Sunday, June 17, 2012

Horse Ranch in Zetas Cartel Case Raised Suspicions

More on  the Zetas Tervino laundering scheme in horse racing.

The Associated Press
If associates of a reputed Mexican drug cartel leader had wanted to lay low while laundering money at an American horse ranch, they seemed to do everything wrong.
They swept their fields at night with a giant spotlight, threw around lots of cash, bought parcels of land in a deep recession and made expensive improvements to their farm in an industry not known for generating large profits.

“It would take a multi-millionaire just to support an operation like that,” neighbor Clifford Massengale said.

A day after federal authorities arrested ranch operator Jose Trevino Morales in an alleged money laundering scheme benefiting the notorious Zeta cartel, people in this horse ranching community said Trevino was a good neighbor. But his ranch, Zule Farms, seemed strangely out of step.

According to tax records cited by prosecutors, Trevino and his wife reported making only $58,000 in 2009. But somehow they plowed millions of dollars into the quarter-horse ranch.

Neighbors questioned how the couple and their associates could afford to pay cash for top-notch horses and said the pair’s determined effort to blend in with the area’s horse-farming culture actually made them stand out.

“The first thing I noticed was they were too obvious in their attempt to let people know they were in the horse business, but they were the best neighbors we’ve ever had on that property,” said Massengale, a retired military officer who lives next door.

He said ranch workers put fresh paint on the barns, built a new barn and took good care of the hundreds of horses that roam the 160 acres southeast of Lexington. The fields were finely manicured.

An indictment against Trevino and his wife, Zulema, was unsealed Tuesday in Texas. Agents raided ranches in Lexington, the Ruidoso Downs horse track in New Mexico and sites in Texas, arresting Trevino, his wife and five others.

The defendants are expected to be extradited to Texas to face charges. Seven other suspects, including two Trevino brothers, were charged but remain at large.

Greg Lucy, who owns Purcell Farm and Ranch Supply in a neighboring town, said it was unusual for anyone to put a large amount of money into a horse operation.

“The horse industry has been real tough over the last three years. Grain markets were high. Fuel markets were high. The drought last year was real tough,” Lucy said. Some operations have gone out of business.

Convenience store operator Jung Kim said Trevino once showed him satellite photos of his property and expressed an interest in expanding.

“I did think they were pretty rich,” Kim said. “They had a lot of nice horses, and the owner talked about buying some other ranches to grow hay.”

Trevino and the ranch hands would stop by occasionally for soft drinks, snacks and beer. They all appeared to be dedicated to the ranch.

“They were working hard every day. They had a lot of horses, raised them, bred them and took them racing,” he said. “I never thought they laundered money.”

Of all the money that the federal government said was spent — $20 million or more — little of it was spent locally. Lucy said he didn’t recall any major purchases at his store. At a saddle shop in Lexington, the people would browse but not buy.

“They didn’t have much of an impact at all on the local economy, as far as I could tell,” Lucy said.

Prosecutors reviewed records from banks, the American Quarter Horse Association and state racing commissions to track the money, according to an affidavit.

Several confidential informants shared information about Trevino and the two brothers also named in the indictment. One of the brothers, Miguel Angel Trevino Morales, helps lead the Zetas drug cartel in Mexico, prosecutors said.

Tax records showed that Trevino and his wife made $70,000 in 2008 and $58,000 in 2009, but that horses were transferred to his ownership to cover up his brothers’ effort to launder money. Horse records were often backdated to indicate Trevino bought an animal at a low price and that its winnings generated the money to run the farm when, in fact, it was drug money, according to prosecutors.

Authorities said Trevino and his wife would need to spend $200,000 per month to feed and care for the horses alone, much less the stunning landscape.

Wage records show that Trevino “did not have a legitimate source of income significant enough” to pay for either the horses or their care, authorities said.

Trevino and his wife lived in North Texas before moving to Oklahoma sometime around 2011, a neighbor said. Madeline Easterling of Balch Springs, Texas, said the couple had four children and that he often looked tired from laying bricks all day.

“We are just floored,” Easterling said. “I can’t help but feel like there has to be some kind of mistake.”

A woman who was at the family’s former home Tuesday in Balch Springs said she was Jose Trevino’s niece. She insisted the charges were untrue.

“Everything is legal,” she said. “I’ve seen receipts.”

The woman, who would only give her middle name, Isabel, said the U.S. government was discriminating against Mexicans and unfairly naming Jose Trevino because of his ties to his brother.

“Just because we’re related to him, they’re trying to tie us to that,” she said. “I don’t get it, though. It’s all stories.”

Neighbors said the spotlight used to illuminate stables was especially unusual. They assumed the fields were illuminated for security reasons.

Debbie Schauf, director of the Oklahoma Quarter Horse Racing Association in Edmond, said the quarter horse industry is not the “sport of kings,” like the high-price thoroughbred industry, and that upfront expenses aren’t that great.

Still, Trevino had 425 horses, so basic daily maintenance would have cost thousands of dollars per day, maybe more to care for race horses.

K.D. Wilhite, whose Old Dog Gun Shop faces the ranch, was grateful for ranch workers who kept a ditch clear of weeds. But he noticed after the fact that some things seemed odd.

“There is no way they could make that much profit from that operation, not unless they know something I don’t,” Wilhite said.

Anyone who spends that much money “is going to stand out,” he said. “They would have had to buy an awful lot of feed. It appeared to me horses were coming and going all the time.”

Government Forced to Take Abandoned Cartel Horses

Federal agents were forced to seize a dozen horses in New Mexico that are part of a racing operation allegedly laundering money for one of Mexico's most powerful drug cartels, after their trainers refused to continue caring for them, prosecutors said in court documents filed Friday.

Prosecutors had hoped a previous protective order would force companies used to front the alleged operation to pay for the continued care of more than 400 horses. But the government has had to take custody of 12 abandoned this week.

The seizure notice came the same day an FBI agent testified in Austin that a Texas horse trainer accused of helping the ruthless Zetas drug cartel launder money would be in danger if released on bail. Eusevio Maldonado Huitron, 48, was arrested earlier this week as part of a money laundering indictment that named two high-ranking Zeta brothers among others.

Authorities estimated it would have cost Jose Trevino Morales, a third brother charged with running the U.S. horse operation, $200,000 a month to care for the hundreds of horses involved. In the indictment unsealed Tuesday in Austin, prosecutors allege millions of dollars in drug profits were funneled through the group's quarter horse activities in Oklahoma, Texas, New Mexico and California.

The government had tried to stay out of the horse business. But that's hard to do when more than 400 quarter horses make up a good chunk of the assets prosecutors want forfeited. It also could be months or even years before the forfeitures can be resolved.

Anticipating this, prosecutors got a protective order earlier this month requiring that the horses continue to be fed and housed by their current caretakers. It was unclear if the front companies listed as the horses' owners were expected to continue using money the government alleges is drug profits and the U.S. Attorney's office did not immediately return phone messages Friday.

Among the 12 horses seized Thursday at Ruidoso Downs in New Mexico were Break Out the Bullets and Eye on Corona. It wasn't immediately clear where those horses were taken.

"Federal agents were concerned about getting enough food and water for the animals and also had security concerns regarding the facility at Ruidoso," the notice filed in court in Austin said.

Court documents showed there was only a week's worth of food remaining at the New Mexico stables and that, when approached by federal agents, one trainer refused to help care for the horses. Another initially agreed but then abandoned the animals because he said his dad saw media coverage of the raids and told him to get out, the document said.

John Kirby, a former federal prosecutor in San Diego who worked on money laundering cases, said seizing animals can be a headache for the government.

"When I was at the U.S. Attorney's office a guy who was in charge of forfeiture always said never seize anything that you have to feed," Kirby said. "And you think about it, I mean they need to eat, they need to be trained. The government is going to have to put some money into them to retain their value."

Also in Austin on Friday, FBI agent Haskell Wilkins testified that investigators found bank statements in the home of Maldonado, the trainer, indicating about $24,000 in personal accounts belonging to his young children. He also described a picture found inside of Maldonado allegedly posing with Jose Trevino and a winning horse named "Tempting Dash."

Wilkins said the photo shows Trevino's children using their hands to make the numbers "40" and "42" — alleged Zeta nicknames for Miguel Trevino and Oscar Trevino.

Wilkins testified Maldonado would likely be at risk if freed on bond.

"There would definitely be some flight to avoid any type of retaliation," Wilkins said.

A judge scheduled the hearing to continue Monday and Huitron will remain in jail until then.