Arson Attack on Monterrey Casino Part of Battle over Gambling Industry

Written by Steven Dudley

Buried in President Calderon's speech on a Monterrey arson attack which left more than 50 dead was the key to why it happened: the rise of illegal gambling establishments in Mexico under his watch, and the emerging battle in the underworld for control of these money-laundering havens.

In the middle of the afternoon on August 25 a group of armed men entered the Casino Royale in Monterrey, north Mexico. They poured gasoline around the building and set it alight, killing at least 52 people.

President Felipe Calderon rushed to condemn the killings, spending most of a 20-minute speech admonishing the "terrorists" for their barbarity and the United States for its consumption of illegal drugs, before hastily adding a single phrase which cuts to the heart of the matter -- the struggle for control of illegal gambling houses. (See 10-minute mark of video below.)

"I specifically ask the [judiciary] to review the legal decisions that have been taken, which allow the operation of many of these types of ... hidden transfer houses that criminals use in various parts of the country," the president said.

According to a recent article in Proceso magazine, the number of illegal gambling houses has risen from 198 to 790 since Calderon took office nearly five years ago. Many of these are illegal, the article adds.

An internal government report obtained by Proceso says that 140 of these businesses are unlicensed. This number fell from 185, in part, the magazine says, because illegal establishments were absorbed by legal establishments.

At the epicenter of this rise in gambling houses is the state of Nuevo Leon, of which Monterrey is the capital. Another excellent overview of the rise of these casinos from the Frontera Norte/Sur news desk (via Borderland Beat) said the number of casinos in the state increased from five to 57 in the last 11 years, adding that 31 are illegal.

Of these underground establishments, 12 are in Monterrey, according to a report by Mexico's ReporteIndigo. One of these was Casino Royale, a separate ReporteIndigo report says.

Aside from the uptick in phenomena that often accompany gambling, such as prostitution and gambling addiction (which Proceso chronicles in another excellent article), there are obvious connections to organized crime.

The United States government estimates that Mexico's criminal groups launder between $19 and $29 billion in proceeds from sales (Mexico's estimates are about half this). The money is laundered through numerous channels such as real estate, hotels, agricultural goods, transport companies, mineral trade, etc.

Heavily cash-driven establishments such as casinos have also traditionally attracted organized criminal groups. But casinos are technically illegal in Mexico, so the establishments themselves seek to have their games categorized as "skill" rather than "chance," thereby sidestepping the legislation, and leading to a proliferation of casinos posing as "foreign books" and "bingos," according to a 2009 report by the International Monetary Fund on money laundering in Mexico (download pdf file here).

What's more, the IMF says that authorities give out about five temporary permits per year for "fairs" and other local events. However, these "temporary" licenses have turned out to be more permanent in recent years, especially as their importance in money laundering schemes appears to be rising.

The result is rising tension in the underworld over who controls this lucrative and important business. This explanation of the Monterrey casino attack has been buried under other news narratives, namely the fight between the Gulf Cartel and their former armed wing, the Zetas.

In this fight, the Zetas are depicted as ruthless and incoherent. This week's events were no different. The gang was blamed for the deaths at Casino Royale. The motive, according to preliminary reports, was that the casino refused to pay its "quota," or extortion payment.

But there is something illogical about this argument. Criminal groups, while increasingly irrational and fragmented organizations, do not want to eliminate potential business opportunities, even those who are delinquent on their payments. They also do not routinely kill dozens of people in order to send a "message" about a relatively low rent activity, such as extortion.

They do, however, want to injure their enemies' businesses. Indeed, the first shots in this fight may have been fired two years ago, when assassins gunned down Rogelio Garza Cantu, alias "El Diablo," a prominent Monterrey nightclub owner, allegedly for failing to pay his quota to the Gulf Cartel.

Frontera Norte/Sur, however, says Garza was also part of the casino business. Just who his partners were in this business is not known, but the report adds that the current violence in the city may be the result of a battle between "casino mafias."

The evidence for this war is compelling and speaks to a problem that goes way beyond extortion payments. On May 25, four casinos in Monterrey were attacked and robbed simultaneously, signalling a fairly sophisticated operation.

The attack at the Casino Royale was also a sophisticated effort aimed at maximum destruction. As the video released by the Nuevo Leon government shows, the eight to 10 men involved were in and out of the place in less than three minutes.

The battle over the gambling business may be spreading to other areas as well. On August 15, a casino in Saltillo, Coahuila, was attacked by armed men. No casualties were reported.

None of this appears in Calderon's speech. Instead the president's focus is narrow in scope and decidedly lacking in retrospection about his own government's part in laying the groundwork for this tragedy.