4 to Testify in Cross-Border Money Laundering Case

Four Mexican nationals have quietly entered guilty pleas and agreed to testify against fellow defendants indicted in Operation Casablanca, the biggest drug money laundering sting in U.S. history.

They are the first defectors from the ranks of about 40 Mexican and Venezuelan bankers, businessmen and suspected drug cartel members arrested in May after a two-year cross-border investigation by undercover agents from the U.S. Customs Service.

Seventy others indicted are fugitives.

In exchange for their “substantial cooperation with law enforcement,” federal prosecutors in Los Angeles have agreed to dismiss some of the charges against the four defendants and to recommend leniency when they appear for sentencing. They face up to 20 years in prison.

Plea bargaining is a common practice of prosecutors, especially in cases involving many defendants. What distinguishes this deal, however, is that three of the four defendants played pivotal roles in the money laundering scheme.

In sworn statements attached to their plea agreements, they directly implicated many of their co-defendants.

It remains to be seen whether their testimony will also strengthen the government’s case against a much more difficult catch--three of Mexico’s most prominent banking institutions.

Bancomer, Banca Serfin and Confia banks were indicted along with more than a dozen low- and mid-level bankers accused of knowingly laundering what they thought were proceeds from the Cali and Juarez drug cartels.

The banks contend that any wrongdoing was committed by rogue employees without their knowledge. They have filed motions with U.S. District Judge Lourdes Baird to sever their cases from the others and to require the government to produce a bill of particulars specifying all illegal acts allegedly committed by the banks.

Assistant U.S. Atty. Duane R. Lyons said Friday that testimony from the four defendants who pleaded guilty “very well might” enhance the prosecution’s case against the banks, but he declined to elaborate.

The defendants--Ernesto Martin De la Torre, Carlos Novelo Correa, Rosendo Ramirez Linares and Mario Valdovinos Ramirez--entered their pleas in Baird’s courtroom on Dec. 17 and 18 without public notice.

“We wanted the pleas taken without fanfare for fear of jeopardizing the safety of any witnesses,” Lyons said. He added, however, that no threats have been made against the four because of their plea deal.

Martin is the cousin of Victor Manuel Alcala Navarro, the man accused of directing the entire money laundering operation in Mexico. Martin served as Alcala’s top lieutenant and has admitted helping recruit Mexican bankers and businessmen, setting up two business fronts in Tijuana and transporting laundered bank drafts to the undercover customs agents in Santa Fe Springs.

He pleaded guilty to one count of money laundering conspiracy, a felony punishable by a maximum of 20 years in prison and a fine of $500,000 or more.

Novelo, a Mexican lawyer, told prosecutors that he recruited two officials from a Bancomer branch in Tijuana into the scheme. He said he and the two bankers drove to San Diego in March to negotiate a deal with the Customs Service’s chief undercover operative, who went by the name of Javier Ramirez.

The lawyer and two bankers agreed to charge Ramirez a 1.5% fee on all drug money they laundered and to split the take, according to Novelo’s account. He too pleaded guilty to one count of money laundering conspiracy.

Also working under Martin was Ramirez Linares, who told of managing an office in Tijuana that Alcala allegedly used to keep in constant touch with the undercover customs operation in Santa Fe Springs.

Operating out of an industrial park under the name of Emerald Empire Co., the customs agents pretended to be money launderers for the Cali cartel and negotiated a deal with Alcala, according to government documents.

The Americans said they wanted to be able to wire money from the United States to Mexico to be converted into readily negotiable and hard-to-trace bank drafts.

Alcala allegedly agreed to oversee the Mexican end of the money laundering operation. Ramirez Linares served as a sort of traffic manager, handling telephone and fax communications between Santa Fe Springs and Tijuana. He also pleaded guilty to one count of money laundering conspiracy.

Of lesser significance in the organization was Valdovinos, a Tijuana businessman who admitted laundering more than $1 million through a company he owned. Valdovinos also traveled to Santa Fe Springs last February to discuss with the undercover agents other ways to launder money. That meeting was secretly videotaped, as were other encounters between the customs agents and more than 100 suspects in the case.

Valdovinos pleaded guilty to two counts of laundering financial instruments and agreed to forfeit $126,000 to the U.S. government.

All four defendants remain in custody without bail along with all but one of the suspects arrested in May.

Trial of all the Mexican bankers and banks is set to begin March 29. It will be the first of four trials arising out of Operation Casablanca so far.

With the trial date approaching, defense lawyers have filed an assortment of motions to have the case thrown out because of lack of jurisdiction or because of government misconduct.

One defense motion contends that the customs agents committed “outrageous misconduct” by failing to inform Mexican officials about the probe until it was over.

That issue has been a sore point in Mexico, offending national pride and prompting an official protest by Mexico’s government. President Clinton and Mexican President Ernesto Zedillo later tried to bury the hatchet by promising closer cooperation by law enforcement agencies in both countries.

But the issue was resurrected Friday when the U.S. attorney’s office filed a lengthy response to the misconduct charges.

U.S. Official Defends Operation’s Secrecy

In an affidavit, Steven P. Lovett, a customs official, said information was withheld from Mexican authorities because “evidence of corruption and possibility of complicity of defendants with certain Mexican authorities was uncovered.”

He said he and other customs officials feared that telling Mexican law enforcement authorities would jeopardize the lives of undercover operatives.

As examples, he cited a statement Alcala allegedly made to the undercover operatives that Mexican police officials were on the payroll of the Juarez cartel.

Lovett said another defendant, Alfredo Garcia Suarez, told undercover operatives that he managed accounts for Mexican federal police agents who provided protection and assistance to drug traffickers.

Another defendant, Roberto Orozco Fernandez, was stopped near the El Paso border crossing in a vehicle carrying 9,330 rounds of ammunition, 94 weapons and credentials from the Mexican federal police, Lovett said.

He quoted Alcala as saying that Orozco was a hit man for the Juarez cartel and that two successive heads of Mexico’s anti-narcotics campaign were on the cartel’s payroll.

Although acknowledging the Mexican government’s protest about being kept in the dark, Lovett said Mexico has not made any formal protest that the customs agents violated the two countries’ treaty on mutual legal assistance.

The U.S. government also has seized through civil court proceedings more than $60 million in assets from the U.S. accounts of 14 Mexican and Venezuelan banks, including the three Mexican banks facing criminal charges.