As strange as it may seem, some of the most prominent drug traffickers in Sinaloa state, Mexico, are compliant taxpayers and employers registered in the national payroll tax, according to a state registry obtained by Mexican magazine Emeequis via a freedom of information request.
What’s more, at least 26 people and companies who have been identified by the United States for links to organized crime — and whose property and assets have been seized by the US Treasury — pay taxes despite being in Mexican prisons or having been extradited.
Family members with names linked to drug trafficking like Zambada, Beltran Leyva, Muñoz, Guzman Loera or Esparragoza are found on the tax census, as well as the companies they own, which have been flagged by the United States. These businesses include milk producers, day care centers, water parks, gas stations, construction firms, clothing stores, ranches and more.
This is the first part of an article which originally appeared in Emeequis, in partnership with Connectas, and was translated, edited for clarification, and reprinted with permission. See Spanish original here. See the second part of InSight Crime’s translation here.
Local authorities, starting with Governor Mario Lopez Valdez, say they don’t know anything about this — nothing about whether a certain business person has drug ties.
What they do know is that in Sinaloa the drug traffickers don’t dodge taxes.
Gerardo Vargas Landeros is the number two in the Sinaloa government, similar to the Secretary of the Interior. Which is to say, he knows everything about the state. Everyone reports to him. But he swears this is not the case.
So he says when asked delicate questions about the ties between business people and drug traffickers. “The majority of business people that I know, and have dealt with as the general secretary of government, have no knowledge of any situation regarding ties to organized crime — so far none,” he said some months back at the government headquarters.
That was September 13, 2014. Two days later, news arrived from Los Angeles, California stating the United States government had secured $65 million that Luis Ignacio Muñoz Orozco, alias “El Nacho” — a successful local entrepreneur and ex-president of the Chamber of Commerce in Culiacan, Sinaloa’s capital — had helped launder money for the Sinaloa Cartel.
But Vargas Landeros knew nothing of this, or any other case involving money laundering or links between businesses and the drug trade. And he continues not knowing.
However, there may be a simple way of fixing this information gap: taking a look at Mexico’s registry of payroll taxes for 2014, as maintained by the revenue office at Sinaloa’s finance ministry.
Vargas would need some time to read it, but will run into some surprises while perusing through the registry’s 60,000 pages, which Emeequis obtained via a freedom of information act request.
The first surprise Vargas would find is that there are at least 26 businesses and individuals whose assets and accounts are frozen in the United States for ties to drug trafficking activities and organized crime. But in Sinaloa they haven’t noticed. In Sinaloa, these people pay their taxes.
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Vargas would also learn that even though the owners of those Sinaloan companies cannot enter the United States without being arrested, nor deposit a single dollar in a US banking system, they have not relinquished their desire to continue expanding their businesses in Mexico.
Therefore, companies identified by the US Treasury Department for their ties to drug trafficking include all kinds of industries: fishing, real estate, farms, gas stations, construction, milk producers, art suppliers, kindergartens and much more.
It is not too hard to find them. Their owners are active tax payers and have names that will be familiar to any official who combs through the registry: Zambada, Guzman, Esparragoza, Beltran Leyva and others of similar lineage.
But neither Gerardo Vargas Landeros nor Governor Mario Lopez Valdez will find out, because they don’t want to. Because if they did find out, an Italian named Antonio Mazzitelli would visit their office and help turn off the fuel that this money provides organized crime.
But the phone of Mazzitelli, head of the UN Office on Drugs and Crime in Mexico, has not rung. No reason to call it.
In Sinaloa, narcos don’t dodge taxes.
Money Laundering All Over the World
Governor Mario Lopez Valdez had barely spent eight months in office when he asserted that, in his opinion, this particular issue is not as relevant as the media would want one to believe.
“They launder money all over the world; everywhere there are resources with illicit origins,” argued the governor on July 26, 2012. He sought to minimize the fact that in Sinaloa’s capital, Culiacan, British bank HSBC had laundered about $100 million, according to a report prepared by the Financial Crime Enforcement Network, a branch of the US Treasury Department.
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The governor tried to put things in perspective. The FBI had blamed HSBC-US in helping to launder $7.5 billion. “Sinaloa looks responsible for $100 million, an amount, well…. out of $7.5 billion; $100 million, yes, sounds like a lot,” but not so much when compared with a billion-dollar figure, Lopez Valdez said.
But the numbers from Sinaloa actually weren’t that small. Five months later, it was reported $1.1 billion had actually been laundered from Culiacan.
And although Lopez Valdez acknowledged that money laundering was a common practice, he said he did not know the extent of the problem in Sinaloa and how it affected the local economy. “We haven’t detected it because we are not the institution responsible for that,” he explained.
He once shared one of concerns with the media: that Sinaloa would continue to be associated with organized crime. That is why he made arrangements with various US institutions so that they would no longer speak of the Sinaloa Cartel, and instead only refer to it as “the Pacific Cartel.”
“We already went to the DEA, and we went to the US State Department, and they agreed; they’ll call it the Pacific Cartel, and they promised not speak ill of Sinaloa,” he said proudly in July 2012.
Two and a half years later, we know that, at least in part, the governor was right: many people launder money and Sinaloa is no exception.
The Impunity Pact
For Edgardo Buscaglia, it is not so difficult to explain the fact that companies belonging to mobsters and their families — with several of these companies located in the United States — are categorized as “active contributors” in the tax census, meaning they pay their taxes.
This forms part of the impunity pacts between politicians and criminal groups. “We have to look at this as the heart of the covenant of political impunity that was recognized by Carlos Navarrete a few months ago with journalist Carmen Aristegui,” said Buscaglia from Italy, in comments to Emeequis.
Buscaglia is not making things up when speaking about these issues. He is senior researcher at Columbia University in New York, director of International Law and Economic Development Center at the University of Virginia, Vice President of the Interamerican Law and Economics Association, and has been a legal and economic consultant for several international organizations, including the United Nations.
Buscaglia received his Phd. from the University of Illinois and the University of California-Berkeley, and currently presides over the Institute of Civic Action for Security and Justice, based in Mexico. Buscaglia has become one of the most experienced voices critical of public policies on drug trafficking and how to combat it.
The Mexican “covenant” Buscaglia speaks of relies on weak and deliberate legal structures that protect the interests of criminals, entrepreneurs, and politicians. It may even include the protection of criminals’ assets, in exchange for certain contributions.
One example, Buscaglia said, is the capture of Joaquin “El Chapo” Guzman Loera, former head of the Sinaloa Cartel. His arrest should have been accompanied by a freezing of his assets, but this did not happen.
“That Chapo Guzman’s detention did not result in hundreds of investigations into his assets is a fact, not my subjective interpretation,” Buscaglia said. “That is monumental impunity. And the US ambassador to Mexico, Anthony Wayne, is, by default, part of the covenant. While his federal prosecutors in the United States are clamoring for investigations into Guzman Loera’s assets, US prosecutors are being threatened or silenced.”
Meanwhile, concluded Buscaglia, narco assets in Mexico remain untouched.
*This is the first part of an article which was written by Silber Meza for the magazine Emeequis as part of the Investigative Reporting Initiative in the Americas by the International Center for Journalists (ICFJ), in partnership with Connectas. See Spanish original here. See the second part of InSight Crime’s translation here.