Beyond Drugs in Los Zeta's Effort to Launder Money

Borderland Beat

Carlos Miguel Nayen Borbolla-Number 5

Carlos Nayen Borbolla was one of 19 people indicted last year in a massive money laundering scheme that law enforcement officials say poured millions of dollars in drug proceeds into the American quarter horse industry, profiting leaders of one of the most ruthless criminal organizations in Mexico. As that case heads to trial in Austin the 15th of April, new records say Nayen also played part in a large operation running guns from Texas, Arizona, New Mexico and Oklahoma to an illegal firearms trafficking organization in the North Texas area.

Weapons and cash were smuggled south into Mexico, while the group moved drugs north across the border to the United States, using proceeds to buy automobiles, houses, jewelry and other valuable assets, according to an indictment transferred last month to a federal court in Austin under the Western District of Texas.

The case, the majority of which remains sealed, was filed last year in an Eastern District of Texas court, a month before another indictment, handed up by a Central Texas grand jury in May, listed Nayen among suspects who helped buy, train and race horses under companies used to launder money for members of the violent Zetas cartel.

Benefiting from the horse industry scheme, court records show, were Miguel Angel Treviño Morales, believed to be the highest and most feared leaders of the Mexican criminal organization, and his two brothers, Oscar Omar and Jose Treviño Morales.

Nayen and Jose Treviño were among more than a dozen people arrested last summer in a series of raids at homes and ranches across the Southwest. The two other Treviño brothers haven’t been caught.

The original indictment against Nayen shows he was responsible for making payments for the care and upkeep of the quarter horses using bulk currency, wire transfers and other forms of financing from Mexico. He also arranged for more than $500,000 in payments when Jose Treviño sold a variety of horses, including one named Number One Cartel and another named Forty Force.

Government officials said the extent of Nayen’s involvement became more apparent as the investigation continued. The case later filed against him was brought to the Austin division to be handled with the trial, said Special Agent Mike Lemoine, a spokesman for the Internal Revenue Service’s criminal investigation division.

“These are ongoing investigations,” Lemoine said. “They don’t stop after the first indictment. We continue to investigate the individuals and the organizations to make sure we are taking out the entire group of alleged criminals.”

But Lemoine and officials with the DEA, FBI and the U.S. Attorney’s office couldn’t provide comment on specifics as prosecution is pending. Nayen’s attorney, Frank Rubio, based in Miami, also declined to comment.

Nayen, known as “Carlito” or “Pilotos,” is listed as number 21 on the additional indictment, which appears to charge about 40 people, all whose names have been redacted.
The records show that from about January 2007 to April 2012, Nayen and others bought and transported guns, magazines, and ammunition to the North Texas trafficking organization, which would then smuggle the weapons into Mexico.

In one occasion on March 6, 2010, a member of the criminal group moved 37 firearms and ammunition that were purchased at a gun show, while a month later another suspect transported 28 firearms and ammunition in a truck and trailer, the records said.
In Maverick County, members of the group were found to have owned 47 rifles in June 2010 and about 23 rifles in August of that year, some of which had serial numbers that were destroyed, and the collection included AK-47s and AR-15s, the filings said. Law enforcement officials discovered one suspect who had on him five .223-caliber rifles, $5,900 in cash and a bulletproof vest, the records said.

The criminal group also moved drugs and more than $1 million from from January 2007 to April 2012, funneling the goods to and from Mexico across Dallas, Fort Worth, Rowlett, Hillsboro and other North Texas cities, according to the filings.

In October 2010 in Mesquite, law enforcement officials said two of the defendants had about 287 kilograms of cocaine, 14 pounds of methamphetamine, 95 pounds of marijuana, 5 pounds of crack and about $412,000 in cash. The cocaine was delivered to Plano, while the currency was prepared for transportation back to Mexico, the filings said.

Court records show federal agents found that one of the suspects kept more than $50,000 in cash and $370,000 worth of jewelry hidden in two safe-deposit boxes in February 2011, while another that year in Rowlett stuffed more than $1.7 million in four bags left in the back of a vehicle.

Dallas criminal lawyer David Finn struggled to a delay the start of the high profile money laundering trial.  U.S. District Judge Sam Sparks denied the motion, according to federal documents released in the U.S. District CourtWestern District of Texas.

Finn represents José Treviño Morales, brother of  Zeta kingpin Miguel Angel Trevino Morales. The family moved to Lexington, Oklahoma, in January 2012 to operate a large ranch of more than 400 quarter horses, as reported in October. A little over a year, José Treviño Morales, his wife Zulema and her family lived on a street with potholes in Balch Springs. 

The U.S. government accuses that the purchase of quarter horses was part of the method  launder millions of dollars in Zeta drug profits. Five Treviño family members  along with a dozen others, were named in the criminal indictment unveiled last June. José Treviño Morales, a naturalized U.S. citizen, has been in custody near Austin since his arrest in June in Oklahoma.

Finn said that U.S. government lawyers delayed the release favorable evidence to his client. U.S. Assistant Attorney Doug Gardner said in court papers that defendants have been provided materials "as soon as it is available."

Now, Finn has an "avalanche" of evidence ranging from documents to transcripts of recordings, supposedly translated from Spanish to English. A disc created only a stack of paper two meters high and there are more than 100 discs, Finn said."This is not a test of ambush. This is a trial by avalanche. "

On last Sunday, federal records show, Finn received a transcript of wiretaps, . Contains this conversation: "What does your brother have to do with it? Your brother has nothing ... he's clean, he's just a normal guy ... he has nothing to do with this and the other is pure ... "

The US transcripts used are sometimes unintelligible.It isn't clear who is talking to whom.

U.S. government lawyers, said one of the persons included in a taped call is now dead, according to documents.

Finn refers  to his client, Jose Treviño Morales, as "the common man."  He argues that his client is innocent.

"If my client is guilty of anything, is to be the brother of two suspects," said Finn, a former criminal judge in Dallas County and former federal prosecutor in Dallas/Fort Worth. "If he is guilty of anything, is being a little naive."

Jury Selection began on Schedule

PDF to properly enlarge/Court Calendar

The horse trial began Monday April 15  in Austin. Jose Treviño Morales , a brother of two top leaders of Los Zetas. As U.S. District Judge Sam Sparks appointed by former President George W. Bush, opened the proceedings, defense lawyers filed documents listing potential evidence.
Judge Sparks said Los Zetas have become the biggest cartel in Mexico, operating in many countries. The five defendants are accused of buying racehorses to hide the cartel's illegal drug profits. Prosecutors say Morales disguised the drug money profits through the purchase of racehorses at a ranch in Oklahoma. He has been charged with conspiracy in federal court in Texas.


Morales' wife and daughter have pleaded guilty to lesser charges. His brothers remain at large. Judge Sparks, asked members of the large jury pool to stand if they were not available for three possibly four weeks. He stated Texas was not like California who could stretch trials for months. 

In Austin prospective jury members were asked to excuse themselves if they had any previous dealing with prosecution or the defense team. 

Mr. Gardner  

Mr.Lawson -FBI

Mr. Pennington-IRS

Mr. Finn and Ms. Williams

These five are standing trial:

Jose Treviño Morales

Francisco Colorado Cessa "Pancho"

Fernando Solis Garcia- "Freddy"

Eusevio Maldonado Hultron

Jesus Maldonado Hultron - "Jessie"

Jury Selective continued throughout the first day

Opening arguments begin Tuesday April 16 in federal court in Austin.

PDF 

Cartel's Sway in Austin Growing in size and Complexity

By Jazmine Ulloa

The operation that federal authorities say the Zetas used to filter millions of dirty dollars through the U.S. horse racing industry started with an old formula drugs go north, masses of cash go south

But like many crime organizations across Mexico, the vicious gang has grown into a sophisticated, transnational enterprise trafficking in more than just illicit narcotics. So, too, have evolved its financial arms in Texas and across the United States.

Law enforcement officials say the intricate network invested its illicit proceeds into front companies across the Southwest to breed, train and race American quarter horses with names like Chanel Chic and Carrera Cartel — while at least one of its members also played a part in a crew running firearms.

The case — which has implicated nearly 20 people and goes to trial Monday in an Austin

federal court — is one of the largest money laundering investigations ever to be prosecuted in Central Texas and could provide a window into the inner workings of a dark and deadly business. But authorities say it also is only one example of a new norm.

An American-Statesman analysis of more than 200 federal cases filed in Austin over the past decade has found that Mexican drug cartels have expanded into some of the most complex organized crime operations in the area and across the state, dipping deep into enterprises such as forced prostitution, weapons and the sale of larger quantities of harder drugs, such as methamphetamine and heroin. With violence and political upheaval in Mexico, authorities say, they are increasingly turning to legitimate U.S. businesses as places to invest and conceal those illegal earnings.

“We have always had international cases because of the (U.S.-Mexico) border,” said Special Agent Mike Lemoine, a spokesman for the Internal Revenue Service’s criminal investigation division. “But now we are getting more cases of narcotics traffickers wanting to put that money into the United States. It is a safer investment.”

The number of money laundering cases filed in Austin has fluctuated over the decade, but court records show that in the past five years investigations involving gangs and Mexican cartels have grown more sophisticated in scope, netting higher numbers of defendants for a wider variety of charges.

About 40 money laundering investigations since 2000 have led to more than 200 federal cases filed in the Austin division of the U.S. Western District of Texas, involving other offenses such as drugs, firearms and human smuggling or trafficking.

The largest of those investigations between 2000 and 2005 implicated only nine people. Since 2005, two busts have each spurred federal charges against roughly 40 defendants, while five busts — including one last week — have each rounded up 20 or more suspects.

Ahead of the curve, authorities say, have been the Zetas, a once small, volatile enforcement arm under the Gulf Cartel based in the northern Mexican state of Tamaulipas.

Different rules

While in Mexico the narco group has gained notoriety for beheadings and dismemberment, bitter brutality it uses symbolically and with impunity, court records show that in Texas and the United States it has followed different rules of engagement, seeping in quietly, often by extorting undocumented immigrants, converting rural areas into distribution zones and using advanced accounting practices in businesses it runs as far north as the Dallas area and beyond.

At least two major rings with ties to the Zetas, one involving firearms and another involving violent human smuggling, have been broken up in Central Texas, while federal agents in San Antonio have accused the group of peddling political influence in Mexico. Investigations there were opened in recent years into its alleged dealings within the real estate industry and have even embroiled a Texas State University professor and Tomás Yarrington Ruvalcaba, the former mayor of the Mexican border city of Matamoros and ex-governor of Tamaulipas.

Among Central Texas authorities, the expansion of such criminal organizations has been slowly acknowledged. Only in 2010 did Travis County join the long-standing High Intensity Drug Trafficking Area program, which coordinates and funds joint law enforcement efforts against organized crime groups.

Other large cities across the state had been members of the program for years.

But law enforcement officials say they have significantly ramped up their cooperation among local, state and federal agencies to find the connections between drug distributors and suppliers and to track transactions, realizing that, as one agent put it, “borders can be good for criminals, bad for cops.”

‘Blurry picture’

Authorities now know of at least six cartels, including the Zetas, operating in Austin, up from four identified in 2011. They also know the area has long served as one of the traffickers’ prime “transfer zones,” sitting on a cluster of major arteries and corridors, including Interstate 35, which stretches from Laredo to Minnesota.

The Zetas made one of their earliest, most menacing appearances in 2008, when investigators broke up a human smuggling ring that brought Mexican and Central American immigrants to San Marcos from stash houses controlled by the narco group in McAllen and across the border in Tamaulipas. The victims were brought to a trailer, stripped to their underwear and guarded by men with pistols until their relatives paid their transport fees.

But no one organization has control here, said Greg Thrash, resident agent in charge with the Drug Enforcement Administration. “It is a very blurry picture and one that changes often,” he said.

Thrash said the ties to Mexican criminal groups have been familial and generational. One of the most sweeping investigations, resulting in more than 40 arrests in 2011, revealed that  La Familia, a quasi-religious, hyperviolent group born in the mountains of Mexico’s Michoacán state, had a base of operations in Austin. Group members funneled large quantities of cocaine, marijuana and especially methamphetamine to places such as Atlanta and Kansas.

Now, as the power of La Familia has diminished, the organization has been taken over by the group known as the Knights Templar.

Just last week, two multiagency task forces busted what they called two elaborate drug distribution networks, including one that had been operating out of an East Austin body shop and had ties to the Knights Templar.” The only way we are able to do this is by all pitching in together, by using our resources, our information and our intelligence to get these organizations and to take them out branch, trunk and root,” U.S. Attorney Robert Pitman said Thursday.

Still, some law enforcement officials and crime experts say their efforts have a long way to go. The majority of money laundering investigations into Mexican organized crime groups still stem from drug interdiction efforts, and such operations cannot be conducted in a vacuum without quelling the consumption and demand for illicit goods in the United States, said Guadalupe Correa-Cabrera, government department chairwoman of the University of Texas at Brownsville.

In the case going to trial Monday, officials allege that Zetas bosses along the northern Mexican border, in marked territories known as “plazas,” directed shipments of narcotics from Colombia and Venezuela via boats, autos and planes to sell in the United States.

Calling the shots at the top, investigators say, was Miguel Angel Treviño Morales, one of the top leaders of the Zetas, and his brother, Oscar Omar Treviño Morales — nicknamed, respectively, “40” and “42.” But both men remain on the loose. 

Going before a jury instead will be another of their brothers, Jose Treviño Morales, whom court records say ran one of the most profitable and prominent businesses in the horse racing industry. His attorney, David Finn, contends the brother is an innocent man targeted only because of his family.  

Borderland Beat Jose Trevino: Trial Begins with US Asking for 60 Million Z-40, Z-42 and Jose

Borderland Beat Los Zeta's Racehorses Auctioned off

Sources: Statesmen, Mexirojo Statesman, mysanantonio , Statesman,  Reuters, Texas Courts

Categories: Austin, Austin-American Statesmen, Carlos Nayen Borbolla, Jazman Ulloa, Jose Treviño Morales, Los Zetas Money Laundering Trial, texas, US District Judge Sam Sparks