MONEY-LAUNDERING LAW SUPPORTERS POINT TO CASES THAT GOT AWAY

To prosecutors, it was a classic organized-crime case. The mob forced a
contractor renovating a Midtown hotel to make weekly payments to prevent
interference from unions. But charges against one defendant fell apart,
prosecutors said, because of a weakness in New York's money-laundering laws,
even though they were able to prove the defendant had forced the contractor
to give him $50,000, which was transferred to an account in Northern
Ireland.

The case was one of several that law enforcement officials cited after Gov.
George E. Pataki proposed legislation last week to expand the definition of
money laundering in the current statute, and to increase penalties for
laundering money.

The governor cited concerns that too many money-laundering cases in New York
were slipping through the cracks. His proposal has gained strong support
from state and federal law enforcement authorities, and some powerful
members of the State Legislature.

The bill would allow state prosecutors to file hundreds of additional
charges against potential defendants each year, state officials said.

Federal authorities often use laws against money laundering -- the transfer
of money to make proceeds from criminal activities appear to be legitimate
gains -- to pursue criminals who would otherwise be difficult to prosecute.

The federal statute is broader than the New York one. Under the New York
law, a person cannot be convicted of money laundering unless the money being
laundered is exchanged for other currency or a narrow list of other valuable
items.

The list includes money orders, travelers' checks, precious metals, jewelry
and stamps, but does not include personal checks or goods like furniture,
vehicles and construction equipment, making it easier to devise exchanges
that are not covered by the state regulations.

In money-laundering schemes, criminals often transfer money from illegal
activities to companies they control, where it is used to purchase products
that can be used in those businesses or sold, transforming the money into a
clean asset.

The transactions often involve vehicles and construction equipment.

The current law "was designed by someone who never wanted to see it used,"
said Bridget G. Brennan, a special narcotics prosecutor in New York City.

She said the governor's bill would lead to more prosecutions by broadening
the definition of an exchanged good to include anything that prosecutors
could prove was received in exchange for money derived from criminal
activity.

This is similar to the definition in the federal money laundering law.

"It makes no sense that the monetary instrument statute is so narrow that it
does not cover wire transfers," said Robert M. Morgenthau, the Manhattan
district attorney, whose office drafted the bill proposed by the governor.

The bill "will make it easier to prosecute major drug dealers, organized
crime and white collar criminals," Mr. Morgenthau said.

The bill would also increase the maximum sentence for money laundering from
7 years in prison to 25.

The proposed law would also be useful to prosecutors working for State
Attorney General Eliot L. Spitzer, whose office has taken on a rapidly
increasing number of white collar crime cases.

Mr. Spitzer said that the current statute "provides a safe haven for
criminals" who are aware that wire transfers and payments by personal check
are not covered by the state laundering law.

In the State Senate, the Republican majority leader, Joseph L. Bruno, has
expressed support for the measure, and Speaker Sheldon Silver of the
Assembly, whom Mr. Morgenthau has personally lobbied, is expected to
announce his support in the coming weeks, officials said. Efforts to contact
Mr. Silver through an aide were unsuccessful yesterday afternoon.

Some business-supported groups favor the proposal. "Money laundering enables
criminal organizations such as drug cartels to flourish, and causes
significant damage to the New York economy," said Thomas A. Reppetto, the
president of the Citizens Crime Commission, a business-financed group that
monitors the city's criminal justice system.

But some business leaders have objected to the bill, fearing that it may
increase the liability of financial institutions that are used as conduits
for money laundering.

In the hotel extortion case, prosecutors under Mr. Morgenthau were able to
indict the defendant, William Capparelli of Queens, on extortion charges,
but they said the case took much longer to investigate than a money
laundering case would have.

Mr. Capparelli could not have been convicted of money laundering under state
law because of its narrowness. And while his actions might have violated
broader federal money-laundering statutes, federal prosecutors do not have
enough resources to pursue every case, officials said.