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Suspected of shielding Mexican drug profits but hiding in plain sight

By Randal C. Archibold

LAST UPDATED: 3:08 a.m. HST, Mar 26, 2014


TLAJOMULCO, Mexico » The United States calls Hugo Cuillar Hurtado a longtime trafficker of the cocaine coming from South America, working with one of the men believed to command Mexico's biggest drug cartel now that its leader, Joaqumn Guzman Loera, has been captured.

But while Guzman known as El Chapo, or Shorty spent 13 years on the run, sometimes even escaping through tunnels dug under bathrooms, Cuillar walks freely around Guadalajara, attending luncheons and chatting up diplomats. He says he even won a government grant for an ostrich farm he runs here.

"Let them come and investigate me," he said leisurely over a breakfast of ostrich steaks and sausages at his 57-acre ranch, which the Treasury Department just designated a money-laundering pit for Guzman's Sinaloa cartel. "I have nothing to hide."

If arresting the cartel's leader proved to be a 13-year challenge, requiring extensive cooperation between Mexican and U.S. authorities, then cracking the financial network sheltering the Sinaloa cartel's money, estimated to be several billion dollars, may be just as tough.

Many of the people and companies suspected of forming the cartel's extensive money-laundering network continue to operate, even though they appear, as Cuillar just did, on the U.S. government's so-called kingpin list of cartel operatives and their associates.

Like Cuillar, businesspeople accused of working with the cartel live openly here and elsewhere in Mexico, despite U.S. assertions that they are helping to hide billions in illicit profits through an intricate web of ranches, pawn shops, jewelry stores, money exchanges, a racetrack, even a day care center that hummed with the comings and goings of children on a recent afternoon. It was blacklisted seven years ago.

While U.S. and Mexican authorities have conducted some joint investigations and seizures, the kind of close collaboration that led to Guzman's capture last month often breaks down when it comes to dismantling the cartel's financial backbone. U.S. officials say that they identify suspects based on intelligence from drug, customs and immigration agents but that, to their great frustration, there is too little follow-through in Mexico to pursue shady businesses and their owners.

"There is not enough emphasis there on making it a priority," said Alonzo Peqa, a former deputy director at Immigration and Customs Enforcement. "It took the U.S. a long time to focus on money.

For a long time, it was 'Let's just go after the drugs.' The U.S. has evolved," he added, while "Mexico is a little behind the curve and not made as much of a shift from drugs to money."

Mexico has enacted laws to fight money-laundering, but a senior Mexican official said the evidence the United States presents often did not rise to a level that would allow property seizures or arrests under Mexican law.

"It's one thing to designate; it's another to give proof," the official said, speaking on the condition of anonymity in order to go beyond official talking points.

Michael S. Vigil, a former chief of global operations at the U.S. Drug Enforcement Administration, said that when Mexico seized property and assets, they were often returned under a judge's order, through loopholes exploited by cartel lawyers.

"There has to be a motivation and willingness to work together and go after the assets," Vigil said. "The only thing that hurts the traffickers is when you take away their money and property."

Few people have gone to prison or lost their businesses as a result of the U.S. sanctioning. Instead, analysts said, it functions more as a scarlet letter that can complicate finances by prohibiting U.S. banks, companies and citizens from doing business with them, making cross-border banking difficult and chasing away some legitimate investors.

"The U.S. operations and designations are pretty unilateral," said Eric L. Olson, a scholar at the Wilson Center's Mexico Institute. But, he noted, Mexican officials "don't have to go along" with the U.S. enforcement actions.

Even when nations work together, "the ability to shut down the finances of a global operation is pretty difficult," Olson said. "It's one thing to go after an individual business like a shoe repair shop in Queritaro, but to dismantle the overall organization like the Sinaloa operation is global."

Guadalajara and Culiacan, the capital of Sinaloa state, which both lie in agricultural hubs along drug smuggling routes, are places where Guzman is believed to have hidden his cash.

"The city is kept afloat by narco money," said Javier Valdez Cardenas, founder of Rmodoce, a newspaper in Culiacan. "The amount of bistros, restaurants, spas, shopping malls, luxury car dealerships, condos it does not correspond to the life of everyday Sinaloans. It's the narco presence."

The Treasury Department says that Cuillar has been a trafficker for decades, arranging cocaine shipments for Juan Josi Esparragoza known as El Azul, or Mr. Blue one of two or three people suspected of leading the cartel after Guzman's capture.

The senior Mexican official declined to comment directly on Cuillar's case, refusing to say whether his assets were being investigated. Cuillar is not known to face criminal charges in Mexico or in the United States, although such charges may be filed under seal and made public later.

The Culiacan auto racing track landed on the Treasury Department's list in 2011 as a cartel asset. It continues to operate and had a healthy crowd on a recent night for its weekly "arrancones," or drag racing.

Joel Lspez, who said he had opened the track in 2006, contended that the Treasury Department had wrongly identified a lieutenant of Ismael Mario Zambada known as El Mayo, another man believed to be one of two or three possible successors to Guzman as the controlling investor behind it.

"I am a businessman, and I have nothing to hide," Lspez said. "The little I have I have obtained with a lot of hard work, and I am deeply concerned I will be involved in an unfortunate situation."

"A lot of things are presumed here in Sinaloa," he added, "so all the businessmen like myself are exposed to the possibility of being linked to organized crime."

The exact ownership and profitability of businesses are often difficult to discern. A dairy called Santa Monica, which the United States says is a reservoir for the cartel's dirty money controlled by family members of a top cartel leader, had no products available at the largest grocery chain in Culiacan, its home base. In a supermarket where the brand was found, only one product, whole milk, was for sale, compared with an array of milks, cheeses and yogurts from other brands.

At the unmarked plant on a highway outside Culiacan, workers said there were no representatives available to talk. At a small administrative office in town, opposite an abandoned Santa Monica plant, a receptionist likewise said no owner or manager was available. No one answered a message left there.

Cuillar landed on the sanctions list five days after Guzman's capture, part of what U.S. officials call a renewed effort to tighten the financial noose on the cartel and its top leaders. Cuillar complained that he now stood to lose U.S. customers and perhaps some Mexican ones, without due process.

Still, his 30-odd workers kept busy, tending the Friesian dress horses he keeps, feeding a new batch of ostrich chicks and carving meat at the ranch's processing plant. A grant from the Mexican agriculture department in 2011 helped modernize the facilities, according to Cuillar and Mexican newspaper accounts.

Cuillar, a Colombian-Mexican who has lived in Mexico for 24 years, says that he is the victim of guilt by association with a childhood friend, Leonidas Vargas Vargas, a Colombian drug lord shot to death in 2009 while serving a 19-year sentence for narcotics trafficking in Spain.

"That is the only thing I can think of, that they think I have some link with that guy," he said.

Five of Cuillar's relatives also face Treasury sanctions, including a son, John Fredy Cuillar, and daughter-in-law, Gabriela Amarillas Lspez. Amarillas is the daughter of Sinaloa state's undersecretary for finance, Gildardo Amarillas Lspez. In a statement, the undersecretary denied that he or his relatives had any illicit businesses or connections to drug trafficking.

If Cuillar's ranch suffers from the U.S. sanctions, he said, he will probably just sell it and do something else. He said he was already considering liquidating some of his assets.

"I guess I would have to find another business," he said.

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