Double Life Hustle: A Cocaine Pusher With a Champagne Front

This is the first installment in a two-part series on VICE, presented by STARZ.

Read the second installment, "The Problem with Dirty Money," here.

"In Brooklyn, money, it changes hands all night long, and it's not the kind of money that you can deposit in the bank. But all that money needs to end up somewhere. They call it a drop bar. We just hide the entire city's dirty money right in plain sight," the novelist Dennis Lehane writes in his screenplay for The Drop.

The drug business in the United States is ubiquitous. It's an industry worth $100 billion a year. A constant tide of cocaine, heroin, and every other conceivable narcotic flows north, and then the cash recedes back south to a supplier, often a cartel.

Imagine you are right in the middle of this flow. You rose from running a lookout for foot soldiers in the Bronx to overseeing a supply chain with entire gangs in your distribution network. The leadership of the Sinaloa Cartel directly supplies you with enough cocaine for a significant portion of New York City. For you, the game has changed; you haven't handled product in a long time. The weight you move now is money.

Your success has created a whole new set of challenges. Your safety deposit boxes are full. Your cut is now so large that a surplus of cash is your problem. To solve it, you have to live a double life. After decades in the game, you realize that half of your hustle will be appearing legit. Here is a step-by-step guide on how to do just that.

Money Laundering 101

Let's begin with the basics: Money laundering is the placement, layering, and integration of capital into a financial system in order to disguise its origin and legitimize its use.

Placement means getting your cash into the banking system via small deposits, funneling it into the revenue stream of a business, using cash or a shell company to purchase assets like real estate, or introducing it into an exchange trading system.

Layering means moving that cheddar between your accounts, exchanges, funds, assets, or transactions so its origin can't be traced.

Integration means spending, accessing, or collecting capital that is now clean. In your operation, one point of integration is when your laundered money travels back to Mexico for the purchase of more drugs. Fortunately for you, the cartel prefers to move its own money across the border in large amounts, welded in boxes to the bottom of trucks, hidden in cars, etc. All your people have to do is hand over a large bag of cash.

Recently, Homeland Security Investigations began deploying special teams to target cash being smuggled south. The agency is cracking down on the trucks and hitting the cartels where it hurts. Your bosses are getting nervous. At some point, this could become your problem, so pay attention.

Laundering fees vary greatly, and aside from tax evasion methods, these schemes usually operate at a loss. Expect to get about 80 percent of your dirty capital back as clean money.

Cash, the O.G.

There are a few things most people don't realize about a large quantity of cash. First of all, it's extremely cumbersome. Even when you're dealing with vacuum-packed $100 bills, it's a high-volume asset. Not that your soldiers are dealing only in hundreds anyway. Your crew is pulling in a very large and unwieldy volume of five-spots and tenners.

This may seem obvious to you, but the other thing about a large quantity of cash is that it is extremely dangerous to have in your possession. The perils of running a criminal enterprise often overshadow the inherent risk in running a highly successful criminal enterprise. Whether the cash is rolling through a bill counter at a drop house downtown or hidden in a safe in a basement in the suburbs, a large amount of drug money can get you or your people killed.

A Nightclub for Dark Money

The simplest way to secure cash is to break it into increments of less than $10,000 and have a group of "smurfs" deposit it into several accounts. But this method is slow and directly traceable by the IRS. If you are pulling in $100,000 a month, smurfing is out of the question.

"You have to get somebody within a legitimate financial institution and compromise them," Melvin Patterson, a spokesman for the DEA, explains. "You usually do that by offering them a percentage of the amount of money that is going to be laundered to ignore some of their protocol to allow the drug trafficking organization to launder their money through their business."

With that in mind, you are about to become a nightclub owner. It is time to update your wardrobe. You need to dress like the kind of high roller who just bought a high-end nightclub in the Meatpacking District. This is your second life. If anyone asks you what you did before, say the words, "Ran a hedge fund," "Derivatives," and "Client portfolio," and most people will have already stopped listening. Remember, no one who made enough money to quit working in finance and buy a nightclub for fun wants to talk about finance.

Now don't forget why you are here. Just as you must act the part of a legit club owner, you must not lose the mindset of a cocaine dealer. Keep your head in the game. This club is a funnel through which you will slowly pour your cash along with they money of everyone else who walks through the door. The revenues streams merge, not unlike simultaneously pouring rum and coke into a glass. The liquids are nearly impossible to separate, but the wrong person with the right nose can smell it. So as the funds go in, you will move them around to several different foreign accounts for layering purposes.

The beauty of your nightclub gig is that it is cash-intensive and the services provided vary in value. This means you can say that last night's bottle service was X amount for Y amount of people and actually charge half as many people half the price you've got on the books. At the end of the night, the only things that can really be traced are the liquor and champagne bottles.

On top of that, you've got a labyrinth of costs, such as promotional services to get celebrities, big names, and high rollers into the club. It's very difficult for the authorities to determine whether you used such a service, whether you needed it, and what it should have cost. A nightclub is a highly subjective business full of variables that the IRS will have a hard time appraising. Of course, the IRS can if it really wants to, but it is unlikely to do so unless you're being indicted for cocaine trafficking. In that case, the IRS is the least of your concerns. You've got the cartels to worry about.

The Overlap

The point of the club is to hide your drug money. The last thing you want to do is end up on the government's because of the club, so start slow. You've got no room for error. Much like your real job, you are selling an experience—a fantasy—and you are naming the price. You want to make it as difficult as possible for any one else to keep track of the value and quantity of all the services, products, and ingredients that go into creating your client's Saturday night.

The other rule is to keep the customers coming back. Now, you do have access to absurd quantities of cocaine, but don't be a fool. Most people aren't going to commit perjury just because you give them free blow. So keep your drugs, along with everyone else's, out of the club and out of the picture. You are trying to launder drug money, not make more of it. And if someone dies from or gets arrested for using someone else's drugs inside your club, then you are going to have a serious problem. So get yourself high-end private security and your own in-house EMT. At this point, you are leading two very separate lives. Do not let them overlap any more than necessary.

The one place where they can overlap, however, is your network. You and your lieutenants have access to a very large network of attractive people whom you can trust at least to some degree. These people are going to become your smurfs, but they aren't going to realize they are smurfing drug money. Out of two or three dozen of these people, you are going to randomly select three or four each week, give them $20,000 each in cash, and tell them to come to the club every other night and spend every single penny.

If they steal your money, then you've learned that you can't trust them anyway. If they ask why, you tell them that it is because they are beautiful and you need attractive people in your club. Vanity is a remarkable force, and people will believe just about anything that precedes the phrase "because you are beautiful." This tactic will be especially effective early on, while you are still getting the hang of running a legal business, since you already have cash piled up at home and you need to move it into the banking system before it gets jacked.

Next are your DJs and performing artists. When you offer a well-known DJ an amount that is twice their performance fee in cash, they aren't going to ask a lot of questions and you will have their loyalty. A well-known DJ will ensure that a lot of people are lined up at the door and ready to pay money to enter your club and buy drinks. This way you can claim that twice as many customers entered and drank twice as much. If the DJ is someone you trust, offer him or her a monthly Saturday night residency. You are going to have a lot of vodka and champagne to give away to customers in order to keep your liquor and cabaret (a club requirement in NYC) license, but no one is going to complain about that.

Night Vision

The most important thing to keep in mind is not to lose sight of what you are doing. The people running your club, aside from whoever is making the bank deposits, need to believe that you are trying to run a profitable business. But you don't want it to become too profitable or there will be no room in the margins for you to launder money.

The good news is that it isn't easy to create a profitable nightclub. It generally takes several years to see a return on such an investment. Your goal is to operate at a slight loss, not enough to be obvious, but enough to launder in your real source of income. Now, if you actually become profitable and there is no way to stop it, don't panic. You might have a legitimate business on your hands. You paid a lot of money in cash for your club, and if it ends up being profitable on its own, then it is simply a good investment. Let it run and buy another club. But remember, you have to pay taxes on honest money. Do not forget this.

There are some ironies here: One is that the most successful clubs don't seem desperate. They are the clubs that don't feel like they are trying to make money, which yours is not. Another irony is that your dealers and couriers on the street are likely (and unknowingly) selling blow to the same people who end up coming to your club, letting you launder their money into your bank account by pretending to sell only alcohol. Since alcohol, cocaine, and narcissistic fantasies are all highly addictive, your customers are going to keep coming back. If that ain't capitalism, what is?

Download the STARZ app to catch up on Power now, and don't miss the Season 3 premiere on Sunday, July 17, at 9 p.m. on STARZ.

This article was paid for by STARZ and was created independently from VICE's editorial staff.