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  The air-transport operation was based in Sharjah, a lesser known emirate of the United Arab Emirates. There, Bout operated a fleet of cargo aircraft able to fly weapons, ammunition, and other goods from Europe and the former Soviet bloc countries to conflict zones throughout the Middle East, South Asia, and Africa. In 2002, the Belgian government requested an Interpol “red notice” against Bout on charges of money laundering through his Belgian front company. Again, the pathway to one of the world’s most notorious criminals was through his money.

  At the Treasury Department, we knew we had the ability to impact Bout’s global operations by drawing scrutiny to his business empire and financial operations—including his illicit financial operations. Andreas Morgener, an analyst at the Office of Foreign Assets Control, mapped out what was known about Bout’s international businesses. OFAC hooked Treasury’s jurisdiction into Bout because he had been a major supplier for Charles Taylor during the Liberian and Sierra Leone civil wars. Taylor was subject to US and European sanctions, and OFAC ran a Liberia program. That was the hook.

  Morgener was methodical—detailing with evidentiary packages and a wall-map-sized chart where Bout had a web of bases and operations. In briefings with Morgener and his boss, Bob McBrien, we decided to move forward to expose Bout’s air fleet and empire. We could do this under US law because of Bout’s prior support to Charles Taylor in violation of UN sanctions. This would also give our action amplified international effect. On April 26, 2005, the US Treasury Department designated Viktor Bout and thirty companies associated with him. The designations froze Bout’s assets and increased the pressure on his global network as it continued to operate throughout the world.

  When I arrived at the White House and saw the Drug Enforcement Administration’s growing capabilities and willingness to go after international criminals, it became apparent that Bout was a prime target. In 2006, DEA officials briefed me on a series of sensitive national security–related cases they were building. They were attempting to lure and prosecute a full range of international criminals tied to the drug trade and terrorism. Congress had given the agency greater license to develop these cases in 2006 with the passage of a law that made it a federal crime to engage in drug trafficking tied to terrorism. In that meeting, I asked DEA Chief of Operations Mike Braun and the assembled DEA leadership whether they had ever considered looking at Victor Bout, because of the dangers he presented across the board to national security. They had not, and they grew quite intrigued as I told them about Bout’s history and what he represented in the world of international criminality. He was an all-purpose force multiplier for international conflict—for states, rogues, and criminals alike—who was willing to play with anyone willing to pay his price. Bout had also been untouchable, protected in Russia despite arrest warrants from Europe and the intelligence and law-enforcement agencies from around the world that were trying to hunt him down.

  Within seven months of that meeting, the DEA had its hooks into Bout and was in the process of luring him to a lucrative deal that would take him out of Russia. The DEA agents posed as representatives of the Revolutionary Armed Forces of Colombia (FARC), a Colombian terrorist insurgency, and requested the purchase of antiaircraft missiles and other weapons to attack US and Colombian forces. Bout was fooled by the undercover operatives and traveled to Thailand on March 6, 2008, to seal the multimillion-dollar deal with the rebel representatives. I had received a message at the White House noting that Bout had taken the bait and that the DEA would be waiting for him. Bout arrived at Bangkok’s Sofitel Silom Hotel, and the undercover operatives taped him agreeing to the arrangement. He expressed his desire to ally with the FARC to hit the Americans. At the right moment, Thai police and US law-enforcement officers swarmed the premises and took him into custody along with two of his bodyguards. At first, Bout seemed stunned. Then he simply said, “The game is over.”

  The US sting finally gave teeth to what the US government had long wanted, the ability to prosecute Viktor Bout in a US court of law. By agreeing to sell weapons to FARC, Bout had committed a cardinal sin in the post-9/11 world: agreeing to provide weapons to a designated foreign terrorist organization. This violation allowed the United States to petition the government of Thailand to extradite Bout back to the United States for prosecution on his charges.

  It did not happen right away, but on November 16, 2010, the Thai government finally extradited him after nearly two years of legal fighting between Bout, the Russian government, and US officials. The Russian government, Bout’s longtime patron and protector, sought to prevent the extradition, and the Russian effort included bribing Thai officials and witnesses to scuttle the extradition hearing.

  Bout was later found guilty in the Southern District of New York—where the highest-profile terrorism cases have been brought—of several federal charges, including providing material support for a designated terrorist organization, conspiring to kill Americans and American officers, and conspiring to acquire antiaircraft missiles. On April 5, 2012, he was sentenced to twenty-five years in US federal prison.

  The DEA agents had spoken to Viktor Bout once he was in custody in New York. When asked about the effects of the US Treasury designations and pressure on his business, Bout reportedly told the agents that the actions had cost him $6 billion.26 His business empire had been squeezed, and his quest for the next big deal had presented itself. Greed led Bout out of Moscow and into the DEA’s trap.

  In the post-9/11 world, we needed to train our sights on the transnational networks and lynchpins that could provide terrorist groups and organized crime with the resources and reach to threaten American security interests. We had started to find ways to do just this with the leading edge of Treasury and enforcement tools. The question remained whether we would survive to continue this work.

  Part II

  A NEW PARADIGM

  5

  BLOWFISH

  On June 6, 2002, Jimmy Gurulé and I, along with our Treasury spokesperson, Tasia Scolinos, landed in Rome. We had made significant progress in finding and choking off avenues of funding for Al Qaeda around the world. Even so, we had come to Europe to discuss new strategies we could take with our foreign government counterparts against the funding of terrorist groups. We were set to meet with Italian finance ministry and central bank officials along with prosecutors and investigators who had begun to apply their well-tested anti-Mafia tactics and techniques against Al Qaeda and its support networks running through Italy and Europe.

  Italian investigators had learned a great deal from dealing with the Mafia’s financial underworld throughout Europe, and we hoped to draw from their experience. Working in cooperation with the Italian authorities, we hoped to target the network of financial and material support for violent Islamist extremists that had long criss-crossed Italy through North African immigrant communities and cities like Milan. But news from Washington would interrupt our trip and call into question the future of our work.

  My cellphone rang just as I was standing up and collecting my things to deplane. It was the Treasury front office, wanting to speak with Jimmy Gurulé. From the curt tone, I could already tell that this was likely not going to be good news.

  There had been hints of what was coming. Since early 2002, there had been ongoing discussions in the White House about creating a Department of Homeland Security (DHS). In light of the perceived failures to prevent the 9/11 attacks, Congress was pushing for a consolidation of border agencies and intelligence functions to improve coordination. The idea was that it would be more natural for a single department to juggle everything from tracking of terrorist travel across borders and protection of ports and critical infrastructure to coordination of crisis and consequence management in response to terrorist attacks. There were approximately one hundred agencies scattered throughout different departments of government that touched on homeland security in some way, and Congress sought for them to be unified under a single umbrella.

  The Bush administration had
been resistant to this idea at first, not wanting to create a new and unnecessary bureaucracy. By early 2002, however, the White House was beginning to explore how such a department might be formed. The effort quickly met with fierce resistance across the government—with departments and agencies defending their existing structures and raising red flags—some legitimate and others purposefully imagined—about shifting entire agencies into a massive, hodgepodge department.

  From such a reorganization, the Treasury Department stood to lose its Office of Enforcement. Treasury’s enforcement role had been born in the early days of the republic as a way of ensuring the collection and payment of tax revenues—whether from tariffs at ports or the modern-day income tax. This is why the Customs Service; the Bureau of Alcohol, Tobacco, and Firearms (ATF); the Internal Revenue Service–Criminal Investigation Division (IRS-CID); and, eventually, the Federal Law Enforcement Training Center (FLETC) were Treasury enforcement bodies. The Secret Service was made part of the Treasury Department out of the need to preserve and regulate the integrity of US currency and the financial system.

  Treasury represented about 40 percent of federal law enforcement. The Treasury agencies had jurisdiction over financial crimes enforcement—from money laundering and trade-related violations to tax evasion and the counterfeiting of currency. Treasury “1811s” (the technical term in federal law enforcement for gun-toting special agents) were considered some of the best financial investigators in the world. From the legendary Eliot Ness to the Customs agents who exposed the most important international bank fraud schemes in the modern era, such as the BCCI scandal, Treasury agents were considered the best financial forensic investigators in the country.

  Even so, the enforcement element of Treasury was traditionally seen as the little brother to the 800-pound gorilla of federal law enforcement, the FBI, and the Department of Justice, whose primary mission was to enforce the law. “Enforcement,” as the office and its “guns and badges” had been known for decades, always seemed an odd fit at the Treasury Department. Treasury was better known for setting fiscal policy, issuing debt, printing money, and housing the government’s best economists and tax experts. Secretaries of the treasury throughout history were titans of the financial, economic, and commercial worlds and always struggled with the enforcement dimensions of Treasury’s mission. Most wondered what the Treasury Department was doing mixed up in the law-enforcement world. The department’s guns and badges had a long, storied history, but in the modern era, they seemed to play second fiddle to the Department of Justice.

  To design the new Department of Homeland Security, Homeland Security Adviser Tom Ridge and White House Deputy Chief of Staff Joe Hagin assigned a small, tight-knit group of advisers within the White House. The effort would take on a clandestine quality to avoid bureaucratic backlash, with Hagin controlling access to the deliberations. One of the defining principles of this effort was to carve deep and wide into the existing governmental structures to pull whole agencies and departments into a new configuration. If an agency or bureau had an essential function that would fit into the new department’s mission, then it would be moved wholesale. No time or political capital would be spent on carving out or leaving behind missions within agencies or bureaus that had little or nothing to do with homeland security. An approach that attempted to surgically remove parts of agencies would prove too messy and difficult to manage, with every agency arguing for some aspect of their work or resources to be held back or split from the “homeland security” functions.

  Though it was likely the easiest and most realistic way of executing such a massive shift in government—the largest change in the US bureaucracy since World War II—it would also create problems for the new department. The result was an assemblage of disparate agencies with multiple missions kluged together, some of which had little to do with the concepts of homeland security as originally envisioned.

  As feared, Enforcement at Treasury was doomed. Secretary O’Neill, like many of his predecessors—but not, most notably, like the first secretary of the treasury, Alexander Hamilton—was extremely uncomfortable with the law-enforcement mission at the Treasury Department. It was not wholly clear to O’Neill why Customs, the Secret Service, and the Bureau of Alcohol, Tobacco, and Firearms were Treasury agencies. He felt that the Treasury itself had become a hodgepodge repository of law-enforcement agencies.

  To O’Neill, the transfer of these Treasury enforcement arms to the new Homeland Security Department was a welcome rationalization of functions and did not present a bureaucratic threat. In meetings with President Bush, O’Neill argued for the wholesale transfer of Treasury enforcement assets, along with the transfer of the FBI to the new department. The former Alcoa executive took great pride in disrupting long-standing practices and structures to create new efficiencies. O’Neill had made a stir within the Treasury when he first arrived because he had wanted to tear down historic walls to make room for open offices full of cubicles. For him, the law-enforcement mission could be handed away without affecting much of what Treasury did at its core—and he could be rid of potential headaches that seemed to fit neither the Treasury Department nor his job description. If the president intended to create a new Department of Homeland Security, O’Neill wanted to help push it into existence.

  In the spring of 2002, White House Chief of Staff Andrew Card called O’Neill to explain that most of Treasury’s enforcement assets—including Customs, the Secret Service, and FLETC—were to be transferred to a new department. O’Neill could have objected strenuously or threatened to go up to Capitol Hill to mount resistance to the administration’s plans, but he did not. Instead, he agreed wholeheartedly with the move, asked Card why the transfer did not also include ATF, and requested that ATF be transferred to the new department as well. Card obliged, and the ATF special agents would soon be on their way to the Department of Justice. Without much of a debate or discussion, the change was made, and Treasury Enforcement would be no more.

  When we arrived at the baggage claim in Rome, I gave Gurulé the cellphone as we waited by the carousel to pick up our bags. Gurulé called back to Treasury, expecting bad news, and that’s exactly what he got. With a deep sense of shock and resignation, he said in his deep voice, “Not the Secret Service, too!” For some time during the deliberations over the new department, there had been a question as to whether the Secret Service—whose mission of presidential protection and security seemed to fit into the new Homeland Security Department—would be ripped out of the Treasury. With its financial investigatory role focusing on counterfeiting and its increasing role in investigating cyber-crimes, however, the Service was not a neat fit in the new DHS. It also was not clear that the Secret Service leadership wanted to be disturbed with a bureaucratic move to an unknown, and likely chaotic, department. The Secret Service would have preferred to be left alone in its historical home, the Treasury.

  For those of us in Treasury, it was as though we were losing the crown jewel of our enforcement agencies—the one with the most prestige and romantic appeal. Even for those unaffiliated with the enforcement mission at Treasury, the Secret Service was an enormous point of pride. It is a law-enforcement agency known traditionally for its meticulous professionalism and its refined expertise—qualities its agents bring to everything they do, from the president’s protective detail to sharp shooting, behavioral analysis, cyber and financial forensics, and counterfeit currency detection. Without the Secret Service, the Treasury simply would no longer be in the law-enforcement business. If the Secret Service were moved along with Customs, ATF, and FLETC, the only “guns and badges” left at Treasury would be IRS criminal investigators, who focused almost exclusively on tax-related crimes.

  Gurulé put down the phone and confirmed that a massive organization would rip away the Secret Service along with most of the other Treasury guns and badges. With the transfer of the vast majority of Treasury’s enforcement agencies, the Treasury was denuded of some of its most important, historical, and id
entifiable assets. The raison d’être of the Office of Enforcement was gone. Gurulé felt as if he had been kicked in the stomach.

  The Office of Enforcement would soon be dismantled, and Gurulé would be out of a job. Treasury’s centuries-long enforcement identity was coming to an end. This decision forever changed the shape of government and the nature of the Treasury Department. There was nothing to do but deal with the consequences.

  From my hotel room in Rome very late that night, I watched the president’s speech announcing the creation of the new Department of Homeland Security. I understood the impetus behind the new department. Still, I had major reservations about whether the experiment would work and whether its mission could be defined distinctly from what other departments and agencies were doing.

  My main concern was with what would happen to Treasury and to the mission we had begun to forge. We had launched an effort to attack terrorist and illicit finance in the most aggressive way the United States had ever seen. The Treasury tools we were using to protect the integrity of the international financial system had little to do with the guns and badges that were being transferred. The parts of Treasury that would remain—the Office of Foreign Assets Control (OFAC), the Financial Crimes Enforcement Network (FinCEN), the Treasury Executive Office for Asset Forfeiture (TEOAF), and IRS-CID—still had a leading role to play in implementing sanctions, working with banks to uncover suspicious activities, and ensuring that the international community remained focused on securing the financial system against abuse.