Thursday, June 11, 2020

Yarrington, Inc. – An analysis of the collusion between Mexican politics and organized crime

Note: This is the latest article from "redlogarythm" for Borderland Beat. Borderland Beat reporter "MX" provided some of the information used in this report.

"Redlogarythm" and "MX" for Borderland Beat
Drug cartels often bribe Mexican politicians in exchange for protection and concessions 
The Mexican Drug War officially began in December 2006 when former President Felipe Calderon declared a military-led campaign against the country's drug cartels. Since then the Mexican government has been battling criminal organizations by using the police and the military. Calderon justified his decision by saying that the government is the only entity that should exercise the legitimate use of force, the right of the governing state to exert authority or violence over a given territory.

But the legitimate use of force is also exerted by corrupt politicians who officially have authority over a given region but are linked to various non-state actors, including businessmen/entrepreneurs and organized crime networks. Politicians in Mexico are divided into three categories: municipal, state and federal. These politicians work together with the military and the never-ending web of municipal, state and federal police corporations. Officially speaking, politicians use security forces to battle organized crime groups. However, in practice, many politicians act independently, and with their own interests, goals and methods.

Obtaining mutual benefits is the binding tie that keeps the government-organized crime relationship alive. The Mexican Drug War cannot be studied as a simple confrontation between the state and criminal groups over the legitimate use of force. In reality, the drug war includes a very ample constellation of individual actors that are constantly searching for their own personal benefit.

In this report, Borderland Beat will tell the story of Tomas Yarrington, the former Governor of Tamaulipas who was accused over the years of collaborating with the Gulf Cartel and Los Zetas. He constructed a sophisticated money laundering network that funneled millions of dollars in the U.S. and Mexico. His story exemplifies what the drug war has become: a gigantic web of various actors (political and organized crime groups) that are constantly demanding and receiving money and resources from each other.

INTRODUCTION
Politicians at the state level can collaborate with criminal organizations by accepting bribes and giving them information about security operations or instructing its security forces to not bother them. In other occasions, security forces can act on their own interest too and collaborate with a criminal cells by providing them with weapons, personnel, logistics or additional security in exchange for money.

In the Mexican political system, governors function very similarly to the former Spanish Viceroy figure from New Spain. They are emissaries of a very distant central government, and hold so much power that they can do and undo things without having to consult a higher authority. Governors directly control Mexico's richest regions. They also decide on local and state-level allocation of resources, including the goods and services used in public security. In other words, governors are fundamental pawns in the chessboard game that the Mexican drug war has become.

Without the explicit or implicit collaboration of political figures, Mexican criminal groups would find it much more difficult to operate in a certain state. Since these relationships are not eternal and vary according to multiple circumstances, the alliances between state governments and criminal organizations are constantly re-shaping, which often leads to higher degrees of violence. Governor Yarrington is the perfect example of how the Mexican political system deals with organized crime. Nevertheless, the relationship between politics and crime are often simplified in the news or in books.

What do cartels obtain through an alliance with a Governor? Undoubtedly, safe passage for drugs and the assurance that security forces will not go after them.

What does the Governor and their accomplices obtain in exchange? Money, of course. But the ways through which money is paid by criminal organizations can vary. Most high-ranking politicians use complex techniques to disguise the origin of the bribes. In this report, Borderland Beat will try to provide a few examples about the relationship between Yarrington and the Tamaulipas-based criminal groups the Gulf Cartel and Los Zetas. We will also analyze bribery payments structures of Yarrington's network and how they were re-invested in the economy.

YARRINGTON: THE DAWN OF A CRIMINAL
Yarrington was born in Matamoros, Tamaulipas, Mexico, in 1957. He started his political career in several youth organizations linked to the Institutional Revolutionary Party (PRI). In 1979, he graduated with an Economics degree from the Monterrey Institute of Technology and Higher Education (ITESM). A year later, he joined the former Secretariat of Programming and Budget (Spanish: Secretaría de Programación y Presupuesto, SPP), a powerful government entity that fused state planning and budget management functions. The SPP's influence grew under the directorship of Mexican political technocrats (tecnócratas), who were concerned with maintaining macroeconomic efficiency and stability. Yarrington was part of this new political breed.

By 1983, Yarrington became a Planning Director in the SPP. Three years later, he left on a scholarship to study Public Administration at the University of Southern California. After graduation he returned to the SPP as Planning Director for Tamaulipas, his home state. His last professional success in the PRI's administrative bureaucracy came to a reality when be became advisor of the President of the National Institute of Statistics and Geography (INEGI), Mexico's federal information agency, in the late 1980s. In 1991, Yarrington was granted a congressional seat as a federal congressman (diputado federal) in Tamaulipas. In 1993, after a long career in the PRI, he was elected Mayor of Matamoros.
Tomas Yarrington, former Mayor of Matamoros and Governor of Tamaulipas
When Yarrington became Mayor of Matamoros, a position he served from 1993 to 1995, his involvement with criminal groups (mainly the Matamoros-based Gulf Cartel) started popping up. However, most of the details would remain buried until the 2010s, when Yarrington was ousted by the PRI for his links to organized crime. It is difficult to find facts about the corruption allegations during his mayoralty because these events happened nearly 30 years ago and are embedded in a number of local anecdotes and rumors that may or may not be completely true.

What we do know for certain is that when Yarrington became mayor, he took full command of the Matamoros Municipal Police force and could have opened up several channels through which the cooperation with the Gulf Cartel became a daily routine. In the book Tamaulipas, la casta de los narcogobernadores: un eastern mexicano, Mexican writer Humberto Padgett Leon talks about Yarrington's first contacts in the criminal underworld and offers a glimpse of his collusion with the Gulf Cartel.

In his bool, he cites a 1998 testimony from Cesar Eduardo Garcia Martinez ("El Pollo"), a former member of the Federal Judicial Police (PJF) in Tamaulipas when Yarrington was Governor of Tamaulipas. El Pollo worked under Gulf Cartel boss Osiel Cardenas Guillen. He said that Yarrington received large payments from several criminal groups, mainly the Gulf Cartel, when he was running for office. The money handling was reportedly facilitated by the Tamaulipas State Police, which received the money directly from the Gulf Cartel and handed it to Yarrington and an associate of his named Jesus Vega Sanchez. This associate reportedly worked as the PRI's liaison with the Gulf Cartel.

The payments ranged between US$400,00 and $800,000 each time. Most of the money was used to support Yarrington's candidacy. According to El Pollo, during the months of July, August, September and October 1998, several deliveries of money were made to Jesus Vega Sanchez for Yarrington's campaign. At some point between July and August 1998, El Pollo personally handed a briefcase containing US$500,000 in $20 and $100 bills to Vega Sanchez, Baltazar Hinojosa Ochoa (former Mayor of Matamoros) and Yarrington. The meeting took place at the lobby of Hotel Residential in Matamoros. El Pollo said that Osiel Cardenas Guillen personally gave him US$500,000 on October 1998 and instructed him to deliver the money to PJF agent Juan Jose Muniz Salinas ("Bimbo"), who would then send the money to Yarrington.

Another testimony of Yarrington's organized crime involvement was offered by Francisco Alberto Vazquez Guzman ("Rufino"), a member of the Gulf Cartel who became a protected witness. Rufino said that by the end of the 1990s, Cardenas Guillen instructed Tamaulipas attorney general Francisco Cayuela Villarreal to designate specific individuals as commanders of various law enforcement units in Tamaulipas. These people would later be coordinated by Yarrington when he became Governor of Tamaulipas to facilitate the Gulf Cartel's operations statewide.

Once in office, Yarrington began purchasing several luxurious properties in Mexico and the U.S. with money he received from the Gulf Cartel. Though Yarrington received a salary from the government, he made most of his earnings through drug money and not by stealing from public resources, as some Mexican politicians have been found guilty of in the past. Yarrington was indeed involved in misuse of government resources, but his de facto salary came mostly from the Gulf Cartel. In our next section, we will cover the investment tactics used by Yarrington and other corrupt public officials.

INVESTMENT TACTICS
The problem corrupt high-level public officials face when accepting a bribe is what to do with the money. Several sophisticated corruption networks that offer money almost anonymously and instantly to corrupt public officials exist. But most of the times, criminal groups do not adopt highly-developed bribing mechanisms and oftentimes simply contact a politician that has the ability to intercede in their favor and offer him/her money.

If the politician accepts, a specific quantity is negotiated in exchange for the favor/services. The money is usually paid in cash since it is extremely difficult to trace its origins. Most of the times public officials do not have high salaries, and even if they do, they are not as high to help mask the bribe as legitimate income. Any politician accepting money will thereby avoid any kind of direct contact with the cash itself. This necessary distance gap between a corrupt public official and the money coming from an organized crime group must be filled with someone who is able to manage the funds anonymously but also who can make them appear legitimate.

Two individuals are involved in the scheme: the financial operator (operador financiero), who manages the entire scheme and is independent of the original launders, be it organized crime groups or a corruption politician; and the front-man (prestanombres), who launders the money from the origin source in a way that makes the money appear to be legitimate. Front-men are usually businessmen with legitimate businesses. The assets they receive from the financial operator can be handed to them directly (via bank deposits) or through other disguised payment methods (e.g. real estate). Laundering money through real estate using front-men can help hide the origin of the asset to the corrupt public official.

Simplified corruption diagram between politicians, organized crime and the business sector in Mexico.
This scheme leads us to the following question: What do the financial operator and the front-man obtain from accepting assets that do not belong to them? The financial operator is nothing more than a professional money launderer and is payed part of the money he/she launders, retaining some of it as a commission. The front-man, on the other hand, can be paid either directly or indirectly. He can take or enjoy part of the assets he holds as his property, can be paid with money for faking the ownership of the assets or can be paid indirectly through deferred administrative payments. These deferred administrative payments are nothing more than illegal public contract awards.

In highly bureaucratic countries like Mexico where the Roman Civil Law system is applied (just like Spain, Italy, Portugal or most of Latin America), the government grants projects to private entities in exchange for a good and/or a service provided by them. The private entity is paid with money from the public treasury. In theory, the government approves of a contract based on a private entity's reputation or previous performance, but this can easily be abused in practice since a public official is the one who signs off on it. This is because the public official with the capacity to determine who wins a public contract can use this as a payment method for the individual who is keeping his/her assets safe.

It is important to note that the Mexican public contract system has never been in a very good shape. When the federal government started privatizing large portions of its public sector in the 1990s, organized crime groups and corrupt politicians occupying high-level positions have used public contracts as a mean of payment for individuals who act as front-men. This practice is not unknown in other places where organized crime often operates as a de facto state.

In Sicily, for example, most of public contracts have been traditionally assigned to individuals suspected of being front-men and who hold assets of the multiple criminal clans affiliated to the Stidda or the Cosa Nostra. In Japan, several Yakuza clans such as the Yamaguchi-Gumi have been deeply involved in real estate projects designed and assigned directly by the Japanese government.

THE YARRINGTON NETWORK
According to the available evidence, Yarrington developed a highly sophisticated laundering network from money from the Gulf Cartel and Los Zetas. The assets were laundered it through several financial operators who bought real estate assets that were then assigned to front-men. Some of these front-men were paid back with public contracts directly assigned by Yarrington's associates in the Tamaulipas government. In this section, we will analyze part of this networking, detailing who was who and how it was maintained.

One of Yarrington's most popular and earliest acquisitions was a luxury apartment at the Bridgepoint Oceanfront Condominiums in South Padre Island, a resort town in Southern Texas. Yarrington purchased it through a front-man on December 1998. Taking into account that he became Governor of Tamaulipas in 1999, we can conclude that by the time he became Governor, Yarrington was already accepting bribes by organized crime groups. In other words, Yarrington was deeply involved with the Gulf Cartel before becoming Governor, which would confirm the testimonies of his corrupt practices when he was Mayor of Matamoros.
Yarrington owned a condo in South Padre Island, Texas
Of course, Yarrington did not buy the apartment in South Padre Island directly. He did so through an intermediary, a front-man. This individual was Napoleon Rodriguez de la Garza. He was a businessman from Matamoros who owned Ferreteria Industrial Rodriguez SA de CV, a hardware store that was awarded with multiple public contracts. The contracts in included public light and paint works in Matamoros and in Tamaulipas when Yarrington was governor.

The apartment was purchased at US$450,00. According to a complaint for forfeiture filed on March 22, 2012, "in the warranty deed it was stipulated that US$300,000 of the price would be financed and secured by a vendor's lien and by a deed of trust. The lien was later released (...) on April 20, 1999", just two months after Yarrington became Governor of Tamaulipas. From this day on, Yarrington took control of the apartment and visited it often although Rodriguez de la Garza was the owner on paper.

View from the Bridgepoint Oceanfront Condominiums, where Yarrington owned an apartment
Because of the apartment's contract, the buyer (Rodriguez de la Garza) was in charge of making monthly maintenance payments of US$900. Since Yarrington could not appear as the owner the apartment, he did monthly payments through a third-party (maybe Rodriguez de la Graza or someone else). The payments were made through four separate bank accounts from three different banks: Wells Fargo, Lone Star National bank and an unidentified third entity.

At Wells Fargo this third party held accounts #xx0509 and #xx1010. From account #xx0509 the following payments were made during these dates (we've committed some for space reasons):


From account #xx1010 the following payments were made during these dates:


We have account #xx1814 at Lone Star National Bank which made the following payments:


The fourth bank account with number #xx5217, identified as "Hunting Account" in court documents, was managed directly by Rodriguez de la Garza, who made the following maintenance payments:


In addition to the South Padre Island condominium, Yarrington also bought other properties in Texas using front-men. In the cities of McAllen and Kyle, Yarrington owned two properties under his alleged ex-girlfriend and Texas State University professor Sindy Chapa. Chapa had a school salary of US$58,000 a year, but the two homes under her name were valued at US$272,910 and US$357,441, respectively. Although investigators believed that the houses were bought by Yarrington's network using drug proceeds, she was not charged with a crime. Following a lengthy investigation, the houses were seized by U.S. federal agents and auctioned. Some of the money used to buy these two homes were laundered in a large real estate project in La Cantera Parkway in San Antonio.

It must be stressed that during these years, Yarrington was likely one of the most powerful men in Tamaulipas along with the Cardenas family and some of their Zetas enforcers. Since Tamaulipas is a state bordering with Texas, the Governors of both states often work together and develop strong friendships. In fact, Yarrington had a good working relationship with Texas Governor Rick Perry, and he was friendly with George W. Bush when Bush was governor.

The closeness between one of the most corrupt men in Mexican politics with the future president of a country who heads a global war on drugs agenda became even more sinister when Bush told reporter many yeras ago that Yarrington was "not only a friend but a compadre". When Bush became U.S. President, Yarrington, was invited to the presidential inauguration in Washington. This happened during Yarrington's heyday as Governor of Tamaulipas and when he was profiting with drug money from the Gulf Cartel. Given the press censorship in Tamaulipas, it is very unlikely that Bush knew about the corruption allegations against Yarrington at that time.

THE AMERICAN BRANCH OF YARRINGTON´S NETWORK: SCAMMING EVEN USA BANKS
Rodriguez de la Garza was only the tip of the iceberg. By the early 2000s, Yarrington had already established a well-oiled money laundering network comprised by several Tamaulipas businessmen (some of them of very humble origin) who were becoming increasingly rich by owning cars, houses, apartments or ranches for Yarrington.

At some point in time between 2003 and 2004, Yarrington and his associates began deceiving several U.S. financial entities by asking for loans that would never be repaid. Yarrington did not ask for the loans himself. He sent his front-men to ask for them to develop real estate projects in the U.S. As collateral, the front-men used the ranches they bought on Yarrington's behalf in Mexico. In this scheme, Yarrington and his associates built a huge network of companies and sub-companies in Texas which were the companies asking for the loans.

Yarrington with Texas Governors Rick Perry and George W. Bush. Bush referred to Yarrington as his "compadre"
For example, at the end of 2004 a high-ranking member of the Tamaulipas government who was one of Yarrington's associates, managed to steal MXN$60 million in public funds. On December 2004, this individual transferred the MXN$60 million to a person who is mentioned in court documents as a member of organized crime. This individual then distributed the money to several of Yarrington's front-men. On January 21, 2005, the Sub-secretary for Expenses of Tamaulipas, Alfredo Sandoval Musi, and Yarrington himself transferred US$300,000 from the original MXN$60 million to account number #xx7535 held at the Inter National Bank, a U.S. financial institution. They used this money to purchase a Sabreliner 60 aircraft for Yarrington's personal use. Another MXN$5 million were transferred to Fernando Cano Martinez, one of Yarrington's main front-men.

By this time, several individuals were travelling all around Texas funding literally dozens of Limited Liability Corporations and Limited Partnerships through which to channel dirty funds coming from Mexico and asking US banks located in South Texas for loans they would not repay. For example, on February 9 2005, an unidentified individual founded in Texas a company called AGM Investments LLC. Later, on March 29 2005, one of Yarrington's main associates and front-man, a Tamaulipas businessman named Pablo Zarate Juarez, formed Premier International Holdings Ltd. Premier was owned in part by AGM Investments. On December 2005, Premier received a US$2,570,000 loan from Inter National Bank in McAllen to purchase a 2005 Pilatus aircraft with registration number N679PE.

The 2005 Pilatus aircraft bought for Yarrington
Pablo Zarate Juarez was born in Matamoros in 1960 and was also a member of the PRI. When Yarrington became Governor, Zarate Juarez became the director of the Tamaulipas Institute for Housing (Instituto Tamaulipeco para la Vivienda, ITAVU). He became inextricably linked to the Governor and started his career as an entrepreneur. Zarate Juarez founded Corporativo ZAVI, a construction holding based in Leon, Guanajuato. The holding company includes 4 subsidiaries: Inmuebles y Casas Modulares SA de CV, Constructora Santa Matilde SA de CV, Urbanizaciones, S.A. DE C.V. and Provisep Proteccion y Vigilancia en Seguridad Privada SA de CV.

According to other sources, he owns two more companies: Constructora Santa Marina SA de CV and a Texas-based company called Viza Construction LLC. In his declaration to U.S. authorities, Zarate Juarez insisted he did not work for Yarrington. But he could not explain why he used public money from the Tamaulipas government to pay for a Pilatus Aircraft which was under the firm Premier LLC. The aircraft had been used extensively by Yarrington but was foreclosed by the Inter National Bank for non-payment on a loan.

Almost all of Zarate Juarez's companies received numerous contracts from the Tamaulipas administration. For example, Inmuebles y Casas Modulares receive 18 contracts for MXN$1,260,212,779. Constructora Santa Matilde received a contract from the Maamoros Public Works Directorate for MXN$6,059,616. Provisep received 4 contracts for MXN$2,379,170. Construcciones Santa Marina received MXN$92,243,279.

MORE U.S. BANK SCAMS
On April 15 2005, an individual registered Pesquera Investments LP, a subsidiary of RGC Development LLC, founded the same day. Two weeks later after its creation, on May 2, Pesquera opened a bank account (#xxx0264) at First National Bank. Four days later, on May 6, a conspirator transferred US$406,387 to this account. On December 2005, Pesquera received a loan from First National Bank (loan number #xx1806) for US$2,850,000 for the development of a real estate project in Cameron County, Texas. Yarrington's accomplices created multiple companies over the years that asked for loans to U.S. banks.

On May 19, 2005, someone created SPI Development Partners LLC. Three days later, on May 22, a subsidiary called SPI Ling and Marlin Townhome Project was created. This subsidiary got a US$610,000 loan from the Inter National Bank in McAllen. It received a second loan of US$3,050,000 on January 2007 from the Lone Star National Bank in Pharr, Texas. The loans were used to develop a supposed real estate project in South Padre Island (where Yarrington already owned a luxury apartment under Rodriguez de la Garza's name).

On December 5, 2005, Yarrington associate José Joaquín Alfredo Vila Ruiz created two companies: SA Cantera Development Partners LLC and its subsidiary, Cantera-Parkway Development Partners SA LP. On February 2006, Cantera-Parkway asked for a US$6,650,000 loan from the First National Bank in Hidalgo County, Texas. The money was later used for buying 46 acres of land at Bexar County. On August 2006 an individual registered Culebra SA 104 Management LLC and its subsidiary, Culebra SA 104 Acres Residential Partnership, LP. This last subsidiary received from the Falcon International Bank a loan of US$2,874,000 for buying in 2006 at least 104 acres of land at Culebra Road, Bexar County.

During these years Yarrington's network purchased houses and vehicles in the U.S. For example, on July 2004, Yarrington obtained through a front-man a loan for US$200,000 from the First National Bank (loan #xx0316). The money was used to build a home. The documents presented to the bank by Yarrington's front-man reflected false information about the applicant. In 2008, Yarrington was granted a second loan (loan #xx5587) of US$150,000 by First National Bank. The money was used to build a second home. Yarrington spent nearly an extra amount of US$750,000 customizing these two properties. In December 2006, Yarrington asked for a US$34,889.63 loan from Capital One Finance and used the money to purchase a 2007 Chevrolet Suburban. It must be pointed that every single one of these loans were done through Yarrington's most reliable front-man: Fernando Alejandro Cano Martinez.

YARRINGTON'S FRONT MEN AND PROPERTIES IN MEXICO
Cano Martinez was at the time Executive Officer and Co-owner of Materiales y Construcciones Villa de Aguayo SA de CV, a construction company based in Ciudad Victoria, Tmaulipas. According to the Mexican database Compranet (where most of the public contracts are shown) between 2002 and 2012 Villa de Aguayo received at least 41 public contracts for a total of MXN$1,560,906,831 (almost US$73,000,000).

It has been stated by U.S. authorities that most of these contracts were assigned fraudulently in exchange of the favors provided by Cano Martinez to Yarrington. In fact, Cano Martinez was the owner of several large ranches all across Tamaulipas. He was the owner of Hacienda San Juan, a ranch constituted by 2,700 hectares of land. The ranch had a hotel and airstrip 1 mi (1.6 km) long. According to information provided by protected witnesses in the US, Yarrington bought this Hacienda from a high-ranking member of Los Zetas. He expanded the ranch by adding nearly 600 hectares from neighboring estates whose owners were reportedly forced to sell their lands by Los Zetas to Yarrington at low prices.


Cano Martinez was not only the only associate who owned ranches for Yarrington. One of the biggest collaborators in this scheme was Eduardo Rodriguez Berlanga ("La Conga"). Rodriguez Berlanga owned at least 3 ranches. Two of them, El Mirador (bought on December 12, 2002) of 1,200 hectares and El Colmenar (bought on August 24, 2005) of 600 hectares were located near Aldama and Soto de la Marina municipalities in Tamaulipas. They were bought by a financial operator of Los Zetas who later donated them to Yarrington.

Rodriguez Berlanga also owned a third ranch called La Providencia. Located 6.2 mi (10 km) from Ciudad Victoria, it had 15 hectares and included a bar, a palenque (cockfighting pit), a horse race strip, cattle, fine horses, stables, oranges, tomatoes, bean, and agave plantations (for producing tequila). On February 2018 an armed group attacked La Providencia, killing one worker and 12 pure-blood horses.

Rodriguez Berlanga was also the owner of Janambres Construcciones SA de CV, a construction company which received at least 8 public contracts between 2005 and 2007 for a total of MXN$25,756,541. The contractors were the Secretariat of Communications and Transportation (Secretaria de Comunicaciones y Transporte, SCT) of Tamaulipas and Nuevo Leon.

One of Yarrington's best known properties is Rancho El Tinieblo. It was acquired through front-man Alfredo Perez Salinas in the municipality of Jimenez, Tamaulipas. El Tinieblo still exists and is managed as a luxury hotel and entertainment company that produces mezcal. Yarrington has more properties than the ones mentioned in this report. Many of them are in Tamaulipas and in the Mexico City area.

THE GOVERNOR'S RETIREMENT
Yarrington's post as Governor of Tamaulipas ended on December 2004. After that he tried to become the PRI's presidential candidate for the 2006 general elections. Details surrounding his presidential desires are mostly unknown because they developed within the deepest circles of the PRI's bloc. At that time, the PRI was divided between the factions headed by Roberto Madrazo (the PRI president) and those who opposed him. They headed a group called Everyone United Against Madrazo (Todos Unidos Contra Madrazo, TUCOM).

Yarrington was one of TUCOM's leaders and began postulating himself as a viable alternative to Madrazo. However, Yarrington did not succeed given the political scandals that plagued TUCOM. One of its leaders, Arturo Montiel Rojas, was accused of political corruption and that ended up tainting TUCOM's reputation among the rest of the PRI and the electorate. This marked the beginning of the end of Yarrington's long political career.

From 2006 and onward, Yarrington lived off the investments he made over the years when he received bribes from the Gulf Cartel. This retirement path that Yarrington followed is the golden rule for most politicians involved in corrupt practices. Countries like Mexico offer better options for individuals like Yarrington because they do not have to relocate their resources offshore. Widespread impunity and immunity from prosecution enables Mexican criminals and politicians to enjoy their assets onshore. Politicians like Carlos Salinas de Gortari, Enrique Peña Nieto and Javier Duarte de Ochoa are living proof that this system can work in their favor.

THE MEXICAN MONEY TRAIL
According to a sealed superseding indictment filed in May 2013 against Yarrington and Cano Martinez, both men were involved in the importation of multi-ton shipments of cocaine. Allegedly these drug trafficking activities occurred between 2007 and 2009.

During this time, Yarrington formalized a working relationship with several high-ranking members of both the Gulf Cartel (his old business partners) and the Beltran Leyva Cartel (which by the time was no longer affiliated with the Sinaloa Cartel and was a major distributor of cocaine both in Mexico and the US). According to the indictment, Yarrington's role in the conspiracy was to use his political connections to grant access to the port of Veracruz for multi-ton shipments of cocaine which came to Mexico by boat. The cocaine was later exported to the US for further distribution.

No were mentions were offered about Yarrington's personal involvement in the drug trade. In this case, Yarrington crossed the line. Instead of staying off the radar and enjoying the profits of his money laundering investments, he became involved in drug trafficking and attracted the attention of U.S. authorities.

How did Yarington manage the money he started obtaining through drug trafficking? During these years a front-man of his started opening several bank accounts in some of Mexico's most important financial institutions. These banks included HSBC, BBVA Bancomer, Banamex, Banregio and Scotia Bank. We must remember that between 2004 and 2006, Yarrington's front-men asked for multi-million loans which were used for buying land and properties.

The following argument is absolute speculation but it would be logical to deduce that Yarrington's intention was to use the drug proceeds provided by his role in the cocaine trade to strengthen his financial presence in the U.S., likely to buy more land and start real estate projects.

Yarrington's network funneled drug money to the U.S. through the following method: The bank accounts he opened in five of Mexico's largest financial institutions received cash deposits by unidentified individuals. In an effort to hide the funds' origins, they were transferred to a financial entity called Monex which would later re-direct the payments to the companies Yarrington's front-men owned. Monex is one of the world's biggest financial conglomerates offering a multiple portfolio of private banking, corporate banking and money exchange services.

For example, Inter National Bank (the bank Yarrington's network used) received several wire transfers from Monex into Premier International Holding's account #xx6539.

In addition, the First National Bank opened account #xx2879 for Cantera Parkway Development Partners of SA which received several transfers from Monex.


Yarrington's spend was so vast that he even developed a secondary set of US banks accounts he used to pay for his daily expenses. In 2004, one of his co-conspirators opened 5 accounts at the First National Bank (accounts number #xx1407, #xx9425, #xx3621, #xx5217 and #xx1637) which from 2008 until 2010 made dozens of daily payments always under the US$10,000 threshold. Otherwise, the payments would have triggered a Currency Transaction Report under the instructions of the Bank Secrecy Act.

YARRINGTON AND LOS ZETAS, A LOVE AND HATE STORY:
Los Zetas were born in the 1990s as an enforcer cell working of the Gulf Cartel. The origins of this group are still vague and quite unknown, but it is generally agreed that by the early 2000s they had become an essential tool in the Gulf Cartel's offensive under the leadership of Osiel Cardenas Guillen.

Over the years, Los Zetas' degree of independence and strength grew so high that they eventually started managing their own affairs. It is still not very clear if they started dealing in drugs on their own conviction or if the Gulf Cartel granted them a degree of autonomy at some point. What we know is that by the mid-2000s Los Zetas, under the leadership of Heriberto Lazcano Lazcano ("Z3") and Miguel Angel Treviño Morales ("Z40") were buying high quantities of cocaine and marijuana for U.S. exportation. In other words, they became a cartel in itself, a fact that would accelerate the split between Los Zetas and the Gulf Cartel in 2010.

When Los Zetas started to get involved in the drug trade, they built a very sophisticated financial network to launder assets obtained from their drug trafficking activities. Los Zetas' money laundering activities were divided among their respective regional bosses (jefes de plaza). Each of them had their own financial network in charge of laundering the money obtained by local Zetas cells. Once the money was laundered locally, Los Zetas had other financial operators who funneled these funds towards the top of the Zetas leadership structure, including Yarrington. One of the individuals responsible for managing this scheme was Zetas member Antonio Peña Arguelles.

A simplified snapshot of Yarrington's network
A former smuggler (fayuquero), Peña Arguelles started working as a financial operator for the Gulf Cartel between 2002 and 2004 under Nuevo Laredo regional boss Guadalupe Eugenio Rivera Mata ("Gordo Mata"). At some point in time he became one of Treviño Morales's most trusted men; he was responsible for being the Zetas liaison with the Tamaulipas political elite circle.

The details about Peña Arguelles's involvement in the Yarrington affair will become clearer when he testifies in Yarrington's trial this upcoming September. Meanwhile, all we can know is what is reflected in a Criminal Complaint filed on February 2 2012, against him. In this document, four Confidential Sources (identified as CS1, CS2, CS3 and CS4) gave testimony about Peña Arguelles's activities.

CS1, who according to the complaint was one of Peña Arguelles's business partners, declared that he, all along with his brother Alfonso, was a top-ranking money launderer for Los Zetas. In fact, he oversaw the laundering of millions of U.S. dollars in cash through several bank accounts and investment funds in the U.S. which were indirectly owned by several Zetas leaders. According to CS1, the Peña Arguelles brothers were used as a liaison between Los Zetas and several politicians of Tamaulipas for delivering money in exchange for protection.

In this role, Peña Arguelles received at least US$4.5 million directly from Zetas leader Treviño Morales for buying protection and political influence. Since this money was delivered in cash, Peña Arguelles deposited it in several bank accounts he owned in Nuevo Laredo and then transferred it to accounts he held at the Commerce Bank of California. Between 2007 and 2008, these accounts were shut down and the money was transferred to bank accounts at the Falcon Bank and the International Bank of Commerce of Texas.

CS2 is identified as a drug trafficker who cooperated with the U.S. Drug Enforcement Administration (DEA) for a sentence reduction. According to his testimony, CS2 met Peña Arguelles through Juan Jose Muñiz-Salinas ("Bimbo"). back in 2007 (remember that Bimbo was one of the police men through which Osiel Cardenas Guillen paid for Yarrington´s campaign in 1998). According to CS2, he started receiving large sums of money from Cardenas Guillen to buy protection under the Government of Yarrington. CS2 stated that in December 2002 he was instructed by Peña Arguelles to deliver US$500,000 in cash to the Mayor of Nuevo Laredo Jose Manuel Suarez Lopez.

One of the clearest glimpses of Peña Arguelles's influence in Los Zetas was provided by CS3, a former employee of Peña Arguelles who stated that he had a close business relationship with Yarrington, Treviño Morales and Lazcano Lazcano. According to CS3's testimony in 2007 and 2008, Peña Arguelles was instructed by his superiors to travel to the U.S. to coordinate the delivery of millions in cash from the local Los Zetas distributors in the country. These deliveries took place at the cities of Brownsville, Roma and Laredo, Texas, and in Las Vegas, Nevada.

This fact supports the idea that by the late 2000s, Los Zetas had become major cocaine distributor in the U.S. We know for sure that on 2008, Peña Arguelles flew from Las Vegas to San Antonio carrying US$500,000 in drug proceeds using the services of a private aircraft company called Signature Flight Support, which enabled him to use a private hangar in the San Antonio airport to avoid undesirable attention.

CS3 stated that Peña Arguelles owned a 15-mi (24 km) ranch located in Nuevo Laredo. The ranch was was used by Los Zetas for smuggling drugs through the place to circumvent a military checkpoint located in a nearby highway. In exchange for this help, Peña Arguelles was paid a certain commission. CS3 personally saw Peña Arguelles meet two or three times with Lazcano and at least once with Treviño Morales. He also saw Peña Arguelles meet with Yarrington both in Nuevo Laredo and in the U.S. On August 2008, Peña Arguelles was arrested by members of the Mexican Army at the Mexico City International Airport. He was held for 53 days after which he was released. Peña Arguelles returned to the U.S. and met Yarrington in San Antonio. CS3 said he saw him have an issue with Yarrington over some money.

CS4 is identified as a DEA informer. According to his testimony, Peña Arguelles started working for Yarrington between 2000 or 2001 by laundering the money Yarrington received from the Gulf Cartel. It was CS4 that provided U.S. prosecutors with the most critical evidences against Jorge Eduardo Costilla Sanchez ("El Coss"), probably the highest-ranking Gulf Cartel imprisoned in the U.S. since Cardenas Guillen.
Tamaulipas Governor candidate Rodolfo Torre Cantu was ambushed and murdered in broad daylight by gunmen
Yarrington and Peña Arguelles are linked to the 2010 assassination of Rodolfo Torre Cantu, the PRI candidate for the Governorship of Tamaulipas. According to CS4, during November 18t or 19, 2011, Los Zetas kidnapped Peña Arguelles's brother Alfonso. Peña Arguelles himself told CS4 that he had talked with his brother over the phone. Alfonso had said he was being held by Treviño Morales and was demanding US$5 million. According to Treviño Morales, he had given Peña Arguelles nearly US$5 millions to buy political protection in Tamaulipas (CS1 stated that Peña Arguelles received $4.5 million in 2004). Peña Arguelles stole the money given to him and kept it for himself.

According to CS4, Peña Arguelles said he did not have US$5 million available and only had US$4.1 million in mutual funds. In the end, Peña Arguelles said he tried to paid Los Zetas giving them only US$380,000 in several payments. Nevertheless, CS4 confirmed he saw bank statements belonging to Peña Arguelles which indicated that between 2007 and 2008 he had approximately US$8.9 million deposited in bank accounts of the Commerce Bank of California.

Several accounting documents seized by U.S. authorities indicate that between 2004 and 2006, Peña Arguelles had nearly US$10 million deposited at Falcon Bank, International Bank of Commerce and Commerce Bank of California. These documents also recorded several payments in U.S. dollars and Mexican pesos done directly to Yarrington by the Peña Arguelles brothers through these accounts.

Treviño Morales did not believe Peña Arguelles and sent him a long text message through his mobile phone. The text was shown by CS4 to DEA officials and could be translated into English in this way:

"Look [Peña Arguelles], we are not asking you for a kidnapping, it is the money you asked that person for, it was for politics, and they were just lies. So, it's best that you pay the money you owe. Since we know how the situation is. All right, don't pay, however let's see where you'll hide because you well know you are not going to have a place to hide, neither you, nor Ponchito, nor Tony. You were all involved, so keep the money and in your next life make sure who you steal from. Besides, your brother has been saying here, you and Tomas Yarrington, along with Costilla murdered the gubernatorial candidate, Rodolfo Torres Cantu because he affected the construction businesses and was sponsored /protected. Anyhow, he was killed for no reason, you and your brother are still here and you all didn't accomplish anything and remember, that as long as that person is alive in any moment time they will kill you. There will not be a safe place for you, Mr. Toño, so good luck. Don't be an idiot and pay attention to whom you rob from and about that candidate, it was because of the businesses you have with Costilla, Tomas and Osiel Cardenas. Your brother also told me about the assumed names of the properties that you have with Osiel and I also know that they're in Laredo, Texas and San Antonio."

Treviño Morales was demanding money he had supposedly paid Peña Arguelles for granting political protection. What is uncertain is when the payment was made. The text message is also important because it places Costilla and Yarrington as the masterminds of the murder of Rodolfo Torre Cantu. He was reportedly murdered because he his election affected the real estate businesses owned by Yarrington's network in Tamaulipas.

On November 29, ten days after the kidnapping, Peña Arguelles's brother was found dead with a bullet on his head. His body was found wrapped inside a blanket under the Christopher Columbus monument in Nuevo Laredo. A written banner (narcomanta) was left at the scene, as reported by Borderland Beat. The exact meaning of the message is unclear.

"Don't be saying this was a kidnapping of a fucking [informant]. It's the $5 million we gave you, you know what for, and you did not meet your obligations on the contrary you left the country. Why play the fool it was you [Peña Arguelles] who ordered Rodolfo Torres killed because he was going against the interests of the businesses that Osiel Cardenas and Tomas Yarrington are partners in. Whatever, you killed him for nothing because his brother is there and still screwing with them. Fucking old hypocrite that's preaching the word of God you swallow saints and shit devils. You're still a money laundering murderer living in the U.S., nice and peaceful. Well isn't it there that they fight drug trafficking and money laundering because they have the best money launderers?"

CS4 told the DEA after they heard about the killing. Peña Arguelles was asked if he indeed stole the US$5 million from Treviño Morales. He did not confirm or deny it.

Alfonso, the brother of Antonio Peña Arguelles, killed by orders of Zetas leader Miguel Angel Treviño Morales
What was the relationship between Peña Arguelles and Yarrington? At the beginning of this report we described a scheme through which two agents work for a corrupt politician: a financial operator who acts as a money launderer and front-men who disguise the ownership of several assets. In this case, Peña Arguelles was Yarrington's financial operator but also worked as an accountant/money launderer for Los Zetas.

The fact that Peña Arguelles worked for several parties at the same time offers us an excellent visual of how professional money launderers behave. They may oftentimes not care about the factions they work or represent. In fact, they might be serving several criminal groups at the same time, just as the Peña Arguelles brothers did. They are hired for laundering cash and for managing the money flows between politicians and organized crime.

A real example about how Peña Arguelles managed dirty money and bank accounts both in Mexico and in the US might shed some light on the way professional money launderers work for Mexican cartels. On March 30 2005, Peña Arguelles opened bank account #5967500110 at the California Commerce Bank. On April 6, this bank account received two separate wire transfers from a bank account held by Peña Arguelles's brother at a Banamex branch in Nuevo Laredo. The first wire transfer accounted for US$4,546,095.48 while the second accounted for US$2,539,152.81.

The origin of the money used for both transfers derived from drug proceed from Treviño Morales. On April 17, 2008 (three years later), bank account #5967500110 at the California Commerce Bank wired two transfers. The first consisted of US$4,000,000 which was transferred to bank account #125000220 held in Peña Arguelles at Falcon International Bank. The second wire transfer consisted of US$2,997,941.76 which were transferred to bank account #3033401090 held in Peña Arguelles's name at the Laredo National Bank.

Four days later, on April 21, Peña Arguelles withdrew US$1,001,968.30 from account #125000220 held at Falcon International Bank through a check which was deposited into bank account #3033401090 at the Laredo National Bank. A year later, on April 2, 2009, Peña Arguelles withdrew a check for US$4,107,828.30 from bank account #3033401090 held at Laredo National Bank and deposited it at bank account #2210146283 held at his own name at International Bank of Commerce (IBC).

These wire transfers lasted for nearly five years and involved 5 different banks and 5 bank accounts located in Mexico and the United States. The purpose of these transfers were to create an extensive and complicated paper trail to disguise its origin. Peña Arguelles wanted to hide the fact that the accounts were managed by him.
The system used by Antonio Peña Arguelles to disguise Treviño Morales's drug money
We cannot determine what kind of businesses he undertook with most of this money. But we know that he bought several properties in Texas. For example, on May 18, 2006, Peña Arguelles bought a condominium located at 7887 Broadway, Unit #802, San Antonio, for US$314,965.06. It was paid with three different wire transfers using accounts at the IBC, Falcon International Bank and the California Commerce Bank.

He also bought a house located at 311 Joshua Way for approximately US$470,000, It was paid in cash and through a wire transfer. Peña Arguelles held a giant safe in this second house where he stored millions of U.S. dollars. In other words, we can infer that Peña Arguelles bought several houses in Texas with the intention of storing Zetas drug money.

Houses bought by Peña Arguelles in San Antonio and Laredo, Texas
Before he was caught by U.S. authorities, Peña Arguelles had amassed quite a fortune which included five real estate properties located in the Texan counties of Bexar and Webb, two bank accounts (#125000220 and #0240524014) held at the Falcon International Bank with a net balance of US$582,966.29 and US$14,000, respectively, and a financial account (#1296882) held at LPL Financial with US$4,242,317.11. LPL Financial is one of the main U.S. brokerage companies, which confirms the rumor that Mexican cartels have been investing in the U.S. financial market with drug money.

We concluded that we do not have too concrete or official evidence linking Peña Arguelles to Yarrington. Nevertheless, the fact that Peña Arguelles was Zetas's liaison with Tamaulipas politicians, that he laundered money for Los Zetas and others, and that he has been accused by protected witnesses of being Yarrington's financial operator are strong indicators that he was in fact the person responsible for coordinating Yarrington's assets and appointing his front-men.

CONCLUSION
By 2012, Yarrington was ousted from the PRI after his corruption allegations became public and were officiated by Mexico's former Attorney General's Office (PGR). It was mentioned that Mexican prosecutors had targeted Yarrington since the 2000s, just after his post as governor, but since he was a powerful political figure he remained untouchable for several years.

There is a similarity in the downfall of some of Mexico's high-ranking politicians accused of corruption. All of them were isolated by their political parties almost immediately. Most of the times they are left without political support, even by their former collaborators. This was not the case for Yarrington.

Yarrington created a blog (which is not shutdown) where he wrote articles and publish personal photos blaming Marisela Morales, the former head of the PGR, and other people for going after him with false accusations. This bought him some time, but once the DEA announced that Yarrington and some of his front-men were indicted for their organized crime activities, Yarrington went into hiding

On August 2012, when Mexico's anti-organized crime investigatory agency began investigating Yarrington, a judge from Tamaulipas issued two arrest warrants against him. The first charged him for organized crime and money laundering. The second one accused Yarrington of drug trafficking in collaboration with organized crime members. By the time the warrants were issued, however, Yarrington had already left Mexico and fled to Europe.

The rumors of Yarrington's whereabouts were discussed for months. Mexican public opinion mostly believed that Yarrington would never be arrested. The PGR offered a MXN$15,000,000 bounty for Yarrington's capture on November 2016, and on December his own party expelled him for "violating the the PRI´s conduct statutes and ethical code".

Investigators highlighted that after escaping from Mexico, Yarrington moved to Paola, a quiet town in the northern part of Calabria and 83 mi (135 km) from Gioia Tauro, the biggest cocaine entry point in all Europe. It is interesting that Yarrington, a man who had dealt and collaborated with some of the biggest cocaine dealers in the Western hemisphere, chose to hide close to the headquarters of the N'drangheta, the Italian criminal organization that controls most of the European cocaine trade.

In 2016, Yarrington was spotted by Italian police in the town of Paola. On April 9, 2017, he traveled by train to Florence. That same night he was intercepted when he left a restaurant in Piazza della Signoria with a Polish citizen. When confronted by the agents, Yarrington falsely identified himself with a fake driver's license. He was taken to the local police station where his fingerprints were scanned with those on file in the Interpol's database. His identity was confirmed.

In 2018, after a year in Italian custody, Yarrington, who had been fighting extradition fiercely, was extradited to the U.S. He has imprisoned in the Houston Federal Detention Center and was recently denied parole after requesting it due to the COVID-19 crisis. His trial has been postponed until September 22, 2020. In his trial, Peña Arguelles and several of the individuals mentioned in this report will testify against Yarrington, their former boss. We cannot know what the verdict will be, but we can be sure that for the first time in his life, Yarrington will no longer be able to abuse his political position.

2 comments:

  1. Very interesting article! I had no idea the deep level of corruption he was involved in

    ReplyDelete
  2. This is extremely in-depth. His friendship with GW really makes me think.

    ReplyDelete

Comments are moderated, refer to policy for more information.
Envía fotos, vídeos, notas, enlaces o información
Todo 100% Anónimo;

borderlandbeat@gmail.com