discussed this week and last in Senate hearings. This note describes how money was funnelled from Bermuda and onto the US.

This description is drawn from pleading filed by the Department of Justice in association with USA v. Swiss American Bank Ltd et al. (op. cit.) and documents and correspondence relates to that matter.

An October, 1989 report by the Special Branch of the Royal Bermuda Police Force and the US grand jury indictment issued against Fitzgerald provide a description of the trail of the funds that is instructive as to how the international banking system is used to move and launder illicit funds. In early 1985, Fitzgerald established a St. Lucian corporation by the name of "Halcyon Days Investments Ltd.,'' and opened an account in that corporation's name at the Canadian Imperial Bank of Commerce in St. Lucia.

Between January and March, 1985, Fitzgerald and other members of the drug organisation deposited $3 million into the account.

In May, 1985 the account was closed and all of the funds (in excess of $3 million), were transferred to the Guinness Marn and Company Bank in the Cayman Islands through a bank cheque issued to the Guinness Bank.

The total in the account subsequently grew to $5 million. In the fall of 1985, the $5 million in funds were wire transferred from the Guinness Bank account to Philadelphia to Manufacturers Hanover Bank in New York and to the Bank of Bermuda, and on to SAB. The wire transfer of $5 million was divided equally between two accounts at SAB (Rosebud Investments and White Rose Investments).

The funds were subsequently transferred into the accounts of Guardian Bank (one at SAB and one at SNAB). According to the (Bermuda) Police report: "Not only is this path murky, but subsequently Guinness Marn sold their subsidiary in Cayman because of their embarrassment at the management. Regrettably Guinness Marn have chosen not to reveal why they were embarrassed or the source of the money.'' The Special Branch (Bermuda Police) report also detailed the irregularities and lack of controls attendant to the accounts and the operations of SAB/SANB during Herrington's tenure: "One of the accounts (Rosebud Investments) received $450,000 in cash from the Bank of Bermuda. The funds appear to have come from a safety deposit box at the Bank of Butterfield. In October, 1985 Herrington used Swiss American's relationship with the Bank of Bermuda to influence the staff there to accept the cash deposit. When the funds were transferred to the account at Swiss American, they were `held' until Herrington make the book entries.

"Another account (Jones Enterprises) was used as a `feeder' account for some of the other Fitzgerald accounts. According to the Police report `large cash deposits were made into the account and later diverted to others but as the clients' statements are missing it is not possible at this stage to say where the cash originated.

"Bank slips were written up as `cash' and `deposit' when money was being transferred from one account to another as a way to disguise the destination.

Only by checking other bank records can the accountants identify whether true cash was handed over and frequently it was not.

"Many of the loans made by the banks are to companies c/o AIT and no other details are available.

"Documents related to the companies associated with the accounts were missing.

"The source of many deposits was unknown, as was the ownership of companies.

"Over $500,000 in cash was deposited directly into accounts at Swiss American Bank. Another $500,000 came through a cash deposit at the Bank of Bermuda.'' The Police report also captures what appears to have been a lack of concern about illicit activities on the part of bank officials. The report notes that the Assistant Manager of the Swiss American Banking Group, MacAllister Abbott, who with Peter Herrington was a signator on the corporate accounts set up for Fitzgerald "thought Guardia was established to hide the profits skimmed from casino operations. He thought Jack Fitzgerald had controlling interest in and also thought that Herrington maintained a second set of books on behalf of the company. Abbott has been described as a person who would turn a blind eye to tax evasion but appears to have no knowledge of drug involvement.'' Mr. Abbott is currently general manager of Antigua Overseas Bank.