'Like An Addiction': Thousands Of Americans Fall Prey To Mexican Cartel Timeshare Scam: Jalisco

 "Char" for Borderland Beat 

This article was reposted USA TODAY

Steve Fisher

For USA TODAY

FEBRUARY 22, 2024 

"EL TARJETAS"

The first call came in December 2011. It was a real estate broker from Mexico offering an exciting opportunity: A buyer wanted to pay Stephen, a financial manager from the Midwest, $65,000 for his timeshare in Cancún – far more than the $47,000 he had spent on it six years earlier. 

Stephen agreed. He loved his two-bedroom condo, with its view of the Caribbean and an entrance lined floor to ceiling in marble. The concierge treated his family like royalty. 

“We felt like kings and queens,” Stephen said. 

He had originally bought two weeks a year so his children could spend time near the ocean. As they grew older and joined sports teams, there was less and less time for family vacations.

The telemarketer’s call seemed fortuitous. 

But there was one catch: Stephen – then 54 – would have to first cover a Mexican federal tax of $3,900 that would be held in escrow, and credited back to him when the deal closed.

Looking back, that was the first sign that he was getting duped by a telemarketing scam, one that would end up costing him nearly $1.8 million as he tried time and again to sell his timeshare. 

“It’s almost like an addiction,” said Stephen, who asked that only his first name be used because he doesn’t want his employer to know. “I kept thinking the next person was going to help me get out of it.”

Treasury Sanctions Fugitive, Others Linked to CJNG Timeshare Fraud Network

According to a U.S, government investigation, over the past decade, thousands of Americans – many of them elderly – have fallen prey to a complex scheme involving one of Mexico’s most violent cartels.

In timeshares, the cartel has found a business venture whose profits, U.S. government officials believe, now rival the business it is most known for: drug trafficking. 

The Jalisco New Generation Cartel, commonly known as CJNG, started its timeshare fraud business in Puerto Vallarta and has now largely taken over the Cancún timeshare market as well. It has expanded the fraud network to at least two dozen call centers that contact U.S. owners of property in those two cities, as well as other areas popular with North American retirees, including Acapulco. 

Buying into a few weeks of a condo is seemingly hawked on every corner in many Mexican resort towns, and people on vacation buy in, only to find later that they’re paying for time they don’t use and are looking to sell.

“You have these people that are desperate,” said Brian Rogers, head of consumer advocacy nonprofit, called Timeshare Users Group, which provides information on how to avoid scams. “The victims are limitless.”

Based on their investigation, a U.S. government official estimated the fraud from Mexico-based companies at hundreds of millions of dollars a year. 

“It’s more cash in hand than they make from drugs,” said the official, who spoke on condition of anonymity. “The overhead is really low for this.” 

Few of the telemarketing firms have been criminally charged, partly because the business shape-shifts, abandoning shell companies and bank accounts as authorities identify them, then quickly creating new ones. 

The U.S. Treasury Department has sanctioned 40 Mexican companies associated with the Jalisco cartel and its telemarketing scam. But few people have been arrested.

The Federal Bureau of Investigation has received an average of 1,400 complaints per year, related to timeshare fraud from Mexico, over the past five years. And more people are reporting timeshare fraud every year.

“What we’re seeing here is an increase in the number of complaints,” said FBI Deputy Assistant Director James Barnacle. ”That’s evidence that the fraud schemes are growing.”

One of the most prominent cases was brought in 2019 by the U.S. Attorney’s Office for the Eastern District of Louisiana, which indicted six Mexican men for defrauding dozens of Americans out of $20 million. Four of the six – including the head of the company and an accountant – have been arrested and convicted. One was sentenced to five years in prison, one four years, and two got 18 months.

Ruthless, entrepreneurial cartel perfects the timeshare scheme

The Jalisco cartel is known for its brutality, with regular headlines across Mexico documenting beheadings, torture, and deadly gunbattle against Mexican military forces. They also are known for their business acumen and ability to diversify their revenue streams. 

As with their well-oiled drug trafficking operations, the cartel turned defrauding American citizens with timeshares into a science. U.S. government investigators found it refined its schemes over time, learning with each iteration what was most likely to persuade elderly Americans to send money to Mexican bank accounts. 

The cartel hires call center workers who speak perfect English and teaches them to lure unsuspecting Americans into believing they are steps away from freeing themselves from their timeshares, which often charge maintenance fees owners no longer want to pay. 

The employees are taught to craft documents with names of companies, brokers and attorneys that appear legitimate. In some cases, they steal the identities of actual lawyers and even real estate agents and promise they are them. 

Even if the timeshare owners do their own research, they’ll find slick websites.

If victims do catch on, the cartel has another layer prepared to draw them back in: New employees call them, sometimes months later, saying that their information was found in a police raid of a call center. They tell them they have been scammed and are owed restitution. 

Enter people posing as government investigators ready to help get to the bottom of the fraud, whose services come with their own costs – often far less than what the victim has lost. 

The money flows through Mexican banks, which cannot be counted on to take a stand, according to Spencer McMullen, an attorney in Mexican law based in Guadalajara. His office sees an average of one timeshare fraud case a month. 

“Mexican banks are not doing their job,” McMullen said. 

And the cartel controls its employees with an iron fist. Last June, cartel leaders turned their fury on eight call center employees who local news outlets reported had tried to quit. Their remains were found in 45 black plastic bags at the bottom of a canyon outside Guadalajara. 

The cartel expects its workers to make calls to Americans every day from 6 a.m. to 9 p.m., working in shifts, according to government officials.

One of those calls was to Filomeno Medina, 73, a retired United Airlines employee who in 2022 was told a buyer would pay $50,000 for 10 weeks of his timeshare in Cancún. 

Like Stephen, Medina was told he had to first pay a capital gains tax and a federal tax. Then they said they sent the buyer’s check via FedEx, but it was held up at the border, and he would have to pay a fee for it to be released. 

All the money would be refunded to Medina the day of the sale, the Hayward, California, resident was told. 

“You’re taking Mexican money out of the country so you have to pay some fees,” Medina remembered the callers telling him. They asked for $30,000 and Medina wired the money. 

That was not the end of it. By the time he hired a lawyer to sue for the funds, he had wired a total of $80,000 to Mexican banks, emptying his savings and 401(k). Medina went bankrupt and lost the sports bar he owned in Hayward. 

“I couldn’t stop crying,” he said. 

A sinister scam takes an even darker turn

Stephen was contacted again in 2013 by another person saying someone wanted to buy his timeshare. 

At first, this buyer seemed more legitimate than the last, he said – until they didn’t. Then, he found himself deep in another scheme, one more convincing than anything he had seen.

Like Medina, Stephen was asked to pay capital gains taxes and a customs fee to release the buyer’s payment. He wired $240,000 before figuring out that he was being scammed. 

He reported the company to the FBI’s Internet Crime and Complaint Center, according to documents Stephen filed with the agency. Officials there responded, confirming the company was fraudulent.

Stephen ignored further calls from the company, and they eventually stopped contacting him. Then, eight years later, in 2021, Stephen received a different kind of call, one offering relief from the harm he had endured.

The woman said she was a part of a Mexican law firm that was bringing a class action lawsuit against Mexican banks for knowingly accepting wire transfers on behalf of fraudulent companies.

The lawsuit was being reviewed by the Mexican Supreme Court, the woman told him. And Stephen was due damages and restitution that would eventually total more than $6 million, according to case documents. 

Stephen researched the woman’s law firm. Everything seemed in order.

The attorney general of Mexico was involved as well, she told him, and so was the Financial Intelligence Unit. He would need to pay fees to those government institutions before he could receive the settlement. 

These included tens of thousands in clerk fees, printing fees, docket fees, court of appeals fees, interpreter fees, honorary court costs, a court tax and an exit tax on the settlement, the documents show – and more than $100,000 more directly to the government entities. 

After Stephen paid the fees, things got even more serious. He was told he had been flagged for money laundering by the International Criminal Police Organization, known as Interpol, in Mexico because he had sent so much to Mexican bank accounts.

As proof, the attorney sent him a copy of his passport with a red flag notice attached. His restitution would be withheld until he paid to be removed from that list, she said. He paid it.

And he was on the U.S. Interpol list too, which would mean tens of thousands of dollars more. Fearing arrest back home, he paid that, too, but then thought to call the Interpol headquarters in the United States, only to find out there was no record of him being flagged. 

In May 2021, Stephen filed another report with the Internet Crime Complaint Center detailing every dollar he had transferred from 2011 to date, according to a copy of the complaint. 

This time, he said, he received no response. 

The scam, spanning more than a decade, had spiraled into multiple complex operations involving 99 wire transfers, more than 150 people and at least 12 Mexican bank accounts, with Stephen making the final payment in December, according to documents reviewed by USA TODAY and The Courier Journal in Louisville, Kentucky, part of the USA TODAY Network. By late last year, Stephen had paid Mexican telemarketing scammers just shy of $1.8 million, according to the records.

Stephen said it is difficult to look back over the past decade and think about all the money he sent to Mexico. Sometimes, in moments of weakness, he finds himself hoping the Mexican Supreme Court might still send the promised $6 million to his bank account. 

It’s in those moments that he asked himself: If he had just sent the $35,000 they asked for in January, would that have done the trick? 

SOURCE: USATODAY