Feds: $22 million in Mexican bonds tied to drug trafficking

McALLEN - Federal prosecutors have initiated forfeiture proceedings against 14 Mexican bond certificates dating back to 1930 that they say are now wrapped up in a complex money laundering scheme.

The debt certificates - worth up to an estimated $22 million - were seized in two separate incidents in April at Hidalgo-Reynosa International Bridge and the Falfurrias checkpoint.

And while thousands of dollars in illicit drug proceeds are estimated to move across the Texas-Mexico border on a daily basis, the use of these so called bearer bonds marks an "unusual" and highly-sophisticated shift for those seeking to hide ill-gotten gains in the Rio Grande Valley, federal agents said.

"There are always new and inventive ways of moving money around," said Robin Sabin, a spokeswoman for the U.S. Internal Revenue Service.

Authorities seized the bonds April 30 from two men who had attended a meeting to negotiate their sale earlier in the day in North McAllen.

Present were at least two men with suspected drug ties that the U.S. Drug Enforcement Agency and the Internal Revenue Service had been tracking for years.

Alfredo Esper, a businessman from Mexico's San Luis Potosí state, had helped set up the meeting, according to an IRS affidavit filed in support of the forfeiture case. But his purported links to the Tamaulipas-based Gulf Cartel were what first drew the attention of federal investigators, the document states.

Esper allegedly served as one of two cartel contacts for Duane Cotter, a Weslaco construction equipment dealer.

Since 2007, agents have tracked Cotter as he reportedly used his business - Mid-Valley Equipment - and a fleet of five private planes to smuggle hundreds of kilograms of cocaine and thousands of dollars between Mexico and U.S. cities such as Atlanta and Henderson, N.C., the affidavit states.

No criminal charges have been filed against Cotter. He did return calls for comment Tuesday about his alleged role in the sale or their purported ties to the drug trade.

Many of the details surrounding the sale of the bearer bonds remain unclear - chief among them who exactly were the buyers and who were the sellers, federal investigators said.

Agents tracked several men to the April 30 meeting, after being first tipped off to the meeting through their investigation of Cotter. They believe the he became involved in the transaction to launder money from their drug business, according to court documents.

Bearer bonds are frequently issued by companies in Latin America as a way to raise money but have become an increasingly used tool in the money laundering game.

Unlike other securities transfers, which financial regulators monitor closely, the sale of bearer bonds are conducted anonymously and the certificates can be redeemed almost like an IOU - making them an attractive conduit for those looking to hide large sums of money earned through illicit means, said John Heasley, general counsel for the Texas Banker's Association.

"They're almost as good as cash," he said.

According to the forfeiture affidavit, an associate first approached Cotter earlier that month to discuss a bond sale worth approximately $100 million. Esper, the Mexican businessman, would facilitate the transaction.

Once the bonds arrived in Valley, the men arranged a meeting between the interested parties, where all agreed to conduct the transaction in Mexico to avoid scrutiny.

Agents later tracked two of the meeting participants and seized the bonds they were holding. But it remains unclear whether the men caught with them at the time had any ties to the drug trade, investigators said.

One man said the bonds had been in his family since the 1930s and were pretty much worthless. The other claimed not to know the value of the papers, court documents state.

An analyst with Inter National Bank later estimated the certificates were each worth more than $1.6 million, according to the IRS affidavit.

So far, none of the parties have come forward to file claims to regain the seized property.

An initial hearing on the forfeiture case is set for Sept. 10.