This post is about Los Zetas money laundering network working in the US between 2008 and 2012 operating through the Quarter horse business. It´s by far the largest post I have posted in BB until now. As always, I´m not a native English speaker so I apologize for the syntaxis/orthographical errors contained in the text
I would like to thank BB member and contributor MX for supplying some of the info being used here, without his contribution this couldn´t have been possible.
Every illicit network needs a constant flow of money for 3 reasons. The first one is to continue funding the operations engaged by the network. The second one is to accumulate reserves/investments in order to use them in times of need. The third one is for pure personal benefit (benefits coming from the network´s activity incrementing the members´ wealth) According to the type of illicit network and the activities engaged by it the structures, channels and laundering strategies will be different. Al Qaida, ISIS or the Tamil Tigers used Hawalla (or Hundi/Fei Chien) for transferring funds to outside operatives. The Basque terrorist organization ETA used local cooperatives in the French border in order to launder the ransoms and contributions obtained by the financial cells in the Basque Country. The Provisional IRA controlled a dozen pubs in Dublin´s downtown and at least one taxi company until the 1990´s. Colombian drug traffickers use the Black Market Peso Exchange (a complicated compensation payment mechanism) in order to obtain pesos leaving the dirty cash in the US to local businessmen. The examples are almost endless.
In Mexico the cartels aren´t an exception. Each organization is divided in cells and each cell has at least an accountant interacting with local businessmen which act as de facto laundrymen. These people are referred as Operadores Financieros (Financial Operatives) and the criminal structures cannot operate without their aid/assistance. These people gather cash coming from express kidnapping, prostitution, local drug distribution, extorsion, contraband or (and these ones are the real key players) large quantities of cash coming from large-scale drug distribution. The CJNG controls several sushi restaurants, the Sinaloa Cartels participates in the National Administration by enjoying large public contracts (or through local petrol stations), los Viagras are the de-facto rulers of Michoacan and control the construction market and the license-granting, the Northeast cartel launders money through Texan insurance companies, etc.
The Zetas weren´t an exception and this paper tries to focus on only one of their several money laundering operations. On June 2012 several properties located in US soil were seized by federal agents, dozens of people were captured and at least 500 extremely expensive Quarter horses were seized in an operation against a money laundering network working directly for the Zetas second in command: Miguel Angel Treviño Morales. In Borderland Beat the operation and subsequent legal procedures were described in detail. Chivis and users did an incredible job describing the hearings and trials that came after 2012. My only intention with this post is to analyze the economic/financial aspect of the network, explaining how it worked and why it was possible for the closest relatives of one of the US most searched men to launder at least $25,000,000 in less than 4 years on US territory, using in the process American Financial Institutions that should have been aware at least about something going wrong.
As always, the statements being done here are totally mine. Since the information I have been able to gather is partial and partially classified I had to work using logic and assumptions that might be wrong. Again, these assumptions/theories aren´t facts but pure speculations. It would be great to add new details or to correct the errors you may find. Please, feel free to suggest or point any of them.
THE ZETAS´ INDEPENDENCE:
We all know the story about the Zetas´ foundation. Osiel Cardenas Guillen, top Gulf Cartel boss by the 1990´s, was able to gather some members of the Grupo Aerotransportado de Fuerzas Especiales (GAFE) to work for him as enforcers and personal guard. Led by Arturo Guzman Decena and his second in command Heriberto Lazcano Lazcano, the enforcement cell quickly expanded being joined by members of local gangs or pandillas. Among these new recruits was a young crook from Tamaulipas called Miguel Angel Treviño Morales who already was a member of a local gang specialized in the smuggling of drugs and contraband through the border. By 2008 Miguel Angel was second in command of Los Zetas which at the time had become so powerful (mainly because of their central role in combating Sinaloa´s Los Negros enforcers trying to occupy Tamaulipas) that the tacit alliance between the Gulf Cartel and the Zetas was known as La Compañia (the Company) At some point during 2008 or 2009 the Zetas degree of independence became so high that they started operating without taking into consideration the Gulf Cartel´s decisions. They didn´t split yet but started operating as a de-facto different organization.
By this point Miguel Angel Treviño (known as Z40) started operating his own networks and businesses and I think it was in this new environment of independence that Miguel Angel Treviño and his brother Oscar Omar (Z42) started developing their own laundering network in order to launder, disguise and storage part of the benefits they obtained as Zetas´´ heavy hitters. By 2008 Los Zetas were smuggling significative quantities of cocaine through Tamaulipas into the US. Much of this trade was directly overseen by Miguel Angel himself, who started building a laundering system in the US involving in the process several hard-core allies and his brother Jose Treviño Morales, a hard-working bricklayer who at the time had nothing to do with the carnage and tragedy personalized on his brothers.
In the end Miguel Angel should have thought: how can I launder my personal profits from cocaine sales in the US in a way that the funds appear clean, totally un-correlated with respect to drug-trafficking and become a reserve that can be used in the future? The answer was simple: through the US Quarter Horse sector.
THE NETWORK BEGINS:
In my opinion this laundering network was personally designed by Miguel Angel Treviño Morales as a way of keeping his and Omar´s personal earnings in the hands of a trusted individual (their brother Jose) since they couldn´t rely in too much people. Jose wasn´t under suspicion, he was a normal guy living with his wife and four children in the US and totally disconnected from the drug trade in Mexico.
In order to introduce Jose into the Quarter horse sector they had to rely on at least an individual who was already into the business. A man with contacts and experience in the Quarter horse business. This man turned to be Ramiro Guajardo Villareal (aka el Gordo), a Mexican who according to legal documents attached to the case was already acting as horse purchaser for Mexican wealthy individuals.
Now that Miguel Angel had the man for beginning purchasing horses he needed a network of individuals in the US who would be the owners of the horses after Ramiro started buying them. These people would act as nominees/strawmen and sometimes would even manage one or more companies which would be assigned the ownership of the horses purchased by Villareal. Another of their roles (extremely important) was to make payments for the feeding, breeding and training of the horses in order to maintain the network fully operative. I´ve been able to identify nearly 20 individuals, some of them real and some others operating with fake IDs, that where the owners of horses or of companies owning the horses. In the end these strawmen would end up buying the horses themselves following direct instructions being told by phone from Tamaulipas by Miguel Angel Treviño himself.
Now we must add a third party: the money providers, the ones who would pay the purchase of the horses. There were two means of paying for the horses after auctions. In some cases it was Jose Treviño who paid for the horses through checks written by himself from his owned bank accounts at Bank of America depositing them into the accounts of Heritage Foundation (the company in charge of auctions) Nevertheless, in most of the cases it was a network of three Mexican businessmen transferring the money from companies they controlled in Mexico to the US. These people were Francisco Pancho Colorado Cessa (who paid through his company ADT Petroservicios), Alejandro Barradas Lagunes (who paid through a company called Grupo Aduanero Intergral, Agencia ADU) and Ramiro Villareal, the same guy who initially purchased some horses (through wire transfers coming from a money exchange/Casa de Cambio operating in Monterrey) We will further discuss the story of these funding providers, analyzing in detail their business ‘profiles and background.
In the end the whole network was designed in order to benefit Jose Treviño and his wife. They both stablished from 2009 to 2011 and directly controlled three businesses: Tremor Enterprises LLC, 66 Land LLC and Zule Farms LLC. I´ve been able to identify three bank accounts from Tremor Enterprises LLC and one from 66 Land LLC, all of them opened in the Bank of America. These bank accounts would be constantly receiving wire transfers and cash deposits (most of them of less than $10,000 in order to avoid detection) from the network´s strawmen and Mexican financiers and even from several horse race tracks when their horses started winning races.
What I´m going to do now is to start analyzing Miguel Angel Treviño´s cocaine distribution network which was the source of a great deal of the money being channeled to the network.
As I´ve mentioned above by 2008/2009 the Zetas were quite autonomous from the Gulf Cartel. A decade at their service must have been enough to build strong contacts with Colombian, Bolivian or Peruvian providers who started supplying cocaine smuggled through Central America (remember the hard-core Zeta networks in Guatemala) At the same time the contacted several Calabrian ´ndrines who were demanding product in order to distribute through Europe (Project Reckoning would reveal a big cocaine trade between the Gulf cartel and the´Ndrangheta in 2008) In the legal documents I´ve been able to gather the people testifying about these cocaine networks are known as Confidential Informants number 1,2 and 3.
CI#1 was working for the Piedras Negras plaza boss (a guy known as Moy) in 2008 as drug distributor in the US. At a certain point Omar Treviño Morales (Z42) killed Moy because he was stealing from him. CI#1 owned several Quarter horses since 2000 and used to organize races in Mexico. Another Zeta heavy hitter called Jesus Enrique Rejon Aguilar (aka El Mamito/Z7) shared his passion for horses and it was through him that CI#1 competed on several occasions with Z42 (although he always lost for fear of retaliation if he won) After developing such friendship ties Z42 told CI#1 that as he was a drug distributor in the US and had contacts he and another guy called Celso Martinez would be granted with 200 kgs. of cocaine. It was at this moment that CI#1 met the top boss, Miguel Angel Treviño Morales (Z40) and one of his associates, a man called Carlos Nayen, who at the time was also dealing in cocaine for Z40 at Dallas, Houston and San Antonio smuggling it through Laredo (Texas) Their relation would be very close since from October 2010 to January 2011 CI#1 would give Nayen 25 kgs. of cocaine every two weeks (at the time Nayen was also purchasing 100/200 kgs. from another Zetas supplier and smuggling nearly 1,5 tons of cannabis thorugh Nuevo Laredo´s Ports of Entry into the US)
One of CI#1 operatives was CI#2, who was at charge of receiving, counting and storage of proceeds from drug distribution. Each week they would receive from $1,500,000 to $2,000,000 (one time they received $5,000,000) They would count the money bill by bill, separating those bills containing marks or strange signs (these money would later be used in order to pay bribes at the border or to make payments for the distribution network´s maintenance) The rest of the money would be introduced in ice chests lined with foam and handed over to Miguel Angel Treviño´s personal accountant (a guy known as Cuno) who would take them to unknown locations.
Another example illustrating how the Treviños obtained the money later laundered through the network in the US is provided by CI#3. CI#3 oversaw bulk currency pickups in Chicago, Houston and Dallas coming from cocaine supplied by the Zetas being distribute locally. CI#3 would take the cash to Piedras Negras or to Nava in Mexico. There CI#3 separated the money classifying it in $20, $50 or $100 bills, rejecting any type of bill who looked marked or old which would then be used for bribery payments. Cuno, Z40´S accountant, would then pick up the cash and take it to money exchanges in Mexico. CI#3 told investigators that once the laundering network was stablished sometimes the money would be directly sent to strawmen integrated in the Treviño´s laundering project in order to make payments for the maintenance of the horses. CI#3 explained that one of their main clients was operating from Dallas. In on occasion by June/July 2010 CI#3 organized a meeting between the client´s crew and Jose Treviño in the Wall Mart located at Buckner Road (Interstate 30, Dallas) with $100,000/$150,000. Jose Treviño was waiting in the dark with the lights of his car on. Once the money was given to him, he used it for paying for the horses’ maintenance.
In summary, by 2009 Miguel Angel and Omar Treviño Morales were selling high quantities of cocaine to local distributors in the US. This trade generated a considerable amount of cash which was smuggled back to Tamaulipas. There it would be ordered and classified according to different bills denominations and handed over to Z40´s personal accountant who would clean it through money exchange businesses and other methods.
What happened with this money the accountant took away? Well, according to CI#1´s statement the purchases of Quarter horses done by Ramiro Villareal were paid trough the bank accounts of several Mexican legitimate businesses who were allied or linked to Miguel Angel Treviño. According to CI#1 Alejandro Barradas and Colorado Cessa used their corporate bank accounts in order to pay for the horses in the US and thus operating with totally clean money. It was after the payments had been done that Miguel Angel Treviño would compensate these payments giving these Mexican businessmen the money he had obtained from cocaine sales (the money the accountant had taken away) This mechanism is very common in the money laundering industry. It´s called Compensation and is extremely popular because it enables the parties to avoid the traditional three-step laundering process of placement, layering and integration. By using the compensation mechanism, the drug dealer (or the party with dirty cash) is able to obtain funds coming from already stablished and apparently innocuous businesses and use them in order to purchase whatever he/she wants. Then the dealer must hand the money to the party who did the payment. This party, since he owns a legitimate stablished business, shouldn´t have any problem cashing the dirty money in order to making it appear as the same income he gave to the dealer. This mechanism is very common not only for illegitimate transactions. It is used in a widespread basis in lots of countries in Asia and the Middle East and even by migrant communities in Europe) It´s even legal in the United Arab Emirates, where it´s known as Hawalla.
Node diagram showing the cashflow between dealing cells in the US and the transfer to the businessmen
Now I´m going to analyze the three known businessmen used by the Treviños in order to make the payments for Quarter horse purchasing, after which I´ll discuss how the purchases were done at the US.
There were three main guys making the payments from Mexico. The first and by far the most interesting one was Francisco Antonio Pancho Colorado. Colorado was a business entrepreneur from the State of Veracruz. According to the trial documents he was a close associate and compadre of Efrain Teodoro Torres (aka Z14), the Veracruz plaza boss during most of the 2000´s. During the trial at which the laundering networks would be judged in 2013 Z14´s accountant (Jose Carlos Hinojosa, Charly) testified that Colorado Cessa and Z14 collaborated in order to create ADT Petroservicios, the company that would be used by Colorado Cessa in order to purchase the horses from Mexico. According to Hinojosa´s statement it was agreed since the very first moment that Hinojosa would contribute with money and Colorado Cessa would be the legitimate face of ADT Petroservicios. Immediately after being founded ADT started receiving public contracts from the Estate-owned oil company PEMEX. It must be pointed that ADT Petroservicios wasn´t a company involved in oil extraction. As a result of the economic de-regulation and liberalization imposed in the 1990´s by the Salinas de Gortari and Zedillo Administrations PEMEX started getting rid of daily activities such as road construction, mapping, facilities cleaning or prospecting, handing such activities in the form of public contracts to the public sector. ADT was involved in the management of these activities. It´s very well-known and documented how these contracts were and still are assigned (first of all you need political contacts, and then you need money, a lot of money, to bribe those in charge of deciding who wins the public contract) This bribery was exposed during the trial when Hinojosa testified that he knew that Colorado Cessa and Z14 had contributed with $12,000,000 to the campaign of the PRI Governor candidate Fidel Herrera (2004/2010) We´ll never know how much did exactly went to the PRI´s pocket, but according to information published on Mexican public records Cessa´s ADT Petroservicios won at least 30 contracts for 2,000 MXP millions ($83 millions) Also during Fidel Herrera´s administration ADT Petroservicios won 22 contracts from de Secretaria de Desarrollo Agropecuario, Rural y Pesca (Agricultural, Rural and Fishing Development Secretary) for 20,554,000 MXP ($1,700,000)
Without doubt ADT´s biggest bid (the jewel of the crown) was a PEMEX contract consisting on the manufacture of 5 industrial drills for oil prospection for $91,000,000 (USD) ADT Petroservicios created in 2009 a subsidiary called MTTM Servicios Petroleros which partnered with Canadian Xtreme Energy Group. According to the initial deal Xtreme would manufacture the drills and ADT, through MTTM, would deal with PEMEX and the Mexican Administration. As a good faith gesture PEMEX paid ADT Petroservicios $4,600,000 (USD) as an advancement. ADT transferred these $4,6 millions to Xtreme. In the end Xtreme went bankrupt and handed only 3 of the drills. ADT sued Xtreme but both companies gathered forces to appeal the sanction imposed by PEMEX for the breach of the contract.
By the time the US laundering network started working (2009) ADT Petroservicios had 4 known headquarters in Mexico: 3 in Veracruz and 1 in Tamaulipas.
The second Mexican businessman is the most unknown one. Alejandro Barradas Lagunes, a Mexican from Veracruz. The only information I´ve been able to find locates Barradas as a Gulf Cartel financial operator using a customs business to smuggle containers filled with drugs through the Gulf coast. This customs business might be Grupo Aduanero Integral, Agencia ADU, a customs firm in charge of wiring literally millions of dollars to the Quarter horse auctions being held in the US. At some point Alejandro Barradas refused to play as strawman for the Treviño network and Z40 ordered his assassination.
The third businessman was called Ramiro Guajardo Villareal, the man who started buying the horses during the first stages of the network´s existence. How did Villareal send the money from Mexico to the auctions in the US? According to legal documents Villareal used a money exchange/Casa de Cambio in Monterrey. This business was called Basic Enterprises SA de CV, was located at Jose Vasconcelos Avenue #1501 in the town of San Pedro Garza Garcia (Monterrey´s most luxurious town) and owned by two brothers: Arturo Sergio Paez Muñoz (an equity partner in the business) and Mauricio Gerardo Paez Muñoz (the guy operating it)
Villareal would arrive to Monterrey in a car with cash hidden in a secret compartment. He identified himself as the owner of several import businesses and sent a guy identifying himself as Francisco Rodriguez to Basic Enterprises with the cash and instructions of the accounts at which the money should be wired (minus Basic Enterprises´ commission, of course)
In the end Ramiro Guajardo Villareal revealed as a tragic actor. After being forced by the Treviños to sell to them some of his fines Quarter horses he ended up being captured by US authorities in Houston and Z40 started saying that Villareal was stealing money from him. In the end he was found dead inside his car on January 2011.
Diagram showing how the Mexican entrepreneurs sent the money to the network
There´s a fourth Mexican businessman who was used against his will by the Treviños. Alfonso del Rayo, a Mexican businessman form Veracruz was kidnapped by a Zetas cell. He was released 9 days later after paying $4,500,000 and suffering tortures so hard he had to undergo reconstructive facial surgery. Some months after these events he was approached by Carlos Nayen (one of the strawmen) who suggested that in order to avoid his family been damaged he should travel to Oklahoma City in order to bid for a horse. Once in the city he was contacted by Fernando Garcia-Solis, who instructed him to make the winning bid for Blues Ferrari (which was owned by Jose Treviño) Del Rayo would buy it for $310,000 and looked so haunted during the auction that the organizer took a photo of him with his cellphone. The fact that the network extorted this man in order to buy the horse might indicate some kind of money shortage.
We must now analyze how the purchase of the horses and the management of these assets were done. At the same time, we´ll talk about the payments and the disguising methods being used in order to hide the fact that the money involved in the transactions was dirt.
THE NETWORK IN ACTION:
During October 24th and 25th 2008, in the Heritage Fall Mixed Sale Ramiro Guajardo Villareal bough 11 Quarter horses for $96,900 which were paid through wire transfers by Basic Enterprises from Monterrey. The purchased horses included Memories Formicha and Crescent Moon Dash which would be transferred to 66 Land LLC during January 2012.
On December 14th, 2008 Mueller Racing sold a Quarter horse called Tempting Dash through Schvaneveldt Ranch Auction to Ramiro Guajardo Villareal for $21,500 dollars. On October 24th, 2009 Tempting Dash won Dash for Cash race held at Lone Star Park in Grand Prairie (Texas) As legal owner Villareal won $180,000. the story surrounding Tempting Dash reflects quite well how the assets were managed by Jose Treviño. On November 14th the American Quarter Horse Association received legal documents indicating Tempting Dash´ ownership had been transferred to Jose Treviño. According to the documents the transfer had occurred on September 29th (even before Tempting Dash had win the Texas race) In the end it was revealed that Miguel Angel Treviño had forced Villareal to sell the horse to Jose for only $50,000. As we´ll see later Temting Dash was an extremely profitable asset for the network
The first large scale purchase took place on September 4th, 2009 at the Heritage Place Yearling Auction. There, Colorado Cessa bought 13 horses for $546,000. From this quantity $516,000 were paid through a chech 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 Treviño)
A similar move was used to purchase between September 17th and 19th 2009 18 horses in the Quarter Horse Yearling Sale in Oklahoma City. Here Ramiro Villareal bought the horses for $430,800 among them was a great stallion called Maverick Perry whose name was immediately changed to Mr. Piloto (Carlos Nayen´s nickname was Piloto) It was again Basic Enterprises, the money exchange form Monterrey the one who paid the purchases through six different wire transfers which were structured in the following way:
The ownership of Mr. Piloto was transferred to Garcia Bloodstock and Racing (a shell company controlled by a strawman called Fernando Solis Garcia) on January 15th, 2010.
On September 5th, 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 Treviño. According to the documents the transfer had taken place on July 10th (two months before)
Two mor large horse purchases would take place in 2009. The first one took place between October 3rd and 4th at Los Alamitos Equine sale. 18 horses were bought by the network for $502,970 (paying Basic Enterprises for the whole lot) Among the horses was Blue Girls Choice, which was transferred to Tremor Enterprises LLC on October 5th 2009 (24 hours after the auction) Blue Girls Choice would be sold in Oklahoma City for $102,000 on November 5th 2011. The last purchase took place at the Heritage Place Fall Mixed Sale. 9 horses were bought for $112,900. The payments were done, again, by Basic Enterprises. Among the horses were Merry for Money and Thanks Jen which would be then transferred to 66 Land LLC.
By the end of 2009 the network was completely stablished, the cocaine money was flowing from the US to Mexico where it was handed to the three businessmen. They would purchase the horses using their own clean funds directly or using strawmen although the use of nominees/strawmen would become widespread during the final stages as we´ll see. After the purchase the horses were transferred to companies controlled by Jose Treviño, sometimes after an amount of time during which the horse had been trained and obtained fame at national races, thus raising its value.
It´s time now to talk about banking. I´ve been able to identify 4 different bank accounts owned by Jose Treviño at the 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 the Bank of America)
According to IRS reports until 2009 Jose Treviño was a bricklayer and Zulema an office Clerk. During 2008 Jose earned approximately $44,500 working for Dee Bron Inc. and Zulema did $25,500 at Lakeshore Staffing. In 2009 Jose earned (according to his legal records we must recall) $29,00 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 January 1st and November 25th, 2009 neither Jose nor Zulema made withdrawals over $1,000 each time the withdrew money. During the 2009 exercise the account never exceeded from $53,000 and the final balance of their account totaled $2,000 by the end of the year.
Nevertheless during this time Jose purchased Tempting Dash (according to the documents he remitted to the American Quarter Horse Association) During the trial the IRS presented evidence demonstrating that the Treviño´s personal account #4881 1761 5000 didn´t 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 Treviño´s during the subsequent trial.
How did Jose Treviño operate his account? Here´s an example of how Treviño mixed cash from two accounts he owned at Bank of America in order to create a paper trail that would disguise the ownership of the funds.
Jose Treviño had founded Termor Enterprises LLC on December 1, 2009. Just 24 hours later (December 2) 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 November 28. Jose Treviño, as the legal owner of Tempting Dash deposited the profits of the victory at the account he had at the institution managing the Texas Classic Futurity Race. By November 28 this account totaled $461,901.66. This account issued a check for $441,855.23 at the name of Jose Treviño on December 11 which was deposited on Jose´s personal account at Bank of America (#4881 1761 5000)
On December 21, Jose transferred $435,000 from his personal account #4881 1761 5000 to Tremor´s account #4880 2680 1054.
On December 22 (24 hours later) José wrote two checks totaling $157,793 from Tremor´s account #4880 2680 1054 (one for $100,000 and the other for $57,793) and deposited them into his personal account #4881 1761 5000.
On December 29 (a week later), wrote another two checks from his personal account #4881 1761 5000 totaling exactly $157,793 and deposited them into Tremor´s account (#4880 2680 1054, thus creating the false appearance of a legitimate profit.
Paper trail created by Jose Treviño in order to create an artifficial personal income
This mechanism of moving the money around between accounts owned by the same person is a laundering method called Layering: a series of deposits, withdrawals and movements of cash whose objective is to create a paper trail long enough to confuse the institutions moving the money and the regulatory authorities thus making the initial cash very difficult to track. In the end it´s all a matter of creating several layers (that´s for the Layering name) by moving the money all around.
With the rest of the money stashed at Tremor´s account #4880 2680 1054 Jose Treviño arranged several payments for several nodes of the network. He paid $1,000 to a relative called Rodolfo Treviño for Referrals. $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 $100,405.90 went to Fred Stanley Equine Ins. for Tempting Dash maintenance. $15,000 went to Ramiro Villareal and $15,000 to Carmina LLC, a firm owning several horses being controlled by Carlos Nayen, another network heavy hitter very closed to Colorado Cessa.
2010 was a year full of purchases. By January the network was fully operative, two more account had been opened at Bank of America, one for Tremor Enterprises LLC (#4880 3073 7266) and one for 66 Land LLC (#4880 2998 4143)
On January 14, 2010, in the Heritage Mixed Place Winter Sale Jose Treviño instructed a strawman to buy Dashin Follies for $875,000 and Corona Coronita Cartel for $250,000. Another network´s front man called Luis Gerardo Aguirre payed part of the price ($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 wans transferred to Luis Gerardo Aguirre paying for the expenses of the horses Carlos Nayen a Vicotr Lopez, two other strawmen. On January 29, 2012, after the two horses had been trained and its value appreciated, they were transferred to 66 Land LLC.
During September 3,4 and 5 Jose Treviño, Carlos Nayen, Sergio Rincon, Raul Ramirez and several more individuals attended the Ruidoso Horse Sales Company Yearling Sales in Ruidoso (New Mexico) Raul Ramirez bid for several horses being instructed by Carlos Nayen and Jose Treviño. For three days the network purchased 23 horses for $2,240,700. After the auction Colorado Cessa (who wasn´t there) was registered as the owner of the hole lot and paid with a check for $2,240,700. it must be stressed that by the time Carlos Nayen had $25 millions deposited in several UBS (Union Bank of Switzerland) accounts in Miami. I don´t know if the checks written by Colorado Cessa against several bank accounts controlled by him were cashed against these accounts at UBS or against the ADT´s accounts down in Mexico.
During 2010 two more purchases were done. During September 16, 17 and 18 the network acquired 31 horses for $758,000 paying Grupo Aduanero Integral, Agencia ADU everything. The three most expensive horses Big Daddy Cartel ($113,000), Ima Perry ($50,000) and Jess Sass Dash ($150,000) were transferred to Jose Treviño. Between October 2/3, at Los Alamitos Equine Sale (California) the network purchased 5 horses for $442,000 paying Grupo Aduanero Integral, Agencia ADU the wole amount through wire transfers.
In the end the massive investment in Quarter horses revealed itself as profitable in September 2010 when Mr. Piloto won the All American Futurity race, the most famous competition for Quarter Horses in the use. Jose´s Horseman account at the Race Administration received $968,440. $100,000 were paid to the jockey as a winning bonus and $899,549.70 were withdrew through a check which was deposited at Tremor´s account #4880 2680 1054. It was later revealed that Mr. Piloto wouldn´t have won if Z40 had not ordered to give $10,000 to each of the race gatekeepers in order to give his horse some advantage. The network was so powerful taht it was able to fix the competition 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 in order to receive the money directly from Mexico.
For example, Felipe Quintero was acting as a horse trainer and strawman. On February 12, 2010 he opened two bank accounts at the Bank of America (#08900-76710 and #08906-75022) appearing him as the owner of both. On September 22 Quintero´s accounts received $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:
- 10/5/2010: $5,000
- 10/6/2010: $4,000
- 10/7/2010: $3,000
- 10/18/201: $9,900
Each of the deposits were strategically under $10,000 which is the quantity for which the financial institutions are obliged to file a Currency Transaction Report (CTR) for the FinCen.
On June 25 Adan Farias, another strawman and horse trainer, opened bank account #07349-69234 at Bank of America. This account accepted checks only (this type of product is called Business Checking Account) The account was in the name of LA Horses Inc. During October, November and December 2010 the account would experience 12 structured deposits totalling $95,150 (all of them below $10,000) coming from money exchanges in Laredo, Texas.
The legal documents show how these payments were arranged in such a way that the money was almost impossible to track. For example, Carlos Nayen who also acted as strawman for the network distributed cocaine in Dallas for Z40. The money being obtained was sent to Piedras Negras where it was handed over to Nayen. He would take it to a money exchange in Nuevo Laredo where he would exchange the Dallas´ dollars for pesos. He would then exchange the pesos for dollars and send them to the US as maintenance payments.
Sometimes Zulema Treviño, Jose´s wife, 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 went to two great sales, one in January (12 horses for $546,200 at Oklahoma City, paying Agencia ADU for everything) and another one in November (8 horses for $211,500 at Oklahoma City) In this last one Jose Treviño sold Blue Girl Choice for $102,000 (he had bought it for $70,000), Number One Cartel for $280,000, Devil Ridge for $100,000 and Forty Force for $40,000.
2012 saw a large purchase when between January 19, 20 and 21 the network purchased at the Heritage Place Winter Mixed Sale at Oklahoma City 5 horses and 2 foals in utero for $280,400. ADT Petroservicios transferred on February 15 $228,700 as partial payment. The resting $52,700 were paid during February 28 and 29 and March 1. Someone made 8 cash deposits through the Bank of America office in Laredo into 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 hole scheme was torn apart on June 2012 when the Feds. stormed the properties and ranches owned by the network and started capturing most of the members (among them Jose Treviño, of course) The subsequent trial was in fact very interesting and it was covered in detail in Borderland Beat, so I won´t analyze it.
A FEW CONSIDERATIONS ABOUT THE WAY THE NETWORK MADE MONEY:
Until this point, we have discussed how this network channeled drug profits from the US 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 isn´t 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 lost a certain amount of the money being laundered (sometimes even a 20% can be lost a result of transaction/operating costs) The only thing that matters is to disguise the dirty money portraying it as clean cash.
It´s true that the Treviño´s network made money when horses such as Tempting Dash or Mr. Piloto won races, but these profits were an incentive, not a main goal. In my opinion Miguel Angel Treviño´s purpose was to invest vas quantities of money into the Quarter horse in order to obtain a heavy, expensive and large portfolio whose assets (at least 500 Quarter horses) would not only last in time but become increasingly expensive as horses grew older and won more competitions.
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 used by the network were nominal owners of companies in charge of breeding and training the horses. Imagine a company owning 5 horses spends $50,000 per month in fodder, stables and training. If we wire money from Mexico, we can send $70,000 instead of $50,000 disguising the whole amount as maintenance payments. Once in the US company we´ll use only $50,000 while the other $20,000 can be kept in the bank accounts or even better, we can cash them and kept them in real physical currency hidden in stash houses. Legally these $20,000 have been spent but in fact they´re being kept by the network.
The over-invoicing method is even easier, A real example will clarify it. Ramiro Villareal bough Blue Girls Choice for $15,000 in cash. At some point in time he sold the horse to one of his strawman for $135,000 (this means he re-purchased it by $135,000) He re-purchased it again for $30,000 and a fourth time for $135,000, always acting through strawmen who are paying with the network´s money. In the end it´s a matter of raising the price in order to pay more for assets much cheaper. 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 Treviños.
Over Invoicing stages, or an endless chain of fake purchases
Another original method used to inject more money into the scheme was the payment of stud fees between strawmen. If one guy had a stallion and another one a mare for breeding the second individual would transfer dirty money to the first one disguising it as a stud fee.
Chart reflecting final aspect of the network. It´s partial sinc most of the strawmen weren´t included for space reasons
In conclusion, the network was stablished as a way of forging a stable and luxurious asset portfolio for Miguel Angel and Oscar Omar Treviño Morales. They would send dirty money laundered in Mexico to the networks which bought Quarter horses with it. At the same time the network would be maintained and filled with dirty cash disguising it as maintenance profits and funneling it through several classical money laundering techniques.
I would like to point that the data being exposed here is partial and it´s possible that the Treviño´s network was much larger. I don´t think that all of Z40´s money went to this scheme. The diversification of the Treviño´s portfolio must be huge and this scheme was only a tiny fraction. If they were able to send money abroad and deposit it at corporate vehicles such as trusts or foundations in opaque jurisdictions the Treviños would have a permanent reserve of money accessible from the most remote Mexican corner. According to official data the Zetas had an accountant for each Estaca or unit in charge of laundering the obtained cash. Theses little accountants were surpassed by people such as the Coahuilan businessman Juan Manuel Muñoz Luevano directed huge laundering networks laundering profits from cocaine sales in Spain. According to authors such as Guadalupe Correa-Cabrera it was people like Colorado Cessa or Juan Manuel Muñoz (people moving dozens of millions for the zetas) the ones at the top of the cartel. The real bosses. Nowadays the Treviño clan still dominate extensive parts of Tamaulipas through the Cartel del Noreste (founded by another Treviño brother, Juan Francisco aka El Kiko Ozuna, and currently directed by Ozuna´s son Juan Gerardo aka El Huevo) According to several reports they would be laundering money coming from extorsion, drug trafficking, alien 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 laundromat (although maybe not as big as this one) is discovered.
This is all for now friends. I´ll be back in a week or so with something much shorter about Los Metros accounting based in several excel spreadsheets contained in a laptop seized in Tamaulipas.
- Guadalupe Correa Cabrera: The Zetas INC.
- Eduardo Salcedo-Albarán & Luis J. Garay-Salamanca : Macro-Criminalidad; complejidad y resiliencia
de las redes criminales
- Joe Tone: Bones. Brothers, horses, cartels and the Borderland Dream
- Several legal documents including an indictment and a search warrant for Tremor Enterprises LLC (if you want them I´ll post them here)
Damn bro. The level of detail and research done for this report is impressive. This is untapped information for most of us. Thanks for the shout out, but you did 99.9% of this all by yourself. I will give it another read and post if I have any comments/questions. Thanks!
wow great post
Wow. that's an amazing post. If you wrote a book I would buy it. Fantastic and unique work here at BB as usual.
@redlogarythm: Your publication is officially part of a two part series. You did an excellent job here and Borderland Beat appreciates your research efforts.
I thought it was very interesting the way you laid out the many money laundering techniques Treviño's network used.
So how much would you say the Trevinos were clearing (profit) annually?
Thank you everyone for your interest guys.
Anon, good question. According to the indicments and legal documents they supposedly laundered $25,000,000 or so (although they say they couldn´t calculate it exactly) In the end the whole scheme was designed not to make immediately profits but to launder dirty cash and buy assets with it.
The only way of addressing your question would be to appraise or rate the total amount of actives: bank accounts, ranchs, businesses, horses, etc. Since a lot of these assets have been lost (some horses even died from lack of care) I can´t answer you sure.
But if the scheme had continued (which wasn´t probable given the low profile of its members) the total portfolio value could have reached $40 or $50 millions by 2020. Again, this is pure speculation, but take into account that this must have been only a tiny fraction of what these guys were laundering in the US and Mexico.
Do you know how much of illicit networks´portfolio is estimated to be seized by authorities in Europe after a 5 year-long investigation concludes? Not more than 2-5%. The rest quickly dissapears abroad.
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