Pubdate: Fri, 14 Sep 2012
Source: Wall Street Journal (US)
Copyright: 2012 Dow Jones & Company, Inc.
Author: Justin Scheck


LIVINGSTON, Calif. - When state drug agents first suspected a 
butcher-shop owner here of selling methamphetamine for a large drug 
network, they had no idea how big an organization their five-month 
probe would uncover.

The resulting bust in August was one of the largest in state history, 
netting 11 arrests in four counties and more than 300 pounds of the 
illegal stimulant. More troubling was the discovery of the gang's 
approach to logistics: It imported raw powdered meth from Mexico and 
refined it at Southern California "conversion labs" into crystal form 
with a higher street value.

That approach is a departure from the old meth industry, in which the 
drug was either produced in small U.S. labs or, in recent years, 
shipped in its final form from Mexico, say law-enforcement officials 
and academics who study drug trafficking.

The sophisticated logistics show how Mexican drug groups have 
developed the business expertise to adapt to changing markets and 
law-enforcement strategies, said John Donnelly, the head of the U.S. 
Drug Enforcement Administration's Fresno, Calif., office.

The new model mimics legal industries that have found that, rather 
than importing finished products, it is more efficient to do final 
processing close to their customers. "Anything that any good 
businessman does, these guys will do," Mr. Donnelly said.

Since 2010, conversion labs have increasingly popped up in suburban 
Georgia and Texas, though the trend seems biggest in California. As 
of Aug. 8, California authorities reported busting 25 meth-conversion 
labs this year, up from 13 for all of 2011. Nationwide, federal 
authorities say they have been involved in busts of 20 conversion 
labs in the first half of 2012, up from 14 in all of 2011.

The size of meth seizures is rising as gangs move to conversion labs. 
California officials have made several large-scale busts tied to the 
labs, seizing 750 pounds in Palo Alto this spring and 600 pounds in 
Gilroy in August 2010. A June bust in Washington state found meth 
from a conversion lab in Stockton, Calif., according to federal court records.

"We never saw those kinds of seizures before," said Erasmo Carrizosa, 
the head of anti-meth strategy for the California Department of 
Justice. "Before, if you popped a guy for five pounds, it was a lot of meth."

The trend is part of the meth industry's "maturation and survival 
curve," said Tim Mulcahy, a research scientist at the NORC Center for 
Public Affairs Research at the University of Chicago who co-wrote a 
recent study on meth markets. In large urban areas, the industry 
appears to be consolidating, he said.

The changes come after years of U.S. meth-lab initiatives shut down 
small, rural producers that fueled a 1990s boom in the drug's 
production, said Mr. Donnelly, of the DEA.

In California's Central Valley, local labs couldn't produce as 
cheaply as Mexican counterparts, in part because they had trouble 
disposing of toxic byproducts, said Manuel Rocha, who heads a 
multiagency meth task force in Merced County.

Mexican groups that took over the California market tried different 
strategies, law-enforcement officials said. They sometimes imported 
crystallized meth, but transportation often crushed the crystals. 
They sold meth powder in the U.S., but it fetched a lower price than crystals.

Conversion labs were the answer. Producing powder or liquid meth in 
Mexico creates the toxic waste there. Converting the imported powder 
to crystal in the U.S. creates little waste but adds maximum value.

Moving final processing close to the consumer meant drug groups could 
smuggle large quantities of easy-to-conceal meth powder or liquid, 
often disguised as products such as antifreeze. Once the product 
arrived in the U.S., organizations could decide whether to sell it 
raw for wholesale or add value by converting it.

Mr. Rocha said his latest case began this spring when an informant 
said Javier Caballero, the co-owner of a butcher shop here in the 
Central Valley, was wholesaling meth.

Agents arranged an undercover buy from Mr. Caballero, Mr. Rocha said. 
On wiretaps, they overheard that he stashed more than 10 pounds of 
meth beneath the spare tire of his Jeep Liberty, Mr. Rocha said, and 
agents seized the car, making it look like a theft.

Wiretapped calls led agents to Southern California men who had 
weapons, three conversion labs and more than 300 pounds of meth, Mr. 
Rocha said. In mid-August, agents arrested the men, who haven't yet 
been indicted by federal authorities.

Authorities said Mr. Caballero, who has pleaded not guilty to state 
meth-related charges, is in custody. Mr. Caballero's lawyer, 
Preciliano Martinez, said his client intends to fight the charges. 
The case is expected to be transferred from state to federal court. 
The DEA's Mr. Donnelly said the investigation is ongoing.

Mr. Rocha said wiretaps intercepted conversations with people in 
Mexico who appeared to be directing the meth traffic in the case. The 
information was relayed to the U.S. DEA, he said, but even with the 
cooperation of Mexican authorities, it can be hard to track people 
there. Often, he said, when it comes to drug cases, "the border is a wall."
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