Anti-Drug Cooperation in Jeopardy, Mexico Tells U.S.

Operation Casablanca, the biggest money-laundering investigation in U.S. history, has so incensed Mexican officials that they are now warning it will damage vital anti-drug cooperation with the American government.

The diplomatic row has cast a pall over an operation that the Clinton administration hailed as a success earlier this month.

The investigation, based in the Los Angeles suburb of Santa Fe Springs, has led to more than 150 arrests and the indictment of three Mexican and four Venezuelan banks accused of laundering drug money.

But Mexican officials have been infuriated by the discovery that U.S. Customs operatives apparently carried out part of the sting investigation here without their knowledge. The Mexicans are so upset that some officials have even threatened to formally charge the American operatives and seek their extradition.

“Our mutual confidence has been damaged. Our cooperation has been damaged,” Foreign Minister Rosario Green told reporters Thursday. “Therefore we must now sit down to talk and reestablish the terms of our cooperation.”

Green said Mexico will demand that the U.S. government sign a “code of conduct” that would prohibit any more such covert cross-border operations.

Mexico’s cooperation in the anti-drug fight is considered vital because the country is not only an important source of other drugs but also the biggest conduit for cocaine entering the United States.

After Mexico filed a protest with the U.S. government last week, President Clinton expressed regret that Mexican officials were not informed in advance about Operation Casablanca. But his apology was clearly not enough to put the matter to rest.

The Mexican irritation stems from two factors. The most serious is that U.S. Customs agents or informants were apparently secretly working in Mexico as part of their sting operation, which led to the indictment of 26 Mexican bankers.

Such an operation not only could violate Mexican laws but also touches deep-seated fears in a country that lost half its territory to the U.S. in the last century and remains wary of its powerful neighbor.

One senior Mexican official offered this argument to substantiate their anger: What would American officials do if they discovered Mexican police in Los Angeles carrying a shipment of cocaine to use in a Mexican sting operation there?

“The Americans would say: ‘Wait a minute, who authorized this operation in the U.S.? You are committing a crime,’ ” said the official, speaking on condition of anonymity.

Sting operations are legal in Mexico only if authorized by the attorney general.

Mexican officials are also angry that they were left in the dark about the U.S. investigation until it was announced in Washington.

Authorities here have come under fierce attack from opposition party members who claim that officials meekly allowed a violation of Mexican sovereignty.

In Washington, Justice Department officials said privately that the operation had to be secret to protect the lives of U.S. agents.

Asked about Green’s remarks on cooperation, U.S. Atty. Gen. Janet Reno said the two governments have worked well together.

“I think we must all do everything that we can to focus on drug trafficking and the damage it is doing to both nations and to take the appropriate steps, based on our laws, that will bring these people to justice,” she said.

An official at the Treasury Department, which oversees Customs, responding to claims that agents may have violated Mexican laws, said: “We understand their concerns, and we’re looking at the situation.”

Times staff writer Robert L. Jackson of The Times’ Washington Bureau contributed to this report.