- Mexican kingpin Joaquin “El Chapo” Guzman was convicted in New York this week.
- That almost certainly ends Guzman’s decades-long career, but his ill-gotten profits are still out there.
- US prosecutors say they want to confiscate $14 billion from Guzman, but they have to find it first.
After 12 weeks of testimony and deliberation, a federal jury in New York this week convicted Sinaloa cartel chief Joaquin “El Chapo” Guzman on all 10 counts he faced, including drug trafficking and money laundering.
Guzman will be sentenced on June 25 and faces a life term, which the 61-year-old will likely spend at ADX Florence in Colorado, a maximum-security prison from which no inmate has ever escaped.
But the money prosecutors want to seize from the kingpin remains to be found.
A 2016 indictment naming Guzman and fellow cartel leader Ismael “El Mayo” Zambada said that upon conviction on the first count – running a continuing criminal enterprise – the US would seek proceeds or property obtained through or used for that enterprise, “including but not limited to at least approximately … $14 billion.”
Forfeitures for convicted cartel leaders aren’t unusual. Other kingpins have been ordered to fork over substantial sums.
Upon pleading guilty in 2010, former Gulf cartel leader Osiel Cardenas Guillen, who Guzman may soon join at ADX Florence, was ordered to forfeit $50 million.
In 2017, Alfredo Beltran Leyva, one-time leader of the Beltran Leyva Organization, was sentenced to life in prison and ordered to forfeit $529 million – reduced from the US government’s $10 billion request.
In November, Vicente Zambada-Niebla – the son of “El Mayo” Zambada and a witness against Guzman – agreed to forfeit $1.37 billion as part of two plea deals.
The $14 billion the government expects from Guzman is the highest value yet assigned to his criminal activities, but it’s not clear how prosecutors arrived at that number or if that money even exists.
‘There’s definitely money’
- Mexico’s Attorney General’s Office/Handout via REUTERS
The $14 billion was “the cumulative amount of money based on his drug-trafficking enterprise, but [US prosecutors] never really spelled out what the $14 billion comes from,” Duncan Levin, a former assistant US attorney who focused on money laundering and asset forfeiture, told Business Insider.
“The US government is going to seek a forfeiture judgment against him in the amount of money that they estimate is the proceeds of his offense,” said Levin, now a managing partner at the law firm Tucker Levin. “Whether he’s worth it or not, whether he can pay for it or not, is almost immaterial.”
When the US catches a figure like Guzman, “they set an amount without really knowing if the defendant possibly has that many assets,” Mike Vigil, former chief of international operations for the US Drug Enforcement Administration, told Business Insider.
“What they’re going to have to do now actually break the [$14 billion] number down and seek a money judgment against him,” Levin said.
- REUTERS/Roberto Armenta
“He’s obviously been made quite wealthy from his illegal activity, and so there’s definitely money, but it’s unclear whether they’ll be able to prove a specific dollar amount,” Levin added. “But they’re allowed to extrapolate and estimate in order to get to a dollar amount, and that’s probably exactly what they’ll do.”
The nature of the business and of narcos like Guzman means much of the cash has already been spent.
“I don’t believe that Chapo Guzman has $14 billion, and even though the Sinaloa cartel makes a lot money, they still have a lot of expenditures,” Vigil said, pointing to the thousands of people on the cartel’s payroll; to expenses like planes, cars and trucks, narco submarines, and even cross-border smuggling tunnels; and to losses from seizures of million-dollar drug shipments. (Those shipments are worth much more once they’re sold on US streets.)
Prosecutors’ estimates don’t typically account for operating expenses, Levin said.
Some of the cartel’s exorbitant profits stay in the US, but significant sums reached Guzman and his associates in Mexico, where they spread it around.
“Most of these people like Chapo Guzman and other drug traffickers, what they do is invest the money in properties all over,” Vigil said.
A former cartel member who testified against Guzman said that in addition to private planes, yachts, and lavish international vacations, Guzman bought homes on every beach and in every state in Mexico.
At his Acapulco beach house, the witness said, Guzman had a zoo with a “little train” he could ride to see lions, tigers, and panthers.
There are also more practical investments, like ranches and retail property, that help launder dirty money. In the Sinaloa state capital of Culiacan – now reportedly Guzman’s sons’ turf – “they have dairy farms, shopping malls. They even have daycare centers,” Vigil said. Narcos also fund churches, sports teams, and charities to build goodwill. The loss of funding was lamented by some in Guzman’s hometown after his conviction.
Finding those assets in Mexico, seizing them, and extracting their value will have to be a bilateral effort.
- Mexico Presidency/Handout via REUTERS
Through the Mutual Legal Assistance Treaty, the US and Mexico “share information and work together collaboratively on certain law-enforcement ventures,” including asset forfeiture, Levin said.
Under that arrangement, the US “would work with a foreign government to try to identify assets, and through the MLAT process … seize property and try to return it to victims in the United States,” Levin added.
In mid-2017, Mexico’s attorney general said his country had found only minor assets belonging to Guzman and that the US had “not found not even one dollar,” mostly because Guzman “didn’t use the financial system.”
The immense amounts of cash the Sinaloa cartel handled would be hard to hide, Levin said. “My guess is that he has put together a network of shell companies and other associates to hide his assets,” but US authorities are adept at “picking apart shell companies and finding where assets really belong.”
In 2014, the Treasury Department named 288 companies it had blacklisted since 2007 for involvement in money laundering linked to Guzman.
“So I think it’s highly unlikely that they’re going to find nothing,” Levin added. “The question is how hard the Mexican government is willing to look to assist the United States government in trying to effectuate a forfeiture order.”
Dethroning the Kingpin Strategy
Guzman’s trial unleashed a flood of corruption accusations, implicating Mexican politicians and security officials at every level – including the two previous presidents, Enrique Peña Nieto and Felipe Calderon.
Both denied the allegations, but the rot pervasive in Mexico’s institutions may prove a hindrance.
“There are allegations in the case that the Mexican government was accepting bribes, or certainly some people were,” Levin said, adding that it remained to be seen “how cooperative they’ll be in trying to find assets.”
“My guess is at the end of the day, the US government will wind up with a money judgment that is not going to be easily collected,” he said.
Mexican President Andres Manuel Lopez Obrador has shifted from the security strategy of his predecessors, known as the Kingpin Strategy, which focused on capturing or killing top-tier criminals and turned instead to fostering development and rooting out corruption. (When he was asked about Guzman’s capture during a visit to Sinaloa in 2016, Lopez Obrador said the “cartel” that steals most was run by Peña Nieto.)
- REUTERS/Daniel Becerril
Lopez Obrador, whose six-year term started in December, said this year no capos had been arrested on his watch. “It’s not our main purpose,” he told reporters. “What we’re looking for is safety, to lower the number of daily homicides.”
Peña Nieto’s administration captured or killed 110 of 122 suspects deemed high-priority, though it got few convictions.
This week, Lopez Obrador made the first presidential visit in recent memory to Badiraguato, Guzman’s home municipality in Sinaloa state, where he praised locals and announced development plans, including a new university.
If Lopez Obrador could seize Guzman’s money, “he would,” Vigil said, “but the fact of the matter is that I think that he wants to follow a new course of action.”
That may make Lopez Obrador less inclined to stir up turmoil by going after corrupt officials and their money, but the scale of their graft likely makes it too hard even if he wanted to do so.
“The corruption is so endemic that I don’t think he is going to be able to make much of an impact in only six years,” Vigil said.