How Did Marty Byrde Launder Money In Ozark?
Ozark is a Netflix original series that follows the story of the Byrde family (Marty, Wendy, and two kids, Charlotte, and Jonah) as they launder money for the Navarro Drug Cartel, the second largest Mexican drug cartel. Marty begins laundering money for the cartel while working at his financial services firm in Chicago, keeping it a secret from his family. Doubt and suspicion on behalf of the cartel's representatives and enforcers (Del) leads to Marty's business partner, Bruce, being killed and Marty only being able to save his own life by promising to move to Osage Beach, Missouri on the Lake of the Ozarks and launder even more money for the cartel.
Marty claims he will be able to launder more money because the Ozarks is a tourist destination and vacation spot for families that is filled with cash based businesses. The summer influx of tourists will mean that it is normal for small cash based businesses to make lots of untraceable money in a short period of time. This general premise is enough for Del to let him live and give him a chance to clean more money for the cartel.
Marty quickly packs up his family's life and moves them to the Ozarks.
While watching the show I wondered several times how money is laundered. There is a fantastic explanation scene where Marty teaches Jonah how laundering works, and I understood that part, but there is even more that is glossed over without detail.
The basic laundering idea is that you have dirty cash that was earned through illegal means. In this case it happens to be drug money. You want to use that money to buy stuff that you want, but any large purchases will involve the IRS or someone else looking into how you got that money. You could, of course, use the dirty cash to buy small stuff that would raise no questions, such as groceries and rent, but for anything larger like cars and real estate, you need to clean the money.
You need to run the money through some process to conceal its true source and make it appear legitimate. One method is to own a business that receives a large portion of its revenue in the form of cash from anonymous customers. If your business regularly accepted payments from named customers through personal checks or debit and credit cards, then the IRS could just check your records and see that an unusually large amount of money came from someone it should not have. If your business, instead, collects payment in cash, then the IRS can have doubts, but there would be no proof that the revenue did not come from legitimate business activities.
Cash based businesses include things like bars, restaurants, car washes, arcades, and strip clubs. These businesses usually get paid in anonymous cash, so having lots of untraceable cash would be reasonable and expected.
To launder dirty money you would need to own a cash based business (either by starting it or buying an existing business) and start adding illicit money in with the normal revenue from the business. The flow should be small and slow enough not to raise too many eyebrows from anyone watching. If a business that has made $100,000 per year each year for the last decade suddenly brings in $15 million, that would be odd enough to invite attention. You would want only moderate increases that seem realistic.
By having this money come into the business, it has taxes paid on it and can be deposited into the banking system. This money then becomes legitimate and can be used to buy anything you like with it.
This process makes sense and I have no questions about it.
At some point in the show after Marty Byrde buys the Blue Cat restaurant and lodge, he starts to launder money by making improvements and renovations to the buildings, and that is where they lost me.
He says that he will launder money by buying construction services and equipment and claiming that he bought more and paid more than he really did. He says that he will inflate construction costs. For example, he buys and installs enough carpet for 5 cabins, but claims somewhere (receipts? tax forms?) that he really bought and installed enough carpet for 25 cabins. He also talks about air conditioners. He would actually buy 5, but claim to have purchased 25.
I do not understand how that launders any money. As I understand it, he is the owner of the Blue Cat but does not own the construction companies or suppliers that he works with to get the carpet and air conditioners. The other companies that he is working with are not in on the scam and do not know that they are helping to launder money. For them this is a legitimate sale and job.
If that is the case, then how does claiming to have paid more than he actually did launder any money. Wouldn't he be losing money?
I can only think of two possible ways for inflating construction costs to launder any money.
The first way is as some sort of tax write off. It is possible that he will pay less in taxes on his business revenue if it is not seen as profit. If he makes $1 million in revenue, but has $1 million in business expenses, then he has earned no profit and has nothing for the government to tax. This would not add any dirty money to be laundered, but would instead prevent him from paying out taxes on the money he has already laundered. This is possible, but Marty does not explain it enough to know and I don't know enough about the tax code to say with certainty that this is how it works.
The other way it could work is if he owned the construction companies and suppliers that he was working with. If he owned them, then it would be like another business he could launder money through. By inflating the construction costs, he would be able to add dirty money revenue to those businesses. It might be that the IRS, if they thought something was suspicious, would only look one layer deep. That is, if they thought the construction company had something fishy going on, they would only look to see that the money came from the Blue Cat, then they would check the records of the Blue Cat to see if what they claimed to pay matched what the construction company claimed to make, and not look into where the Blue Cat's money came from. I see this option as less likely than the first, but it is still possible.
I have done some digging through articles I found on Google, but have not been able to find any solid answers. All the results simply talk about the easy to understand method and totally ignore the inflation of construction costs.
The same type of laundering scheme eventually leads Marty to want to build a church so that he can inflate those costs. It is obviously a strong enough method that he tries it multiple times.
I really want to know how it works and what is really going on here. I have shared my best ideas about what it might be, but I would love to hear from you in the comments as to what you believe it is. Do you know how Marty Byrde launders money? Please share your thoughts!