Following a two-year investigation, federal prosecutors have submitted a mindboggling 30,000 pages of documentation and 2,000 recorded phone calls that paint an extensive picture of how one of Mexico’s most powerful drug-trafficking organizations raises, moves and eventually washes its illicit funds.
The indictment, issued by the Northern District of Texas, charges fifteen people with laundering millions of dollars in drug profits on a sleepy Oklahoma ranch on behalf of the Los Zetas cartel, the most powerful syndicate in Mexico today. In a trial scheduled for October in Austin, Texas, the IRS and other federal authorities will present findings based on thousands of financial records and recorded conversations and dozens of witness interviews that provide information on how the Zetas conduct their business.
The case became public in June when federal agents carried out a sweep of seven locations in several states and seized 200 boxes of evidence. Eight suspects have been arrested, and an additional seven remain at large. It is widely believed that some of the defendants will take plea bargains after providing federal authorities with intelligence. The most notable figure incarcerated is Jose Trevino Morales, the brother of two high-ranking Zetas, Miguel Angel Trevino Morales and Oscar Omar Trevino Morales.
U.S. authorities consider the Zetas to be the “most technologically advanced, sophisticated and dangerous cartel operating in Mexico.” The Zetas origins date back to 1999, when members of Mexico’s Grupo Aeromóvil de Fuerzas Especiales (GAFE), an elite special forces unit, were incubated by the Gulf Cartel, the oldest organized crime organization in Mexico. In 2010, following hostilities between the two groups, the Zetas broke away and founded their own well-armed syndicate based in Nuevo Lareda, directly across from Laredo, Texas. Analysts believe that the Zetas, who control 11 Mexican states, are Mexico’s largest drug cartel geographically, and that they have now superseded their chief rival, the Sinaloa cartel. They are best known for brutality, assassinations, extortion, kidnapping, beheadings, indiscriminate killings and torture.
The Zetas, with a leading role in narco-trafficking, have mastered the money-laundering cycle. Like other crime syndicates, they are involved in bulk cash smuggling, the black market peso exchange and trade-based money-laundering. For the last decade, they have also laundered money through the horse-racing industry.
Over a two-year period, the Zetas reportedly spent some $1 million per month on the purchase of quarter horses, which specialize in racing short distances. Hundreds of horses were purchased on behalf of the Zetas in Oklahoma, New Mexico and California. Some were paid for directly from narcotics proceeds, in large wads of cash, while others were bought using wire transfers from legitimate businessmen in Mexico to auction houses in the Southwest, and shortly thereafter, were sold back to the Zetas. Ownership of horses who won races was transferred at low prices, allowing individuals affiliated with the group to show apparent legitimate profits from minimal investments.
Many of the horses had colorful names, like Number One Cartel, while Tempting Dash and Mr. Piloto did particularly well for the Trevino bothers. Mr. Piloto won the All American Futurity race in 2010, netting an account controlled by the Zetas with $968,440. In 2009, Tempting Dash not only set a track record during the Texas Classic Futurity, but also netted more than $600,000.
The federal indictment, which reads like a pulp fiction novel, describes in movie-like detail how leading members of the Zetas clean their money. According to court documents, Miguel Trevino boasted that using the horse-racing industry was an “easy way” to launder money. More generally, Assistant U.S. Attorney Doug Gardner claims that that the Trevino brothers move $25 million monthly in drug proceeds between the United States and Mexico.
The indictment also records a wealth of other information on Zetas operations, including secret meetings of the three brothers across the border in Mexico; horses taken back and forth between the United States and Mexico; bribes of up to $10,000 to race gatekeepers to fix races; and bulk cash smuggled in hidden car compartments into Mexico, where only pristine bills were laundered in casas de cambio (exchange houses) and “dirty bills” with any kind of markings were used to bribe Mexican officials. Perhaps the most interesting information sheds light on how the Zetas abuse the banking sector to move their money. The affidavit records how two accounts at Bank of America dating back to 2009 were exploited by the Trevino brothers for transactions in excess of $1.5 million. A check drawn on the American Express Bank International was also cited. While neither bank is accused of any wrongdoing by federal authorities, the Zetas churned money through banking sector and to many shady characters in order to obfuscate the money trail and make it difficult for banking and law enforcement officials to follow the money.
Federal and local law enforcement authorities should study this and similar cases carefully, both to gather intelligence on the ways seasoned drug-trafficking organizations are now moving their illicit commodities and to consider creative steps to curb their activity. It is no secret that narco-traffickers launder money through cash-intensive businesses, money service bureaus, banks and legitimate businesses. Following the money often leads directly to the power brokers that if found and eventually prosecuted can do massive damage to a crime syndicate’s operations.
As policymakers consider the most effective way to fight drugs and money laundering, it will be crucial to destroy the infrastructure with which illicit actors launder their money and move their contraband. It is time to hit drug-trafficking organizations where it hurts most—their pocketbook.