Blood money flows by wire to Mexico

The bleeding body of Mexican immigrant Javier Resendiz Martinez was the first thing police noticed when they raided the bungalow on North 63rd Avenue here four years ago after reports of gunshots.

Soon afterward, however, they found payment logs of more than 100 wire transfers to Western Unions in the border town of Caborca, Mexico -- which state and federal officials cite as evidence that the financial services company and other money transmitters are used by Mexican crime syndicates to help facilitate the smuggling of people into the United States.

Arizona Atty. Gen. Terry Goddard said human smuggling has become a $2-billion-a-year business in his state alone, thanks in large part to what he calls “blood wires,” the payments from family members, friends and employers to smugglers via Western Union and other companies.

Goddard and other Arizona officials have not accused Western Union of a crime. But in interviews and court documents they say the company consistently has rejected requests for cooperation, undermining efforts in Arizona to go after the crime cartels that control much of the increasingly violent trade in humans, drugs, weapons and laundered cash from their havens in Mexico.

Western Union spokesman Daniel Diaz called Goddard’s accusations “erroneous and inflammatory.”

The Colorado-based company works cooperatively with law enforcement agencies around the world to identify and prosecute illegal activity, said Peter Ziverts, its vice president for anti-money laundering. He said Western Union had instituted numerous reforms to detect illegal wire transfers, including far more aggressive oversight of its thousands of independent money-store operators.

Near the U.S. border, he said, the company caps the total amount that someone can transfer, but keeps the cap and the time frame secret to avoid tipping off smugglers. The company has filed more than 30,000 suspicious activity reports from Arizona, Texas and Mexico in the last year, he said.

“We cooperate . . . and we go over and above what we’re required to do,” Ziverts said.

Marcy M. Forman, who heads the investigative arm of the Department of Homeland Security’s Immigration and Customs Enforcement division, said Western Union had cooperated on specific criminal investigations. “When we need information, we generally don’t have a problem getting it,” Forman said. “But ours is case specific. So that may be the difference.”

Homeland Security Secretary Janet Napolitano, until recently Arizona’s governor and its attorney general before Goddard, had no comment on Goddard’s ongoing battles with Western Union.

“The general strategy of targeting drug cartels and [drug and human] smugglers by breaking their financial backbone was an approach Napolitano originated as state [attorney general] and has proved immensely successful at the state level,” said a senior Homeland Security official, who spoke on condition of anonymity when discussing department thinking.

Goddard said that since he took office in 2003, Western Union had denied many of his formal demands for information on money transfers and refused to comply with warrants ordering the seizure of large volumes of suspicious payments -- especially those to Caborca and other smuggler strongholds in Mexico’s Sonora state, just south of Arizona.

Western Union has argued in court that many of Goddard’s demands are unconstitutionally broad and violate the privacy of its customers, many of whom are immigrants sending money home to Mexico. Some customers won’t want to use Western Union if their money could be seized, it says, although it acknowledges that no transfers have been seized in Arizona in several years. The company also opposes the state’s efforts to get access to the wire transfer data, calling that unconstitutional.

Some judges have agreed.

Last week, the Arizona Supreme Court ruled that Goddard had overstepped his authority in trying to seize records of wire transfers exceeding $500 from 29 other U.S. states to Sonora.

Western Union hailed the ruling. But Goddard, a likely candidate for governor, said the decision was narrowly focused and still would allow him to seize some of the payments if they were linked to human smuggling into those other states via Arizona.

He likens his request for the data to getting approval for a wiretap: The information helps authorities find suspicious patterns of activity, which they can use for further investigation and possible prosecution.

Goddard said that he was focusing on money transfers because, without them, the human smugglers would be out of business.

According to law enforcement officials, Mexican smugglers almost always do business in cash. But migrants pay most of the $2,000 or so fee when the trip is completed.

To ensure they get paid, smugglers hold their human cargo -- usually half dressed and under armed guard -- in a vast network of “stash houses” until the transfers come through. Then they whisk the migrants by van to their destinations around the nation.

Authorities say there are about 300 stash houses around Phoenix at any given time, each filled with dozens of immigrants. Hundreds more hideaways are scattered throughout the Southwest and in dozens of “corridor” states where the migrants end up.

After they reach the United States, many migrants are forced to pay two or three times the negotiated fee -- and may be assaulted, raped or killed if they object.

When Resendiz protested at the house on 63rd Avenue, he was given a phone and told to call his brother in Philadelphia. Officials said that, as his brother listened in, Resendiz, 36, argued with his captors and was executed.

Authorities contend that tracing the flurry of electronic payments that Western Union, MoneyGram and other firms process is vital to finding the smugglers and their stash houses.

Between 1999 to 2001, according to a sworn declaration from Daniel Kelly of the Arizona Financial Crimes Task Force, one group of smugglers laundered more than $10 million through Western Union.

Since 2003, the U.S. Treasury Department and Arizona have fined Western Union $6 million for willful failure to file suspicious activity reports and other violations. Authorities call that a significant disciplinary action.

“Our system wasn’t nearly as robust as it is now,” Ziverts said recently.

By 2005, Arizona officials said, their money seizures and enforcement efforts had reduced the flow of smuggling proceeds into the state by $600 million a year. The smugglers began having the money wired from other states directly to associates in Mexico.

That year, Western Union complied with an Arizona state subpoena to provide data for two months of wire transfers to Sonora.

Authorities found that in that short window, three suspected smugglers linked to the stash house where Resendiz was killed had picked up 161 wire transfers at a single Western Union in Caborca.

Only one of those payments had originated from Arizona, Kelly said -- further proof that state authorities needed broader seizure powers.

In all, $28 million flowed during that short period from other states into Western Unions in Caborca and other Sonora smuggling hubs.

So Goddard obtained a warrant to seize those suspicious payments too. Western Union refused to comply, and the impasse took three years to work its way through state courts.

Goddard and other state officials say the firm has not done enough to monitor questionable payments, institute safeguards, discipline incompetent and unscrupulous employees.

“Western Union has made every effort to prevent data disclosure and identification of criminal activity which we could be able to make from that disclosure,” he said during a March Senate hearing.

Western Union disagrees. The company recently agreed to provide some of the data from other states.

But Goddard -- who has pressed for tougher federal laws and regulations to crack down on the smugglers -- said the firm had not done enough.

No other states, he said, systematically analyze and target suspected smugglers’ wire transfers for prosecution, and neither does the U.S. or Mexican government. As a result, Arizona authorities said, their hunt for the smugglers will remain largely futile.

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josh.meyer@latimes.com