Source: New York Times (NY) Author: Julia Preston Contact: Website: http://www.nytimes.com/ Pubdate: Sat, 06 Jun 1998 UNDERCOVER ANTI-DRUG OPERATION STRAINS U.S. TIES WITH MEXICO MEXICO CITY -- A flap over an undercover money-laundering operation by American customs agents has escalated into a full-scale diplomatic altercation that has strained the close ties between the United States and Mexico. The feud took a new turn Friday with the publication here of a letter from Sen. Trent Lott, the Senate majority leader, to President Ernesto Zedillo. In the May 26 letter the senator expressed his "deep disappointment" over recent comments by Zedillo that the operation violated Mexican law and sovereignty as well as several bilateral cooperation agreements. Lott said he was "astonished" by Zedillo's criticisms, which he said added to a string of "broken promises" by Mexico in the fight against international narcotics trafficking. Top Mexican officials were infuriated by the letter. Jesus Reyes Heroles, Mexico's ambassador in Washington, blasted back on May 29 with a five-page response defending Mexico's anti-drug record and renewing the attack on the undercover operation, which was code-named Casablanca. That letter was also released Friday. Tensions between the two countries flared last February after Gen. Jesus Gutierrez Rebollo, a top-ranking army officer who was in charge of Mexico's anti-drug program, was arrested on charges that he collaborated with the most powerful drug trafficker. Americans officials were appalled to discover that drug organizations had infiltrated Mexican justice at such high levels. A stormy debate in Washington forced the Clinton administration to postpone its annual assessment of Mexico's narcotics enforcement progress. In this case, however, Mexico is driving the dispute. The last time Mexico objected this bitterly to an American action was in 1990, when American agents seized a Mexican medical doctor in Mexico and took him to the United States to stand trial in the killing of an American anti-drug agent. The doctor, Humberto Alvarez Machain, was later freed by an American court. More than 100 people, including some 30 Mexican and Venezuelan bankers, and three large Mexican banks have been charged with laundering more than $110 million in narcotics proceeds as a result of the three-year undercover operation by the U.S. Customs Service. U.S. officials called it the most successful operation of its type ever undertaken by American law enforcement. But Mexican officials were embarrassed by the operation, which seems to have exposed much more extensive money-laundering through Mexican banks than they had acknowledged. It also deepened popular suspicion in Mexico about the financial system at a time when Zedillo is trying to push major banking reforms through a skeptical Congress. American officials did not inform Mexico about the operation while it was under way in order, they said, to protect undercover agents and secret informants. The agents had a number of meetings with suspects in Mexico and, through a front company based in Los Angeles, relayed orders to Mexican bankers from Colombian drug lords. In a speech in May, Zedillo called the operation "inadmissible because it tramples on our laws." Mexico has said that it will demand the extradition for trial here of American customs agents who held meetings in Mexico as part of the operation. Lott wrote: "Mr. President, this is not 'inadmissible' or a 'violation' of your sovereignty. It is a decisive action against ruthless criminals." Ambassador Reyes Heroles called Operation Casablanca "an act of a criminal nature similar to the crimes it was supposed to uncover." Last week President Clinton called Zedillo to explain why American law enforcement decided to leave Mexican authorities in the dark. But Mexican officials have dismissed the American statements as inadequate. Copyright 1998 The New York Times Company - --- Checked-by: Richard Lake