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Mexican drug money ties to US horse racing probed

Officials say millions laundered as cartel became big player in horse industry

The government alleges that horse owner Jose Trevino Morales, center, was part of a cartel that used Mexican drug money in connection with a successful horse breeding business in the United States.

Rudy Gutierrez/The El Paso Times/AP

The government alleges that horse owner Jose Trevino Morales, center, was part of a cartel that used Mexican drug money in connection with a successful horse breeding business in the United States.

Newcomers rarely make it into the winner’s circle at the All American Futurity, considered the Kentucky Derby of quarter horse racing.

Yet in September 2010, a beaming band of men waving Mexican flags and miniature pinatas swept into Ruidoso, N.M., to claim the million-dollar prize with a long-shot colt named Mr. Piloto.

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Leading the revelry at the track was Mr. Piloto’s owner, Jose Trevino Morales, 45, a self-described brick mason who had grown up poor in Mexico. Across the border, Ramiro Villarreal, an affable associate who had helped acquire the winning colt, celebrated at a bar with friends.

As for the man who made the whole day possible, Miguel Angel Trevino Morales, he was living on the run, one of the most wanted drug traffickers in the world.

Miguel Angel Trevino, a younger brother of Jose Trevino, is second in command of Mexico’s Zetas drug trafficking organization. Thin with a furrowed brow, he has become the organization’s lead enforcer — infamous for dismembering his victims while they are still alive.

The race was one of many victories for the Trevino brothers, who managed to establish a prominent horse breeding operation, Tremor Enterprises, in the United States that allowed them to launder millions of dollars in drug money, according to current and former federal law enforcement officials. The operation amounted to a foothold in the United States for one of Mexico’s most dangerous criminal networks, the officials said.

Using Miguel Angel Trevino’s cash, Jose Trevino’s legal residency and Villarreal’s eye for a good horse, Tremor bought a sprawling ranch in Oklahoma and an estimated 300 stallions and mares. The Trevino brothers might have kept their operation quiet, given the criminal connection, but their passion for horses and winning apparently proved too tempting. In the short span of three years, Tremor won three of the industry’s biggest races, with prizes totaling some $2.5 million.

The business was ‘‘so far out there it’s hard to believe,’’ said Morris Panner, a former prosecutor who handled drug cases. ‘‘Maybe they were using some kind of perverse logic that told them they could hide in plain sight, precisely because people wouldn’t believe it or question it.’’

The Justice Department moved against Tremor on Tuesday morning, dispatching several helicopters and hundreds of law enforcement agents to the company’s stables in Ruidoso and its ranch in Oklahoma. Jose Trevino and several associates were taken into custody and were charged later in the day, authorities said.

Miguel Angel Trevino, 38, and another brother, Omar, 36, were also charged. The two remain at large in Mexico. Omar Trevino is also a high-ranking member of the Zetas and an FBI affidavit filed in U.S. district court describes him as participating in the money laundering.

The affidavit said the Zetas funneled about $1 million a month into buying quarter horses in the United States. The authorities were tipped off to Tremor’s activities in January 2010, when the Zetas paid more than $1 million in a single day for two broodmares, the affidavit said.

The New York Times became aware of Tremor’s activities in December 2011 while reporting on the Zetas. The Times learned of the government’s investigation last month and agreed to hold this story until Tuesday morning’s arrests.

Law enforcement officials took a horse away from the stable area at Ruidoso Downs Racetrack and Casino in Ruidoso, N.M., Tuesday after conducting a raid.

Mike Curran/The El Paso Times/AP

Law enforcement officials took a horse away from the stable area at Ruidoso Downs Racetrack and Casino in Ruidoso, N.M., Tuesday after conducting a raid.

The Trevino brothers devised an elaborate scheme in which Mexican businessmen paid for the horses — some of them worth hundreds of thousands of dollars — from their own bank accounts so the purchases would appear legitimate, according to the affidavit. The Zetas would later reimburse the businessmen, and the horses’ ownership would be transferred to Tremor.

The brothers’ activities on either side of the border made for a stark contrast. One week in May began with the authorities pointing fingers at Miguel Angel Trevino for dumping the bodies of 49 people — without heads, hands or feet — in garbage bags along a busy highway in northern Mexico. The week concluded with Jose Trevino fielding four Tremor horses in a prestigious race at Los Alamitos Race Course, near Los Angeles.

By then, Villarreal’s story had come to a fatal, fiery end. Not long after the 2010 victory at Ruidoso, he was detained by the Drug Enforcement Administration and reluctantly agreed to work as an informant. Five months later, his charred remains were found in a burnt-out car on the highway outside Nuevo Laredo.

The buzz around Tremor’s winnings and acquisitions began three years ago, when Jose Trevino bought an estimated $3 million in quarter horses, including one named Number One Cartel.

Since then he has worked with breeders, trainers and brokers considered pillars of the business. Tremor Enterprises did not always put its name on the horses it owned or the races they ran, presumably to avoid the attention of tax collectors and law enforcement authorities, according to federal agents.

But people inside the financially struggling industry do not need written records to tell them who is doing business with whom. And some of those insiders acknowledged that the subject of Jose Trevino’s identity, and where he got his money, was treated like so many taboos: People did not ask many questions, either because they did not care, or did not want to know.

‘‘Everyone knows who Jose Trevino is,’’ one trainer said. ‘‘But all they cared about was whether his checks would clear.’’

A drug organization ascends

Made up of rogue members of the Mexican military and police, the Zetas were a protection force for the powerful Gulf Cartel before they set out on their own in 2010. Their ascendancy ignited a spate of massacres and assassinations of elected officials, police chiefs, journalists and others, which turned organized crime from a law enforcement problem to the No. 1 national security threat for Mexico’s fragile democracy.

Miguel Angel Trevino, known as Zeta-40, was never in the military. But he became useful to the Zetas for his experience moving contraband across the border.

Law enforcement authorities said the Zetas have been able to rapidly expand their reach beyond Mexico’s borders with the United States and Guatemala. And while other Mexican drug organizations prefer to keep themselves and their money close to home, the Zetas have established outposts as far as South America and West Africa.

‘’The Zetas are particularly adroit at spreading their tentacles across borders,’’ said Michael S. Vigil, a former senior official with the Drug Enforcement Administration. He added that the gang’s extensive intelligence and operational capabilities allow it to take control of new territory so quickly that it is difficult for law enforcement to keep up.

Their primary stronghold is Nuevo Laredo, one of North America’s busiest border-crossings and Trevino’s hometown.

He had grown up there in a large family with six brothers, including Jose, and six sisters, U.S. authorities said. Like most local residents, the Trevino family treated the border as a kind of imaginary line.

Law enforcement authorities knowledgeable about the family said the siblings learned the tricks of moving easily between the United States and Mexico, using temporary visas and border-crossing cards to start families, buy properties and do business in both countries.

Court records lay out the nature of the brothers’ turn to crime, which dates back at least two decades. In 1995, an older brother, Juan Francisco Trevino, was sentenced on charges of conspiring to smuggle hundreds of pounds of marijuana into the United States.

On the witness stand, Juan Francisco described himself as a struggling entrepreneur who had tried to make a go of a small construction company, Trevino Masonry, but later went into trucking.

Prosecutors argued that those businesses were fronts for the Trevinos’ smuggling activities, citing a raft of lapsed business licenses, false identification documents and suspicious wire transfers.

The defendant was sentenced to 22 years in prison, and remains incarcerated. Jose and Miguel Angel Trevino were implicated in the case, but were never prosecuted for lack of evidence, said authorities involved in the investigation.

It is unclear whether the two brothers parted ways at that point or continued collaborating. Miguel Angel Trevino’s rise through the ranks of the Zetas is well known. Jere Miles, an expert on the Zetas at the Department of Homeland Security, said that among the Mexican underworld, Trevino had gained the notoriety of a cult figure, one who has escaped unscathed from several gun battles against the law, makes deals with no one and seems unafraid to die. Dismembered bodies, dumped by the dozens, have become his calling card.

The identity of Jose Trevino, left, was not something many insiders of the horse industry wanted to ask about.

Rudy Gutierrez/The El Paso Times/AP

The identity of Jose Trevino, left, was not something many insiders of the horse industry wanted to ask about.

He also manages the organization’s money, according to George Grayson, a professor at the College of William and Mary who has written a book about the Zetas. Trevino’s closest partner in brutality and trafficking is Omar Trevino, who joined the Zetas shortly after his brother and is known as 42.

The trail of public information on Jose Trevino goes cold until 2009, when he began buying expensive racehorses.

‘‘From all appearances, he looked like anyone else interested in quarter horses,’’ said one person in the industry who knows Jose Trevino. ‘‘But he had a massive amount of money, with no good explanation where it came from. And he had a family name that made a lot of people wonder.’’

New player at the track

As much as Tremor was a money-laundering operation, the Trevino brothers’ quarter horse venture allowed them to mix business with pleasure. Horses have long been considered a status symbol in Latin America and drug traffickers have been among the region’s most avid collectors.

Law enforcement officials said quarter horse racing was one of Miguel Angel Trevino’s favorite pastimes, and even while living on the run, he has managed to keep control of several ranches and racetracks in Mexico and Guatemala where he holds match races, known as parejeras.

But Mexican horse racing — like so much else in that country — has been battered by the violence of the drug war. Many Mexican breeders have moved their operations to the United States, where they could buy horses with better bloodlines and compete for bigger prizes, without fearing for their lives. Breeders and owners often allowed Trevino to win races there out of fear that he would kill them if he lost, according to the FBI affidavit.

‘‘Much of the growth in American quarter horse racing is due to those guys,’’ said one industry expert, referring to the influx of breeders and buyers from Mexico. ‘‘They have spent a lot of money. And it’s made a big, big difference.’’

The races, centered in the Southwest, pit scrappier, less expensive horses than high-end thoroughbreds in contests that can be over in less than 20 seconds.

To get in on the action at U.S. tracks, Miguel Angel Trevino needed someone he could trust to pick a winner. For that, he turned to Villarreal.

Villarreal was an unlikely horseman, the socially awkward son of a bookkeeper and teacher known for his build and bottomless appetite as ‘‘El Gordo,’’ or ‘‘Fatso.’’ He began attending auctions as a child, and developed an uncanny ability to spot horses that may not have come from the best lineage, but whose stride or attitude suggested an exceptional capacity for speed.

Villarreal’s parents said he started buying horses as a teenager, mostly borrowing from relatives and friends. Still, he never seemed to have enough to purchase the kinds of horses that could compete for major prizes. Nor did the strikingly effeminate man ever develop the social skills needed to fit into the macho world of breeders and trainers.

In some ways, said one friend, he stopped trying. For awhile, he named his horses after runway models — like Campbell, as in Naomi, and Elle, as in Macpherson — because he was captivated by women’s fashion.

Villarreal got his big break in 2006, when he cobbled together $10,500 to buy a colt at an auction at Los Alamitos, records show. He took the horse to Mexico, named it ‘‘El Sicario’’ — which means ‘‘The Assassin’’ — and entered it in the parejera circuit, where it began to beat younger, better-rated competitors.

‘‘That horse got 40s attention,’’ said one of Villarreal’s friends. ‘‘He told Ramiro, ‘I want you to buy horses for me.’’’

He did not hesitate, the friend said. ‘‘This was his chance to live his dream.’’

Villarreal’s father, who is also named Ramiro, saw it slightly differently.

‘‘If someone like that asks you to do something,’’ the elder Villarreal said, ‘‘Are you going to tell him no?’’

Soon, the younger Villarreal’s name began appearing on the lists of the top buyers at auctions in California, Texas, New Mexico and Oklahoma. His first champion was Tempting Dash, which won more than $600,000 in 2009, set a track record during the Texas Classic Futurity and gave Tremor its first victory in a million-dollar race.

No matter how successful, Villarreal always showed deference to his boss, calling him ‘‘Papi.’’ When Miguel Angel Trevino wanted to see Tempting Dash for himself, Villarreal drove the horse, along with dozens of others, to Mexico.

Getting back was more complicated. To avoid inspections, quarantines and other procedures required for bringing livestock into the United States, Villarreal had trainers sneak the horses back across the border, herding them just after dawn through the Rio Grande.

‘‘My son used to tell me that his biggest blessing was also his curse,’’ said Villarreal’s father. ‘‘He would tell me, ‘My problem is that I am good at what I do, so a lot of people ask me to help them. Some of those people are good. Some of those people are bad.’’

‘A great moment’

As much as Miguel Angel Trevino relied on Villarreal, he needed his brother, Jose, to be the face of his fledgling U.S. horse business.

Jose Trevino, the clean-cut father of three, with a small tattooed Tremor logo on his hand, almost always attended races with his family at his side. He often credited his success to a combination of divine intervention and dumb luck.

‘‘After a win, he always says that he’s been blessed with an ability to pick the right horses and run them in the right races,’’ said one person who met him. ‘‘He’s always humble. He’s the kind of guy who knows what he doesn’t know, who seems eager to learn, and who isn’t shy about asking for advice.’’

At the start, Jose Trevino seemed reticent in the spotlight, avoiding reporters by pretending he did not speak good English. But the more races he won, the more comfortable he seemed with cameras and microphones. People who knew him said he never sought out the media, but never refused to talk when they called.

And they called often.

‘‘That was awesome, that was awesome,’’ Jose Trevino said, beaming before reporters in November 2009, after Tempting Dash won the Texas Classic Futurity. ‘‘We were expecting him to run big, but we weren’t expecting something like this, to break the track record like this.’’

The following year, when the colt named Mr. Piloto won the All American Futurity in Ruidoso, N.M., racing writers called it the ‘‘biggest upset in All-American history,’’ and marveled at how Trevino, with a ‘‘green-as-grass’’ horse, could beat competitors with better qualifying times and world-class jockeys.

Piloto may have had help. The FBI affidavit said Miguel Angel Trevino boasted to associates that he had paid some $10,000 to ‘‘gatekeepers to hold back the horses competing against Mr. Piloto.’’

Last year, a sorrel filly named Separate Fire swept the Ed Burke Futurity at Los Alamitos, Calif., delivering Jose Trevino his third race where the top prizes were worth $1 million — a record.

‘‘We’re down-to-the-ground people,’’ he humbly told Track Magazine after the race last July. ‘‘This is a great moment, one we are going to enjoy for a long time. But I think you have to take it as it comes and don’t let it change your life.’’

Still, his life did change. Tremor’s winning streak allowed him to hire the most respected jockeys, trainers and sales associates in the business. Last year, said people who know him, Jose Trevino moved his family from a modest suburban house in Mesquite, Texas, where he said he worked in the construction industry, to a large ranch outside Lexington, Okla.

The 70-acre ranch, Zule Farms, is named after his wife, Zulema, a former secretary who told people that she kept the books for Tremor. A person familiar with the ranch said that Jose Trevino had converted a manure-filled cattle barn on the property into a breeding facility, with state-of-the-art labs and special stalls where mares are implanted with embryos.

Across the quarter horse industry, people started to whisper about where he was getting his money.

‘’There’s no way all the money he’s putting into that ranch came from being a brick mason. It’s just not logical,’’ said a person familiar with Zule Farms.

Nor were Jose Trevino’s operations always transparent. Records show that on at least a couple occasions, he had other people sign for the company’s major purchases. One deal was signed by a teenager who looked like he was not yet old enough to drive. The other was handled by the scion of a prominent quarter horse family, Tyler Graham, who stunned a packed auction house in Oklahoma by agreeing to pay a record $875,000 for a broodmare named Dashin Follies.

At the time of the sale, Graham said he was buying the horse on behalf of a client he would only identify as ‘‘a Mexico resident.’’ Shortly afterward, records show, he turned the horse over to Tremor. Graham has not been accused of any wrongdoing.

An industry expert who attended the auction said the sale prompted more rumors. But he said sketchy deals are not uncommon in an industry where payments are made in cash and records are notoriously — even deliberately — unreliable.

‘‘If someone walks into an auction with hundreds of thousands of dollars, and refuses to give his name, no one is going turn him away,’’ the industry expert said. ‘‘What they’ll tell him is, ‘We’ll register the horse in any name you want.’’’

A mysterious death

As Jose Trevino’s prominence grew in the quarter horse community, so did Miguel Angel Trevino’s place in the drug trade. By the end of 2010, he had helped lead a brutal expansion so deep into Mexico that the Zetas became not only a priority for Mexico’s security forces, but also an enemy that inspired other drug organizations to join forces and fight.

Miguel Angel Trevino’s control over drug warehouses and hit squads across the border also compelled United States authorities to offer a $5 million reward for information leading to his arrest.

At the same time, Villarreal was falling out of favor with Tremor. He was openly upset that the Zetas had forced him to transfer ownership of one of his best racehorses to Tremor, according to the affidavit, which said the cartel used ‘‘the threat of death’’ to compel associates to sign over horses or help them move money. He was in debt because the Trevino brothers barely paid him enough to cover travel costs, friends said. Villarreal began padding his expenses, prompting Miguel Angel Trevino to suspect him of skimming money from Tremor, the friends said.

In September 2010, Villarreal was traveling to a horse auction in Oklahoma when he was detained by DEA agents during a layover at a Houston airport. A spokesman for the agency refused to comment on its relationship with Villarreal.

But several law enforcement officials familiar with the case said agents held him for up to six hours, questioning him about his ties to Miguel Angel Trevino. Before releasing him, the agents confiscated Villarreal’s cellphone and computer, and ordered him to meet with them a few days later.

When Villarreal returned, the agents said he could either work for them as an informant or face being prosecuted himself, according to the officials. The DEA wanted Villarreal to help track Miguel Angel Trevino’s whereabouts and then lure him into the United States.

Villarreal pleaded that he was too nervous to pull off the ruse, adding that Miguel Angel Trevino would never trust him enough to follow him across the border.

But the DEA insisted and a beleaguered Villarreal relented, the officials said.

At least once, Villarreal tipped off his handlers when Miguel Angel Trevino went to a racetrack in Nuevo Laredo.

‘‘Mexican authorities took pictures of 40, but they didn’t try to arrest him,’’ said one of Villarreal’s friends. ‘‘They told Ramiro that they were afraid too many people might get killed. Ramiro told them if they waited any longer, he was going to get killed.’’

Sometime around the end of that year, Miguel Angel Trevino summoned Villarreal to a meeting. Villarreal’s friends recounted the following incident as he had described it to them.

A pickup point was arranged in Laredo, where Villarreal was blindfolded and then driven into the Mexican desert by gang members.

Minutes dragged as Villarreal waited for Miguel Angel Trevino to arrive. He saw two vats filled with a liquid he presumed to be acid, one of the trafficker’s preferred methods for disposing of bodies.

‘’Where’s Papi?’’ he asked the men.

‘‘Don’t worry,’’ they answered. ‘‘He’s coming.’’

Miguel Angel Trevino arrived about an hour later in a car with more lieutenants and an unknown man, who was also wearing a blindfold.

The trafficker hugged Villarreal and asked, ‘‘You’re not screwing me, are you, Gordo?’’

‘’No, of course not, Papi,’’ Villarreal answered.

Saying he would be back ‘‘in a minute,’’ Miguel Angel Trevino walked over to the unknown man, took off his blindfold, shot him in the head and ordered his men to dump the body in one of the vats of acid.

Villarreal passed out. He told his friends he did not know how long he was unconscious, but when he awoke Miguel Angel Trevino was slapping him in the face and laughing.

‘‘What’s wrong, Gordo?’’ he joked. ‘‘You can’t handle seeing me kill someone? Next time, I’m going to have you do it.’’

‘‘No Papi,’’ Villarreal said. ‘‘I don’t want there to be a next time.’’

The drug trafficker got back into his car and drove away. Villarreal was taken back to Laredo and immediately got in touch with the DEA, imploring the agents to release him from their agreement.

‘‘When I met him he was a complete mess; profusely sweating, gangrene in one leg, and barely able to walk,’’ said a former law enforcement official. ‘‘He was in between a rock and a hard place: either stay in the United States and risk going to prison, or go back to Mexico and risk getting killed.’’

In the end, Villarreal, 38, continued informing for the DEA and in March, Miguel Angel Trevino summoned him to a meeting.

On March 10, 2011, Villarreal’s car was found incinerated outside Nuevo Laredo. There was so little left of him that authorities took DNA samples from the ashes to identify his remains.

One federal law enforcement official said some agents believed his death was an accident, but acknowledged that no investigation was conducted.

Villarreal’s father said he had little hope of ever finding the truth. Asked who he thought was behind Villarreal’s death, the round, balding man looked over at his wife, tears streaming down her cheeks, and echoed a refrain heard from so many Mexican crime victims. ‘‘If we ask questions, we could be the next ones to die, so for us, this is a closed chapter.’’

Whispers of a ‘‘mob hit’’ spread across the quarter horse industry. In March, law enforcement agents even raided Tremor’s stables at Los Alamitos racetrack. But none of it seemed to slow down Tremor’s business.

Last weekend, at Los Alamitos, a Tremor colt named Mr. Ease Cartel ran the second-fastest qualifying time for a million-dollar race scheduled for June 24. When Jose Trevino’s daughter was married recently, guests included well-known figures in the industry and Track magazine covered the ‘‘big event’’ on its website.

‘‘If he had been some thug, or the stereotypical person you’d expect to be in a drug cartel, then maybe people wouldn’t have accepted him and done business with him,’’ a former trainer said of Jose Trevino. ‘‘But he’s a really nice guy, so none of us wanted to believe he could have anything to do with the killing going on in Mexico.’’

Mike McIntire contributed reporting. Jack Begg, Alain Delaqueriere and Sheelagh McNeill contributed research.
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