Pubdate: Mon, 11 Feb 2002
Source: Denver Rocky Mountain News (CO)
Copyright: 2002, Denver Publishing Co.
Contact:  http://www.rockymountainnews.com/
Details: http://www.mapinc.org/media/371
Author: Kelley Shannon, Associated Press Writer
Note: AP writer Natalie Gott contributed to this report.

MORALES SAYS SANCHEZ SHOULD HAVE KNOWN OF DRUG MONEY LAUNDERING

Democratic gubernatorial candidate Dan Morales said Monday opponent Tony 
Sanchez should have known about drug money laundering at his Laredo savings 
and loan in the 1980s.

"Let me be clear: I do not allege that Mr. Sanchez knew that Mexican drug 
money was being laundered through his business. But I absolutely do believe 
that he should have known," Morales said.

Morales, who has pledged he won't run a negative primary campaign, said 
Sanchez's business background should be scrutinized, including his 
management of the failed Tesoro Savings and Loan.

Sanchez should explain how $25 million in drug cartel money was laundered 
through the thrift over 17 months in 1983 and 1984 and why Tesoro officials 
wired $8 million of that money to an account in Panama as federal agents 
were about to freeze those assets, Morales said.

At the time, Sanchez was chairman and majority shareholder at Tesoro.

The money laundering probe has been the subject of news reports for several 
months since Sanchez entered the governor's race.

At a rally in Austin on Monday, Sanchez said Morales is wrong and doesn't 
know the facts.

"These are desperate acts of a desperate man," Sanchez said. "The polls are 
showing that he's plummeting and that we're going to be victorious and I 
think these are very desperate acts. I feel sorry for him because he's 
falling apart."

Earlier, Sanchez's spokeswoman Michelle Kucera said Sanchez has nothing to 
hide and said "Tesoro was victimized by unscrupulous people who represented 
themselves as legitimate businessmen."

Sanchez campaign manager Glenn Smith also noted that when Morales himself 
went to Mexico to work on his anti-drug initiative as attorney general, he 
wound up meeting with the main target of the Mexican anti-narcotic squad.

"We sympathize with Morales being fooled by someone pretending to be 
someone they weren't," Smith said.

Last year, Sanchez commented on the Tesoro probe involving two depositors 
and said neither he nor any officer of the institution was accused of 
wrongdoing and that they were exonerated by three federal agencies and a 
federal judge.

"But it happened on my watch and I took full responsibility. I also took 
steps to make sure it never happened again, and it didn't," Sanchez said.

David Almaraz, a former assistant U.S. attorney, said last August that 
"there was never any type of suspicion that any of the heads of the bank, 
the stockholders, the president, had any knowledge of these transactions."

Sanchez, a multimillionaire, made his fortune through the Laredo-based bank 
holding company International Bancshares Corp. and in the oil and gas 
business, among other ventures. He has never held elected office.

Because his background is in business, his business record must be 
examined, Morales said.

Morales said: "How can Mr. Sanchez claim to be able to keep drugs out of 
our schools and our communities, when he cannot keep drug money out of his 
own business?"

Morales, citing his own background as a Bexar County prosecutor and as the 
attorney general, said as governor he would make fighting drugs and drug 
money laundering a high priority.

Sanchez said Morales should not try to compare himself to Sanchez.

"He's never had a job outside of politics. He doesn't know what management 
is from the private sector," Sanchez said.

At his lunchtime rally, where about 300 enthusiastic supporters were 
offered 400 pounds of barbecue brisket along with potato salad, Sanchez 
tried to focus on other topics.

Sanchez again stressed his proposals for improving education and questioned 
whether failed state leadership contributed to the state's projected $5 
billion shortfall. He also told the crowd he wanted to keep homeowner 
insurance rates down through more regulation of the industry.

He proposed drafting a law that would force insurance companies, especially 
those who are not currently regulated by the state, to justify any proposed 
premium hikes. He also said he would give the Texas Department of Insurance 
the tools it needs to enforce the law and refocus its efforts toward 
lowering the cost of property insurance for homeowners.

"We're just very concerned that insurance rates are double the national 
average, and we are going to try do some things to change that," Sanchez said.

He criticized Morales and Republican Gov. Rick Perry on economic 
development, saying neither has created a job. Sanchez boasts that his 
family's businesses and activities have created more than 75,000 jobs since 
1981.

Now that he has raised questions about Sanchez's savings and loan, Morales 
may face more questions about his dealings with private attorneys in the 
state's $17.3 billion tobacco settlement, reached when he was attorney general.

State and federal investigators have looked into contracts with private 
lawyers hired to pursue the case, including a friend of Morales who tried 
to claim up to $500 million despite complaints from the other attorneys 
that he did little or no work.

Morales said he is prepared to discuss those allegations.

"The entirety of the lawyers who worked on the tobacco case provided 
substantive, valuable contributions to the state's ultimate victory," 
Morales said.

The Democratic primary is March 12. Sanchez and Morales along with Bill 
Lyon and John WorldPeace are in the race.

The winner faces Perry, who is unopposed in his party, in November.

AP writer Natalie Gott contributed to this report.
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