MAC: Mines and Communities

Gold smuggling networks in Chile and Peru exposed

Published by MAC on 2017-03-22
Source: Blooomberg (2017-04-03)

A conspiracy that involved laundering more than $1 billion in illicit gold sales

According to Blooomberg, US prosecutors outlined a conspiracy in which NTR Metals employees bought Peruvian gold from illegal mines that support human trafficking, forced labor and environmental devastation.

The scheme allowed the NTR Metals office in Miami to launder billions of dollars for criminal organizations by buying gold from mines they control, according to a complaint filed in Miami.

A 2016 Verité study found that five countries in Latin America shipped 40 tons of gold from illegal mines to the U.S. in one year, almost twice the legal exports from those countries.

See also: 2016-04-13 Organized crime and illegally mined gold in Latin America

Salesman Who Bought Gold in Jungle to Fight Laundering Case

Michael Smith and David Voreacos

https://www.bloomberg.com/news/articles/2017-03-20/salesman-who-bought-gold-in-jungle-will-fight-laundering-charges

March 20, 2017

Juan Pablo Granda had a simple job -- go into South American jungles and buy gold for his employer, NTR Metals, to smelt.

After U.S. investigators began examining whether NTR might have helped traffickers convert cocaine profits into cash, the company hired Jones Day to review its practices -- and Granda agreed to help the law firm, his lawyer said. So, when NTR told him to fly home last week for a meeting, nothing seemed amiss. But by the time that was over, he’d been fired.

Then his mother called from the home they shared in Miami.

“She said, ‘Listen, I’ve got all these FBI agents here, they might want to arrest you,”’ said Granda’s attorney, Edward O’Donnell IV. “So he got in his car and went to his mom’s house. He talked to the FBI agents, and they arrested him.”

Granda, 35, was charged with conspiracy to commit money laundering for his role in a smuggling network in which NTR allegedly helped South American drug dealers reap billions of dollars in cash from gold mined illegally in the Amazon.

Jailed since his March 15 arrest, Granda was denied bail Monday in federal court in Miami after a prosecutor said he might flee. The judge said Granda can ask again for bail at an arraignment set for March 31. At the hearing, a prosecutor said Granda played a key role in a conspiracy that involved laundering more than $1 billion in illicit gold sales.

“The scope of this is enormous, and right in the middle of it is Mr. Granda,” Assistant U.S. Attorney Frank Maderal told the judge. He said the evidence is strong against Granda, who has an Ecuadorian passport and has traveled widely in South America.

One of Granda’s alleged accomplices bought a plane ticket to Colombia at midnight and flew there at 3 a.m. on Monday, Maderal said.

Maderal said Granda physically handled more than $200 million in gold and supplemented his salary with tens of thousands of dollars in kickbacks. Granda also told arresting agents that he never touched cocaine, but later told court officials that he has used the drug.

Drug-Linked Mines

Prosecutors outlined a conspiracy in which NTR employees bought Peruvian gold from illegal mines that support human trafficking, forced labor and environmental devastation. NTR’s office in Miami then laundered billions of dollars for Peruvian narco-terrorists and others who controlled those mines by purchasing their gold, according to the U.S. complaint filed in Miami.

“Gold smuggling goes hand-in-hand with narcotics trafficking,” Maderal said.

Dallas-based NTR Metals wasn’t charged and prosecutors have declined to say whether the company is under investigation. NTR, also known as Elemetal Direct, is one of eight divisions of Dallas-based Elemetal LLC. Trey Gum, general counsel for Elemetal, declined to comment.

U.S. customs records “strongly suggest” that NTR began buying illegally mined gold in Peru in 2012, according to the complaint filed by Homeland Security Investigations and the FBI. NTR then began “smuggling illegal gold through a shifting array of Latin American countries,” eventually importing $3.6 billion worth from 2012 to 2015, according to the complaint.

Internal Investigation

O’Donnell said Jones Day, a prominent white-collar law firm, has spent several months investigating NTR’s practices. In corporate scandals, companies often hire law firms to conduct internal investigations, push to fire culpable employees and suggest improvements to compliance programs. Prosecutors review such responses in deciding whether to charge a company.

At the bail hearing, O’Donnell said Granda had nothing to do with the crimes, and that NTR had hired a former federal agent to handle compliance with anti-money laundering laws.

On March 9, the day before a judge ordered Granda’s arrest, Bloomberg Businessweek detailed how smugglers, refiners and traders supply gold moving from illegal mines in Latin America, through Miami, and into the international market. The report focused on one Chilean smuggler who sold thousands of pounds of illegally mined or contraband gold, mainly to NTR’s Miami office, before his arrest last year in Santiago.

Granda, who joined NTR five years ago, held the title of operations manager but was actually a salesman in Peru and other South American countries, O’Donnell said.

“His company sent him in the middle of the jungle to buy gold,” the lawyer said. “He wasn’t a logistics guy.”

“The compliance department created the paperwork to have the gold change hands,” O’Donnell said. “Juan, as an employee of that very large company, just assumed it was done correctly.”

Granda twice answered questioned from Jones Day lawyers, O’Donnell said.

“My client thought he was just helping the company,” said O’Donnell, who was hired after the arrest.

But the criminal complaint paints a different picture of Granda, a graduate of Florida State University.

The salesman, and colleagues identified as Salespersons 1 and 2, engaged in a “smiling and dialing” campaign to learn who had gold to sell, forming relationships and pitching NTR, authorities said. They invited customers to tour NTR facilities in the U.S., entertaining them and promising to pay for gold faster than other refineries.

Like Escobar

The complaint details some of the encrypted group chats Granda and the salespeople allegedly conducted on their mobile phones, including ones in which the operations manager and Salesperson 1 bragged about their gold “mules” and sent pictures of young men carrying backpacks.

In another, Granda referred to himself as a “modern-day Pablo Escobar” -- the Colombian drug boss killed in 1993. “I’m like Pablo coming to Ecuador to get the coke,” the complaint cited him as saying.

The case is U.S. v. Granda, 17-mj-02376, U.S. District Court, Southern District of Florida (Miami).


Gold Company Manager Charged in Vast Peruvian Smuggling Plot

Michael Smith and David Voreacos

https://www.bloomberg.com/news/articles/2017-03-16/gold-company-manager-charged-in-vast-peruvian-smuggling-scheme

March 16, 2017

The operations manager at a metals-refining company was charged with helping run a gold smuggling network that reaped billions of dollars for illegal mines controlled by drug dealers and other criminals in South America.

A criminal complaint against Juan Pablo Granda, 35, outlines a vast conspiracy involving employees at NTR Metals to buy huge amounts of gold from illegal mines in Peru that support human trafficking, forced labor and environmental devastation. The scheme allowed the NTR Metals office in Miami to launder billions of dollars for criminal organizations -- including Peruvian narco-terrorists -- by buying gold from mines they control, according to the U.S. complaint filed in Miami.

The charges signal a U.S. crackdown on smugglers exploiting a spike in worldwide consumption of gold mined illegally in the Amazon basin, where laborers use fire hoses and mercury to extract the nearly pure precious metal.

On March 9, Bloomberg Businessweek detailed how smugglers, refiners and traders supply gold moving from illegal mines in Latin America, through Miami, and into the international market. The report focused on one Chilean smuggler who sold thousands of pounds of illegally mined or contraband gold, mainly to NTR’s Miami office, before his arrest last year in Santiago.

Dallas-based NTR Metals isn’t charged in the case. The company, also known as Elemetal Direct, is one of eight divisions of Dallas-based Elemetal LLC. Trey Gum, general counsel for Elemetal, declined to comment.

Granda, who was arrested Wednesday, appeared Thursday in handcuffs in federal court in Miami, where he was ordered detained until a bail hearing on March 20. Granda’s attorney, Edward O’Donnell IV, said he is from Miami, but was running NTR operations in Cali, Colombia. O’Donnell wasn’t immediately available for further comment.

U.S. customs records “strongly suggest” that NTR began buying illegal gold in Peru in 2012, according to the complaint by Homeland Security Investigations and the FBI. NTR then began “smuggling illegal gold through a shifting array of Latin American countries,” eventually importing $3.6 billion worth from 2012 to 2015, according to the complaint.

“For all of the billions of dollars’ worth shipped from Latin America to NTR in Miami, NTR sent billions of dollars in wire payments to Latin America from the United States,” HSI agent Colberd Almeida wrote in an affidavit filed March 10 under seal in federal court in Miami.

‘Illegal Mining’

Granda conspired with two salespeople and others who knew the transactions involved “organized crime, gold smuggling and entry of goods into the U.S. by false means and statements, illegal mining, and narcotics trafficking, all in the hopes of creating more profits for themselves and NTR,” Almeida wrote.

Bloomberg reported on March 9 that a Chilean smuggler, Harold Vilches, had told U.S. and Chilean prosecutors that he sold 4,000 pounds of illegally mined gold, mostly to NTR Metals Miami. Vilches, in sworn statements to the FBI and Chilean prosecutors, said two NTR employees in Miami knew his gold was illegal and coached him on how to smuggle it into the U.S.

After Vilches was charged June 1 with fraud in Chile, Gum told Bloomberg, NTR “reported the matter to appropriate governmental authorities” and ordered NTR Metals Miami to “suspend all operations in Chile pending a review of current risks and procedures in that country.” The two NTR employees denied Vilches’s assertions and said they trusted documents showing it was legal.

Social Issues

Illegal gold smuggling and money laundering have become prominent social and political issues in Latin America, and several countries have begun investigations, “many of which involve gold being sold to NTR,” Almeida wrote.

In 2013, Peru seized $18 million worth of gold bound for refineries in Miami and elsewhere, including NTR. One company sending gold to NTR was financed by a Peruvian acquitted of narcotics money laundering but arrested for his role in a $500 million gold scheme, according to the U.S. He is identified in the criminal complaint only as P.F.

After the Peruvian raid, smuggled gold was moved to Bolivia before heading to NTR in Miami, according to Almeida. Last year, Ecuador made arrests in a $400 million money laundering scheme involving gold mined in Peru and bound for NTR, the agent wrote. Chile also made arrests stemming from investigations into gold from Peru and Argentina that was sold to NTR, Almeida wrote.

‘Highly Suspicious’

Beyond “highly suspicious gold imports” from Peru, Ecuador and Bolivia, NTR also turned to Chile, Guyana and the Caribbean, the U.S. said.

Granda and colleagues identified as Salespersons 1 and 2 engaged in a “smiling and dialing” campaign to learn who had gold to sell, forming relationships and pitching NTR, according to the complaint. They invited customers to the U.S. to tour NTR facilities, entertaining them and promising to pay for gold faster than other refineries.

The complaint details some of the encrypted group chats that Granda and his confederates sent on their cell phones. Almeida said Granda referred to himself as a “modern-day Pablo Escobar” -- the Colombian drug boss killed in 1993.

“I’m like Pablo coming to Ecuador to get the coke,” he said, according to the complaint.

Granda and Salesperson 1 bragged to each other about their gold “mules,” sending pictures of young men carrying backpacks.

Several confidential sources in Latin America and the U.S. spelled out details of the use of front companies to move dirty money, the U.S. said. One source helped the smuggler referred to as P.F. “in exporting illegally mined gold without any documentation to NTR through a series of front companies,” according to the complaint.

Granda asked this source about a scheme to avoid suspicion by exporting gold in small volumes through many companies rather than one bigger company, according to the complaint.


How to Become an International Gold Smuggler

Harold Vilches, a 23-year-old Chilean, exported $80 million in contraband gold. It all started with a Google search.

https://www.bloomberg.com/news/features/2017-03-09/how-to-become-an-international-gold-smuggler

March 9, 2017

As the minutes ticked by on the afternoon of April 28, 2015, Harold Vilches watched stoically while customs officers at Santiago’s international airport scrutinized his carry-on. Inside the roller bag was 44 pounds of solid gold, worth almost $800,000, and all the baby-faced, 21-year-old college student wanted was clearance to get on a red-eye to Miami. Vilches had arrived at the airport six hours early because he thought there might be some trouble—he’d heard that customs had recently seized shipments from competing smugglers. But Vilches had done this run, or sent people to do it, more than a dozen times, and he’d prepared his falsified export paperwork with extra care. He was pretty sure he wouldn’t have any trouble. While he waited, he texted his contacts in Florida, telling them he’d already cleared customs.

The plan was to hand off the gold at the Miami airport to a pair of guards, who would load it into an armored truck for the short trip to NTR Metals Miami LLC, a company that buys gold in quantities large and small and sells it into the global supply chain. The modesty of its shabby office, where a receptionist sits behind an inch-thick acrylic barrier, belies the amount of business that goes on inside. U.S. Department of Justice investigators believe NTR Metals Miami has bought at least $3 billion in South American gold in the past four years, much of it from illegal mining operations, people familiar with the investigation say.

Vilches didn’t need this headache. In just two years he had rapidly risen in the ranks of Latin American gold smugglers. Although he was barely old enough to order a beer in Miami, he’d won a $101 million contract to supply a gold dealer in Dubai. That hadn’t exactly worked out—the Dubai company was after him for $5.2 million it says he misappropriated—but still, in a brief career he’d acquired and then resold more than 4,000 lb. of gold, according to Chilean prosecutors. U.S. investigators and Chilean prosecutors suspect almost all of it was contraband.

That evening at the airport, Vilches employed his standard cover story, saying that the gold came from coins acquired from customers and recast as ingots. The customs officers weren’t buying it. The laboratory Vilches had used to vouch for the gold wasn’t government-certified, they said, and they doubted his claims that the gold had come from coins. Vilches was irate. He couldn’t believe it when the man behind the desk called his boss and then relayed orders from above: If it’s Vilches’s gold, seize it.

Investigators with the Policía de Investigaciones, Chile’s equivalent of the FBI, had been monitoring Vilches for months, intercepting his phone calls and scouring the export papers he’d submitted. The kid was clever, they agreed, but who was he working for? “I thought there was someone behind him, always,” says José Luis Pérez, a Chilean prosecutor on the case.

After the airport officials confiscated Vilches’s gold, they let him go. For the next 15 months, Chilean authorities allowed Vilches to bring illegal gold in and ship it out as they built a case, searching for associates and those above him. They listened in on various telephones, read Vilches’s text messages, and followed couriers. They watched as smugglers brought gold south from Peru, across remote stretches of desert and through valleys in the Andes Mountains, or west from Argentina, driving over the snowy mountain pass in the shadow of 22,800-foot-high Aconcagua, then down to Santiago and Vilches’s headquarters, a place police nicknamed “The Bunker.” Inside, Vilches assayed, weighed, and paid for the gold. He melted it down and recast it as ingots, then flew it, or used a family member to fly it, to Miami.

To their growing amazement, the police never found the larger organization they presumed was supporting and protecting Vilches. There was, as far as they could determine, no bigger fish. Finally, in August 2016, they arrested him. Investigators say they have documented $80 million in gold shipments that moved through his hands via eight shell companies he established in Chile and Miami—and they think there was much more. They charged Vilches and four associates, including his wife and her father, with racketeering, smuggling, customs fraud, and money laundering. None of them have been tried, and the case remains open. Vilches’s wife and father-in-law declined through their lawyer to comment. Today, Vilches lives with his wife in an apartment in a rundown part of Santiago; he’s under house arrest from 10 p.m. to 6 a.m.

In exchange for his release from jail, Vilches provided extensive testimony that has allowed Chilean prosecutors and the U.S. Department of Justice to try to build a huge, multinational gold smuggling case. Interviews with police and prosecutors in Chile and the U.S. and hundreds of pages of police files describe Vilches’s part in a black market that adds literally tons of illegally mined and contraband gold to the international economy every year.

In the past decade and a half, global gold consumption has risen by almost 1,000 tons a year, to about 4,300 tons, according to the World Gold Council, a London-based industry group. Legal mining operations haven’t kept up with demand, so illegal mines controlled by criminal gangs, from the Amazon to central Africa, help cover the deficit, according to Verité, a nonprofit group in Amherst, Mass., that’s researched the illegal gold trade. A 2016 Verité study found that five countries in Latin America shipped 40 tons of gold from illegal mines to the U.S. in one year, almost twice the legal exports from those countries. South America’s illegal gold mines, most of them in the Amazon basin, are toxic pits in which mobs of laborers use fire hoses and mercury to extract nearly pure gold nuggets from the red earth. According to a finding by the United Nations, the industry thrives on child labor, devastates the environment, and enables prostitution at ramshackle camps around the mines. The gold moves from smuggler to smuggler, then into a network of refiners and traders, all feeding the world’s voracious demand.

Vilches, a city kid, never saw any of this, but he did grow up around gold. His father, Mario, owns a jewelry shop; his uncle Enrique, an evangelical preacher, built Joyas Barón, a chain of 18 jewelry stores. Enrique has more than once attracted the attention of the authorities. In 1998, Chilean prosecutors caught Ecuadorean smugglers with 18 ingots of gold at the airport, and they claimed to be delivering it to Enrique. (He was cleared of all criminal charges after arguing that police set him up.) In March 2015, Enrique was sentenced to five years’ probation for tax fraud by an appeals court in Santiago. Last year tax authorities filed further charges alleging that Enrique had organized an enormous accounting scam and owed an estimated $18 million in back taxes. Speaking on Chilean TV, Enrique Vilches denied all connections to his nephew’s gold smuggling. “I don’t have any commercial relationship with what’s being investigated,” he said. “[There’s] no situation that involves me, therefore I want to remain absolutely separated from this situation.”

By 15, Harold was working for his father’s business. Within a year, his dad was stuffing his backpack with up to 50 million pesos ($78,000) in cash and sending him to the bank to make deposits. In 2013, Vilches entered college at the Universidad Mayor in Santiago to study business administration. He hadn’t been there long when his father had a stroke, and he cut back his classwork to focus on the family business. If he was going to be doing that, he decided, he wanted to do more than buy and sell trinkets. He intended to make some real money, and that meant getting into the bulk gold business.

His first move was to persuade Gonzalo Farias, a metals exporter in Santiago, to take him on as a supplier. In September 2013, Vilches made his first delivery to Farias—6.6 lb. of gold legally acquired in Chile. He made several more such deliveries. But he wanted to be bigger. He went around Farias and cut a deal directly with Fujairah Gold, a Dubai-based company that Farias supplied. In June 2014, Vilches signed a contract to deliver 6,000 lb. of gold over the next 12 months to Fujairah’s head office. The contract began with 90 lb. the first month, then ratcheted up. He didn’t have the money to buy that much gold, so the company gave him access to an account holding $5.2 million. This was his big break—the contract was potentially worth more than $100 million. He stood to make $2 million to $6 million in profit.

This was beyond ambitious for Vilches—there weren’t enough available gold coins and jewelry in Chile to fill Fujairah’s orders. So Vilches decided to become a smuggler. It was easy: He Googled gold dealers in Peru. He found Rodolfo Soria Cipriano, one of the country’s most prolific exporters, according to Peruvian newspaper El Comercial. An answer came quickly. Vilches told investigators Soria promised to set him up with all the gold he wanted if he showed up with the cash. Vilches said he didn’t ask where the gold came from. Whatever its source, he evaded export controls and moved the gold into Chile without paying taxes or duties, prosecutors say.

Soria made introductions to a network of suppliers, with whom Vilches later arranged buys via WhatsApp messages. Once the gold was ready for pickup, he would fly to Arica, in northern Chile, where he kept a Mazda sedan expressly for trips into Peru. On at least 10 trips, beginning in the middle of 2014, Vilches says, he and his father-in-law drove across the border to the city of Tacna, a few miles inside Peru, with the door panels of their car stuffed with cash, as much as $2 million at a time.

Vilches bragged to prosecutors that he moved with ease in the criminal world. With relish, he described making a buy at a safe house in Tacna. While his father-in-law waited outside in the car, Vilches was escorted by armed men through multiple metal detectors and locked gates before arriving at a secure room that held a huge stash of gold. He suspected the house doubled as a cocaine dealing operation, he told prosecutors, but he kept his cool. He tested the gold for purity, then went back outside, packed the contraband into the door panels of the Mazda, and drove back to Chile.

Vilches began making as many as five gold runs a month to Peru and also hired couriers, who delivered to him directly in Santiago. It added up to enough to allow him to make several successful deliveries to Fujairah using air cargo companies. Then, in August 2014, customs agents at the airport in Arica stopped a pair of his couriers with 105 lb. of gold. The paperwork and the duo’s explanations about how they’d obtained the gold didn’t add up. The gold was seized, and Vilches was looking at his first legal trouble: a tax-evasion case, which has yet to be resolved.

Vilches decided to abandon Fujairah. Fulfilling the contract would require dozens of buying trips or courier runs, and getting the gold to Dubai would involve massive logistical challenges. When the company asked about its overdue deliveries, Vilches invented excuses. But lawyers for Fujairah were convinced he was lying. They suspected he was selling to other companies on the side. Fujairah also came to the conclusion that the gold was illegal.

Almost two years later, Vilches faced his first criminal charges, for fraud and appropriating $5.2 million from Fujairah Gold. Through his lawyer, Marko Magdic, Vilches denied the charges and said the only issue was a breach of contract. Fujairah continues to press claims in court to recover the money.

As his relationship with Fujairah deteriorated, Vilches sought new buyers. He knew some of his Chilean clients were selling the gold he brought from Peru to NTR Metals in Miami. Soria, he told prosecutors, made an introduction. “I was cleared by the company’s compliance committee in more or less three weeks,” he told the FBI. Trey Gum, general counsel for Elemetal LLC, NTR’s parent company, says the company established a relationship with Vilches only after its representatives visited his companies in Chile. “The information NTR Miami received was that Mr. Vilches came from a family of established jewelers with close ties to the evangelical community in Chile,” Gum said in an emailed statement. Soria couldn’t be reached for comment. The offices of his company in Lima appear to have shut down, and its phone numbers are out of service.

Vilches told prosecutors he then went to Florida and met with two NTR executives: Renato Rodriguez, executive sales director for Latin America, and Samer Barrage, who oversees the Miami operation. They sat down together at a restaurant in Coral Gables. “They knew something was up with my gold because it was so pure. ... A few months later I expressly told them it was contraband gold,” Vilches said. He also told prosecutors that Rodriguez and Barrage coached him on falsifying customs paperwork.

None of this is true, according to Rodriguez and Barrage. Standing in the lobby of NTR’s Miami office, Rodriguez says the company trusted the documentation Vilches provided—as did, he points out, customs officials in Chile and the U.S. “All that stuff is made up,” he said. Barrage said in an email: “I want to be emphatically clear at no point did I have any knowledge whatsoever regarding his metal being sourced from illegal mining operations. There was absolutely no coaching or involvement regarding his export process or import process for that matter.”

To maximize the appearance of legitimacy, Vilches wanted to cast his gold into brick-size ingots, with a seal identifying the weight and purity. It was a challenge—he’d watched his father do it, but he had almost no idea how to manage it himself. When he plugged in an imported machine to melt the gold, it shorted out and filled his office with black smoke; he’d neglected to buy a transformer so the equipment would work with Chile’s higher-voltage electrical system. Eventually, Vilches says, he and his father-in-law taught themselves how to make the ingots by watching YouTube videos.

In December 2014, Vilches made his first delivery to NTR Metals Miami, with a suitcase full of gold bars. That was how he capped his first full year in business, during which he shipped 3,119 lb. of gold valued at $57.4 million, export records cited in the criminal investigation show. Chilean investigators later cited 10 shipments from Vilches to NTR as clearly illegal because of falsifications in customs declarations and failure to pay taxes and duties on the initial importation of the gold.

Chilean prosecutors say they have evidence NTR was aware the gold was illegal or contraband based on Vilches’s statements and his telephone, email, and text communications, all of which they’ve shared with U.S. investigators. “NTR knows the gold is illegal. It’s cheaper than legitimate gold. That’s the business,” says Tufit Bufadel, a Chilean prosecutor involved in the case.

In early 2015, Vilches told the FBI, Rodriguez and Barrage summoned him to Miami to make a bold proposal. “They asked me to find a gold supplier in Africa,” he said. According to Vilches, the NTR executives proposed that he try to arrange a 1,000-kilo-per-month smuggling operation.

Vilches was game. If he could pull it off, he’d be moving an estimated $20 million a month in dirty gold. But it was going to be complicated. “What they told me is that, because of compliance policies, they could not receive African gold,” Vilches told the FBI. “So they proposed that I export from Africa to Chile and then send it to Miami to NTR Metals.”

Vilches flew to Dar es Salaam in Tanzania, where he spent almost a month viewing stashes of gold and negotiating with South African and Cameroon-based traders. He told the FBI he “maintained constant communications with Renato and Samer” about possible shipping routes. But he got scammed out of $300,000 by someone he thought was a supplier. The entire Tanzania affair unnerved him. At one point, he told the FBI, he was accosted by two carloads of armed men—probably government security forces, he thought—and held for hours in a grimy room while being interrogated about his business in Tanzania. He was relieved to escape with his life.

Rodriguez and Barrage denied suggesting Vilches go to Africa. “In fact, in 2015 he asked if we purchased from Africa,” Rodriguez wrote in an email. “I unequivocally told him no and that it was a policy of NTR not to do so.” Barrage wrote: “There was ... no encouragement to source gold from Africa.”

Despite the setbacks in Tanzania, Vilches had a good 2015. He spent his money on a $1 million home adjacent to a lake with lilies and swans. He also invested $150,000 in a fortified building in Recoleta, a Santiago neighborhood where stray dogs roam streets strewn with trash. Graffiti-covered 12-foot walls topped with barbed wire surrounded a two-story building outfitted with Level 5 bulletproof glass and armored metal doors. Steel-reinforced walls and an array of 32 security cameras protected an inner sanctum. The final touch was a pepper spray system. “Even in a bank you don’t see such high-quality protection and security measures,” says Pérez, the Chilean prosecutor.

It was here that Vilches toiled, usually alone, transforming his gold into the standard-size ingots needed to avoid raising suspicions at customs. He marked each with the precise weight and purity and added the seal of Aurum Metals LLC, a company he’d set up in Miami. It was also in the bunker that Vilches stashed cash and falsified documentation for the gold.

Vilches told prosecutors that the NTR executives advised him to make videos of the refining process to better support his claims that the gold came from legal sources. He did that, and his marketing brochures carried photos of himself grinning while pouring liquid from a flask like a high school chemistry student, except that the flask was filled with liquid gold.

NTR Metals Miami is one of the 49 offices of NTR Metals, also known as Elemetal Direct, one of eight divisions of Dallas-based Elemetal LLC. Elemetal Direct sells its gold as 99.99 percent pure bullion—and certified as coming from legal mines by industry groups. Those groups include the London Bullion Market Association, or LBMA, the industry’s self-regulating body, which counts officials from major banks and gold traders on its board. Elemetal dedicates a section of its website to certifications of quality and origin, including a copy of the LBMA’s “responsible gold certificate” from a “third-party audit of the company’s supply chain due diligence.” LBMA spokesman Aelred Connelly declined to comment about Elemetal’s certification.

Another certificate comes from the Conflict-Free Sourcing Initiative of the Electronic Industry Citizenship Coalition, or EICC. It’s for Elemetal’s gold smelter in Jackson, Ohio. To renew the certification each year, Elemetal hires auditors to review purchase and import records, tour the smelter, and interview employees about the source of purchased gold. The mission is to assure that no gold comes from illegal mines that give rise to prostitution, labor abuses, and environmental damage or fund illegal activities or war, especially in Latin America, says Leah Butler, director of the conflict-free smelter program at the EICC. “We know that gold from Latin America is high-risk,” says Butler. She declined to comment on Elemetal, citing EICC rules. The organization “takes allegations of wrongdoing by any smelter or refiner in its program very seriously,” she says.

Amjad Rihan, a former Ernst & Young auditor who specializes in researching commodity supply chains, says it’s easy to fool auditors. Rihan now works for Martello Risk, a London consulting firm that helps companies scour supply lines for illegal minerals. “The problem is these audits really don’t go beyond the paperwork,” he says.

These seals of approval are critical across the industry. Under U.S. and European law, corporations must ensure their suppliers aren’t buying from mines that fund conflict. So they source gold from companies that are certified as having clean supply chains. Elemetal’s certified smelter is a valuable asset that allowed the company to supply 68 Fortune 500 companies in 2015 according to a Verité analysis of corporate conflict minerals reports, which are required under the U.S. Dodd-Frank Act. Those include Alphabet, Apple, GE, GM, and HP, the latest corporate filings show.

According to Gum, Elemetal’s lawyer, NTR Metals Miami stopped doing business with Vilches on June 1, 2016, the day the fraud charge against him was filed, and “reported the matter to appropriate governmental authorities.” Elemetal also, “as a precautionary measure,” ordered NTR Metals Miami to “suspend all operations in Chile pending a review of current risks and procedures in that country,” Gum says.

On the night everything began to fall apart, when agents at the Santiago airport seized the five ingots in his carry-on, Vilches immediately called NTR, he told FBI investigators. Rodriguez and Barrage suggested, he said, that he forget about ever seeing that gold again and concentrate on getting the paperwork right the next time. NTR executives “gave me instructions to keep U.S. Customs from realizing my certificates of origin were false,” Vilches said.

It seemed to work, for quite a while. Chilean police were itching to bust him, but prosecutors ordered detectives to stand down to gather more evidence. They were reluctant to give up on the idea of snagging someone higher than Vilches. And so he both imported and exported dirty gold without interruption.

The net began to close in early 2016, when banks in Chile and Miami began filing suspicious-activity reports on Vilches’s huge cash transactions and shutting down his accounts. Then came the criminal complaint involving the Fujairah Gold contract. Finally, police arrested Vilches and seized $300,000 in cash and a small amount of gold from the bunker. Facing a multiyear jail sentence for money laundering and tax evasion, Vilches agreed to cooperate with law enforcement in both the U.S. and Chile. He also dropped out of college. Today, Vilches and NTR Metals are at the center of a sweeping criminal investigation by the U.S. Justice Department, Chile’s National Economic Prosecutor’s office, and law enforcement in Peru and Ecuador, according to Pérez, the Chilean prosecutor. Sarah Schall, a spokeswoman for the U.S. Attorney’s Office in Miami, declined to comment, citing policy against confirming or denying the existence of an investigation.

In October 2016, FBI agents and prosecutors with the U.S. Attorney’s Office in Miami traveled to Chile to interview Vilches. After becoming convinced his information was legitimate, they told him he might get immunity in the U.S. from prosecution in exchange for his sworn testimony, people with knowledge of the probe say. As Vilches spent hour after hour in interrogation, FBI agents and Chilean detectives were both fascinated and entertained. Upwards of 15 law enforcement professionals crowded into a meeting room at Santiago 1, a sprawling prison complex, and Vilches fed off the attention. He laughed and seemed to shrug off the seriousness of his situation. His confessions took on the air of a performance, according to one of the investigators present. “All you lacked was the popcorn,” he says with a laugh. FBI agent Lourdes McLoughlin, the assistant legal attaché at the U.S. embassy in Santiago, declined to comment, citing a policy of not commenting on active investigations.

In December the U.S. Attorney’s Office and FBI brought Vilches to Miami, where he told a federal grand jury that he was coached by NTR Metals Miami on how to set up his corporate structure in the U.S. to handle smuggled gold and then launder the proceeds, people familiar with the U.S. probe say. Elemetal and NTR Metals Miami didn’t respond to questions about an investigation.

Vilches lived large only briefly. He’s traded down to an apartment along Gran Avenida, a thoroughfare in a tough Santiago neighborhood. Because of his cooperation, he’s unlikely to face additional jail time for smuggling. He still faces multiple criminal charges, including tax evasion.

Chilean export regulations have been beefed up in the wake of the Vilches case. One gold dealer describes the new export process as similar to “being told to stand up against the wall and put your hands up.” Customs officials from Ecuador, Bolivia, and Peru have visited Chile to exchange information and compare notes. Pérez approves, but he has no illusions. If Vilches, without any particular advantages except his boldness, could get this far in the illegal gold trade, who else could? “I think there are 100 Vilcheses across Latin America,” he says. “It’s easier than it looks.”

—With assistance from Ben Bartenstein

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