Informant Testifies in Drug Trial

The chief undercover informant in Operation Casablanca emerged from heavily protected seclusion Tuesday to testify against six Mexican nationals being tried on charges of laundering money for the Cali and Juarez drug cartels.

Fred Mendoza, a Colombian-born U.S. citizen, took the stand in Los Angeles federal court to describe for the first time in public how he was able establish his cover as “Javier Ramirez,” money-launderer for the Cali cartel, a role that enabled customs agents to penetrate the Mexican banking establishment.

With Mendoza’s help, agents were able to bring money-laundering indictments last year against more than 100 people, as well as three of Mexico’s most prominent banks.

While Mendoza’s testimony, punctuated by clips from secretly recorded videotapes, dominated the day’s proceedings before the jury, an equally important legal battle was being waged outside the jurors’ presence.

Defense lawyers fought unsuccessfully for permission from U.S. District Judge Lourdes Baird to tell the jury about recent government disclosures that Mendoza was accused of large-scale drug trafficking before he signed on as a government informant.

The allegations were made several years ago by an FBI informant in Houston, who claimed to have witnessed a meeting in 1992 between Mendoza and Amado Carillo Fuentes, the late head of Mexico’s most notorious drug cartel. At that meeting, the informant said, Mendoza agreed to smuggle 80 tons of cocaine into the United States.

The informant said Mendoza also boasted about his close contacts with Colombian cartel members and about how he had piloted airplanes ferrying drugs into the Bahamas.

And, according to a government disclosure on Tuesday, Mendoza was reportedly kidnapped by a Colombian drug cartel in 1994, held for an unspecified time and released to another Colombian drug syndicate under unexplained circumstances. He became a paid government informant the next year.

Until those allegations were made public in recent days, prosecutors had said only that Mendoza had been implicated, but never charged, in a major money-laundering investigation in the early 1990s known as Operation Polar Cap. The probe targeted businesses in Los Angeles’ downtown jewelry district and elsewhere.

After learning of the Houston informant’s charges against Mendoza in March, the U.S. attorney’s office ordered customs agents to interrogate their star witness more closely about his past.

Assistant U.S. Atty. Duane R. Lyons told Baird on Tuesday that Mendoza has admitted to some of the allegations made by the Houston informant and denied others. He provided no details.

Lyons also revealed that Mendoza’s handlers at the Customs Service knew of the allegations, but did not pursue them with the FBI during the four years he worked for them.

Defense attorney Michael Pancer said he wanted to use the government documents to show that Mendoza may have been motivated to become an informant to avoid being prosecuted.

Although Baird conceded that Pancer’s argument had some merit, she ruled that the defense could not submit the documents as evidence or even refer to their existence before the jury. However, she said defense attorneys are at liberty to ask Mendoza questions based on information gleaned from the documents.

Siding with the prosecution, Baird said the allegations about Mendoza’s past are “extrinsic” to the case and would prejudice the jury with “something that may have happened years ago.”

The judge also denied Pancer’s request to introduce tape recordings that the Houston informant had made of his conversations with Mendoza in the early 1990s.

At the government’s request, Baird prohibited lawyers in the case from publicly disclosing the contents of the latest Mendoza documents, even though key elements were already divulged in court. Late in the day, however, she ordered the prosecutor to submit a written motion today explaining his reasoning.

In other testimony Tuesday, Mendoza’s former control agent, Steven Lovett, said Mendoza has so far received $2.2 million compensation from the government from 1995 through 1998, and that he stands to receive up to $7.5 million more.

More than $1.7 million of the amount already paid constitutes a 2% commission Mendoza received on the money laundered during the undercover operation.

Customs also shelled out more than $382,000 to Mendoza in informant’s fees and nearly $100,000 in expenses.

His compensation and terms of employment were spelled out in a “personal assistance agreement” signed after he was designated a confidential informant in 1995.

It also provided that he could apply for a separate award given to Customs Service informers totaling as much as 10% of the value of money and drugs seized during the investigation.

The award, which Lovett estimated could total $7.5 million, is discretionary and must be approved by a special committee and the head of the Customs Service in Washington.

Mendoza is due back on the witness stand today. Prosecutors said his testimony could last several more days.