Countdown to July 2, 2000

The Narco News Bulletin

1994: The Consolidation of Narco-Power

Part Two of Our Special Election Report

June 15, 2000

The true bosses of the illegal drug trade do not appear on the FBI "Most Wanted" list. Nor do they appear on Washington's "narco-list" of "top foreign drug traffickers," a report that conveniently ignores a lot (i.e. the entire Mexican South) in its naming of mid-level managers, teamsters and enforcers in the cocaine trade.

The real chiefs of drug trafficking appear, rather, in the Forbes magazine list of the wealthiest men on earth.

The Chief Operating Officers of drug traffickiing are not Mexicans, nor Colombians: they are US and European bankers, those who launder the illicit proceeds of drug trafficking. Institutions like Citibank of New York -- as this report documents -- are the true beneficiaries of the prohibition on drugs and its illegal profits.

Mexico has an election coming up on July 2nd in which narco-money is already flowing freely in a blatant vote-buying campaign (also documented by this series, in both its historic and its present forms).

Today we look at the white-collar drug trafficking class of Mexico, those who consolidated their control over that country's piece of the narco under Presidents Salinas and Zedillo, Bush and Clinton.

Some of these men -- like BANAMEX CEO Roberto Hernández Ramírez -- are rags-to-riches stories. Hernández, according to Forbes magazine, could not afford to finance an American Express credit card in 1980. Today he earns the largest annual salary in Mexico -- reported as $29 million dollars -- and is a billionaire presiding over Mexico's top banking institution.

Other political businessmen, like Carlos Hank González, his son Carlos Hank Rohn, TV Azteca owner Ricardo Salinas Pliego, Serfin bank owner Adrián Sada González, Bancomer owner Eugenio Garza Lagüera, Banorte owner Roberto González, and BANAMEX co-owner Alfredo Harp Helú appear with Hernández on the Forbes list. The first three have been widely implicated in narco-money, and the bankers all own banks in which officials have been arrested for drug money laundering.

Former Mexican President Carlos Salinas de Gortari is not on the Forbes list but there is considerable evidence that he ought to be.

His shadow ownership behind many of the above-named companis dates back to his term as president (1988-1994) when he privatized the banking and media institutions that made these men their billions. A sound estimate of the true value of the Salinas forturne, according to the Mexican news magazine La Crisis, is $18 billion dollars.

If true, that would make Carlos Salinas the fifth richest man in the world by the Forbes list's own computations.

One could say that he still remains "at large" from both the FBI and Forbes lists.

A review of recent history:

Salinas became president through a massive and corrupt act of election fraud (see Part One of this series for the facts).

During his term he privatized the banking industry. And he sold the banks to men who were not bankers: Roberto Hernández, Adrián Sada, Roberto González and Alfredo Harp Helú were no more professional bankers than TV Azteca owner Ricardo Salinas Pliego -- who bought the station with $29.5 million dollars in laundered money provided by Salinas' brother -- was a professional journalist. Salinas sold the banks and other industries to his group; a club of political supporters of the PRI, known as the "technocrats" or "neoliberals."

The old-school bankers, men like Manuel Espinosa Iglesias (who died last week, perhaps of a broken heart), professionals in the field of banking who had managed Mexico's banks -- in his case, Bancomer -- since 1982 when then-president José López Portillo nationalized the bank. The banking pros were all pushed out of the way during the Salinas term. Espinosa was physically barred from the premises of Bancomer by then-secretary of treasury Pedro Aspe Armella when the bank was privatized in 1991.

The single-biggest winner in the wave of bank privatizations was Roberto Hernández Ramírez, who received the largest prize of all: BANAMEX, the National Bank of Mexico. He and his team of investors paid roughly one billion US dollars for BANAMEX. The first year's recorded profits equalled, already, one-half of the investment: $500 million dollars.

Where did this group of neo-bankers obtain the capital to purchase these banks? It will never be known. A suspicious fire in the federal treasury department destroyed all the documents pertaining to the bank sales. But the tracks have not been entirely charred nor covered.

Roberto Hernández and others purchased the nation's banks with narco-money.

The privatization of Mexico's banks was specifically designed by Salinas to make possible the laundering of illegal drug money. And President Salinas -- using his brother, Raúl as the bag man -- built into the plan his own enrichment. It was the single-largest get-rich-quick scheme in human history.

He also assured that his political party, the PRI, would receive its secret slush fund for the 1994 elections (after the 1988 electoral fraud was exposed, Salinas needed to develop a more sophisticated election-stealing plan). Roberto Hernández and other members of the Salinas project would see to that as part of their end of the deal.

Roberto Hernández had been, according to the newspaper Por Esto!, the financial engineer of the Gulf Cartel, launched in the 1980s by Juan N. Guerra and based in the Texas border city of Matamoros, Tamaulipas. The Hernández narco-trafficking story has been widely explored by Por Esto! since its first report on December 16, 1996, and also by The Narco News Bulletin.

And yet Hernández quickly surpassed the legendary drug-trafficker Juan N. Guerra, who remained a kind of narco-ecologist: Guerra's primary product was marijuana. Hernández entered the lucrative cocaine trade, as documented by the photos of cocaine trafficking on his Caribbean beachfront properties.

As Jorge Fernández Menéndez -- columnist for the daily Milenio of Mexico City -- wrote in his book Narcotráfico y Poder (1999, Rayuela Editors), and translated by The Narco News Bulletin:

"The relation of of Raúl Salinas with the Gulf Cartel presumably surged at the end of the 1980s and began with Juan N. Guerra, who since the middle of the decade had led this organization dedicated to drug trafficking (above all, marijuana) and contraband. In 1989, Guerra made various investments in construction projects, mainly in Villahermosa, with Raúl Salinas. But, already an old man with grave health problems, with a limited empresarial vision of his activity, Juan N. Guerra was not the ideal individual to head the project that would be settled by the strong growth of the Cali Cartel: the change from marijuana to cocaine...."

The Gulf Cartel was taken over by Juan García Abrego, notes Fernández, an expert on drug trafficking matters:

" the person responsible for the operation of the cartel, Raúl Salinas de Gortari as the presumed chief of political relations and power of the same, and Carlos Cabal Peniche as its financial brain."

Carlos Cabal Peniche is today a prisoner in Melbourne, Australia, fighting his extradition to Mexico. He was, during the Salinas presidency, on a fast-track to the Forbes list: Salinas granted him two privatized banks -- Banco Union and Banca-Cremi -- and made it possible for Cabal Peniche (Salinas often appeared with him in public and called him a "model businessman") to purchase Del Monte Fresh Products.

According to a US Central Intelligence Agency (CIA) report, Cabal took full advantage of "the infrastructure of Del Monte in Tabasco to export cocaine to the United States through the port of Dos Bocas, renovated with the money of Mexican taxpayers by President Salinas, precisely to facilitate the activities of this company."

Cabal Peniche would also become one of the largest beneficiaries of the FOBAPROA bank scandal, in which government-guaranteed loans were never paid and now leave the Mexican People with a debt approaching $80 billion dollars.

Cabal Peniche disappeared from view four years later, at the same time that Salinas, now ex-president, fled to Ireland. Cabal Peniche, according to the Fernández book: "Is not only accused of multiple fraud in the Cremi-Union Group... but is also suspected of laundering money for the Gulf Cartel."

According to Swiss prosecutors, Raúl Salinas de Gortari was the silent owner of 52 percent of Banca-Cremi. The Swiss have documented more than $67 million US dollars in laundered drug funds through this bank alone.

Cabal Peniche, beyond his key position among the neo-bankers, was assigned another important task of international significance by President Salinas. With Del Monte Fresh Products as his cover, Cabal Peniche was presented by the Mexican president to the presidents of Guatemala, El Salvador, Honduras, Nicaragua (after the Sandinista government was defeated in 1992), Costa Rica, and Panama.

Cabal Peniche's mission: to involve the bankers and governments of these Central American countries in the Salinas project -- the Mexican domination of the cocaine trade.

The beginning of the end for the neo-bankers came with the unraveling of the FOBAPROA scandal. (This past week Hernández began to feel the sting of the end of the Zedillo presidency, when the BANAMEX proposal to buy Bancomer was squashed after a foreign bank BBV, allied with the Spanish government, won the battle to take over the struggling Bancomer.)

FOBAPROA, a program akin to the FDIC banking insurance fund in the US, was purportedly designed to insure the Mexican bank industry and keep it solvent. The neo-bankers, however, took full advantage of its loopholes to make loans to phony corporations -- owned by themselves and their friends, often to launder drug money -- that did not have the capital or business activity to pay the back the loans. They took the money and ran. That the FOBAPROA fund would pay the banks for their uncollected bad loans was a money-launderer's dream; a means by which they could form paper corporations and make self-loans, never to be paid, and collect the money a second time from the government. The paper corporations were also ideal for hiding and moving drug money around.

FOBAPROA would become the primary fundraising operation of the PRI for its 1994 campaign. And because of this -- every Mexican bank is implicated in FOBAPROA according to a Canadian auditor's report -- the Mexican regime of the PRI refuses to release, even to Congress, the documents regarding FOBAPROA. And this stance, no doubt, keeps those contributions coming in today in 2000: hush money from those who ripped off a nation.

The "free money" made by the neo-bankers, of course, was not free: the unofficial tax came in the form of kickbacks to the ruling party and to Salinas, thus ensuring the election of Zedillo as president to continue the Salinas-Washington economic model.

Throughout the Zedillo presidency (1994-2000), PRI officials vehemently denied accusations by journalists and opposition leaders that FOBAPROA and drug money were behind the Zedillo campaign.

In the Autumn of 1998, the PRI received a major boost in its cover-up, when legislators of the National Action Party, or PAN, joined with PRI legislators to approve the taxpayer bailout of FOBAPROA and protect the wrongdoers by keeping the records secret.

But history has a way of coming full circle. In this case the boomerang moved across the earth and back again when Carlos Cabal Peniche was apprehended in Australia. Today he is in the Port Phillipe prison and his lawyers battle his extradition to Mexico.

Every sexenio -- six year presidential term -- in Mexico needs its scapegoats so that the succeeding PRI regime and the US government in Washington can wash their hands of the corruption and robbery to which they were accomplice in the term before. Indeed, during the next six years, some of the neo-bankers above may see themselves fall from grace as swiftly as Cabal Peniche's luck changed.

But Cabal Peniche isn't taking it lying down. He hired Australia's top P.R. firm, IPR Shandwick, Ltd., and attempted, at first behind the scenes, to negotiate his freedom. When that didn't happen, he went ballistic.

In June 1999, still behind bars, Cabal Peniche began leaking documents to the international press. It started with the Miami Herald, to which he confessed: In 1994, the narco-banker Cabal Peniche donated $25 million dollars to the PRI. Interesting, how this sum corresponds with the $25 million "fee" charged to other Mexican oligarchs at a fateful 1993 banquet: keep reading.

President Zedillo reacted angrily, denying up and down that he and his party received $25 million dollars from the narco-banker that was no longer on his team.

PRI officials defended: Cabal Peniche had only given about $300,000 US dollars to the PRI presidential campaign (under US law, that would be 300 times the legal limit that an individual can give to a presidential campaign; but it's legal in Mexico, a country with inadequate campaign finance reporting requirements).

Cabal Peniche then placed Zedillo and the PRI in checkmate: He furnished copies of the deposited checks and bank records to the press -- adding up to $15 million US dollars. This carried the implied threat that he was saving about $10 million more in proofs as part of his bargaining game with the Zedillo government.

The PRI placed full page ads in Mexican dailies, shouting: "CABAL PENICHE LIES." But the evidence had already proven them to be the liars.

The real losers in this internecene battle between oligarchs, however, has been the Mexican people, who must foot the bill for the $80 billion dollar FOBAPROA bailout. This gigantic sum has as consequence that the true needs of the country -- in education, economic development, social programs, etc. -- will not be met in the years to come.

Worse, even after the FOBAPROA bailout, the banking system was not salvaged. Other banks are still finding themselves at the brink of falling and the PRI government has bailed them out. Interest rates for the general public have soared to 18 percent and millions of debtors have been financially destroyed for their inability to pay these usurious rates.

The purchase, now, of Bancomer by foreign capital demonstrates one reason why the US government has sat back laughing at the poverty and misery of the Mexican people: by weakening the banks, the way is paved for US financial interests to invade. Indeed, the Mexican bank Confia was recently swallowed by a US giant: Citibank.

But what does all this have to do with the 1994 elections?

We lead you to the night of February 23, 1993, toward the end of the Salinas presidency. Some of the names you have read above -- Roberto Hernández is central to this story -- you will now read again.

The best account of how drug money and the profits from its related FOBAPROA robbery were diverted into the 1994 presidential campaign, illegally and secretly, comes from the report by Miami Herald correspondent Andrés Oppenheimer, in his book: Bordering on Chaos - Guerrillas, Stockbrokers, Politicians and Mexico's Road to Prosperity (1996, Little, Brown and Company).

Oppenheimer is not a leftist, nor is he anti-business. To the contrary, he is known worldwide for his hostility to the Cuban and other left-leaning governments. This may in fact have helped him gain the sources to reveal this story. He is also a Pulitzer prize winner in journalism.

In his book, Oppenheimer reports on the $750 million dollar banquet hosted by Salinas with the 30 Mexican businessmen who were most enriched by his presidency. Narco News will provide a link to the full chapter by Oppenheimer below, but here are a few key excerpts so that our readers may understand the magnitude of The Buying of the Election 1994.

Oppenheimer writes:

Nothing made Zapatista leader Subcommander Marcos's claims that Mexico's political system was hopelessly corrupt more apparent than a private dinner party held at the home of former finance minister Don Antonio Oruz Mena to raise funds for the ruling party's I994 campaign.

It was one of those high-level, top-secret meetings that seem to exist only in the minds of conspiracy theorists -- but that turned out to be real.

The party, attended by President Salinas and Mexico's top billionaires, was supposed to have remained a confidential affair. It had taken place on a Tuesday evening about ten months before the Zapatista uprising, on February 23, 1993.

It was 8:30 P.M., and one by one, the thirty wealthiest men in Mexico (there were no women in the group) began arriving in their limousines at the mansion of Ortiz Mena at Tres Picos Street Number 10, in Mexico City's exclusive Polanco neighborhood. Their invitations had asked them to attend "a small dinner party" -- a code for no wives included and no word out to the media -- with President Salinas.

The agenda of the secret meeting, as specified in the invitation letter, was to discuss a five-point program to help prop up the PRI for the 1994 elections... and discussing the upcoming electoral campaign fund-raising drive. The key proposal to be discussed called for getting the PRI to raise its own funds instead of continuing to receive massive government financial aid. Mexico could no longer afford to be described by critics at home and abroad as a state party system. The time had come for the PRI to sever its financial ties with the government and help give Mexico a democratic image.

PRI president Genaro Borrego had organized the dinner with the help of two business leaders close to Salinas -- banking tycoon Roberto Hernandez and construction magnate Gilberto Borja....

A uniformed watchman guided the guests, most of them overweight, folksy-looking men in their late fifties, to the elevator that took them to the second floor dining area.... In the middle of the room was a U-shaped table, with the guests' place cards in alphabetical order. Facing the center of the table, between its two open wings, was a small table for three: Salinas, PRI president Borrego, and the host.

...Among the guests were television tycoon Don Emilio Azcarraga, known as El Tigre ("The Tiger"), described by Forbes magazine as the richest man in Latin America (the magazine estimated his net worth that year at $5.1 billion); telecommunications czar Don Carlos Slim (net worth: $3.7 billion); cement baron Lorenzo Zambrano (net worth: $2 billion); Bernardo Garza Sada (net worth: $2 billion); Jeronimo Arango (net worth: $1.1 billion); Angel Losada Gomez (net worth: $1.3 billion); Adrian Sada (net worth: $1 billion); and Carlos Hank Rohn, whose multimillion-dollar fortune was almost entirely in family-owned businesses and thus unaccountable. Mixed with the guests were party organizers Borja and Hernandez, who had -- as an additional show of support for the party -- provided the Paris-trained kitchen personnel of his Banamex bank to cater the event....

Thus, when North Americans look at the photos of cocaine trafficking on Hernández properties and wonder -- Why isn't this man in prison, or on the US "narco-list"? Why has the Mexican government persecuted the journalists who proved the narco-banker's illicit crimes? Why did President Bill Clinton agree to hold an "anti-drug" summit at Hernández' hacienda in 1999? -- this story provides the answers. We return to Oppenheimer's splendidly-researched text:

....But how much were the business leaders supposed to fork out? The conversation went back and forth. Officials at the head table at first avoided giving a figure, then suggested that the PRI needed a campaign chest of at least $500 million. Then, Salinas's friend Roberto Hernández, the banker, threw out the figure that had been previously agreed upon between the three banquet organizers during their breakfast at the University Club.

"Mr. President, I commit myself to making my best effort to collect twenty-five million," Hernández said.

There was an awkward silence in the room.

"Mexican pesos or dollars?" one of the billionaire guests asked.

"Dollars," responded Hernández and Borrego, almost in chorus. Twenty-five million dollars each?! There were hmms and ahhs around the table. Don Garza Sada, of Monterrey's Visa soft drinks empire, said he agreed -- it was the business community's responsibility to support the party. Telecommunications magnate Slim, who had won the government bid to privatize the national telephone monopoly, supported the motion, adding only that he wished the funds had been collected privately, rather than at a dinner, because publicity over the banquet could "turn into a political scandal." In a country where half the population was living under the poverty line, there would be immediate questions as to how these magnates -- many of whom had been middle-class businesspeople until the recent privatization of state companies -- could each come up with $2 5 million in cash for the ruling party. Charges of massive corruption under the Salinas administration were bound to surface....

...Television baron Emilio Azcarraga stood up, full of enthusiasm, to make his pledge. The minute he rose from his chair, the room went silent. Azcarraga was the biggest among the big -- not only financially but physically. An imposing man of six feet two inches, he commanded instant attention -- and some fear -- wherever he went. He could be brutal with his aides and would often publicly embarrass almost anybody but the president. He gave a vintage Azcarraga performance: loud, arrogant, and grandiose.

"I, and all of you, have earned so much money over the past six years that I think we have a big debt of gratitude to this government," Don Emilio said. "I'm ready to more than double what has been pledged so far, and I hope that most in this room will join me. We owe it to the president, and to the country."

Everybody raised his eyebrows. Azcarraga was talking of pledging more than $50 million. President Salinas. smiling broadly, applauded. Others followed suit. A few did their best to smile, still dumbfounded....

By midnight, when the president left, Mexico's wealthiest business men had committed themselves to contributing an average of $25 million apiece to the ruling party, for a total of about $750 million. The men swore themselves to secrecy, slapped each other on the back, exchanged the last jokes of the evening, and walked out to their limousines.

More clear today in 2000 than in 1996, when Oppenheimer's book was published, is that Carlos Salinas and his brother Raúl, upon the end of the presidential term, made off with billions of dollars, and that drug money was central to that sum. Indeed, one theory on the crash of the Mexican peso in December of 1994, two weeks after Salinas' exit, was that it was caused precisely when the Salinas family converted its pesos into dollars and, in one fell swoop, destroyed the nation's economy.

Read the entire text of Oppenheimer's report for a more detailed account of the $750 million dollar banquet and the economic connections -- the impunity and arrogance -- between the Salinas government and the New Mexican Oligarchy.

The story does not, of course, end there. More clear, now than ever, is the role of some of these magnates -- like the Banamex owner Hernández and the Carlos Hank family -- at the highest levels of drug trafficking.

Indeed, the exit of Cabal Peniche from the country -- he hid out in the United States and in the Dominican Republic before he was caught in Australia -- merely created a space for another PRI friend to take over his narco-turf. Today, the Central American connections are handled by Carlos Hank González. As the Geopolitical Drug Observatory describes:

"Carlos Hank González, one of the wealthiest and most powerful politicians in Mexico, is untouchable and probably will continue being so in the United States as well as Mexico, at least until the presidential election of the year 2000. His company is stockholder in a business that employes former US Ambassador to Mexico James Jones... and, according to the former Costa Rica president Rafael Caldera, the successor of Jones in Mexico, Jeffrey Davidow, was also hosted at the palace of the unavoidable 'Professor' in Mexico....·

It was the son of Carlos Hank González, himself also on the Forbes list and present at the oligarch's banquet, Carlos Hank Rohn, who, it is now well documented, presented Raúl Salinas to a friend who could help him hide his illicit millions. Her name was Amy Elliot. She worked on the 17th floor of the Citibank building in New York City. Elliot -- blonde, white, well-dressed, educated -- is, more than any Mexican, the true face of narco power.

Elliot has cavorted on the properties of the late "Lord of the Skies" and chief of the Juárez Cartel Amado Carrillo Fuentes, according to La Jornada of Mexico City. Her suspicious behavior has also been criticized by the US Congress General Accounting Office. But the US Justice Department, while making its little list of mid-level traffickers in Mexico, never touched Elliot or Citibank "not even with the petal of a rose" as the popular Mexican expression goes.

Amy Elliot was the manager of Carlos Hank Rohn's accounts in Citibank. That year she opened up a multi-billion dollar account for Raúl Salinas under the alias of Juan Guillermo Gómez Gutiérrez. Elliot knew his true identity -- she admitted that before Congress -- but added, incredibly, "I didn't have motives to suspect that the money would be dirty."

Likewise, the Hank family stands accused before the US Federal Reserve Bank of forming two banks in Texas with laundered monies. In 1993, while Carlos Hank González was Salinas' secretary of agriculture -- a position that has obvious advantages in the drug trade -- he met with a Citibank executive in Mexico City and said that he wanted to buy a controlling interest in the Laredo National Bank of Texas. And could Citibank arrange for the purchase -- in the name of his son Carlos Hank Rohn -- using $20 million dollars from "offshore" accounts in the Virgin Islands? Citibank obliged him.

Some sincere DEA, FBI and US Treasury agents tried to blow the whistle on this money-washing scheme. But US prosecutors and treasury officials did nothing. Citibank remained untouchable, as did the Hank family.

In fact, US Ambassador to Mexico Jeffrey Davidow was present with Hank in Costa Rica, in 1997. Back then, Davidow was a regional chief for the US State Department. Neither Davidow nor US officials have answered questions posed to him about what happened during that meeting in Central America. Costa Rican congress members say that was precisely when and where the deal was sealed in which Hank would run cocaine trafficking out of that country.

Now, weeks before the July 2nd Mexican elections, the money spigots have been turned on. In the coming days, The Narco News Bulletin will publish documentation of the massive funds being spent to buy and coerce votes, especially from impoverished rural peasants throughout Mexico.

Some of these funds come directly from the government. They are easiest to document and the proofs are already staggering, as we shall demonstrate. But since the FOBAPROA bailout, the government's funds are limited. This is one reason why PRI candidate Francisco Labastida -- and PAN candidate Vicente Fox -- have been inching closer and closer to the likes of Carlos Hank and family, Roberto Hernández, TV Azteca owner Ricardo Salinas Pliego, and other members of the oligarchy who have been linked to narco money and to FOBAPROA.

PRI Presidential Candidate Francisco Labastida with Carlos Hank González
Proceso Magazine, April 30, 2000

And so when President Zedillo, elected by the interconnected web of narco and bank fraud money, says that Mexico today has free and fair elections, the Mexican public does not believe him. That's why his chosen successor, Labastida, does not count with majority support. And that's why the scenario could turn even more interesting after the election: legitimacy may escape the winner.

Any government, observer group or media outlet that says that the Mexican elections are "clean and transparent" is being dishonest. There are many of them -- domestic and foreign -- spouting this fiction right now and, by doing so, they reveal themselves as part of the problem, uncommitted to democracy.

But why, you may ask, isn't the Mexican public more upset about narco money in their campaigns?

We posed this question to a prominent Oaxaca businessman, who answered it very frankly. Indeed, we have heard this sentiment from many Mexican citizens who have nothing to do with drugs or drug money.

"Narco money in the campaign?" he repeated the question. "Good! The elections are the only time when the narco reinvests in Mexico! The rest of the time their money is put into Swiss banks, into Citibank, into Grand Cayman, everywhere but here. For all the pain we Mexicans receive from the narco, the election is the only time when they give anything back to our national economy."

"That's probably not the answer you wanted to hear," he concluded. "But it is the reality of my country."


1999: The Stealing of Guerrero

How Electoral Fraud and the Narco Team Up Now More than Ever to Rob Democracy from Mexico

Truth From Below