|Over-invoicing stages, or an endless chain of fake purchases
In early September 2012, Jose, Nayen, Sergio Rincon, Raul Ramirez and several more individuals attended the Ruidoso Horse Sales Company Yearling Sales in New Mexico. Ramirez bid for several horses from Nayen and Jose. For three days the network purchased 23 horses for US$2,240,700. After the auction Colorado Cessa (who was not there in the sales event) was registered as the owner of the whole lot and paid for the horses with a US$2,240,700 check. It is worth mentioning that by this time Nayen had US$25 million deposited in several UBS (Union Bank of Switzerland) accounts in Miami. We were not able to establish if the checks written by Colorado Cessa were cashed out at UBS or against the ADT accounts in Mexico.
Between 16 – 18 September, the network acquired 31 horses for US$758,000 by paying through Grupo Aduanero Integral, Agencia ADU. The three most expensive horses were Big Daddy Cartel (US$113,000), Ima Perry (US$50,000) and Jess Sass Dash (US$150,000). All of them were transferred to Jose. Between 2 – 3 October at Los Alamitos Equine Sale in California, the network purchased 5 horses for US$442,000. Grupo Aduanero Integral, Agencia ADU paid for these horses through wire transfers.
The Network’s Peak And Downfall
In the end, the massive investment in Quarter horses proved immensely successful when in September 2010 Mr. Piloto won the All-American Futurity race, the most famous competition for Quarter Horses in the U.S. Jose’s horseman received US$968,440. An additional US$100,000 was paid to the jockey as a winning bonus. US$899,549.70 were withdrawn and deposited in Tremor’s account #4880 2680 1054. It was later revealed that Mr. Piloto would not have won if Miguel Angel had not given US$10,000 to each of the race gatekeepers to give his horse some advantage.
The network was able to control the competition by bribing its organizers. By this time the network had diversified and specialized in such a way that some of the front men started opening bank accounts to receive the money directly from Mexico. For example, Felipe Quintero was acting as a horse trainer and strawman. On 12 February 2010, he opened two bank accounts at the Bank of America (#08900-76710 and #08906-75022). On 22 September, Quintero’s accounts received US$90,000 from ADT Petroservicios (Colorado Cessa’s company). Victor Manuel Lopez, a strawman in charge of making payments for horse maintenance did the following cash deposits: $5,000 (10/5/2010); $4,000 (10/6/2010); $3,000 (10/7/2010); $9,900 (10/18/2010). Each of the deposits were strategically under US$10,000, which is the quantity for which the financial institutions are obliged to file a Currency Transaction Report (CTR).
On 25 June, Adan Farias, another strawman and horse trainer, opened bank account #07349-69234 at Bank of America. This account accepted checks only (like a sBusiness Checking Account). The account was under the name of LA Horses Inc. During October, November and December 2010 the account had 12 structured deposits totaling $95,150 (all of them below $10,000) from money exchanges in Laredo, Texas.
- 10/21: $8,000
- 10/22: $5,500
- 10/22: $8,000
- 10/29: $9,900
- 11/01: $6,300
- 11/01: $8,000
- 11/02: $1,650
- 11/17: $6,000
- 11/17: $9,000
- 11/18: $9,000
- 12/20: $5,900
- 12/20: $9,900
The legal documents show how these payments were arranged in such a way that the money was almost impossible to track. For example, Nayen, who also acted as strawman for the network, distributed cocaine in Dallas for Miguel Angel. The drug proceeds were sent to Piedras Negras before Nayen took the money to money exchange businesses in Nuevo Laredo. He would then exchange the pesos for dollars and send them to the U.S. as maintenance payments. Sometimes Zulema would arrange some maintenance payments through the corporate structure she co-owned. For example, during June 2010, Zulema made several payments through Tremor’s accounts. On another occasion on November 2011, Zulema paid the expenses of several horses being trained at Lexington, Oklahoma, through 66 Land LLC.
2011 was another successful year for the network. The strawmen sold two large deals. One occurred in January (12 horses for sold for US$546,200 at Oklahoma City; Agencia ADU received the amount) and another one in November (8 horses for US$211,500 at Oklahoma City). In this last one Jose sold Blue Girl Choice for US$102,000 (he had bought it for $70,000), Number One Cartel for US$280,000, Devil Ridge for US$100,000 and Forty Force for US$40,000.
2012 saw a large purchase when between 19 – 21 January the network purchased at the Heritage Place Winter Mixed Sale at Oklahoma City 5 horses and 2 in-utero foals for US$280,400. ADT Petroservicios transferred $228,700 as partial payment on 15 February. The remaining US$52,700 were paid on 28 – 29 February 28 and 1 March. Someone made 8 cash deposits through the Bank of America office in Laredo to the Heritage Place’s account. 4 of the deposits were under $9,900. Since 2010 the FBI had spotted the network and started investigating it. As the legal documents show, the whole scheme was torn apart on June 2012 when the U.S. federal agents stormed the properties and ranches owned by the network and started capturing most of the members, including Jose. The trial was covered extensively by Borderland Beat.
Key Considerations: How The Network Made Money
Until this point, we have discussed how this network channeled drug profits from the U.S. to Mexico where it was laundered through legitimate business and then wired to the US to buy horses or to pay for the horses’ maintenance. We have described how the purchases were made. In the end the network spent literally millions of dollars buying horses and sold only a few of them.
One can ask himself: how did these people made money? When answering this question, we must consider that the money laundering business is not about obtaining profits but about disguising the illicit origins of the funds being laundered. If the laundering network can obtain profits managing the dirty money, the better for the owners of the money. Nevertheless, in fact most of laundering networks do not obtain profits but lose a certain amount of the money being laundered (sometimes even a 20% can be lost because of transaction/operating costs). The only thing that matters is to disguise the dirty money.
|FBI agents at horse property owned by Los Zetas (credit: AP)
The Treviño network made money when horses such as Tempting Dash or Mr. Piloto won races, but these profits were an incentive, not a main goal. Miguel Angel’s goal was to invest vast quantities of money into the Quarter horse to create a large portfolio of assets (at least 500 Quarter horses) whose value would increase over time. The pool of cash could be incremented by two ways: through maintenance payments and through over-invoicing. The first method is simple. A lot of the strawmen who used by the network were nominal owners of companies in charge of breeding and training the horses. For example, imagine a company that owns 5 horses spends US$50,000 per month in fodder, stables and training. If someone in Mexico is trying to launder their money, they can wire them US$70,000 instead of US$50,000, thus disguising the whole amount as maintenance payments. Once in the U.S., the company will expense the US$50,000. The remaining US$20,000 can be kept in the bank accounts, or even better, they can be cash out as physical money. Legally, these $20,000 have been spent but in fact they are being kept by the network.
The over-invoicing method is even easier. A real example will clarify it. El Gordo bought Blue Girls Choice for US$15,000 in cash. At some point in time he sold the horse to one of his strawmen for US$135,000 (this means he re-purchased it for US$135,000). He re-purchased it again for US$30,000 and a fourth time for US$135,000, always acting through strawmen who paid with the network’s money. In the end, it was a matter of raising the price to pay more. In this way the network can fuel more and more cash into the system since the strawmen selling the horse transfer the funds to entities controlled by the Treviño brothers.
In conclusion, the network was established to create a diverse asset portfolio for Miguel Angel and his brother Oscar Omar. They would send dirty money laundered in Mexico to the network, which bought Quarter horses with it. At the same time the network would be maintained and filled with dirty cash disguising it as maintenance expenses and funneling it through several classical money laundering techniques.
We would like to point that the data presented here could be partial and that it is possible that the Treviño network was much larger. The Treviño’s portfolio is possibly large and diverse, and this scheme could be only a tiny fraction of it. If they were able to send money abroad and disguise it for years, it is likely the Treviño’s have larger reserves of money accessible from other parts of Mexico.
Los Zetas reportedly have small-time accountants for each of their criminal units, but there are others who sometimes reach high-ranking positions in the cartel. Among them was Juan Manuel Muñoz Luevano (“El Mono”), who managed a money laundering network from cocaine sales Los Zetas made in Spain.
Nowadays, the Treviño clan still dominates extensive parts of Tamaulipas through the Cartel del Noreste (founded by another Treviño relative, Juan Francisco “El Kiko Ozuna”, and currently directed by his son Juan Gerardo “El Huevo”). According to several reports they would be laundering money coming from extortion, drug trafficking, human smuggling, oil theft and contraband through insurance companies located in Texas.