Mar.30, 2010

Wachovia, a banking subsidiary of Wells Fargo & Company, agreed March 17 to pay a $160 million settlement for its role in laundering money related to the trade in illegal drugs, effectively closing a five-year investigation by the U.S. Drug Enforcement Agency. Wachovia was accused of violations that permitted the laundering of $110 million in drug money; the settlement includes that amount, plus a $50 million fine.

The terms of the settlement stipulate that no money from the Troubled Assets Relief Program shall be used to pay the settlement. TARP was used by the U.S. government to prevent the failure of the largest banks in 2008.

However, Wachovia only exists because of the $25 billion in TARP funds given to Wells Fargo to aid its purchase of Wachovia in the same year. In other words, Wachovia is using the government-mandated largesse of U.S. taxpayers to avoid significant criminal penalties for its own illegal activities.

Additionally, in exchange for settling, Wachovia executives will not face criminal prosecution. SWAT teams did not break into their corporate offices and throw bank directors to the floor in handcuffs after pushing them up against the wall.

The class nature of the capitalist state could not be more obvious in this case. The “war on drugs” has terrorized and decimated communities, particularly oppressed Black and Latino communities since its inception in the 1970s. Powerful bankers facilitating large-scale drug trafficking, however, need not worry about criminal prosecution.

Racist war on drugs

Workers facing drug charges often must rely on overworked public defenders who urge the accused to plead guilty to the crime, rather than fight for their rights. Workers cannot pay exorbitant fines and often cannot even pay bail without throwing themselves and their families into crippling amounts of debt.

Furthermore, mandatory minimum sentences often require that the possession of a small amount of an illegal substance leads to imprisonment and a felony record. In many states, this bars the convicted person from voting and places significant barriers to employment and economic opportunity.

These measures are used particularly harshly against the most oppressed people in society. Although Black drug users only constituted 13 percent of the total in 2003, they represented 35 percent of those arrested for drug possession, 55 percent of persons convicted and 74 percent of people sent to prison, at a rate 13 times greater than that of whites. Latinos are incarcerated twice as often as whites.

Capitalist banks, government and drug profiteers

While the image most people have of a drug dealer is the small dealer standing on the street corner, in reality the drug trade is big business. For these large-scale operations, money laundering gives illicit money the semblance of legality. Both banks and drug cartels benefit from these illegal operations. The Wachovia settlement is the latest case to show the symbiotic relationship between high finance and the criminal drug trade.

The “war on drugs” is not a war on drugs at all. It is a pretext to incarcerate youth from oppressed communities. It is a pretext for billions of dollars in military aid to Colombia, among other client states, which has used these resources to repress working-class and revolutionary movements.

The $160 million settlement, while bigger than some of the civil fines imposed in the past, is still just a slap on the wrist for Wachovia. Any serious effort to deal a blow to drug trafficking would involve vigorous prosecution of money laundering—yet no such effort is taking place. That the government has not moved to do so goes to show it is a government of and for the capitalist class.