U.S. Chemical Companies Face Few Legal Risks, and the Cartels Bank On It
03 Dec 2020

One November morning in 2015, a lawyer named Clark Jordan rose sheepishly from his chair to face the judge in a federal courtroom in eastern Pennsylvania. Jordan, then 51, had spent most of his adult life in corporate law, but this day was different. As a vice president of Eastman Chemical Co., he was appearing for Eastman’s board of directors to enter a guilty plea in a drug case. The six-count criminal information charged that an Eastman subsidiary, Taminco U.S. Inc., had knowingly violated federal narcotics laws. Before that morning, Jordan had thought this would be “no big deal,” he later recalled. But in the solemnity of the courtroom, the gravity of the moment sank in.

Taminco, which Eastman had acquired 11 months earlier for $2.8 billion, was one of the world’s top producers of a chemical called monomethylamine, or MMA. Legally used to make pesticides and pharmaceuticals, it’s also an essential ingredient for Mexican cartels cooking the cheapest and most potent methamphetamine ever sold on American streets. Federal drug laws contain a set of crimes for U.S.-based companies that fail to control the sale and distribution of every liter they make. Requirements include verifying the legitimacy of any customer worldwide. Even contractors that pour the chemical into barrels must be licensed by the Drug Enforcement Administration.

Taminco was pleading guilty to illegally selling more than 22,000 gallons of MMA to two shadowy Mexican companies without conducting even basic checks of their bona fides. One of the companies may have never existed; the other was controlled by Taminco’s own Mexican sales rep, who was selling to himself before reselling to unknown buyers. In the first six months of 2010 alone, Taminco sold the two Mexican companies enough MMA to make nearly 100,000 kilograms of meth, or more than 11 times the total amount of the drug seized by U.S. law enforcement that year.

As Bloomberg Businessweek has reported, narcos have easily tapped the operations of American chemical companies to keep the cartels’ heroin, meth, and cocaine labs humming, despite a 30-year-old system of international drug laws designed to prevent the diversion of the chemicals. The price has been steep for Americans. For U.S. chemical companies, it’s been nominal. The prosecution of Taminco is likely the only one of its kind in the past decade. For those 22,000 gallons of MMA—enough to make about $3.2 billion worth of methamphetamine—Eastman paid a total of $1.3 million, which represents roughly an hour and 13 minutes’ worth of sales that year. Here’s another perspective: Aiding and abetting the distribution of just 50 grams of meth brings a mandatory federal sentence of at least 10 years in prison. More than two million times the 50-gram threshold could be made with the MMA sales covered by Taminco’s sentencing agreement. No one connected to the case would spend a day behind bars.

Although Eastman hadn’t owned Taminco when the crimes were committed, Jordan, a straitlaced former lieutenant in the U.S. Navy, was understandably moved as he rose to take the rap. When U.S. District Judge Edward G. Smith asked if he was ready to plead guilty, Jordan reflexively clarified that he wasn’t personally guilty of anything and that he was there only “on behalf of Taminco U.S. Incorporated.” The judge promised to underline the distinction. “If I misstate that throughout the course of this proceeding,” he said, “please don’t hesitate to stop me.”

Jordan’s concern was understandable; none of the executives responsible for Taminco’s operations when it committed the crimes were in the courtroom. They weren’t charged, or even publicly named. Less than a year earlier, Eastman had given Laurent Lenoir, the Taminco chief executive officer who also had headed global MMA sales, an exit package worth more than $12 million.

By the end of 2007, a U.S. crackdown on meth-making chemicals contained in over-the-counter cold medicines was becoming so successful it was pushing meth production out of backyard labs and over America’s southern border. Mexico’s increasingly powerful drug cartels would soon have little trouble executing a near-total takeover of the American meth market. They did this in part by employing a purer, more potent recipe for the drug with two key ingredients, including MMA, cooked in hundreds of industrial “superlabs” around the country.

As this shift was under way, Taminco’s then-owner, a London-based private equity firm called CVC Capital Partners, began a drive to boost its chemical sales, with an eye toward a sale or a public stock offering for Taminco. From 2007 through 2010, Taminco increased sales 14%.

To land sales and customers in Mexico, the company in October 2007 contracted with a sales representative there. Its North American headquarters, in Allentown, Pa., was supposed to ensure that U.S. drug laws were followed for each of the Mexican rep’s sales: Taminco needed to verify the existence, identity, and legitimacy of each customer. It also needed to confirm that each shipment reached its intended, verified end user in Mexico. And it was required to immediately alert the DEA if something went wrong.

Through their new man in Mexico, whom prosecutors did not charge or name, Taminco sold 47 truckloads of MMA in a 32-month window leading up to July 2010. Each truck carried roughly 96 55-gallon drums of MMA. Almost 60% of those barrels went to just two Mexican customers, court records show. Federal prosecutors identified one by the initials CRC. Taminco’s own Mexican sales agent controlled the company. It’s unclear from court records when Taminco’s executives first became aware of his double role. The records make clear, however, that Taminco approved sales to the agent’s company before checking it out—or verifying the legitimacy, or even existence, of others in Mexico to whom the agent resold the meth-making chemical.

Although MMA had been strictly controlled under U.S. drug laws since 1988, Mexican authorities didn’t crack down on it until 2010. That year, at a border checkpoint in Laredo, Texas, Mexican inspectors started turning away Taminco shipments bound for the Mexican sales rep’s company. Three such shipments, in March 2010, landed in limbo in the warehouse of a Taminco shipping agent in Texas, awaiting clearance. Two months later, a U.S.-based business partner of Taminco’s Mexican sales rep had those barrels removed from the warehouse. Taminco would never see the barrels, holding 11,000 gallons of its MMA, again—nor would it report the loss to the DEA, according to its guilty plea.

By Cam Simpson, Bloomberg Businessweek, 1 December 2020

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