Cartel money laundering cases tough but critical

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By CHRISTOPHER SHERMAN, Associated Press

McALLEN, Texas (AP) — When it comes to arresting drug traffickers and dismantling organized crime, the investigation into a U.S. horse racing operation allegedly laundering money for one of Mexico's most powerful cartels is rare — and difficult to prosecute.

Unlike most drug busts, the backbone of sophisticated money laundering cases is a complicated trail of paper — reams of bank, tax and property records — that usually take years to track. But hitting organized crime where it hurts the most — the money flow — is the most effective way to shut the crime networks down, investigators say.

"The money is much more valuable to the trafficker than the drugs are," said John Kirby, a former federal prosecutor in San Diego, who worked on money laundering cases against the Arellano-Felix cartel, among others. "If you want to hurt these guys that's how you do it, because that's the end product. That's what they really want. And if you can try to take that away, then you're really having an impact."

During his 10 years in the U.S. Attorney's office, Kirby said he prosecuted hundreds of drug traffickers. "I had eight good money laundering cases. They're just hard."

Chasing organized crime's money flow isn't a new tactic. The same racketeering laws being used against Mexican cartels today are the ones that targeted the mafia in the 1970s. Money laundering was spelled out as a federal crime with a 20-year maximum sentence per count in 1986 as law enforcement officials increasingly recognized that just seizing the drugs wasn't enough to bring down traffickers.

In this latest case, federal agents raided an Oklahoma ranch, a New Mexico quarter horse race track and sites in Texas on Tuesday, alleging a brother of a leader in the Zetas drug cartel was using a horse-breeding operation to launder money. Millions of dollars went through the operation, which bought, trained, bred and raced quarter horses throughout the southwest United States, the indictment says.

Eight people were arrested, including Jose Trevino Morales and his wife in Oklahoma. Two of his brothers and four others remain at large.

"That case will be a model, a blueprint for a long time to come of how we need to take on these 21st-century criminal techniques," said Douglas Leff, who was chief of the FBI's Asset Forfeiture and Money Laundering Unit before recently returning to New York. He expects more cases because of a 2010 Mexican banking law that makes it difficult to deposit U.S. dollars into accounts across the border. That means cartels will do more money laundering in the U.S., he says.

"If we can follow the money successfully, that's going to be the avenue that leads us to the top of the food chain rather than somebody who's just a trusted manager," said Leff, who spent some time on the case while at headquarters.

The government's investigation into the horse operation began in January 2010 with a tip from an informant in Mexico that two Trevinos at the top of the Zetas organization were the real buyers behind two quarter horses that sold for more than $1.1 million at an auction in Oklahoma City, according to court records. The IRS had its own investigation of Jose Trevino, and the investigations merged in February 2011.

Usually the drug cash was smuggled back into Mexico and run through currency exchanges for an initial rinsing. Then the Trevino brothers recruited Mexican businessmen to wire payment or write checks for horses bought in the U.S. to make the transactions appear legitimate. They would reimburse them in cash. At other times, workers for the Zetas' Dallas cocaine distributor passed drug cash directly to Jose Trevino — at least once at a Wal-Mart outside Dallas — cutting out the return trip to Mexico, court records say.

One informant told investigators that he distributed $4 million in horse-related expenses in one year for the Zetas and all the money came from drug proceeds.

Kenneth Rijock, who was a banking lawyer in Miami before spending a decade as a money launderer for Colombian drug traffickers, noted the Zetas' scheme had a number of flaws. Jose Trevino's ranch stood out among his neighbors. And Rijock called the fact that Trevino and his wife reported a combined income of $58,000 in 2009 — the same year Trevino was telling people he bought a winner of a horse for $25,000 — "insane."

"That guy should be making half a million dollars or more," said Rijock, author of "The Laundry Man," who since serving a federal prison sentence has trained law enforcement agents and banking officials in money laundering detection.

"In the world of money laundering you're only limited by your imagination," he said. "And what money launderers do is they stay up nights and weekends just to find new targets of opportunity."

Any business from perfume to race horses has potential to be a front for organized crime. Some are natural fits, such as art and antiques where people are private about transactions, willing to accept cash and don't keep good records for tax purposes. A few recent cases include:

— In January, a New York federal judge sentenced a Laredo-based perfume impresario to nearly 20 years in prison for conspiring to launder millions for the Sinaloa cartel. Vikram Datta sold large shipments of perfume to Mexican buyers and was paid with drug proceeds that had been first run through currency exchanges in Mexico at a steep discount.

— The following month, a federal grand jury in San Antonio indicted Antonio Pena Arguelles on money laundering charges alleging that since 2000 he invested drug profits in the U.S. for the Gulf cartel and Zetas. He has pleaded not guilty. Documents also name him as the conduit between the cartels and payments to Mexican politicians, including a former governor, for influence and protection.

The recent run of cases doesn't signal a change in tactics, but rather the natural arc of complex criminal investigations that begin by busting a load of cocaine on a Texas highway or getting a tip from a bank.

"If we can actually find out how the money is being moved and disrupt a major source of it, that hurts," Leff said. "It cripples the cartels themselves."

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