As feds target ‘blood gold’ and dirty money, this Miami refinery has bigger problems

Republic Metals, the South Florida-based gold refiner that is one of the nation’s largest, has filed for bankruptcy, a further sign of trouble for the U.S. precious metals industry, which has been targeted by federal prosecutors investigating “blood gold” for more than two years.

Republic — a family-owned company with a 38-year history in South Florida — buys raw gold and silver from the United States, Canada and Latin America, processes the metal and then sells it to corporate giants, including Tiffany & Co., Apple and General Motors.

Because of its proximity to Latin America, which is rich both in gold deposits and drug traffickers seeking to launder money, Miami has become a major hub for the U.S. gold industry.

Republic’s financial problems were uncovered in April, when the company said an internal inventory could not account for a large amount of precious metal at its plant in Opa-locka. That shortfall, coupled with serious bank debt, led Republic to try to sell itself to a major Swiss gold refiner. The deal failed, leading the company to file for Chapter 11 bankruptcy in federal court in New York on Nov. 2.

The bankruptcy filing comes at a time of upheaval for the industry. The U.S. Attorney’s Office in Miami is investigating domestic gold refineries for buying illegally mined and smuggled metal from Latin America. So-called blood gold is extracted from delicate rainforest ecosystems at great cost to the environment and local workers — and manufactured into jewelry, bullion and electronics for U.S. consumers. Drug-trafficking organizations and criminal gangs are said to be financing a significant portion of the region’s gold trade. The metal is difficult to trace to its source and easy to smuggle, making it attractive to money launderers.

Prosecutors have already brought down a major Miami-based competitor of Republic, NTR Metals, charging three of its gold traders in a $3.6 billion money-laundering scheme. But they are continuing to investigate the industry.

There is no connection between that investigation and Republic’s bankruptcy, according to a source close to the company who was not authorized to talk on the record. Large-scale inventory shortfalls have happened at other gold refineries because of accounting errors and other mishaps.

In January, the Miami Herald published an investigative series, “Dirty Gold, Clean Cash,” showing how U.S. reliance on Latin American gold drives widespread environmental destruction, human-rights abuses and mercury poisoning. On a visit to a ravaged Peruvian mining town this year, Pope Francis condemned illegal gold as a “false god that demands human sacrifice.”

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This 2014 photo shows a deforested area dotted with blue tarps, marking the area where miners reside, and craters filled with water, caused by illegal gold mining activities, in Peru’s Madre de Dios region. Pope Francis will visit the area Friday. Rodrigo Abd AP

Republic’s past dealings have caught the attention of authorities: In 2012, Republic bought a large volume of gold from a Peruvian metals dealer who is suspected by U.S. prosecutors of having links to drug traffickers. The gold dealer, Pedro Pérez Miranda, was charged this year in Miami federal court with money laundering. He’s in jail in Peru.

Between May and November of 2012, Republic bought at least 3,200 kilos of gold, worth more than $174 million, from Business Investments, one of Pérez Miranda’s companies, according to Peruvian police documents obtained by the Miami Herald.

U.S. prosecutors have zeroed in on Pérez Miranda, who was tried and acquitted of narcotics money laundering in Peru in the 1990s. His sales to NTR Metals formed the basis of the $3.6 billion money-laundering case filed last year. Pérez Miranda, known in Peru by the alias “Peter Ferrari,” maintains his innocence and is awaiting extradition.

The three NTR gold traders pleaded guilty and went to prison. NTR’s parent company, Dallas-based Elemetal, paid a $15 million fine, agreed not to trade gold internationally for five years, and shut down its refinery in rural Ohio, costing hundreds of jobs.

Meanwhile, other Miami-based gold companies, including Republic, continue to face scrutiny from prosecutors, according to sources familiar with the investigation. Those sources said Republic is in negotiations with prosecutors, although the nature of those discussions isn’t clear.

Republic CEO Jason Rubin declined an interview request this week. So did the company’s attorney, Roy Altman. A spokeswoman for the U.S. Attorney’s Office in Miami also declined to comment.

Republic employs about 200 people, mostly at its main plant in Opa-locka.

Gold has a wide variety of industrial uses, from components of smartphones to car parts, as well as more traditional products like necklaces and rings. A Tiffany subsidiary is one of Republic’s biggest creditors and is seeking $17 million paid for a “trade debt,” according to a bankruptcy court filing.

Republic says it owes $86 million to its raw metal suppliers — including mines in Mexico, Canada and Peru — and its gold-and-silver buying customers, who range in size from Tiffany to small shops in downtown Miami’s jewelry district. Republic also owes $177 million to eight banks that provide financing for gold transactions — the all-important cash that keeps the trade flowing internationally. In total, Republic declared liabilities of $265 million, greatly exceeding assets of $175 million, which mostly consist of precious metals, according to the bankruptcy filing.

Pedro Pérez Miranda, whose alias is ‘Peter Ferrari’, has been charged in Peru with laundering drug money through the gold trade. He was recently indicted in Miami on a similar charge. Alessandro Currarino El Comercio

Republic appears to have stopped buying gold from Pérez Miranda after those 2012 deals, and before the U.S. investigation began. NTR stepped in to fill the vacuum, buying hundreds of millions of dollars of gold from Pérez Miranda’s companies and smuggling it into neighboring countries to hide its tainted origins, according to federal court filings. The gold was then shipped to Miami.

The case alarmed gold traders and banks involved in what had historically been a lightly regulated industry. Since then, crucial bank financing has dried up. Another Miami gold company, Kaloti Metals & Logistics, shut down this fall because it couldn’t get loans, according to the company’s lawyer, Michael Hantman. Banks don’t want to take the risk of financing deals that could be tainted with illegally mined gold.

Industry in trouble

Republic’s bankruptcy spells further trouble for the American gold industry.

While the company’s main U.S. competitors have been acquired by foreign multinationals in recent years, Republic is owned by South Florida’s Rubin family.

With Elemetal’s Ohio plant shuttered, and Republic filing for bankruptcy, only two major gold refineries are still standing in the United States: Asahi Refining in Salt Lake City, Utah, and Metalor Refining in Attleboro, Mass. Both are owned by Japanese conglomerates, although Metalor remains headquartered in Switzerland.

In its bankruptcy filing, Republic acknowledged inventory “discrepancies” were at the root of its financial problems. But the company did not provide details on whether gold and silver actually went missing or if it made an accounting error.

Such discrepancies are not unheard of in the industry because of the vast amounts of metal involved. In 2014, South Africa’s Rand Refinery said a software glitch led it to overstate its gold inventory by 2.7 tons, roughly $113 million at the time, requiring an emergency loan from shareholders to bridge the gap.

After discovering the severity of its shortfall in June, Republic asked its lenders for breathing room and began looking for buyers. The firm came close to securing a sale to Swiss gold refiner Valcambi in October. The companies even put out a news release saying a deal had been struck. But Republic and its senior lenders were ultimately unable to reach terms with Valcambi, leading to the bankruptcy filing in November.

“With limited cash, and the inability to trade metals or deliver refined goods,” Republic wrote in a court filing, it could not do business.

Republic’s lenders include Mitsubishi International Corporation ($54 million); the Dutch financial institution Coöperatieve Rabobank ($31 million); Bank Leumi ($23 million) and Bank Hapoalim ($11 million), both of Israel; and New York-based private bank Brown Brothers Harriman ($9 million).

Meanwhile, Republic remains on the hunt for a buyer. If it can’t find one, it would have to liquidate, selling its plant and other assets. Valcambi declined to comment when asked if it was still interested.

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Miami Herald archive

Republic’s sophisticated refining operation, as well as its remaining precious metals inventory of $141 million, could still make it an attractive target. The company says it processes about 350 tons of gold per year, and seven times as much silver, as well as producing 55 million coins, bars and other minted products.

Mined metal is delivered to Republic’s refinery in rough bars of gold and silver alloy. Workers at Republic’s high-security plant then process the metal mix and separate it into purer bars of gold and silver. Huge cauldrons pour molten mixes of metal. Chemists test for purity in a lab. Giant minting machines spit out bars and coins. Employees and visitors, including Miami Herald reporters allowed to tour the site last year, walk through full-body scanners.

The company’s bankruptcy is now causing serious problems for customers, according to court filings.

One wholesale jewelry seller said he placed an order for nearly $15,000 worth of silver on Oct. 16.

Normally, Republic delivered metal within a business week, the customer, Yong Choi of Miami-based NCF Florida, wrote in a Dec. 11 letter to the bankruptcy court.

This time, however, the company “was evasive in answering phone calls and continued to push back the expected delivery date,” he wrote.

That meant his company couldn’t deliver jewelry it had promised to customers.

“NCF Florida is a small family-owned business,” he added.

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Republic was founded in 1980 by Richard Rubin. The company grew into one of the largest gold refiners in the United States.

As the company expanded, however, it ran into trouble. The global price of gold skyrocketed in the 2000s, leading American companies including Republic to buy more gold from untapped sources such as Latin America. But the boom in mining there was accompanied by criminals infiltrating the industry.

In 2012, the U.S. Department of Justice attempted to seize more than $20 million held in a Republic bank account. The government claimed the money belonged to a drug organization selling gold to launder dirty money.

But unbeknownst to New York prosecutors, Republic had previously tipped off Miami-based Drug Enforcement Administration agents about the alleged narcos and was cooperating with a DEA investigation. The feds returned the money.

Then, in 2015, Colombian authorities charged Goldex, a Colombian gold dealer, with money laundering. The company was a major supplier for Republic, as well as for competitor Metalor.

Republic stopped buying metal from Goldex, which denied wrongdoing.

Jason Rubin took over the business after his father died in 2013. In the next few years, Republic changed its sourcing policies in Peru and Colombia in a bid to prevent dirty gold from entering its supply stream. It would no longer buy gold from smaller dealers, or “aggregators,” who sell gold that can be impossible to trace and may come from illegal mines. Instead, Republic began buying only from large, licensed mines owned by multinational companies. Many competitors continued to buy from aggregators.

The Republic program was called “Peace of Mined.”

Nicholas Nehamas is an investigative reporter at the Miami Herald, where he was part of the Pulitzer Prize-winning team that broke the Panama Papers in 2016. He and his Herald colleagues were also named Pulitzer finalists in 2019 for the series “Dirty Gold, Clean Cash.” He joined the Herald in 2014.
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Jay Weaver writes about bad guys who specialize in con jobs, rip-offs and squirreling away millions. Since joining the Miami Herald in 1999, he’s covered the federal courts nonstop, from Elian’s custody battle to A-Rod’s steroid abuse. He was on the Herald team that won the Pulitzer Prize for breaking news in 2001. He and three Herald colleagues were Pulitzer Prize finalists for explanatory reporting in 2019 for a series on gold smuggled from South America to Miami.