COLUMN ONE : The Drug Web That Entangles Mexico : The nation’s deepening crises and a new attack on corruption expose the sinister ties between cartels and government, investigators say.

Six months ago, President Ernesto Zedillo took over a nation in crisis. A confidential report that landed on his desk in his first week spelled out a major reason why--drugs.

The warning from the government’s National Institute for Combatting Drugs was ominous: The increasing power of Mexico’s drug cartels threatens the nation’s stability and, indeed, could ultimately make the country ungovernable.

That power lies at the root of the swirling political crisis, the emerging economic disaster and the assassinations that have bred a new sense of national insecurity.

“As a result of the financial capacity of these drug-trafficking organizations, the tendency to infiltrate the government and financial structures will continue,” said the report, a copy of which was obtained by The Times. “The power of the drug-trafficking organizations could lead to situations of ungovernability, using whatever political or economic space in which institutions show weakness or inattention; the advance of drug-trafficking promotes impunity and uncertainty in the institutions, justifies violence and increases intimidation of the authorities.”

Within weeks, those words took on prophetic urgency. The long-rumored ties between the highest levels of Mexico’s government and the cartels that U.S. Drug Enforcement Administration chief Thomas Constantine says supply three-fourths of the cocaine sold in America became all too clear.

These ties are emerging in evidence supporting the arrests of two seemingly untouchable figures--the former chief narcotics investigator and the brother of the former president, both suspected of having direct links with the cartels. That evidence has opened a window onto what is known here as “narco-politics”--the collusion, based on converging financial interests, of the drug gangs and the very top of the Mexican power structure, including Zedillo’s own ruling party.

Alarmed, the president decided that the cartels’ infiltration of the government was a critical national security issue. He called in his attorney general, Antonio Lozano--the first member of the opposition to hold a Cabinet position--and gave him free rein to crack down on corruption and end official impunity.

The result: Police broke decades of tradition and arrested Raul Salinas de Gortari, elder brother of Zedillo’s predecessor, and charged him with ordering the assassination of the ruling party’s No. 2 man last year. They also opened an investigation into ties between Raul Salinas and Mexico’s cartels.

Mounting Evidence

One week later, prosecutors charged Mario Ruiz Massieu, a former deputy attorney general whom former President Carlos Salinas de Gortari had appointed as Mexico’s counter-narcotics chief, with covering up Raul Salinas’ alleged role in last year’s murder of the ruling party’s secretary general--Ruiz Massieu’s own brother. Both accused men have denied the charges, Raul Salinas through his lawyer and Ruiz Massieu at an extradition hearing in New Jersey on Wednesday.

In the months since, Lozano’s investigators and U.S. drug enforcement agents have found mounting evidence of how deeply entrenched the cartels have become. In documenting ties between Raul Salinas and Ruiz Massieu and the cartels, investigators have been piecing together how, throughout the Salinas administration, drug gangs used their money to influence the running of the country.

Despite Zedillo’s efforts to clean house, he and his Cabinet officials concede that drug corruption continues. And Clinton Administration officials have called it a threat to the security of America’s border states, including California.

The two developing cases from the Salinas administration show how the drug corruption works and raise serious questions about whether Carlos Salinas was involved in wrongdoing during the years when he was the darling of two consecutive U.S. administrations. Salinas himself has no charges pending against him in Mexico or the United States, where he is currently residing. But the Mexican attorney general’s office indicated this week that it is trying to determine whether Salinas knew about his brother’s alleged involvement in the murder of Francisco Ruiz Massieu.

During his nine months as Mexico’s chief anti-drug prosecutor, Mario Ruiz Massieu allegedly oversaw a nationwide network of corruption, receiving millions of dollars in kickbacks from prosecutors and police commanders protecting drug mafias, according to officials and investigative documents.

Raul Salinas has been linked to prominent officials accused of collusion with the cartel and to top drug traffickers, according to law enforcement officials and documents.

“[Mexico is] a country that right now is very vulnerable to the cartels,” DEA chief Constantine told The Times in a recent interview. “They are on a tipping edge. Where they go in the next two to five years” will be decisive, he said.

Constantine praised Zedillo’s reforms and said that Mexican drug lords have not attained the sophistication of their counterparts in Colombia, who have won elected office and waged virtual war on the government there.

Citing the past dominance of gangsters in Sicily and in some big U.S. cities, however, Constantine said: “Organized crime has never existed without influence over the political system. . . . It’s very obvious the Mexican cartels could not have as much power as they have without having corrupted parts of the government.”

‘Narco-Democracy’

Other experts go further, asserting that Mexico has become a “narco-democracy,” in the words of former Mexican prosecutor Eduardo Valle Espinosa, a crusading investigator now living in Washington. His well-documented allegations have rocked Mexico. He coined the term to reflect the apparent contradiction of a nation governed by elected officials and a democratic constitution falling under the influence of ruthless international drug cartels.

Bleak assessments emerge from dozens of interviews with U.S. and Mexican government officials, investigators and other experts, as well as from court cases and studies reviewed by The Times:

* The bosses of Mexico’s handful of major cartels remain at large, racking up what Constantine estimates at $7 billion in annual profits as they consolidate their presence north of the border.

* Notable murders blamed on “narco-politics,” such as the slaying of presidential candidate Luis Donaldo Colosio last year and that of the Roman Catholic cardinal of Guadalajara the year before, have gone unsolved. Mexican and U.S. authorities are investigating ruling party leaders suspected of collusion with drug lords in these and other crimes.

* Drug corruption pervades law enforcement. Federal and state police serve as soldiers of the underworld. They commit murders, guard drug lords and, as was graphically illustrated in the mystery surrounding a giant cocaine shipment that landed in the state of Zacatecas last year, escort huge loads of drugs toward the United States. Mexican federal officers protect smuggling operations in hub cities such as Mexicali, according to U.S. law enforcement.

* The corruption pipeline crosses the border as well, as demonstrated by U.S. smuggling indictments this year against half a dozen American border inspectors and immigration officers in Calexico and in El Paso and other Texas locations.

“There has been a history [of], and there continue to be problems with, the groups of Mexican federal police assigned to high-profile areas of trafficking, such as the border,” said Craig Chretien, special agent in charge of the DEA in San Diego. “They get percentages of drug profits; they get compromised. It has been tough. There is an unacceptable level of corruption.

“But it would be naive to say that corruption only exists on the other side of that line.”

* During the boom years preceding the current crisis, drug lords prospered: They laundered their proceeds in industries such as tourism, construction and transportation, which are also used for smuggling. Like the Colombian drug groups, according to a recent study published by the Autonomous National University of Mexico, the Mexican cartels have the economic power to not only corrupt state and federal officials but also to infiltrate key sectors of the economy, “such as banks, stock exchanges and money-changing houses and other businesses.”

* Six months of economic woes, which impoverished most Mexicans nearly overnight, have been a boon to the cartels. A U.N. commission on transnational crime recently said gangs have used the battered economy as a Laundromat for their illicit profits. They convert their dollar revenues into cheap pesos and buy movable assets, such as luxury cars, in Mexico. Then they sell them abroad for “clean” dollar profits. U.N. sources estimated that the cartels laundered tens of millions of dollars in Mexico this year.

“There are honestly earned fortunes in Mexico,” said Jose Luis Perez Canchola, vice president of the Mexican Academy of Human Rights. “But . . . in this past [Salinas] administration, multimillionaires appeared under rocks, like mushrooms--people for whom it was impossible to make so much money so fast by legal means.”

The money makes its mark north of the border as well. In a landmark case last year, a senior banker at American Express Bank International of Beverly Hills was convicted of laundering $30 million in drug earnings for a middleman. The money was alleged to have come from the Gulf cartel, a northeastern Mexico group that has direct links with the powerful cocaine cartel based in the Colombian city of Cali.

Zedillo will have to go beyond locking up a few traffickers and former top officials to fulfill the bold law-and-order pledges he has made since becoming president, observers say; he must attack the nexus between the cartels and the ruling elite that continues to flourish under his administration.

Gov. Ernesto Ruffo Appel, the opposition-party leader of Baja California, a border state severely affected by the drug trade, said that top figures in the ruling Institutional Revolutionary Party, or PRI, are aligned with the cartels but that targeting them could be difficult and entails risks for Zedillo. Several PRI officials privately agreed.

“The decisions that are made will have repercussions,” Ruffo said. “This could even endanger the life of the president.”

New Crackdown

DEA agent Chretien said he is encouraged by the new tenacity of Mexican investigators with whom U.S. agents are working closely. “There is more effort on their part in terms of really going after the heavy targets,” he said. “Recent indications from the Mexican government show that the investigation will go wherever it goes. If it includes government and political figures, so be it.”

The rise of the cartels paralleled the dramatic opening up of Mexico that occurred during the six-year Salinas administration, according to the DEA and half a dozen academic studies. Salinas’ free-market policies, praised by both the George Bush and Clinton administrations, brought Mexico and the United States as close as they ever have been and culminated in approval of the North American Free Trade Agreement, which went into effect last year.

Salinas’ privatization of banks, telecommunications and other key industries revolutionized the economy. But those policies also opened it to foreign investment--including that by the world’s most powerful drug cartels, particularly the Cali cartel, said several experts.

The Clinton Administration showed “a pattern of not focusing on drug trafficking in Mexico during NAFTA consideration,” said Peter Smith, director of the Center for Iberian and Latin American Studies at UC San Diego. “President Salinas was consummating a reconfiguration of the power structure in Mexico, and one of the elements in that power structure was international billionaires. People who qualify for membership in that group include the leaders of drug cartels.”

U.S. Destinations

Geography and a successful U.S. interception campaign also played key roles in Mexico’s emergence as the prime smuggling route to the United States. In the late 1980s, the United States cracked down on seagoing routes to South Florida across the Caribbean. Colombia’s drug cartels, which produce the bulk of the world’s cocaine, cemented a partnership with Mexican smuggling rings to expand operations in Mexico.

Under that arrangement, DEA investigators said, the Colombians fly the merchandise to central and southern Mexico in converted 727s and other jets capable of carrying loads of up to 10 tons; they also use ships. The Mexican transporters send the drugs north in trucks, small planes and trains to be smuggled across the porous 2,000-mile border into the United States, where operatives paid by the Colombian cartels break up the shipments and sell them.

At every key transit point, bribed Mexican officials are on hand to help. As they shifted to the land route, Colombian traffickers began paying their Mexican partners in cocaine rather than cash, and ceding them key sales turf--in Los Angeles, Houston, New York. “The Mexicans are increasingly distributors as well,” said Chretien. The Mexicans have been given a lot of the West Coast for distribution. . . . This is still evolving. It’s much more lucrative and creates much more money floating around.”

The explosion of profits transformed the Mexican organizations from junior partners into kingpins in their own right, experts say.

“The Colombians created a bit of a monster,” said Thomas J. Clifford, a retired DEA supervisory agent in San Diego and an expert on money laundering.

Mexican drug lords now spend as much as $500 million a year on bribery, according to the Autonomous National University of Mexico study. Its findings are based on an internationally accepted formula that assumes a basic level of corruption in major drug-producing or -trafficking countries: $1,000 in payoffs for each kilogram of cocaine smuggled through a country.

The study noted that the Mexican federal attorney general’s annual budget is about $200 million--less than half of the cartels’ presumed kickbacks.

The allegations against Mario Ruiz Massieu provide a glimpse of the scale of that corruption. One Mexican official described the network that the former anti-drug prosecutor built in just months last year as a “franchising system.”

During that period, when federal cocaine seizures dropped dramatically, Mexican federal prosecutors and police commanders allegedly paid Ruiz Massieu up to $1 million for lucrative assignments to border cities and other key drug zones--the states of Tamaulipas, Baja California and Sonora. They delivered suitcases containing up to $150,000 in monthly and weekly kickbacks to him, according to officials and documents gathered to support Mexico’s extradition case against Ruiz Massieu. He was arrested in New Jersey in early March on charges of violating U.S. currency-declaration laws.

Vanishing Cocaine

Investigators and officials suspect that network was behind one of the most controversial drug cases of last year--the “disappearance” of nearly eight tons of Colombian cocaine in the central state of Zacatecas. The drugs, in fact, did not disappear but crossed into Southern California soon after the shipment was hijacked from one Mexican federal police agency by another.

The case, according to documents and officials familiar with it, demonstrates the flow of vast quantities of cocaine in the final year of the Salinas administration and underscores the role Ruiz Massieu’s appointed federal officials played in facilitating the traffic.

The drama began Aug. 4, when a French-built cargo plane landed in the town of Sombrerete--one of more than a dozen remote airstrips that Mexican officials say the cartels use as transit points. Under President Salinas, an investigation by federal transportation and highway police commander Miguel Angel Reyes Ortiz, who interviewed every police officer and investigator on the scene that day, found that the plane was overloaded--with what was later estimated to be a 10-ton cargo that burst the plane’s tires on landing.

The value of that single shipment on the streets of the United States: $200 million.

Reyes Ortiz’s official report on the incident stated that the shipment was seized by federal transportation police. But as they were driving it to the Zacatecas state capital, about 60 federal judicial police--a separate force under Ruiz Massieu’s command--hijacked it, according to Reyes Ortiz’s official statement in the case.

The commander said he interviewed all 16 highway police escorts and concluded that the judicial police unloaded into trucks about three-quarters of the drugs before allowing the shipment to proceed to the state capital.

Reyes Ortiz said he reported the theft to Ruiz Massieu and his deputy, Jorge Stergios, who also has been charged in the alleged kickback scheme. Both, he said, ignored his report.

“In this operation, it’s left absolutely clear the connection that exists between high officials of the attorney general’s office and the narcotics gangs operating in Zacatecas,” Reyes Ortiz concluded in his formal deposition.

Based on the distinct packaging of the shipment, U.S. drug enforcement agents on the border said they have documented that the shipment reached the American drug market within days. They pushed for a high-level Mexican government investigation of the case. But the case was officially closed in April. Top U.S. Justice Department officials concluded that the drug theft was covered up.

Inherited Kickbacks

Officials close to the Ruiz Massieu investigation now say they believe that he did not invent the kickback scheme: He inherited it.

A deputy attorney general under Salinas was implicated in a multimillion-dollar payoff scheme involving the Gulf cartel, according to court testimony in Texas last year. One witness in the Texas case admitted to delivering hundreds of thousands of dollars to federal commanders.

A clear indication of what happens to such payoffs surfaced in the Ruiz Massieu case. Investigators discovered bank accounts in Texas in his name after the former prosecutor was arrested in New Jersey. The total dollar deposits in Texas alone during his nine months as chief narcotics investigator: $9.4 million. Mexican federal prosecutors also found that Ruiz Massieu had purchased luxury homes in Texas, Acapulco and elsewhere during the same period.

Unlike his predecessors, however, Ruiz Massieu was more than just an allegedly crooked top cop; he is the scion of a clan related to the former president by marriage and politics.

In a web of family intrigue, he is accused of covering up for his former sister-in-law’s brother, Raul Salinas, in the 1994 murder of his own brother, Francisco Ruiz Massieu. He did so, court documents allege, while serving as chief investigator in his brother’s death. And the case the Mexican government is presenting at Ruiz Massieu’s extradition hearing this week reinforces the widely held belief that corruption has spread above and beyond the police.

The arrest of Raul Salinas, a multimillionaire businessman and former government official, also brought revelations about his alleged relationship with drug traffickers. Investigators cite the account of Guillermo Gonzalez Calderoni, a former commander of elite federal anti-drug squads, who was also named in last year’s Texas trial as a protector of the Gulf cartel.

Gonzalez was arrested in Texas in an unsuccessful extradition attempt by Mexican authorities, who had charged him with corruption. Shortly after his arrest, Gonzalez--now free and presumed to be living in Texas--told investigators that he had damaging information on Raul Salinas.

“Gonzalez said that he had personally delivered to Raul recordings of telephone wiretaps of opposition politicians in the north,” a Mexican investigator told The Times.

“He said he was aware of the relationship between Gulf cartel chief Juan Garcia Abrego and Raul. He said Raul had meetings with [Garcia] Abrego and that Raul served as a front for [Garcia] Abrego through his companies.”

There are further reports that Raul Salinas has been seen on several occasions--at restaurants, in an airport and at a private party in Monterrey--with the drug lord Garcia, according to a Mexican official. Garcia was placed on the FBI’s 10 Most Wanted List earlier this year.

No single motive has been established publicly for the slaying of Francisco Ruiz Massieu. But officials believe that one factor may have been a conflict between him and Raul Salinas over a huge Acapulco real estate development. The Diamond Point project, in which Salinas reportedly invested, was a suspected conduit for money laundering while the victim was governor of the state of Guerrero in the late 1980s.

Moreover, at least two suspects in the assassination have reputed Gulf cartel ties--a hit man who reportedly absconded with a payment instead of carrying out the murder and a Tamaulipas congressman who allegedly directed the plot at Raul Salinas’ behest and is believed dead.

The investigation of such high-profile cases, particularly the nearly eight tons of cocaine spirited away from Zacatecas, has been impeded by the drug cartels’ infiltration of the federal police from top jobs to the street, U.S. officials said.

It is a grim reality that caused former Atty. Gen. Jorge Carpizo MacGregor to exclaim that he was “surrounded by traitors.”

Targeting Corruption

Current Atty. Gen. Lozano has vowed to clean house, using secretive elite units that report directly to him and special prosecutor Pablo Chapa Bezanilla. Lozano also unveiled last week a sweeping plan that includes individual reviews of all federal police officers and prosecutors, complete with mandatory drug tests, to combat internal corruption.

But the obstacles are daunting, according to Baja’s Gov. Ruffo. The governor has worked closely with federal prosecutors on the Colosio case and the murder last year of the police chief in Tijuana--a crime thought to be related to the Colosio assassination and blamed on federal police commanders linked to drug lords.

“Unfortunately for Lozano and Chapa, they are in the hands of an agency that in its majority is not loyal,” said Ruffo, whose state police have also been implicated in official corruption. “There are few officers whom they can depend on. In there, they give an order and the bad guys know about it before the officers. . . . It turns out that the one who receives the order is the traitor.”

Fineman reported from Mexico City and Rotella from Tijuana.

Next: The drug cartels’ battle for the border.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

The Top Cartels

Mexico has about half a dozen drug organizations of international scope and about 90 regional groups. The most notorious are:

TIJUANA CARTEL: Reportedly run by the Arellano Felix brothers, the cartel continues to run cocaine, heroin and marijuana on the so-called Pacific route two years after being accused of killing the cardinal of Guadalajara. Fighting with rivals for control of corridor to Los Angeles.

SINALOA CARTEL: Alleged leader Hector (Guero) Palma continues to fight the Arellanos from his base in Sinaloa, a state notorious for violence and marijuana production, and has networks in Central and South America.

CIUDAD JUAREZ CARTEL: The group “has fomented corruption among prominent public officials and social and economic sectors,” according to a confidential report from Mexico’s National Institute for Combatting Drugs. It dominates the northern states of Chihuahua and Sonora.

GULF CARTEL: Allegedly headed by Juan Garcia Abrego, this organization, based in the states of Tamaulipas and Nuevo Leon, established direct links with the Cali cartel of Colombia to operate a flourishing cocaine pipeline along the Gulf of Mexico.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Key Players

Some key players in the Mexican corruption crisis:

Ernesto Zedillo: President of Mexico. Launched crackdown on corruption following secret report from national anti-drug institute saying increasing power of Mexico’s drug cartels threatens national stability.

Antonio Lozano: Attorney general of Mexico. First member of opposition to hold a Cabinet poisition.

Francisco Ruiz Massieu: Former husband of Adriana Salinas, sister of Carlos and Raul Salinas. No. 2 man in ruling political party, he was assassinated in September.

Mario Ruiz Massieu: Brother of Francisco. Former deputy attorney general and counter-narcotics chief. Now jailed in New Jersey pending possible extradition on charges of covering up murder of his brother.

Raul Salinas de Gortari: Brother of former president Carlos Salinas. In jail in Mexico on charges that he ordered the assassination of Francisco Ruiz Massieu.

Carlos Salinas de Gortari: Former president; also former brother-in-law and political sponsor of Francisco Ruiz Massieu. Currently residing in United States.