The first step to laundering drug money is called “placement”—getting it out of the safe house and into a legitimate financial system. The easiest places for criminals to start the laundering process are banks, which, despite increased regulation, accept and move trillions of dollars of drug proceeds. As the Zetas rose to power in the 2000s, the Mexican branches of HSBC, a British bank, accepted large cash deposits so willingly that cartel operatives started making them in boxes designed specifically to fit through teller windows. Around the same time, a Zeta operative opened an account with Banamex USA, a division of Citigroup that operated along the Mexican border. In his application, the operative described himself as a small-time cattle breeder who would deposit only hundreds of dollars a year. Then he deposited $60 million in drug proceeds without raising a single red flag at the bank—not even after he was indicted on money-laundering charges.
Eventually, the banks, like the operatives using them, get caught. The only difference is what happens next. For “cleaning” just $550,000 of drug proceeds, launderers caught in the United States can face up to twenty years in federal prison, and the feds can seize every dime they can find. When investigators discovered that HSBC allowed Mexican and Colombian traffickers to launder $900 million through its U.S. bank, among other violations, the Justice Department called it too risky to the international financial system to indict any bank officials. Instead, they reached a settlement with the bank, which would forfeit about a billion dollars, plus pay a $700 million fine. With $2.7 trillion in assets, HSBC managed to survive.
Once in bank accounts, drug money can easily be “layered”—moved from account to account in an effort to distance it from the initial deposit and confuse investigators. It can be whisked across borders, into businesses and investments. Eventually it can land in the hands of family members living cleanly in Mexico, the United States, or elsewhere. By then, it’s harder for the feds to trace or seize.
The Zetas bosses flow a good chunk of money through small businesses. They use your rolled-up twenties to open nightclubs, restaurants, car washes, and other businesses in Los Dos Laredos and across northern Mexico. The other cartels do the same. One Gulf Cartel money launderer famously laundered drug proceeds through a soccer club called Los Mapaches, or the Raccoons. The team wasn’t any good and didn’t have much apparent revenue, but they pulled new uniforms out of the box for every game.
In Mexico, the top drug lords, like El Chapo and Forty, have the assets, power, and connections to pour their money into larger-scale ventures. They use their illicit cash to invest in real estate developments, oil-field companies, and other big-money enterprises, creating assets that they or their families can cash out of down the line, often with the help of well-paid lawyers.
In the United States, washing cash through bigger business is often too difficult: too much red tape, too much paperwork, too much regulation, and too much talking. It can be done, though. The Sinaloa cartel did it for years through the Los Angeles garment and textile industry, paying a fee to flow hundreds of millions of drug proceeds into the middle of international textile transactions. And around the time your twenty makes it from your wallet to Katy to Junior, from the stash house to the gas tank to Cuno’s stacks, Forty will have decided to pump some money into the American horse business.
ELGIN, TEXAS
November 2007
You can only spread the shit so thick. That’s the headache, Tyler Graham was saying, getting the shit spread evenly across every acre, so the regulators who test the soil don’t accuse you of overshitting it. Spread too little and you end up with excess shit, which is a problem when you shovel fifty tons a week. Spread too much and something will set the regulators off—if not the nitrates, then the potassium; if not the potassium, then the sulfur. It’s always something with “the environmental people.”
Tyler was talking a lot about shit. He was doing an interview with a food journal called Southern Foodways Alliance about his grandfather’s cattle-feed yard, one of a handful of livestock businesses his family owned in the rolling hills east of Austin, Texas. The feed yard was an hour south in Gonzales, but luckily Tyler and his interviewer were on his family’s thirteen-hundred-acre horse farm in Tyler’s hometown of Elgin. Even with their heyday receding in the rearview, these stables remained the jewel in the Graham dynasty’s crown. They smelled better, too.
There wasn’t much to Elgin. The area had been settled in the 1800s by members of Stephen F. Austin’s “Little Colony,” who received land grants from the Mexican government to help make something of the Coahuila y Tejas state. The settlers escaped Comanche raids and survived the Texas Revolution, and in 1871, after a flood forced the Texas Central Railroad to alter its route, their colony became one of the few rail stops between Houston and Austin. Elgin, named for the area’s land commissioner, was born.
The population boom in trendy Austin, twenty-five miles to the west, eventually spilled into town some, finally giving the big-box stores reason to open out here. But even by Tyler’s day, downtown Elgin still consisted of just a couple of blocks of red-brick storefronts, including the train depot–turned–history museum and the musty offices of the town newspaper. The rest of Elgin was mostly covered with small, simple homes, some strip malls, and a lot of gnawed-on grassland.
Tyler seemed to love his hometown, and why not? He was a star here. His last name got that ball rolling.
Tyler’s paternal grandfather, Dr. Charles Graham, founded the Elgin Veterinary Hospital in the 1960s, catering to the cattle and horses that grazed central Texas. From there, Doc Graham built a livestock empire. Down in Gonzales, those thirty thousand cattle Tyler was talking about were fattened up on a mix of brewer’s grain and steamed flake corn, then sent off to slaughter. There was also a cattle-trucking company, a cattle-auction house, and a horse-auction house in Oklahoma.
But it was this ranch, Southwest Stallion Station, that really made the Graham name ring in the ears of central Texans. Doc Graham had started it back in the 1960s, and over the years his horses had been responsible, as runners or breeders, for $65 million in racetrack winnings.
The Texas ranching business wasn’t always kind. After cattle prices soared in the late 1980s, an oversupply of beef sent them plummeting, forcing ranchers across the country to thin or liquidate their herds. At the same time, peso devaluations in Mexico forced ranchers there to sell their beef for cheap, further flooding the American beef supply. The cattle industry limped through the 1990s; when Doc’s company applied for a $7 million credit line, the bank expressed concern about the business’s negative working capital. But things always rebounded. And Doc himself was well positioned to pass his wealth to future generations of Grahams. By the time his grandson, Tyler, went off to college in 2002, Doc Graham could list more than $30 million in assets on a personal financial statement.
In turn, Doc Graham always made sure to reinvest his money in the institutions that supported his interests. He donated hundreds of thousands of dollars to political candidates from both parties in Texas. After watching New Mexico and California become quarter-horse racing meccas, he successfully pressured reluctant Texas lawmakers to approve racetrack gambling. He also pledged enough money to his alma mater, Texas A&M, to get a campus street named after him. He was a member of the Texas Horse Racing Hall of Fame and the American Quarter Horse Hall of Fame, and soon he would be inducted into the Texas Cowboy Hall of Fame, alongside Nolan Ryan, Tommy Lee Jones, and George Strait.
Like a lot of successful cowboys, Doc Graham was feared, too, and always game for a fight. He’d sued a neighbor over a road that their properties shared, and he’d sued two business partners. Just recently, he’d sued his own bankers, over some seemingly private and