This story is part of Reporting the Border, a project of the International Center for Journalists in partnership with the Border Center for Journalists and Bloggers.
Click here for the Spanish version, translated by Jorge Luis Sierra, president of the Border Center for Journalists and Bloggers.
More than a decade after federal investigators began seizing Texas real estate and bank accounts owned by former Mexican officials who had plundered public coffers, the U.S. Department of Justice (DOJ) says it’s returning some of that money to the country where it was stolen.
The DOJ said plans to send $26 million to Mexico represent a historic first: The United States has never returned the recouped proceeds of corruption to its southern neighbor.
That money is a portion of tens of millions of dollars federal prosecutors based in Texas recovered during a sprawling investigation into state and municipal officials from Mexico that the Texas Observer has chronicled the last two years.
From 2012 to 2018, prosecutors and federal agents in Houston, San Antonio, Corpus Christi, and the Rio Grande Valley aggressively targeted government officials and business owners from four Mexican states who the Department of Justice alleged had stolen public funds and laundered the money in Texas. They traced stolen money to condos on South Padre Island, gas stations and strip malls in Brownsville, a storage tower in San Antonio that sold for nearly $11.5 million, and homes in the Austin and Houston areas. The cases illustrate how the United States struggles to deter kleptocrats from laundering money here and exposed shortcomings in banking and real estate regulations. The DOJ eventually abandoned the prosecutions, dismissing indictments and quietly settling civil lawsuits—but not before recovering tens of millions of dollars through forfeiture, the legal process of compelling a property owner to surrender assets.
The plans to return some of that money—victims of financial crimes can petition to recover funds seized by the Department of Justice—raise new questions about how the United States should handle dirty money from abroad. The DOJ’s stated goal in seizing the money is to make the United States a less attractive place for corrupt foreign officials to launder money and to return embezzled public funds.
“These monies that these kleptocrats steal … first of all greatly impoverish the people in the country, and second of all completely undermine the mechanisms for democracy and rule of law these countries need to ensure kleptocracy doesn’t continue,” said Tutu Alicante, a human rights activist from Equatorial Guinea living in exile in the United States.
But returning that money isn’t always easy. In many countries, the corruption that allowed the theft in the first place still exists even when the United States is trying to give the money back.
When repatriating the proceeds of corruption, countries like the United States need to ask, “Who ultimately is the victim of the corruption?” said Sarah Saadoun, a senior researcher at Human Rights Watch. “In situations like this, where public funds are stolen … the question becomes, what would benefit the public the most?”
In 2017, Mexico’s government sent a request to then-Attorney General Jeff Sessions asking for $2.28 million the U.S. government had seized from a Bermuda bank account belonging to former Coahuila state Treasurer Héctor Javier Villarreal Hernández. Coauhila, which borders parts of South and West Texas, has been in dire financial straits since 2011, when news broke that Villarreal and other officials had siphoned hundreds of millions of dollars from a massive public works campaign. Today the state owes nearly $2 billion.
Villarreal was eventually accused in Mexico of falsifying government records to take out nearly $250 million in loans on the state’s credit and, in the United States, of laundering tens of millions of dollars through Texas real estate and bank accounts. Mexico’s federal government is ultimately responsible for paying the debt Villarreal fraudulently accrued, wrote Raúl Cervantes Andrade, Mexico’s attorney general at the time of the 2017 petition. In April of this year, the Department of Justice said it will return $26 million of the money it has recovered.
In Mexico, that’s sparked a debate over whom should get the money, and confusion reigns about how it will be spent. The Department of Justice says Mexico’s federal government has pledged to spend the money on a fentanyl education program. State officials in Coahuila have called for it to be returned to them. Mexican President Andrés Manuel López Obrador has said if he sends the money to Coahuila, it will just be stolen again.
“We have to ensure that it’s being handled well, because people are already saying it should be sent to Coahuila. No,” López Obrador said during a May press conference. “To the people of Coahuila, yes, but we need to be careful with how we handle this money.”
Corruption and impunity remain problems at the federal level in Mexico as well. López Obrador has faced allegations of corruption and his security forces have perpetrated human rights abuses and engaged in domestic spying. As if to underscore how far the corruption reaches, Villarreal, who pleaded guilty to financial crimes in 2014 in San Antonio but still hasn’t been sentenced, testified earlier this year in the New York trial of Genaro García Luna, Mexico’s former head of public security. A jury found García Luna guilty of taking bribes from drug traffickers, and he’s accused in a separate civil lawsuit, filed by Mexico’s federal government in Miami, of inflating contracts in exchange for bribes.
Mexico has also failed to bring charges against other former Coahuila officials. Villarreal is still wanted in Mexico, but prosecutors there have not charged the dozens of other former officials and state contractors he’s testified were involved in a complex scheme involving inflated and falsified contracts. The fraudulent loans, which are the focus of Mexico’s investigation, were part of a much larger conspiracy to defraud the state and control the political process in Coahuila, Villarreal testified before a Corpus Christi federal judge in 2021.
At the state level, “the accountability systems are very weak, and the governors are very corrupt,” said Raúl Benítez Manaut, a professor and researcher at the Autonomous University of Mexico and an expert on U.S.-Mexico relations. There’s more oversight at the federal level, but “the government of López Obrador is not serious about combating corruption,” he added.
When the Department of Justice reached a settlement in 2014 with the son of Equatorial Guinea’s president to turn over more than $30 million in U.S. assets prosecutors said were purchased with the proceeds of corruption, simply returning it to the country from where it was stolen was not an option. President Teodoro Obiang Nguema Mbasogo has ruled since 1979, and U.S. officials realized once his son’s Malibu mansion, Ferrari sports car, and rare Michael Jackson memorabilia were sold off, the money could end up back in the hands of the same despotic family that has plundered the Central African nation for decades. Obiang’s son, who purchased all those assets, is now the country’s vice president.
After seven years of negotiating, the United States and Equatorial Guinea agreed to send nearly $20 million to the United Nations for a COVID-19 vaccine program and more than $6 million to a charitable organization in Maryland.
One problem, said Alicante, whose nonprofit EG Justice worked with U.S. investigators trying to understand the theft of public funds in Equatorial Guinea, was that by the time the money was donated, the country already had a vaccine program. The Department of Justice had come up with a novel solution to the problem of returning ill-gotten gains to foreign nations, but those decisions should involve civil society in the country where it was stolen, Alicante said.
“You have to have some mechanisms for accountability,” he said. “It’s great that you can give vaccines to people. But are we ensuring the people who suffered most from kleptocracy are prioritized?”
Trying to return money through nongovernmental organizations would be difficult in Mexico, Benítez Manaut said. For one thing, López Obrador is deeply distrustful of nongovernmental organizations, particularly those with ties to the United States. For another, U.S. anti-drug and anti-immigration policies are deeply reliant on Mexico’s help.
In the Coahuila case, the United States has a potentially simple solution: use the $26 million to pay off some of the state’s crushing debt. As to why the United States and Mexico haven’t agreed to that, Benítez Manaut said, “I don’t know the answer.”
Questions also remain about how much money the United States has recovered. Court records and public auction results show Villarreal forfeited $34 million in real estate and bank accounts to the federal government and nearly $6 million more to Bexar County. Federal judges in San Antonio have sealed portions of settlements with a Coahuila businessman and the mother-in-law of a former governor, making it impossible to know who ended up with their money. Defendants have also surrendered property behind closed doors, including a Mercedes McLaren, a rare sports car that can sell for hundreds of thousands of dollars, that Villarreal testified he forfeited.
Department of Justice officials would not agree to an interview for this story. Instead, the agency said in a statement:
“DOJ provides remission to qualifying victims from assets recovered in the case net of expenses. Sometimes only a portion of the loss are recovered in forfeiture in a case. For example, sometimes a defendant spends the funds on items that cannot be recovered like living expenses or entertainment, other times the defendant spends the money on assets that have not been maintained and thus the value is less than the original purchase price.”
Transparency “matters on both sides of the border,” Saadoun said. “I think it matters both to make sure the U.S. is fully accounting for all of the assets that were [seized] … and making sure once it is repatriated it actually … goes to repay the original loans or is going to some other way of benefiting the public.”
This story was publish originaly in Texas Observer
JASON BUCH is an independent journalist based in Texas. A native of Austin, Buch spent 10 years covering immigration and the Texas-Mexico border for Texas newspapers.
COAHUILA DEPARTMENT OF JUSTICE FOLLOW THE MONEY MEXICO MONEY LAUNDERING RAÚL CERVANTES ANDRADE
