Part II: Los Zetas and the Treviño's Personal Laundering Network

"redlogarythm" for Borderland Beat           Use this hyperlink for Part I

Note from redlogarythm: This is the second and final publication of a series about the money laundering network Los Zetas had in place in the U.S. between 2008 and 2012 when they operated a Quarter horse breeding business. I would like to thank Borderland Beat contributor "MX" for supplying some of the info used here.

Chart displaying the horse quarter laundering front managed by Los Zetas

As discussed in Part I of this series, Los Zetas ran a successful Quarter horse business from 2008 till 2012 in the U.S. It was one of the most sophisticated money laundering schemes done by the cartel to date.

Los Zetas laundered cocaine proceeds made in the U.S. and sent the money back to Mexico where it was laundered and funneled back into the cartel's network in creative ways. The network was owned by the siblings Miguel Angel and Oscar Omar Trevino Morales, and it included an array of strawmen, legitimate businesses and bank accounts.

In this Part II, we will cover how the horse purchasing process worked and how Los Zetas managed their assets. In addition, we will look at the different disguising methods they used to hide the illegal nature of their assets.

The Scheme Begins

On 24 October 2008, Ramiro Guajardo Villareal (“El Gordo”) bought 11 Quarter horses for US$96,900, which were paid through wire transfers by Basic Enterprises from Monterrey. The purchased horses included Memories Formicha and Crescent Moon Dash; both horses were transferred under 66 Land LLC in January 2012. On 14 December 2008, Mueller Racing sold a Quarter horse called Tempting Dash through Schvaneveldt Ranch Auction to El Gordo for US$21,500.

On 24 October 2009, Tempting Dash won Dash for Cash race held at Lone Star Park in Grand Prairie, Texas. As the legal owner of the horse, El Gordo won US$180,000. The story surrounding Tempting Dash reflects quite well how the assets were managed by Jose Treviño Morales. On November 14, the American Quarter Horse Association received legal documents indicating Tempting Dash’s ownership had been transferred to Jose. According to the documents the transfer had occurred on September 29 (even before Tempting Dash had won the Texas race). In the end it was revealed that Miguel Angel Treviño (“Z-40”) had forced El Gordo to sell the horse to Jose for only US$50,000. As we will see later, Tempting Dash was profitable asset for the network.

The first large scale purchase took place on 4 September 2009 at the Heritage Place Yearling Auction. Colorado Cessa bought 13 horses for US$546,000. From this quantity, US$516,000 were paid through a check written by Colorado Cessa against his own bank account at the American Express Bank International. In this auction Colorado Cessa acquired two horses called Morning Cartel and Feature Honor, which would then be transferred to Tremor Enterprises LLC and 66 Land LLC (two business entities controlled by Jose).

A similar move was used to purchase 18 horses in the Quarter Horse Yearling Sale in Oklahoma City between 17 September and 19 September 2009. In this auction, El Gordo bought the horses for US$430,800. Among them was a stallion called Maverick Perry, whose name was immediately changed to Mr. Piloto (Carlos Nayen, one of the people involved in the scheme, was nicknamed Piloto). Basic Enterprises, the money exchange company in Monterrey, paid for the horse in six different wire transfers that were structured in the following way:

• 09/25/09: $68,000
• 09/28/09: $100,000
• 10/05/09: $80,000
• 10/07/09: $80,000
• 10/09/09: $60,000
• 10/15/09: $60,000

The ownership of Mr. Piloto was transferred to Garcia Bloodstock and Racing (a shell company controlled by a strawman called Fernando Solis Garcia) on 15 January 2010. On 5 September 2010 the American Quarter Horse Association received a request for transferring Mr. Piloto’s ownership from Garcia Bloodstock and Racing to Tremor Enterprises, an entity controlled by Jose. According to the documents, the transfer took place on 10 July (two months before the request to the association).

Two more large horse purchases would take place in 2009. The first occurred between 3 – 4 October at Los Alamitos Equine sale. 18 horses were bought by the network for US$502,970 (Basic Enterprises paid for the whole lot). Among the horses was Blue Girls Choice, which was transferred to Tremor Enterprises LLC on 5 October 2009 (24 hours after the auction). Blue Girls Choice would be sold in Oklahoma City for US$102,000 on 5 November 2011. The last purchase took place at the Heritage Place Fall Mixed Sale. 9 horses were bought for US$112,900. The payments were done, again, by Basic Enterprises. Among the horses were Merry for Money and Thanks Jen. Both were transferred to 66 Land LLC.

By the end of 2009 the network was completely established. The cocaine money was flowing from the U.S. to Mexico where it was handed over to Trevino’s money launderers. They would purchase the horses using their own clean funds directly or using strawmen (although the use of strawmen would become widespread during the final stages, as we will cover later). After the purchase, the horses were transferred to companies controlled by Jose, sometimes after an amount of time during which the horse had been trained and obtained fame at national races, thus raising its value.

In the following section we will cover the banking structure of Los Zetas in this scheme. We were been able to identify 4 different bank accounts owned by Jose at Bank of America and three more used by two different strawman (two in the name of Felipe Quintero and another one owned by Adan Farias, all of them at Bank of America).

Disguising Methods

According to Internal Revenue Service (IRS) reports from 2009, José was a bricklayer and his wife Zulema worked as an office clerk. The year before, José earned approximately US$44,500 working for Dee Bron Inc. and Zulema made US$25,500 at Lakeshore Staffing. In 2009, José earned (according to his legal records) US$29,000 at Texas Storey Tile LLC and Dee Brown Inc. and Zulema did $29,000 at Lakeshore Staffing. During this time the Jose and Zulema owned a bank account at Bank of America (number #4881 1761 5000) were their family earnings were deposited and cashed. Between 1 January and 25 November 2009, neither José nor Zulema made withdrawals over US$1,000.

During 2009 the account never exceeded US$53,000 and the final balance of their account totaled US$2,000 by the end of the year. However, during this time, Jose purchased Tempting Dash. In trial, the IRS presented evidence demonstrating that Jose’s personal account #4881 1761 5000 did not present any significant withdrawal in an amount enough to buy any Quarter horse. This mistake of using funds without being able to allege a legitimate source would be the end for the Trevino’s.

Paper trail created by Jose Trevino to create a fake personal income flow

Jose operated his personal account by mixing money from two different accounts he owned at Bank of America to create a paper trail that helped him disguise the ownership of the funds. Jose founded Termor Enterprises LLC on 1 December 2009. Just 24 hours later, he opened a corporate account at Bank of America at the name of Tremor (#4880 2680 1054). Tempting Cash won the Texas Classic Futurity Race on 28 November. Jose, as the legal owner of Tempting Dash, deposited the profits of the victory in the Bank of America account.

By November 28, this account totaled US$461,901.66. On 11 December, this account issued a check to Jose for US$441,855.23. Jose deposited the sum in his other Bank of America account (#4881 1761 5000). On 21 December, Jose transferred US$435,000 from his personal account #4881 1761 5000 to Tremor’s account #4880 2680 1054. On 22 December, José wrote two checks totaling US$157,793 from Tremor’s account #4880 2680 1054 (one for US$100,000 and the other for US$57,793) and deposited them into his personal account #4881 1761 5000. On December 29 (a week later), he wrote another two checks from his personal account #4881 1761 5000 totaling exactly US$157,793 and deposited them into Tremor’s account (#4880 2680 1054), thus creating the false appearance of a legitimate profit.

"Layering"

This mechanism of moving the money around between accounts owned by the same person is called Layering. It is usually done through a series of deposits, withdrawals and movements of cash with the objective of creating a paper trail long enough to confuse the institutions moving the money and the regulatory. This makes it very difficult to track the initial deposit. In the end, launders create several “layers” by moving the money around.

With the rest of the money in Tremor’s account #4880 2680 1054, Jose arranged several payments for several nodes of the network. He paid US$1,000 to a relative called Rodolfo Treviño. US$52,318.20 went to Huitron Homes Inc., a construction company controlled by Eusevio Maldonado Huitron, a Mexican-American who was the trainer for most of the network’s best horses. Another US$100,405.90 went to Fred Stanley Equine Ins. for Tempting Dash maintenance. US$15,000 went to Ramiro Villareal and US$15,000 to Carmina LLC, a firm owning several horses being controlled by Nayen.

2010 was a year full of purchases. In January 2010, the network was fully operative. Two more accounts were opened at Bank of America, one for Tremor Enterprises LLC (#4880 3073 7266) and one for 66 Land LLC (#4880 2998 4143). On 14 January in the Heritage Mixed Place Winter Sale, Jose instructed a strawman to buy Dashin Follies for US$875,000 and Corona Coronita Cartel for US$250,000. Another strawperson called Luis Gerardo Aguirre payed part of the price (US$100,000); the rest of the amount was paid by Grupo Aduanero Integral, Agencia ADU (the business controlled by Alejandro Barradas) through wire transfers from Mexico. By the end of 2010 the ownership of Dashin Follies and CC. Cartel was transferred to Luis Gerardo Aguirre. The expenses were paid by Nayen and Victor Lopez, another strawperson. On 29 January 2012, after the two horses had been trained and its value appreciated, they were transferred to 66 Land LLC.

Over-invoicing stages, or an endless chain of fake purchases

In early September 2012, Jose, Nayen, Sergio Rincon, Raul Ramirez and several more individuals attended the Ruidoso Horse Sales Company Yearling Sales in New Mexico. Ramirez bid for several horses from Nayen and Jose. For three days the network purchased 23 horses for US$2,240,700. After the auction Colorado Cessa (who was not there in the sales event) was registered as the owner of the whole lot and paid for the horses with a US$2,240,700 check. It is worth mentioning that by this time Nayen had US$25 million deposited in several UBS (Union Bank of Switzerland) accounts in Miami. We were not able to establish if the checks written by Colorado Cessa were cashed out at UBS or against the ADT accounts in Mexico.

Between 16 – 18 September, the network acquired 31 horses for US$758,000 by paying through Grupo Aduanero Integral, Agencia ADU. The three most expensive horses were Big Daddy Cartel (US$113,000), Ima Perry (US$50,000) and Jess Sass Dash (US$150,000). All of them were transferred to Jose. Between 2 – 3 October at Los Alamitos Equine Sale in California, the network purchased 5 horses for US$442,000. Grupo Aduanero Integral, Agencia ADU paid for these horses through wire transfers.

The Network's Peak And Downfall

In the end, the massive investment in Quarter horses proved immensely successful when in September 2010 Mr. Piloto won the All-American Futurity race, the most famous competition for Quarter Horses in the U.S. Jose’s horseman received US$968,440. An additional US$100,000 was paid to the jockey as a winning bonus. US$899,549.70 were withdrawn and deposited in Tremor’s account #4880 2680 1054. It was later revealed that Mr. Piloto would not have won if Miguel Angel had not given US$10,000 to each of the race gatekeepers to give his horse some advantage.

The network was able to control the competition by bribing its organizers. By this time the network had diversified and specialized in such a way that some of the front men started opening bank accounts to receive the money directly from Mexico. For example, Felipe Quintero was acting as a horse trainer and strawman. On 12 February 2010, he opened two bank accounts at the Bank of America (#08900-76710 and #08906-75022). On 22 September, Quintero’s accounts received US$90,000 from ADT Petroservicios (Colorado Cessa’s company). Victor Manuel Lopez, a strawman in charge of making payments for horse maintenance did the following cash deposits: $5,000 (10/5/2010); $4,000 (10/6/2010); $3,000 (10/7/2010); $9,900 (10/18/2010). Each of the deposits were strategically under US$10,000, which is the quantity for which the financial institutions are obliged to file a Currency Transaction Report (CTR).

On 25 June, Adan Farias, another strawman and horse trainer, opened bank account #07349-69234 at Bank of America. This account accepted checks only (like a sBusiness Checking Account). The account was under the name of LA Horses Inc. During October, November and December 2010 the account had 12 structured deposits totaling $95,150 (all of them below $10,000) from money exchanges in Laredo, Texas.

• 10/21: $8,000
• 10/22: $5,500
• 10/22: $8,000
• 10/29: $9,900
• 11/01: $6,300
• 11/01: $8,000
• 11/02: $1,650
• 11/17: $6,000
• 11/17: $9,000
• 11/18: $9,000
• 12/20: $5,900
• 12/20: $9,900

The legal documents show how these payments were arranged in such a way that the money was almost impossible to track. For example, Nayen, who also acted as strawman for the network, distributed cocaine in Dallas for Miguel Angel. The drug proceeds were sent to Piedras Negras before Nayen took the money to money exchange businesses in Nuevo Laredo. He would then exchange the pesos for dollars and send them to the U.S. as maintenance payments. Sometimes Zulema would arrange some maintenance payments through the corporate structure she co-owned. For example, during June 2010, Zulema made several payments through Tremor’s accounts. On another occasion on November 2011, Zulema paid the expenses of several horses being trained at Lexington, Oklahoma, through 66 Land LLC.

2011 was another successful year for the network. The strawmen sold two large deals. One occurred in January (12 horses for sold for US$546,200 at Oklahoma City; Agencia ADU received the amount) and another one in November (8 horses for US$211,500 at Oklahoma City). In this last one Jose sold Blue Girl Choice for US$102,000 (he had bought it for $70,000), Number One Cartel for US$280,000, Devil Ridge for US$100,000 and Forty Force for US$40,000.

2012 saw a large purchase when between 19 – 21 January the network purchased at the Heritage Place Winter Mixed Sale at Oklahoma City 5 horses and 2 in-utero foals for US$280,400. ADT Petroservicios transferred $228,700 as partial payment on 15 February. The remaining US$52,700 were paid on 28 – 29 February 28 and 1 March. Someone made 8 cash deposits through the Bank of America office in Laredo to the Heritage Place’s account. 4 of the deposits were under $9,900. Since 2010 the FBI had spotted the network and started investigating it. As the legal documents show, the whole scheme was torn apart on June 2012 when the U.S. federal agents stormed the properties and ranches owned by the network and started capturing most of the members, including Jose. The trial was covered extensively by Borderland Beat.

Key Considerations: How The Network Made Money

Until this point, we have discussed how this network channeled drug profits from the U.S. to Mexico where it was laundered through legitimate business and then wired to the US to buy horses or to pay for the horses’ maintenance. We have described how the purchases were made. In the end the network spent literally millions of dollars buying horses and sold only a few of them.

One can ask himself: how did these people made money? When answering this question, we must consider that the money laundering business is not about obtaining profits but about disguising the illicit origins of the funds being laundered. If the laundering network can obtain profits managing the dirty money, the better for the owners of the money. Nevertheless, in fact most of laundering networks do not obtain profits but lose a certain amount of the money being laundered (sometimes even a 20% can be lost because of transaction/operating costs). The only thing that matters is to disguise the dirty money.

FBI agents at horse property owned by Los Zetas (credit: AP)

The Treviño network made money when horses such as Tempting Dash or Mr. Piloto won races, but these profits were an incentive, not a main goal. Miguel Angel’s goal was to invest vast quantities of money into the Quarter horse to create a large portfolio of assets (at least 500 Quarter horses) whose value would increase over time. The pool of cash could be incremented by two ways: through maintenance payments and through over-invoicing. The first method is simple. A lot of the strawmen who used by the network were nominal owners of companies in charge of breeding and training the horses. For example, imagine a company that owns 5 horses spends US$50,000 per month in fodder, stables and training. If someone in Mexico is trying to launder their money, they can wire them US$70,000 instead of US$50,000, thus disguising the whole amount as maintenance payments. Once in the U.S., the company will expense the US$50,000. The remaining US$20,000 can be kept in the bank accounts, or even better, they can be cash out as physical money. Legally, these $20,000 have been spent but in fact they are being kept by the network.

The over-invoicing method is even easier. A real example will clarify it. El Gordo bought Blue Girls Choice for US$15,000 in cash. At some point in time he sold the horse to one of his strawmen for US$135,000 (this means he re-purchased it for US$135,000). He re-purchased it again for US$30,000 and a fourth time for US$135,000, always acting through strawmen who paid with the network’s money. In the end, it was a matter of raising the price to pay more. In this way the network can fuel more and more cash into the system since the strawmen selling the horse transfer the funds to entities controlled by the Treviño brothers.

Conclusion

In conclusion, the network was established to create a diverse asset portfolio for Miguel Angel and his brother Oscar Omar. They would send dirty money laundered in Mexico to the network, which bought Quarter horses with it. At the same time the network would be maintained and filled with dirty cash disguising it as maintenance expenses and funneling it through several classical money laundering techniques.

We would like to point that the data presented here could be partial and that it is possible that the Treviño network was much larger. The Treviño’s portfolio is possibly large and diverse, and this scheme could be only a tiny fraction of it. If they were able to send money abroad and disguise it for years, it is likely the Treviño’s have larger reserves of money accessible from other parts of Mexico.

Los Zetas reportedly have small-time accountants for each of their criminal units, but there are others who sometimes reach high-ranking positions in the cartel. Among them was Juan Manuel Muñoz Luevano ("El Mono"), who managed a money laundering network from cocaine sales Los Zetas made in Spain.

Nowadays, the Treviño clan still dominates extensive parts of Tamaulipas through the Cartel del Noreste (founded by another Treviño relative, Juan Francisco "El Kiko Ozuna", and currently directed by his son Juan Gerardo "El Huevo"). According to several reports they would be laundering money coming from extortion, drug trafficking, human smuggling, oil theft and contraband through insurance companies located in Texas.

In the end the Treviño clan has been able to create several laundering networks through which their money is constantly circulating. Only time will tell when the next money laundering network (although maybe not as big as this one) is discovered.

Sources: Guadalupe Correa-Cabrera (2012); Eduardo Salcedo-Albarán & Luis J. Garay-Salamanca (2019); Joe Tone (2012); Reporte Indigo (May 2013 and July 2013); Proceso (2018); U.S. Indictment (2012)