Dennis Lawrence, CFE
Lawrence is a Denver-based risk consultant.
Mexico has rightfully earned its reputation as a hotbed for chaos and corruption. Home to the world’s most powerful drug cartels, both local and national political figures live in constant fear of upsetting the wrong person. Compounded with a weak rule of law in many regions and a complicated relationship with big business, it is no surprise that government officials routinely exploit their positions for personal economic gain. Whether they can figure out a way to successfully launder corrupt payments, however, is a less certain affair.
Financial institutions are cracking down on money laundering in Mexico in light of increasing pressure from regulatory authorities, and it is perhaps more challenging today than ever for government officials to keep bribes undetected. Here are a few real life stories (and methods) of the worst offenders who got caught.
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Former governor of Quintana Roo, Mario Villanueva, spent the latter half of the 1990s amassing a fortune by authorizing the Juarez cartel to smuggle hundreds of tons of cocaine from Colombia to the U.S. via the Yucatan Peninsula. In exchange for a minimum of $400,000 in cash per load, Villanueva directed state and federal police to offload, transport, store and protect drug shipments destined for American consumers. In search of a way to protect his growing fortune, the governor enlisted the help of Lehman Brothers broker Consuelo Marquez to create several offshore corporations of which Villanueva and his son were beneficiaries. Each was carefully designed to conceal the names of its true owners (entities owned by layers of other companies or trusts is a favorite tactic). Marquez then established brokerage accounts at Lehman Brothers in the names of those offshore corporations and coordinated transfers of drug trafficking proceeds into and out of the accounts at the direction of the governor. Nearly $19 million was laundered through the firm. Villanueva disappeared days before the end of his term in 1999, and was discovered by Mexican police in a remote part of the Yucatan two years later. According to the Federal Bureau of Prisons, the ex-governor is currently incarcerated in Lexington, Kentucky, and is scheduled for release in 2019.
Between 2005 and 2011, former Secretary of Finance for the Mexican state of Coahuila, Javier Villarreal, increased the state government’s public debt from $27 million to $2.8 billion, likely with the help of former Governor Humberto Moreira, who has yet to be officially charged with any crimes. According to court records, Villarreal obtained fraudulent state loans amounting to $250 million using falsified documents before tasking his wife and other relatives to open bank accounts in the U.S. The accounts collectively received millions in cross-border transfers from Mexico, likely from entities funneling money to obfuscate the origin of official government funds. Family members went on to create several LLCs for purchasing both commercial and residential properties in Texas.
Villarreal’s mistress, Altagracia Daniela Rodriguez-Garcia, was placed in charge of opening a particularly strategic bank account at a JPMorgan Chase branch in Brownsville, Texas. As instructed, she waited one year prior to quietly adding Villarreal’s name as an authorized signer. Shortly thereafter, Villarreal traveled to the same branch to open an offshore investment account held in Bermuda. The pieces of the puzzle came together when it was learned that he and a co-conspirator held a meeting with JPMorgan Chase bankers in Mexico where they inquired as to whether wire transfers could be deleted from bank systems so that no transactions would be seen going from Mexico to Bermuda via the U.S. Villarreal was arrested by Mexican authorities in 2012 as part of a public corruption investigation, but disappeared for two years before surrendering to U.S. authorities on the international bridge between Juarez and El Paso. In September 2014, he pleaded guilty to money laundering charges in a Texas federal court.
Located in Northern Mexico, the lawless border state of Tamaulipas has been the site of numerous massacres and beheadings in recent years. According to U.S. law enforcement officials, the deterioration in security can be partially attributed to the tenure of former governor Tomas Yarrington who allowed drug cartels to operate freely in Tamaulipas without police interference. Apart from payments related to drug trafficking, Yarrington received an abundance of bribes for public works projects. In exchange for the rigged awarding of contracts, construction company owner Fernando Cano purchased real estate for the governor using front names. As Yarrington’s trust in Cano grew, the wealthy businessman became responsible for personally guaranteeing a $2.5 million loan on an airplane acquired using ill-gotten gains through a front company set up by another conspirator. He subsequently guaranteed numerous other loans linked to real estate opportunities involving similar modus operandi where shell companies were created by individuals in Yarrington’s inner circle and used to obtain expensive properties in the U.S. and Mexico. The governor’s demise came when, in the midst of divorce proceedings, Cano’s angry ex-wife spoke openly about the two mens’ wrongdoings. Yarrington disappeared in 2012 and remains on the run.
Financial crimes involving members of government are certainly not limited to Mexico, but as it stands today, the country is a magnet for public corruption. With that said, perhaps the sole commonality among almost all political figures who launder money is that they can’t do it alone. Family members, confidantes, bribe givers and the occasional corrupt financial services employee all play a role in the process… not to mention the banks that safeguard the funds themselves. Consequently, it only takes one mistake at the bank resulting in a Suspicious Activity Report, one angry colleague-turned-police informant or one careless act in an otherwise perfectly run multi-year operation to trigger the downfall of another elected official. The only question is, who’s next?
[Note: All figures are in U.S. dollars.]