protections provided by the District government.

Similarly, this Nation's Capital is often viewed as the political capital of the world, and many of the international organizations and diplomatic personnel conducting business in the United States are headquartered in the District of Columbia. Clearly, the District's cost structure is impacted by this substantive international community.

Moreover, this international community presents various imperatives for which, due to Federal laws, international agreements or diplomatic customers, the District usually cannot claim compensation. Because the missions of these international organizations are related to the concerns of the Federal Government, the District government is generally prohibited from levying taxes upon international and foreign properties or upon the income associated therewith.

The magnitude of the potential fiscal problem for the District caused by tax-exempt properties related to the presence of the Federal Government is significant. More than 56 percent of the land area of the District of Columbia is classified as tax exempt; yet, only 5 percent of the land area is classified as tax exempt for purposes related to the District government.

Excluding international and other tax-exempt properties, the Federal Government alone places 42 percent of the District's land out of the reach of taxation. The Federal Government currently holds as tax exempt over one-third of the assessed value of real estate and improvements in the District of Columbia. This figure, one-third of the assessed value, would likely be higher if the potential development of Federal parklands was included.

Although some of this tax-exempt property would not be a part of the State of New Columbia, it is anticipated that numerous Fedwould you agree that probably significantly greater than half the money laundering at one time or another is going offshore?

Ms. TISCHLER. I really can say that, because the big cartels—I mean, the different narcotics products probably generate different forms of how they handle their cash. At least that's what we saw. Cocaine definitely, all that cash was going offshore, not only as cash but wire transfers, investments. Because most of the people who were at the top of the cartels live someplace else than the United States, they don't care about their money being here. And I am not sure they do that much investing here.

Mr. McCOLLUM. And that's why it is so important to have some of the additional powers that the administration bill addresses that our bills didn't highlight.

I thank you very much for your testimony. I appreciate it very much.

I yield back.

Mr. HUGHES. Some of the testimony indicated that in one instance in Ohio individuals involved in money laundering actually traveled to Canada, purchased coats, brought them back to Ohio and sold them at below cost or at cost in a competitive fashion. Do you see much of that activity?

Ms. TISCHLER. We used to see in south Florida that individuals who were involved in narcotics and money laundering activities were also involved in commodity exchanges as well. We saw where, for instance, checks that, say, were the result of a money laundering activity were used to purchase Remington typewriters in a large volume, which only meant one thing: that it was for export, and it was going back to be sold, for instance, in San Andreas Island in Colombia. So, the story about the coats in Canada didn't surprise me at all. I think it's a favorite trick.

Custom says, you smuggle one thing, you smuggle everything. But I think it's also true in terms of commodity trading as well as cash. The people are involved in other businesses sometimes besides money laundering, and it helps them launder cash, just like a retail business.

Mr. HUGHES. I don't think anybody is surprised that they use these techniques. Do you have any idea of the scope of that practice though?

Ms. TISCHLER. No; most of our cases don't reflect a commodity exchange anymore.

Mr. HUGHES. How is a fraudulent commercial invoice used to launder money?

Ms. TISCHLER. That's a very sneaky method. Basically, somebody will purchase a letter of credit in the United States for an alleged importation from Colombia, for instance, coffee. And then in order to retrieve the letter of credit, all they do is present false invoices at the bank; and they cash in the letter of credit. Well, the letter of credit was bought with, sometimes it's a second generation thing. Cash has gone in a bank someplace else. The money has been wire transferred in. The letter of credit is purchased. And then it is redeemed by false invoices from South America.

We saw that some of the time in south Florida. We haven't seen it lately, other places.

[merged small][ocr errors]


All of that, I would suspect—and I have to go with, I don't know which one of the panel members, maybe Mr. Walker said that things are getting more complicated. They certainly are. I mean, the bulk transfers that we were looking at weren't happening. The only place we are seeing large amounts of cash is outbound now. We are just not seeing the obscene lots of cash walk the streets that we used to, I think, in 1980 and 1981.

Mr. HUGHES. Give us a typical example of how the cash is laundered, however, with a fraudulent commercial letter of credit, a commercial invoice. They would have to take the cash, I presume, and purchase the letter of credit. Do they turn the cash in?

Ms. TISCHLER. Right. But it requires, as I said, generally a twostage operation, where money goes into one financial institution and then is wired into another, where a letter of credit is purchased. We have never seen where somebody just has walked in the door with a lot of cash and purchased a letter of credit. It is not unknown, but we haven't seen it. We have heard that they have done it.

Let me explain. One of the reasons that we saw it happening in Colombia was because they had their own currency restrictions. The only way they could get cash in or out in dollars was to show in fact that it was a commercial undertaking. So, for them it wasn't so much getting around our laws as it was getting around their laws. And that's what engendered the letter of credit and the false invoices, because they could bring the cash back in. They take a letter of credit, usually, and they stop off in Panama. Then they bring cash into the country.

Mr. HUGHES. Let me move on to Operation Greenback. You apparently were in on Greenback from the very start?

Ms. TISCHLER. Yes, sir.
Mr. HUGHES. When did DEA come into Operation Greenback?

Ms. TISCHLER. They came in briefly in about late 1981. Then they left again. Then they returned, I think, in 1983.

Mr. HUGHES. Who was in beside Customs?

Ms. TISCHLER. IRS. It was IRS and Customs almost the whole way.

Mr. HUGHES. OK. Thank you very much. I think you have answered all the questions that I have. We thank you for your testimony. It has been very helpful.

With that, the subcommittee stands adjourned.

[Whereupon, at 12:50 p.m., the subcommittee was adjourned, subject to the call of the Chair.]

[Additional material follows:

« AnteriorContinuar »