Feds: Popular McAllen restaurant built on drug money

McALLEN — For years, Israel and Gloria Sanchez appeared to helm separate business empires.

Gloria, 45, managed operations at one of McAllen’s most popular Mexican eateries, Chucho’s Restaurant and Bar on North 23rd Street. On any given day she could be seen directing staff and observing diners from a large table prominently placed near the dining room’s entryway.

Israel, meanwhile, dabbled in more illicit commerce, federal prosecutors allege. For more than a decade, he ran a multi-state drug smuggling and money laundering ring responsible for moving multi-ton loads of marijuana and cocaine and millions of dollars in proceeds between Atlanta, Houston and the Rio Grande Valley.

Despite their façade of holding totally separate careers, investigators believe their work was inextricably linked — her restaurant funded by his drug money, his drug money reliant on her restaurant to wash off its ties to narcotics.

Now, attorneys for the government hope to take over their interest in the restaurant’s management corporation, alleging it served an integral role in the Sanchez drug trafficking organization.

“Special agents contend (the couple) was utilizing the commercial bank account of Chucho’s Restaurant and Bar to launder the proceeds from distribution of narcotics,” the U.S. Drug Enforcement Administration said in court records.

INCONSISTENT INCOMES

In May, a federal judge in Corpus Christi sentenced Israel Sanchez, 49, of Mission, to 28 years in prison after he pleaded guilty to one count each of drug smuggling and money laundering conspiracy. Gloria Sanchez received a six-year sentence for admitting to conspiring to launder money.

Attorneys for the couple did not return calls for comment. But voluminous court records in the 2-year-old case detail how the profitable dining establishment paid large dividends to the Sanchez family even while many of its members were enrolled in government-assisted benefit programs such as Medicaid and food stamps.

Gloria Sanchez opened Chucho’s in December 2007 after purchasing the property and business near the intersection of Nolana and North 23rd Street for a price estimated at more than $1 million.

At the time of the sale, she assumed a more than $760,000 bank loan from its previous owner — who operated the restaurant for years under the name Don Juan’s — and borrowed an additional $240,000 to jumpstart the business, according to court records.

Almost immediately, the couple launched a costly renovation to put their stamp on the business, federal agents said.

And while both Don Juan’s and its successor business drew large revenues for their upscale, traditional Mexican fare, the family’s spending seemed inconsistent with the family’s official income history.

Even while withdrawing sums in excess of $130,000 from the restaurant corporation’s bank accounts in 2007, Gloria Sanchez claimed to be unemployed and receiving no income on applications to continue her eligibility for Medicaid, according to an affidavit filed by DEA agents seeking a warrant to search the restaurant.

Her daughter and another relative who took home at least $20,000 and $29,000, respectively, in restaurant funds during the spring of 2007 both were enrolled in Medicaid and food stamps.

SUSPECT SPENDING

DEA investigators first zeroed in on the restaurant in August 2007 while investigating Israel Sanchez’s cross-state drug smuggling operation.

While tracking multi-ton loads of narcotics Sanchez shipped on tractor-trailers, they stumbled across dozens of stash houses and shell businesses meant to launder the proceeds. In addition to the restaurant, federal prosecutors allege Israel Sanchez used the drug money to buy several homes in Donna, Houston, McAllen and the Delta region.

DEA agents followed several vehicles suspected of carrying drugs from these stash houses to Chucho’s. In one case in February 2008, undercover agents observed Israel Sanchez’s brother leave a suspected stash house in west McAllen and stop at the restaurant before making deposits at three separate McAllen ATMs. Investigators alleged in a subsequent affidavit that he was attempting to break up large sums of cash to avoid suspicion from bank regulators.

“Special agents believe that Susano Sanchez was making structured deposits or withdrawals of currency,” the document states.

In May 2008, a federal grand jury in McAllen handed down a nine-count indictment against Israel and Gloria Sanchez and 16 others and sought to take control of their interest in Chucho’s.

Gloria Ruiz Sanchez remains the registered agent of the restaurant’s management corporation, according to records kept by the Texas Secretary of State’s Office.

But because the corporation owes creditors approximately $1 million for the original mortgage and subsequent business loans, federal attorneys have not sought to take over the business entirely, lawyers involved in ongoing negotiations between the restaurant corporation and the government said.

Government attorneys have also conceded that the day-to-day spending at the restaurant was likely sustained by the business’ earnings and that only the purchase and remodeling of the property were funded by drug money.

They have asked a judge to require Chucho’s LLC to forfeit the money spent for those costs and are currently awaiting a decision.

The corporation’s current president, Jesus de la Torre Sanchez, could not be reached for comment.