Pubdate: Sun, 20 Aug 2000
Source: San Diego Union Tribune (CA)
Copyright: 2000 Union-Tribune Publishing Co.
Contact:  PO Box 120191, San Diego, CA, 92112-0191
Fax: (619) 293-1440
Website: http://www.uniontrib.com/
Forum: http://www.uniontrib.com/cgi-bin/WebX
Author: Anna Cearley, Staff Writer

DRUG CASH SUSPECTED IN TIJUANA LAND DEALS

Laundering Probe Looks For Links To Cartel Figure

TIJUANA -- Over the past decade, a land development and construction 
business owned by the brother of a suspected drug cartel member quietly 
bought dozens of acres near the border.

Ismael Labra Aviles' company reshaped Tijuana's landscape, building 
shopping centers along a major thoroughfare and dressing up vacant lots for 
businesses interested in locating near the Otay Mesa border checkpoint.

It wasn't until his brother, Jesus "Chuy" Labra, was arrested in March that 
Calafia Constructora e Inmobiliaria came under scrutiny by Mexican 
investigators interested in exploring a connection with the Tijuana-based 
Arellano Felix drug cartel.

The possibility that money-laundering built this low-key Tijuana company, 
just as it has built many other companies throughout the world, doesn't 
surprise those familiar with the patterns of money launderers.

Mexico is considered a destination for some of the $300 billion to $600 
billion laundered worldwide each year, mostly from drug transactions, 
according to U.S. agencies.

Usually the ill-gotten money is funneled into banks, despite laws in many 
nations that require banks to file reports on large transactions. From 
there, it is wired through legitimate channels to businesses and front 
companies and turned into spendable cash.

Dismantling these operations can paralyze a drug cartel's ability to wheel 
and deal, and even slow the flow of drugs.

But the Mexican government's investigation of Calafia Constructora shows 
how hard it can be to go after suspected companies.

In April, three anti-drug agents investigating Jesus Labra were tortured 
and killed. The team was said to have been looking into the possibility 
that Jesus Labra was using Calafia Constructora as a money-laundering 
operation, a suspicion also harbored by U.S. Drug Enforcement 
Administration agents. Two attorneys for Jesus Labra also have been killed.

Neither of the Labra brothers could be interviewed.

After Jesus Labra's arrest, payments suddenly stopped on one of Calafia 
Constructora's purchases of land from a Baja California state redevelopment 
agency.

Administrators with the agency justify their business dealings with Ismael 
Labra by saying he had a sound business record and had not been convicted 
of any crimes.

Still, federal officials continue to interview employees of the agency, 
known as PRODUTSA. They also have confiscated the more than 50 properties 
known to be owned by Calafia Constructora and members of the Labra family 
until the case is resolved.

Peter H. Smith, director of Latin American Studies at the University of 
California San Diego, said such investigations are a good sign because 
money laundering is rarely given top priority in Mexico.

"Mexico is very busy responding to pressure from the United States, going 
after cartels and leaders, fumigating and eradicating fields as fast as 
they can," Smith said. "There are not a lot of other resources left to go 
after money laundering."

Choice parcel

Ismael Labra, the founder of Calafia Constructora, had a keen interest in 
developing land -- and deep pockets for projects that caught his fancy.

Where his money came from and how much land he bought is unclear. It is 
common practice, however, for people wishing to remain anonymous to buy 
properties using the names of friends and family members.

But Ismael Labra did leave paper trails.

The land he bought in the 1980s, before starting his company, came from 
PRODUTSA, which was overseeing the development of property near a canal 
project. The 550,000-square-foot parcel Labra bought was considered a prime 
investment because it was in the center of the city and near a major roadway.

Labra paid cash, close to $300,000 in large payments spread over several 
years. (Mexican government agencies now require payment by check to make it 
harder for drug traffickers to launder money through real-estate transactions.)

In 1989, Labra formed Calafia Constructora with a team of investors and 
equity of 30 million pesos at a time when the peso was extremely unstable. 
In the company's early years, according to state business registration 
documents, the company was interested in PRODUTSA's land offerings but 
noted that "because of the economic situation of the current business 
partners, it appears necessary to search for outside financing."

That's when the names of other Labras started to appear. A Jesus Labra 
Felix -- not the same as Jesus Labra Aviles -- and a Leonel Labra Felix 
bought shares from previous investors and pumped in large quantities of 
their own money.

The company bought two small parcels in the canal redevelopment area in the 
1990s, including one in 1996 for about $432,000, PRODUTSA officials said. 
It also apparently bought more land in the area from others who had bought 
land from PRODUTSA.

Land for rent or sale near border

The company did not limit itself to PRODUTSA properties.

Calafia Constructora's Web site lists land for rent or sale near the Otay 
Mesa border checkpoint. The lots total about 2 million square feet.

The company also constructed retail buildings. In 1997, it built Los 
Porticos, a $4 million shopping mall along the Via Rapida Poniente highway 
that has an Office Depot as its anchor store, according to the Web site.

In 1998, Ismael Labra sold his shares in Calafia to the two other Labras, 
who remained as the company's only shareholders, according to state records.

With the arrest of Jesus Labra this year, Mexican investigators began 
trying to prove that the company was being used for money laundering. They 
have collected state records of land sales to Calafia Constructora and met 
with the state officials who handled the sales.

Investigators are also reportedly interviewing PRODUTSA officials who sold 
land to Ismael Labra in the 1980s.

Jorge Ramos -- now second in command in the state government -- was in 
charge of PRODUTSA during the 1996 sale to Labra. He did not return a 
reporter's phone calls. But in an interview with El Universal newspaper, he 
said that no state official personally benefited from the transaction, and 
that he could not legally have refused to sell the land to Ismael Labra.

"I don't have the authority to consider the reputation of the clients," he 
was quoted as saying. "Furthermore, I don't know if the relatives of Jesus 
Labra are accused of anything, nor do I know if the brother is a delinquent."

Sergio Lujan Avalos, president of Tijuana's Chamber of Industry and 
Construction, said state officials have a moral obligation to shun 
companies suspected of money laundering. "They can say it's all legal, but 
what happened was immoral," he said.

Others say the state agency is being unfairly targeted. They say the true 
culprits are the banks that issued checks on the company's behalf.

Sergio Vasquez, current head of PRODUTSA, said his agency makes sure 
businesses are properly registered, but "it is not our duty to investigate 
how they pay as long as they use checks."

Increasing the pressure

Tracing dirty money is hard in any country, but Mexico poses particular 
challenges.

In recent years, traffickers have infiltrated several Mexican banks, 
including Bancomer, which issued checks for Calafia Constructora.

Investigators also face corruption within law-enforcement agencies and are 
forced to rely on overburdened agents with little time to focus on 
complicated tax laws, according to a recent report on money laundering by 
the U.S. State Department.

Those hurdles prompted a controversial three-year undercover operation by 
the U.S. Customs Service. In 1998, Operation Casablanca resulted in the 
seizure of more than $103 million and charges against three Mexican banks.

Some employees from a Bancomer branch in Tijuana were implicated in the 
money-laundering investigation, which linked the banks to the 
Colombia-based Cali and Mexico-based Juarez drug cartels. Most of the 44 
people arrested in the operation were convicted or pleaded guilty.

A Mexico City spokesman for Bancomer said he was unaware of a federal 
investigation into the bank's business with Calafia Constructora, but said 
the bank is "willing to work with authorities in any official investigation."

Like other banks implicated in Operation Casablanca, Bancomer was required 
as a result of the investigation to set up internal mechanisms to make 
money laundering more difficult.

Mexico also has beefed up its efforts against money laundering with new 
laws and more aggressive investigations.

In 1996, the Treasury's money-laundering section conducted 68 audits and 
recommended prosecution in 21. The Treasury also has assisted in U.S. 
investigations.

In 1997, authorities were given the power to tap phones and use video 
surveillance and to reduce the sentences of low-level drug traffickers who 
cooperate in the prosecution of higher-level cartel members. Stricter 
reporting requirements also were put into place for transactions of more 
than $10,000.

No property?

When Jesus Labra was arrested, many were surprised to find that he had no 
properties listed under his name.

That didn't make sense for a man who once owned hotels and restaurants 
throughout Tijuana, or for someone suspected of being a top player in the 
lucrative Arellano Felix drug cartel, believed to be the most vicious and 
aggressive trafficking group in Mexico.

So, how did Jesus Labra earn money?

Two people who offered answers to that question didn't live long.

One of Jesus Labra's attorneys described his client's work as "once in a 
while buying a little piece of property." That attorney was tortured and 
killed soon after Labra's arrest.

The commander of the Mexican Attorney General's Office in Tijuana said in a 
1996 interview that Labra collected dues from small drug traffickers. He 
also said Labra is the nephew of drug trafficker Pablo Aviles and uncle to 
the Arellano Felix brothers. That commander, Ernesto Ibarra Santes, was 
shot to death five days later.

Jesus Labra is in a high-security prison outside Mexico City, waiting to 
stand trial for a long list of drug-related charges. His connection with 
his brother's land development business is under investigation.

Ismael Labra, the businessman who created Calafia Constructora in 1989, has 
disappeared, officials said. So have the other family partners in the business.

And Calafia Constructora, once a big player in Tijuana's development, is 
now shut down. Although its Web site is running, its phones have been 
disconnected.
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