Los Zetas Moves Into Counterfeit Goods Trade

Businessmen, market vendors and mom-and-pop storeowners on both sides of the border with the United States are facing increasing pressure from Mexican crime syndicates, including Los Zetas, to sell counterfeit and pirated goods, from DVDs and perfume to apparel and toys.

Mexican and U.S. law-enforcement agencies have increased their anti-counterfeiting cooperation and over the weekend of April 14th/15th U.S. Immigration and Customs agents launched raids in El Paso, Texas, and seized thousands of counterfeit goods worth nearly a million dollars.

“It’s become such a lucrative business that the drug cartels are now investing in this type of crime,” says Leticia Zamarripa, a spokeswoman for ICE.

Among the items seized were:

8,911 DVDs with a manufacturer’s suggested retail price of $122,210.72;

10,669 CDs with an MSRP of $128,454.76; and

1,728 items, including handbags, NFL merchandise and NIKE-brand sneakers with an MSRP of $648,409.15.

The El Paso raids were a continuation of a cooperative crackdown on both sides of the border over Christmas and the New Year when U.S. and Mexican authorities shared intelligence on the cross-border trade in counterfeit goods and launched a joint operation, called “Humbug Christmas”. A series of raids during the holiday season resulted in the seizure of hundreds of thousands of counterfeit goods worth an estimated $76 million.

The operation involved Mexican and U.S. agents inspecting shops, markets and import-export facilities. In the U.S., agents seized toys, cell phones, leather wallets, videos, perfume, and software and arrested 33 people.

Mexican authorities seized cigarettes, tools, toys, electronics and cell phones, as well as 10 tons of clothing that had entered Mexico illegally from the Far East.

Asked which cartels are involved in the counterfeit trade, Oscar Hagelsieb, assistant special agent in charge of Homeland Security Investigations (HSI) in El Paso, said “the Juarez and Zeta Cartels primarily.”

In an email interview with Agora, Hagelsieb, said, “Los Zetas are involved but mainly in the Mexican states of Nuevo Leon and Coahuila.”

He added that there had been a tremendous growth of cartel involvement in the counterfeit trade. “Historically, intelligence had indicated that cartels were not involved in the counterfeit and pirated goods market. That all changed when the cartels started warring. Cartels sought other rackets to supplement the income lost from fighting. We (Homeland Security Investigations) began to see cartels charging ‘quotas’ for allowing the vendors to operate in their territory. In some instances, the cartels took over the market. The Zetas, for example, run the markets in Monterrey.”

South of the border with Texas, market vendors and storeowners are “receiving threats from the cartels and in many instances have been kidnapped and killed,” says Hagelsieb. The HIS special agent says his agency is coordinating with law enforcement counterparts in Mexico.

“We constantly feed intelligence to our law enforcement agency partners in Mexico.”

The counterfeit trade is taking its toll on legitimate Mexican businesses and traders. The Mexican Institute of Industrial Property estimated that in 2009 alone Mexico might have lost nearly half-a-million jobs because of it. Nine out of ten movies sold in Mexico are believed to be pirated.

Counterfeit merchandise is often substandard and in some cases can pose a risk to health or safety, especially in the case of counterfeit or fake medicines.

It is not just in the border regions that the cartels are pushing pirated and counterfeit goods. The muscling in by the Mexican cartels on the lucrative trade in counterfeit goods and piracy is further evidence of how the major cartels have diversified in recent years their criminal activity — from human trafficking to extortion and kidnapping and on to trading in counterfeit and pirated goods, says Edgardo Buscaglia, a lawyer and economist at ITAM, a Mexico City university.

Based on the sampling of federal and state indictments and cases since 2003, Buscaglia has seen a dramatic shift in the cartels’ focus. “About half of their manpower and resources are now dedicated to other crimes aside from drug trafficking and there has been a major increase in their involvement, for example, in the trade in counterfeit goods,” he says.

According to the PGR, Los Zetas has been highly aggressive in Chiapas, Tabasco, Veracruz and Puebla in forcing traders to sell their fake products. Many of the pirated DVDs and CDs carry the cartel’s brand name “Productions Zeta.”
 In Chiapas, Veracruz and Puebla, Los Zetas have control over piracy, say PGR officials.

The PGR estimates that there has been a huge growth in counterfeit and pirated goods in the country – everything from video games, apparel, accessories, shoes, food, medicines, software and even books. For small manufacturers, the counterfeit trade threatens bankruptcy and it reduces the profits of big business, too.

In February 2011, Microsoft executives revealed at the Global Congress on Combating Counterfeiting and Piracy in Paris that La Familia had been selling counterfeit Microsoft software complete with the cartel’s “FMM” logo.

Cartel logos are often stamped on pirated movies and counterfeit software. Los Zetas uses a “Z” or a bucking bronco and La Familia Michoacana sometimes uses a monarch butterfly.

David Finn, associate general counsel in Microsoft’s anti-piracy unit, said in a blog posting that “drug cartels have developed large scale counterfeiting operations and are selling illegal software to consumers. He added: “These illegal enterprises have generated astronomical profits that the gangs funnel toward violent crimes such as drug trafficking, arms and weapons trafficking, kidnapping and extortion.”

On March 14, two Los Zetas members, Pablo Gonzalez Macedo and Martin Rafael Castañeda Castañeda, were sentenced by a court in Aguascalientes to 20 years and six months and 15 years and nine months respectively for forcing merchants to sell pirated goods.

The case provided a glimpse into how aggressive and determined Los Zetas is prepared to be in imposing their will on businessmen, storeowners and market stallholders.

Federal agents arrested the two Los Zetas members in 2011. In one case, according to court documents, the pair snatched a storeowner in November 2010 while he was having breakfast at an outdoor food stall and then drove him to the neighboring city of Zacatecas. There at a cartel safe house he was threatened and told that if he wanted to live, he had to sell Los Zetas goods.

The terrified man indicated his willingness to submit and was released after he handed over his Ford Expedition and arranged for the transfer of $100,000 in cash. But subsequently he reported the kidnapping to state authorities.