As it tends to happen in Honduras, the news began as a well-heeled rumor: Javier Rivera Maradiaga, the oldest of the three Rivera Maradiaga brothers still alive and leader of the feared and powerful Honduran drug trafficking group known as the Cachiros, had handed himself in to United States authorities to face drug trafficking charges.

A few days later the news leaked on to social media, then it was on the radio,1 and then in several newspapers.2 Soon, it was clear that Javier was in US custody. What’s more, Javier’s brother Devis Leonel and possibly his other brother, Santos Isidro, had also surrendered to face the charges.

The details of their surrender were sketchy. One of the more popular versions said they had handed themselves in to the US Embassy in Tegucigalpa.But others said it happened on an island in the Caribbean, most likely the Bahamas.4 Still others told InSight Crime that it occurred at sea, in international waters.5 In all three scenarios, the results were the same: the core of a group that few in Honduras even talked about just a few years ago was in US custody.

The timing was not a coincidence. The Cachiros had been virtual fugitives in their own country for years. Even though they did not face criminal charges in Honduras, the US government had made them the poster boys for international drug trafficking in the country when the US Treasury announced in 2013 that it was targeting the group’s assets. This was for good reason. The organization, which began as a family of cattle rustlers, had risen to create a multi-million dollar empire that included legal and illegal businesses across Honduras' northern seaboard. They were financing political campaigns and even had a stake in a popular soccer team.

More importantly, the Cachiros’ businesses had intersected with important Honduran elites. These elites included some of the most well-established names in Honduras’ business and political circles. The records show that the business partnerships were clear, but the business and political relationships these elites had with Rivera Maradiagas were hazy. Did the elites know who they were dealing with? Was the source of the Cachiros’ wealth known? Did it matter since the Cachiros were not facing criminal charges in Honduras? These are questions that few people ask in places like Honduras. Money can smooth over most transgressions, especially with impunity rates that reach into the 90th percentile.

But there is always the off chance that word could leak out beyond the inner circles of power to those in United States law enforcement who are somewhat less forgiving. This seemed to be the danger with the Cachiros who, more than seeking to account for their past, seemed to be fleeing to the only safe place left for them. In the days following their surrender, Óscar Álvarez, a powerful congressman and two-time former security minister, said those who had “worked with [the Cachiros], done business with them, should be worried."6 Later, press reports said the brothers were cooperating with US law enforcement in exchange for the safety of their immediate family and other relatives.7

Just what the Cachiros feared had become clear in the days prior to the reports of their dramatic handover. Their network included a wide ring of third party owners and political brokers who held an equal or greater amount of damning information about their contacts with Honduras’ elites of the type Álvarez cited. Among those brokers was a man named Juan Gómez Meléndez. Gómez was a former governor and congressman who at some point began managing Cachiros’ businesses.8 Like the Cachiros, there were rumors about Gómez handing himself in to US authorities, but Gómez did not make it as far as the Rivera Maradiaga brothers. He was murdered as he exited a bank in the city of Tocoa,9 the Cachiros’ de facto headquarters for close to a decade before their flight the US penal system.

According to at least one press account, Gómez’s murder solidified the Cachiros’ decision to flee into US arms.10 For years, they had provided a huge injection of resources into the banking system, the agricultural and tourist industries, and various political parties’ coffers. In return, they had enjoyed a run as one of the most powerful drug trafficking organizations on the isthmus. But, as Gómez’s murder clearly showed, that run had ended, and they were in danger of being assassinated themselves. In other words, the Cachiros understood that their utility to the Honduran elites had run its course. It was time to leave while they still could.  

Background – Northeastern Honduras and Development in Isolation

The northeastern coastal area where the Cachiros operated covers the states of Colón, parts of Gracias a Dios and Olancho, and stretches as far west as the city of San Pedro Sula. The region has been in the strange position of being the site of huge agro-development projects, but little infrastructure. The Truxillo Railroad Company, a subsidiary of the United Fruit Company, operated from Colón state in the early 20th century. Large areas of land were distributed to peasant groups during an aggressive agrarian reform project in the 1970s and 1980s, but agribusinesses like the Standard Fruit Company, a subsidiary of Dole Food Company remain operational in the zone.

honduras-en

In the 1990s, with a law that allowed this land to be sold to private owners, some of the land passed into the hands of large agro-interests, most notably Miguel Facussé, one of Honduras’ wealthiest men. The process remains in dispute to this day and is discussed in more detail below. Suffice to say that Facussé and numerous others have since developed large African palm plantations that stretch the length and width of what is known as the Bajo Aguan Valley, a fertile region with numerous rivers that makes the area an attractive zone for farming. Other large industries -- most notably cattle and mining -- are also present and growing in size and importance in the area.

Despite the presence of these large economic interests, the area remains to this day relatively isolated from the central governing structures of Honduras in Tegucigalpa. Only one major road leads to the country’s industrial capital, San Pedro Sula. In fact, the first paved road to any city in the region -- from La Ceiba to Trujillo -- was not finished until the 1980s.

The only major development of this area can be attributed mostly to its tremendous access to the sea, which has helped it attract some tourism as well. That reality helps explain why Trujillo was Honduras’ first capital and major port, and the first place where Spanish ships docked on the Central American mainland. Efforts to fend off near-constant incursions by pirates led many to flee inland, accounting for the larger settlements, such as Tocoa, which today are the centers of economic and political activity in the zone, even though Trujillo remains the political capital of the department of Colón. 

Honduras-elites-crime-pdf-cover

This is one part of a multipart series concerning elites and organized crime. Read full Honduras report (pdf). See other parts of the series here.

Given the relative isolation of the area, it is to be expected that its economic activity centered more on trade along the coast and with other Caribbean nations than with the central part of the country. In the 19th century, elite families such as the Castillos and the Julias, who formed the “Julia & Castillo” corporation, exported cattle to Cuba.11 Another family, the Crespos, imported liquor from Cuba.12 The Crespo family later intermarried with another elite family, the Melhados, to form the nucleus of a political-economic elite that would dominate the area’s political and economic activities through the end of the 20th Century.

Whether for political or economic reasons, these elites worked hard to keep the area for themselves. To cite but one example, José Castillo Melhado, a congressman from Colón in the 1930s, helped the Truxillo Railroad Company get out of a contractual obligation to the government that would have led to the building of a railroad between Trujillo and Tegucigalpa. In the meantime, the elites continued to develop the coast and inland areas to receive and process imports from as far away as England.13 This relative isolation may also have facilitated the illicit activities of these elites. At least one researcher suggests the elites benefitted from contraband trade, much of it from England.14 But while it seems a very probable scenario, InSight Crime could not find any documentation to substantiate these claims.

As in the rest of Honduras, many of the elites in the northeast were of foreign origin. The Glynn family, descendants of English immigrants, operated the lucrative Truxillo Railroad Company. The Glynns eventually became one of the foremost import-export families in the area, as well as large land and cattle owners.15 These families came to dominate the political arena in the northeast and occupied many diplomatic posts, especially those in England, the United States and Spain.

In the 1970s and 1980s, the northeast became a center of experimentation and alternative development, a process that facilitated the arrival of other elites to the area. Under the rule of a two-time military dictator, General Oswaldo López Arellano, the country embarked on an agrarian reform that called for the expropriation of upwards of 600,000 hectares, a good portion of which would come from the Standard Fruit Company.16 That ambitious proposal was truncated for political reasons, but some of the company’s land did pass into the hands of farming cooperatives, which, with the help of the government, formed the Empresa Asociativa Campesina de Isletas (EACI). 

For a few years, the EACI was the envy of cooperatives throughout Central America. It exported bananas, and its operators became important political and social leaders in the region. The EACI, however, was short-lived. It suffered from corruption, and the military government systematically persecuted its leaders during the 1980s. Its sales fell off, and in a highly controversial deal in the early 1990s, as much as 8,000 hectares of its lands were sold to various suitors including Standard Fruit and entrepreneurs like Miguel Facussé.17 The land deal with Facussé has been at the center of a contentious and near-constant battle between the remnants of the cooperatives that formed the core of the EACI, on one side, and Facussé, among others, on the other. As we will see with the Cachiros, criminal actors have taken advantage of this tumult to advance their own interests.

The land sale was the beginning of a wholesale change of elites in the northeast. The power of the traditional import-export and land-based elites of the area waned to some extent, while the transnational elites, particularly Facussé, entered the area in force. What remains is a combination of the various elites described in the introduction to the Honduras section. Traditional elites are major players in the region. Ramón Lobo, a former congressman and brother to ex-president Porfirio Lobo, is chief among them. Others, including congressman Oscar Nájera are large landowners in the Bajo Aguan as well.

The combination of agrarian reform, government incentive programs and the emergence of the African palm industry has bolstered the region’s population. Census data shows that the population of Tocoa grew four-fold in the last quarter of the 20th century.18 It’s not clear that the economy has sustained enough growth to support this burgeoning population. African palm, for instance, is labor intensive at the outset but not over the long term.

This is the gap that the new criminal economy fills in the region. It is difficult to say how much organized crime has played a role in the development of the zone. Numerous regional experts told InSight Crime researchers19 that, at the very least, increased economic activity gives criminals an opportunity to launder their earnings. But others declared that criminal proceeds are a major motor of economic activity and certainly a generator of employment. Although the extent and length of the criminals’ reach is impossible to measure -- as is clear from the case of the Cachiros -- it is significant. And this influence has stretched into the political, economic and social spheres of life in the region.  

The Cachiros

Figure 1: Cachiros’ Organizational Chart

US Treasury Cachiros Organizational Chart

Source: Taken from US Treasury

One of the most important criminal groups in Honduras in the last two decades was the Cachiros. At the core of the Cachiros was the Rivera Maradiaga family, who come from Cayo Sierra, a small town outside Tocoa. By numerous accounts, the family’s underworld activities began with cattle rustling.20 A Honduran intelligence official said the family was also involved in car theft.21 The family’s activities in the underworld increased when it came into contact and began working directly with Jorge Aníbal Echeverría Ramos, alias "El Coque." Less is known about El Coque, but he appears to have been a leader of another trafficking, theft and contraband organization whose fortunes -- along with the Cachiros’ -- were rising in the early 2000s.

At the time, Honduras was becoming a more important corridor for cocaine moving north. The reasons are many but center mainly on the Mexican criminal groups’ seizing control of the distribution chain from their Colombian counterparts. The natural cocaine transport corridor for these Mexican groups is Central America. Upticks in Central American drug seizures during this period speak to this trend.22 The increased volume of drugs meant increased returns for organizations like those of El Coque and the Cachiros.

El Coque had powerful allies that helped him grow into a formidable force. News reports linked him with Margarita Lobo, the daughter of aforementioned political heavyweight Ramón Lobo.23 Lobo was a congressman at the time. His brother, Porfirio, was the president of the Congress and would become president of Honduras a few years later. Ramón Lobo has ever been charged with trafficking illegal drugs or anything related to organized crime activities.

El Coque also made powerful enemies, including the Cachiros. It’s not clear why the rift occurred. One report said El Coque killed one member of the Rivera Maradiaga family,24 but there is no definitive account. What is clear is that at some point there was a violent split, and the Cachiros went on the offensive. Assassins first tried to kill El Coque in San Pedro Sula, putting 25 bullet holes in one of his vehicles and injuring Margarita Lobo in the process.25 El Coque survived and fled to Cuba, then to Costa Rica where another team of assassins tried a second time. After that failed as well, El Coque went to Panama, where he was arrested and returned to Honduras. On his fourth day in jail, assassins shot El Coque three times, killing him.26

Led by the eldest brother Javier, the Cachiros took control of some of the most important cocaine routes on the isthmus. Colón is strategically located along the northeastern coastline: to the east is Gracias a Dios state, and to the south Olancho. These three states have become some of the best landing areas for small aircraft carrying drugs from South America, in part because of the infrastructure left by the agro-export economy that once thrived in the area. There is little state presence, and vast stretches of land that are used to create makeshift, clandestine airstrips. There are also large tracts of African palm plantations and other agro-industrial businesses that can help camouflage the storage and movement of illicit products. In addition, the coastline receives drugs by sea, ferried via go-fast boats and fishing vessels.

There is reason to believe that large landowners facilitate at least some movement of illicit goods through the area. A March 19, 2004, US diplomatic cable released by WikiLeaks says an unauthorized aircraft carrying about a ton of cocaine landed on Miguel Facussé’s ranch a few days earlier.27 The cable says Facussé himself told the police the airplane had landed on March 16, and that guards on his property had fired on the aircraft, which had burst into flames. However, the diplomatic cable cast doubt on Facussé’s version of events. The cable, citing police and other “sources,” says the plane landed March 14; about 30 armed men offloaded the cocaine, then burned the aircraft.

“Facussé’s property is heavily guarded and the prospect that individuals were able to access the property and, without authorization, use the airstrip is questionable,” the cable says. “In addition, Facussé’s report obviously contradicts other information received from the law enforcement source about the actual date of the event and TAT’s [Tactical Analysis Team] intelligence about the March 14 air track.” 

There is no evidence to suggest that this cocaine was part of the Cachiros’ illicit business dealings in the area. In fact, as detailed below, the Cachiros may have worked against Facussé’s interests, fomenting armed incursions onto his lands. The Cachiros themselves also have sufficient land to move, store and dispatch illegal goods. As noted in more detail below, they own vast amounts of African palm and cattle, and have other infrastructure and companies to facilitate these activities without having to rely on others. The event on Facussé’s land is more noteworthy as a means of illustrating the opportunity -- or risk, depending on your interpretation of the event -- for the largest of landowners in the area.

The area also offers a large pool of labor. Under- and unemployed fishermen and boat operators are available to receive and store illicit goods. They can also help refuel boats and work as lookouts. A large, isolated and marginalized indigenous population that stretches into Nicaragua offers further services for illicit activities. An alleged Cachiro associate, Bismarck Antonio Lira Jirón, was arrested in Nicaragua, where authorities charged him with money laundering, among other crimes, after discovering his multimillion-dollar offers to buy land in various parts of the country.28

By numerous accounts, the Cachiros were a tight-knit organization. They kept most of their dealings within the family and close friends. While Javier was the leader, his brothers, Dévis Leonel and Santos Isidro, reportedly developed other military and business ends of the group. His father, mother, sister and at least one cousin were involved in the business side. Still, in order to run their main business of trafficking cocaine, the organization had to contract out much of its operations to other, small groups. These included a pool of seafaring and land-based transporters, mechanics, lawyers and other infrastructure necessary to keep the operation running smoothly.

Throughout its existence, the organization had to develop contacts within the security forces. The most important was the police. The Honduran police are known as one of the most corrupt in the hemisphere. Police have been linked to drug trafficking, car theft rings, extortion schemes, and death squads. Attempts to purge the police have largely failed and led to the resignation of at least one security minister.29 The police are, in essence, at the service of the highest bidder.

In Colón, the Cachiros allegedly kept the police chief on their payroll, and officers often had to pay a price to get that post.30 These police formed the first ring of protection. They ensured the group and its associates were aware of any law enforcement presence or activity. The Cachiros’ reach went to the highest level of the institution. The list of suspected collaborators compiled by InSight Crime investigators includes a former Honduran national police chief. None of these police have been investigated or prosecuted by authorities making it difficult to declare with any degree of certainty exactly what this relationship entailed.

The Cachiros also worked to infiltrate other parts of the security forces. The military officer in charge of Colón told InSight Crime that his driver worked with the criminal group until he transferred him. He said he had lost trust in the other soldiers as well. In apparent confirmation of that suspicion, the officer whispered answers to questions when his troops stood nearby. The criminal group had also tried to insert its people into top-level security ministry posts. One emissary, Colón congressman Juan Ramón Salgado Cuevas, was assassinated in 2006 after he failed to push the Cachiros’ candidate into the ministry, intelligence sources told InSight Crime.31 

The Cachiros maintained contacts at the highest levels of the judicial and security forces, InSight Crime researchers found. Prior to their flight to the US, members of the Rivera Maradiaga family had been arrested on at least two occasions, but were not prosecuted. According to various Honduran officials interviewed by InSight Crime researchers, Dévis Leonel still faces charges for attempted murder stemming from the 2003 attack that injured Margarita Lobo; and Santos Isidro has an outstanding warrant related to illegal weapons possession. But even after the US Treasury designated them as “kingpins” in 2013, and the Honduran authorities began to target and seize numerous assets, the family members did not face formal criminal charges for drug trafficking in Honduras. What’s more, by the time authorities reached their bank accounts to seize their money, the accounts had been emptied.32

The Cachiros’ business model worked. They accumulated considerable wealth from their illicit project. Authorities give wide-ranging estimates for how much cocaine moves through the Cachiros’ area of influence, but they agree that it is significant, or at least was significant at the group’s height. At the low end, authorities said the group was moving between one and two tons per month; at the high end, they put it at between four and five tons a month. The range of monthly earnings was therefore between $2 million and $12.5 million.33 Authorities say the group also controlled local distribution of cocaine, human smuggling and possibly other underworld activities in their area of influence.

The Cachiros steadily funneled their earnings into the licit economy and positioned themselves as important political and economic players on a national scale. In September 2013, when Honduran and US authorities began seizing the organization’s properties, US and Honduran officials estimated the group’s assets at $500 million and $800 million respectively.34 In an interview, a top official at the country’s asset seizure group, which goes by the acronym OABI, said the value of the assets was closer to $300 million.35

The businesses played an important role in the regional and possibly the national economy. The group’s cattle ranching business, Ganaderos Agricultores del Norte, was one of the largest purveyors of meat in the northeast, and, according to one buyer of this meat, the country.36 They had bought and developed at least two hotels and a zoo and eco-park called Joya Grande. They allegedly had a strong hand in the operations of the Tocoa soccer club, Real Sociedad, although those ties may have been severed after the high profile actions against the family by the US. More recently, they had branched into mining. In all, Honduran authorities said they had seized 128 different Cachiros’ assets,37 including a transport company, a security company, various large plots of land, a clothing store, a gasoline station, and tens of millions in cash.38

The Cachiros also had vast African palm plantations in the Bajo Aguan region near their de facto headquarters, Tocoa, as well as to the west in the state of Cortés. They owned one of the few African palm-processing plants in the country, which one US official said was not operational.39 The African palm industry is ripe for organized crime infiltration on many levels: it involves large extensions of land where it’s easy to establish clandestine airstrips and keep them hidden; regular transactions in cash; use of many vehicles, including trucks that help transport all types of goods; influx of chemicals and outflows of products, which facilitates the movement of illicit products and money laundering activities; and connections with other large, agro-industrial projects and the political power that comes with them. Traditional agri-business ventures such as cattle are mainstays for illicit interests for many of the same reasons.  

The Cachiros and Transnational Elites

Figure 2: Rosenthal Organizational Chart

US Treasury Rosenthal Organization

Source: Taken from US Treasury

The Cachiros used their licit businesses and their participation in the political process to place them in the closest proximity to the elites. This contact seems to have led to some business arrangements and possibly some campaign contributions, though, as noted at the outset, the evidence is scarce. The Cachiros, like most criminal enterprises, used proxies to front their businesses and appear to have given contributions in cash, although they may have videotaped some of their encounters.40 They also used intermediaries to deal with their partners. Because the group’s members often are not the listed principals of the companies, and because they do not directly handle the businesses or political relations, it is impossible to know whether their partners were aware that they were working with suspected criminals unless they have at some point been prosecuted. The evidence presented here is therefore largely circumstantial and is not to be considered a formal accusation of any wrongdoing.

Arguably the most important business interaction between the Cachiros and the transnational elites was through the banking sector. The banking sector, as noted earlier, is one of Honduras’ most important and is largely controlled by the transnational elites. It has thrived in recent decades as Honduras has become integrated into the global economy, and remittances and investment in businesses such as fast food franchises have soared. The Cachiros were, in effect, some of the country’s largest providers of remittances and local investment in agro-industrial and tourism projects.

The Cachiros banked at various places including one of the largest, family-owned operations in Honduras, Continental Bank. Of the 64 accounts, seized by the government, “the vast majority,” were with Continental, according to one government official who investigated the group.41 The Cachiros, the investigator said, “had all their lines of credit with the Continental Bank.” This included the cattle, African Palm, and the zoo, he said. The bank’s connections to the Cachiros did not go unnoticed by authorities. In 2014 the government’s Banking and Insurance Commission fined the bank some 12 million lempiras (just over $500,000) for failure to check the source of some of their clients' income, the government investigator said.

There is nothing official to tie the Cachiros to the bank’s owners, the powerful Rosenthal clan, but the bank has come under some scrutiny from officials in other circumstances as well. In 2012, for example, the government sought to create a privately held escrow fund to manage collections and distribution from a special security tax. The fund manager would have to handle sensitive information, including how the resources would be spent on the security forces as well as other security-related equipment, infrastructure and projects. Continental offered the most attractive bid, according to two sources close to the process. However, members of the government’s Banking and Insurance Commission, as well as outside consultants, recommended the government steer clear of this bank because it had not followed proper protocol in vetting some of its customers, among them the Rivera Maradiaga family.42 The government eventually decided to manage the funds itself through the Central Bank, offering a public excuse for its sudden change in direction.43

The most damning accusation against the bank came from the United States Justice Department. In October 2015, the US arrested Yankel Rosenthal, the nephew of Jaime Rosenthal Oliva. The Rosenthal family owns Continental Bank, as well as numerous other companies. Following the arrest, the US unsealed an indictment against Yankel, Jaime, Jaime’s son, Yani, and a company lawyer named Andrés Acosta García for money laundering.44 On the same day, the US Treasury added the family to its “kingpin” list,45 prohibiting businesses from engaging with the Rosenthal family businesses and effectively destroying its powerful conglomerate, which had operated for nearly half a century.  

The Rosenthals are a Romanian-Jewish family that settled in Honduras in 1929.46 Its patriarch, Jaime Rosenthal Oliva, is a perennial political and economic juggernaut in Honduras. He ran for president in 1985, was Vice President in the late 1980s and remains a high-ranking official in the Liberal Party. His son, Yani Benjamin Rosenthal Hidalgo, is following in his father’s footsteps and ran for president in the last elections. Yani Rosenthal is still a member of Congress and an important party official. The rest of the Rosenthals are spread throughout the family businesses.

The family’s holdings make them one of country’s top five conglomerates, according to various unofficial tabulations done by media, academics and economists in Honduras. In addition to the bank, the Continental Group, as the conglomerate is known, owns a percentage of another Honduran top tier bank, Banco de Occidente,47 a cement company, an insurance company, a coffee export business, a television station, a meat-packing plant, a newspaper, and a leather goods operation, and many other businesses. Some of the group’s economic assets veer into non-traditional exports such as African palm oil and alligator farms.

Notwithstanding the issue with the special security tax, Continental and the Rosenthals also do major business with the government, especially as it relates to public-private partnership initiatives.48 In 2013, for instance, the bank was selected to manage funds for a project that sought to recuperate “lost” energy costs.49 During the same year, the bank was selected to manage scholarships for the Education Ministry in five states.50 For its part, Banco de Occidente, also regularly receives government contracts, such as those relating to the purchase of medicines for the public health care system.51

The Continental Group also did business with the Cachiros. Jamie Rosenthal and his daughter Patricia Rosenthal, in an interview with InSight Crime, say this relationship began in the late 1970s or early 1980s, when Javier Rivera Maradiaga began bringing cattle from Colón to sell to the Rosenthal’s meat packing plant, Empacadora Continental, in San Pedro Sula. Javier, the Rosenthals said, was poor, selling about a dozen cattle a time, then sleeping in his car on the street before driving home the next day. Over time, his situation changed.

“And he just got steadily bigger. You look and see a person who starts small and then afterwards gets a little truck, and then another and another,” he explained. “He was doing good business; he was growing.”

The Rosenthals admit the Rivera Maradiaga clan eventually set up accounts in Continental Bank, but they say Cachiros were not managing exorbitant amounts of money in these accounts. “The accounts that they managed were in line with the businesses they had,” Patricia Rosenthal, who is listed as the Vice President of Continental Bank, said.

As noted by the government prosecutor, the big business between the Continental Group and the Cachiros was in loans. The Rosenthals said they first loaned the Rivera Maradiaga family money for their cattle and milk production businesses in 2006.

“That was when we started to have a relationship with them, of loans, and that was when the relations began with the bank,” Patricia Rosenthal explained. “The meat packing plant knew him. They brought more cattle and we said, ‘Look, this could be a good client,’ and we lent to them for the cattle and the dairy farm. The dairy products they sold in [La] Ceiba to a large cattle ranch and the cattle to us and other meat packing plants. For the bank, this was not a bad business, I mean they had good [cattle], they could pay us, the buyers, directly, all of whom were big.” 

The Rosenthals said that like any client, they ran the Rivera Maradiaga family through their due diligence process but got no red flags. They added that the Cachiros paid back their loans in checks and showed InSight Crime a copy of a signed check provided to the bank by Javier Rivera Maradiaga, which they said was a payment for a loan. (See photograph below)

15-10-08-honduras-cachiros-check

Other loans came after the cattle and milk production business loans, including some for the Cachiros’ African palm plantations. The Rosenthals said it was a natural fit: the bank’s strong suit was lending to agriculture businesses, and the Rivera Maradiagas were good clients.

“They were good clients for us,” Patricia Rosenthal said. “Another important thing is that the bank’s strength is in the north, which includes the northern coast, and we are the strongest bank in agriculture and housing. [This is] because the board of directors that presides over the bank has always believed that it is our duty to give back to these areas in Honduras.”

Perhaps the most obvious connection between business group and the Cachiros is that Continental Bank was a major investor in the Joya Grande Zoo and Eco-park, evidenced by the plaque commemorating this support at the zoo’s entrance and an outstanding loan the bank gave for the construction of the zoo.52 Government sources told InSight Crime they believe the bank had not reclaimed the remainder of the loan because of the questions it would face regarding its due diligence practices.53

The Rosenthals said they had not reclaimed it because the loan was tied up in the legal process against the Cachiros. While it has been arguably the most embarrassing, public connection between Continental Group and the Rivera Maradiaga family, the Rosenthals insisted that it was a good business that did not involve drug money. “It’s not a project that they were going to pay with drugs, it was a project that paid itself,” Rosenthal said.

To be sure, the park still gets rave reviews from tourists.54 And the Rosenthals say it was an investment decision that has benefitted Honduras.

“When we analyzed this loan, it was a very good loan, not just for us but for the country. The loan paid itself off and promoted tourism in an area of the country where people normally never went. They did a great job because they started to attract people from all of Central America,” Jaime Rosenthal said.

Cachiros-Rosenthal-Connections

Continental Bank also supported the Tocoa soccer team, which the Rivera Maradiaga family allegedly supported financially. The logo of the bank appeared on Real Sociedad’s shirt, and as of 2012, the bank was listed on the team’s website as an official sponsor. But that type of support is not unusual, Jaime Rosenthal said. The bank sponsors other teams, such as the perennial powerhouse Marathón, which the Rosenthals own. Tocoa’s team is also sponsored by the likes of Coca-Cola. In a written response to an InSight Crime article that talked about the Tocoa team’s alleged connections to the Cachiros, Jaime Rosenthal said advertising on soccer jerseys is just good business; he also defended the bank’s record of transparency.55

“Certainly your article damages our image, and it is causing problems to us,” Rosenthal wrote to InSight Crime. “We have been in business in Honduras for more than 100 years… We have audited statements for more than 35 years, and we can prove the origin of every penny we have.”

The Cachiros, and Traditional and Bureaucratic Elites

Throughout this period of incredible economic growth for the trafficking group, the Cachiros became more involved in politics, fostering candidates from various parties, supporting local festivals and social programs, and developing the type of business contacts that allowed them to work with the government and to influence its operations. These connections were facilitated by the financial contributions from the criminal organization to the politicians themselves and began a process whereby the criminal group could penetrate all portions of the state and society.

The extent of the Cachiros’ campaign contributions is unknown, but numerous Honduran and international investigators, as well as local sources in Colón, told InSight Crime that they were significant and regular. The group also appears to have been an equal opportunity giver. The country’s two main parties, the National Party and Liberal Party, were both beneficiaries, Honduran and foreign authorities told InSight Crime. Other parties also benefitted from the Cachiros’ campaign investments, various sources said.

The contributions shine a light on a fundamental weakness in the Honduras political system: Honduras and other developing nations’ political parties depend heavily on wealthy donors. What’s more, there is little, if any regulation of these campaign contributions. Honduran law does not put limits on the amount individuals can donate, nor does it require publication of the names of donors. It is also unclear which, if any, government institution is directly responsible for supervising campaign finance issues.56 There is no rigorous oversight committee investigating campaign contributions in Honduras, and evidence of illicit contributions is anecdotal and often circumstantial. InSight Crime investigators, for example, heard stories about a politician’s campaign at a “narco-owned” hotel and the exchange of “suitcases full of cash.” But there are no judicial cases on the record on which to base these assertions.

Nevertheless, numerous sources told InSight Crime that these political contributions are helping to rebuild the traditional elites’ power, which is centered on controlling the political process as much as it is the accumulation of new sources of capital. In this regard, Honduran government sources told InSight Crime that the Cachiros’ political connections were centered on various current and former congressmen, and a former governor of the state.

Among these, former governor of Colón Juan Gómez Melendez was the most important political operative the Cachiros had, intelligence sources told InSight Crime. Before his murder in January 2015, he was the Cachiros’ proxy of choice and their most active intermediary with other business and political allies, according to government intelligence officials and documents obtained by InSight Crime. He operated at least part of their cattle and palm oil operations, intelligence officials said. One company he ran secured public works contracts and maintained relations with other important figures that operate in this opaque narco-political world.

This mix of illicit capital, corruption and narco-influence creates a lucrative merry-go-round that is most clearly illustrated by the various companies that obtain public works projects and licenses to develop, for example, mineral extraction or tourism projects. Both the illicit actors and the politicians benefit from these contracts. The politicians receive kickbacks or an economic share in the projects. And the illicit actors are able to strengthen their legitimate business interests, extend their social capital and hide their illicit proceeds.

In the case of the Cachiros, InSight Crime investigators found numerous contracts between Rivera Maradiaga-controlled companies and the Fondo Vial, or Highway Fund, the government agency responsible for administrating the building and maintenance of the country’s national roadways, bridges, and tunnels. The contracts between the Cachiros’ companies and the Fondo Vial, which occurred between 2010 and 2013, totaled a little over $4 million (84,751,000 Lempiras). They included stretches of roads between three departments: Colón, Olancho and Yoro. The contracts covered “emergency” fixes, building roads and constructing one bridge. 

The man executing these contracts was Hugo Ardón, the head of the Fondo Vial up until June 2015. Ardón is the brother of the infamous former mayor of El Paraíso, Copán, Alexander Ardón. Alexander Ardón made himself famous for refurbishing the mayor’s office to make it look like the White House, which included adding a heliport on the city hall roof, and has long faced down accusations of drug trafficking. Not surprisingly, the brothers also executed public works contracts.57

In 2014, the Honduras Security minister told InSight Crime that Alexander Ardón was under investigation for drug trafficking, but no charges have been filed and Alexander Ardón has denied any connections to illicit activities in the past.58 Sources suggested to InSight Crime that this lack of action against Alexander Ardón was related to Hugo Ardón’s connections to the presidency. In addition to running the Fondo Vial, Hugo Ardón ran Juan Orlando Hernández’s presidential campaign in the western part of the country.59

These alliances have developed, in part, because internal and external economic factors have changed the composition of Honduran society and power dynamics amongst the elites. The country’s economy remains dependent on money from foreign sources. But it has expanded the channels through which this money passes and the number of beneficiaries it has. What this means in practice is that control over the government posts that are the filter for this capital is more important than ever. And it is in these spaces where a new brand of what we are calling bureaucratic elites60 are merging with traditional elites and challenging the transnational elites who have run Honduras for decades.

As outlined in our first case study, on Juan Ramón Matta Ballesteros, these bureaucratic elites are often a hybrid between those who depend on government posts for their power and those who come from traditional, landed backgrounds and have since secured political power. President Juan Orlando Hernández is a good example of this new, hybrid elite. As the first case study shows, the president has used both his personal wealth and his government posts to become the preeminent power in the country. Understanding that the base of his power is reliant on bureaucratic posts, he has also placed his allies in important positions throughout the government.

Among these allies is retired General Julián Pacheco, who represents an example of how these bureaucratic elites have intersected with the Cachiros. Pacheco was the head of the military’s battalion in Colón in the early 2000s, while the Cachiros were gaining prominence. The governor at the time was the aforementioned Juan Gómez Meléndez. Pacheco had a close relationship with Gómez, who was the government’s interlocutor in the region on security matters. The two met on an almost weekly basis, Pacheco said in an interview.61 They remained in touch after Pacheco moved to another post, although Pacheco said he distanced himself from the politician before his murder in January 2015.

Bureaucratic elites are in a unique position. As noted in the first case study, they are both the direct beneficiaries of their connections to illicit actors, and, ironically, beneficiaries of the resources to fight it. Both of these relationships to organized crime come from their control of these government posts. Their understanding and ability to control these filters is what has helped catapult them into the positions they currently hold, and they will do most anything to keep these positions. In other words, they need political power and the resources that come with it. To get there, they rely on illicit campaign contributions as much as any other elite.

Bureaucratic elites also have a vested interest in maintaining this system where the government is the all-important gatekeeper to these and other public resources, and the guardian of law and order. The system works for them in numerous ways, including giving them the pretext to strengthen the security forces, broaden its powers of vigilance, guard its finances under a veil of secrecy and “national security,” and undermine the balance of powers. All of these actions help them keep the status quo, win more allies and weaken rivals. 

The Cachiros and Social Elites

In addition to their connections with the transnational, traditional and bureaucratic elites, the Cachiros depend on an elaborate arrangement of other actors to do their illicit and licit businesses. To begin with, they have thousands of employees, among them lawyers, engineers, as well as construction, agricultural and transport workers. They reportedly pay a large number of taxi drivers, indigents and persons with disabilities who spend large amounts of time in public places to work as informants. Sources in Tocoa say the Cachiros regularly interact with religious authorities as well as community leaders, and help pay for local festivals. Their social standing has reportedly risen with their management of the soccer team, which competed for the championship of the Honduran soccer league several years in a row when the Rivera Maradiaga family took an interest. 

At least part of the Cachiros’ social cache comes from the fact that at some point they kept gang violence and extortion in check, local authorities and other sources told InSight Crime. The group’s strongest gang connection is with the feared 18th Street gang, or Barrio 18. The Dieciocho, as it is most commonly known, is one of the two most prominent street gangs in the western hemisphere. The Cachiros used the gang’s branches to receive, store and move drugs in small quantities, local and foreign investigators say. These groups moved the drugs using motorcycles and cars that intermittently go off road to avoid police and military checkpoints. The Cachiros exerted some control over the groups’ activities, which include the local sale of drugs that the Cachiros themselves provide, often as an in-kind payment for the gang's services. 

The irony is that the arrival of larger quantities of illicit drugs is in and of itself one cause of increased violence in Honduras in recent years. The Violence Observatory reported that Colón had 277 homicides in 2014, giving it a murder rate of more than 88 per 100,000 inhabitants.62 The violence is, according to a local prosecutor, in part due to competition for what they call “lines” (lineas) of territory, where gangs can sell their product. Local sources reported that the Cachiros had said they would push to lower the violence, but the high number of homicides indicates that it may have been out of their control.

Some local sources reported that the Cachiros may have extended their network to include farmers’ cooperatives. There are at least seven peasant farmer cooperatives in the region, many of which have thousands of members and control large tracts of land. These groups campaign and carry out land invasions in an attempt to recover land that they claim was transferred into private hands in the 1990s through fraud or by force. The leaders of these groups can in some senses be considered as a form of social elite in the region, given their power to influence their large membership, and their international links to non-governmental organizations in Europe and the United States. The United Peasant Farmer Movement of the Aguan (Movimiento Unificado Campesino del Aguan - MUCA), for example, has been present in the region since its formation in 2001, and now reportedly controls some 4,000 hectares of land, more than any cooperative in the area.

As documented above, there is evidence that other actors in the land conflict, including local military units and large landowners, have been compromised by criminal groups. Some farmers’ cooperatives may have been as well. The stakes are high -- the conflict has cost more than 100 lives since 2010, including peasant farmers, members of the security forces, and agribusiness employees. Peasant farmers are particularly vulnerable to this violence, and activists reported that at least 88 farmers or their supporters were killed between 2010 and 2013, many in targeted attacks.63

One cooperative member told InSight Crime researchers that elements within the local cooperatives had formed links with drug traffickers in the region. The cooperative member said that elements within the cooperatives benefitted from these dealings. In exchange for weapons to fight the land conflict, members of the peasant farmer group offer drug storage facilities and allow drug shipments to move through their territory, and may even carry out contract killings for the traffickers.

There are numerous armed groups in the area, some of whom have been linked to the large farming interests, others to the cooperatives and still others to the drug trafficking groups. As noted above, some of them can camouflage their activities behind the pretense that they are private security. Land conflicts often involve conflict and separating one armed group from another, as well as discerning alliances, is a near impossible task.

InSight Crime researchers were present during one such takeover during a field trip to the area in August 2013. The cooperative, an offshoot of MUCA that called itself MOCRA (Movimiento Campesino Recuperacion del Aguan), included about 200 peasant farmers. Private security on the land -- which news sources said belonged to Miguel Facussé64-- fired at the cooperative members, who were also armed. Three squatters were injured.65 Reinforcements for MOCRA arrived in high-end 4 x 4 pickups and well armed, but by then the police and the army had arrived and kept the farmers from proceeding with their plan to continue the incursion.

The upshot of these connections to the social elites is that they are hard to separate from the Cachiros’ general political and economic presence in the zone. The potential links to influential cooperatives, religious authorities and other important members of society come with actually being a family that has thousands of employees, numerous businesses and extensive stretches of land.

What is clear is that the Cachiros understood the importance of the social elite, and they appeared to be using these connections to their advantage. This was manifest after the government seized some of its properties and businesses. Hundreds of employees and their family members took to the streets and marched with placards in support of the criminal organization. They also issued direct warnings to then candidate Juan Orlando Hernández about the potential political repercussions should he attempt to extradite Rivera Maradiaga family members to the United States to face charges. (See video below)

We do not know if these manifestations had a direct impact on government policy. However, the government has made an effort to keep at least part of the Cachiros’ businesses running.

Conclusions - A Dangerous Game

The connections between Honduran elites and major criminal groups fit, in many ways, within the larger scheme of Honduran economic and political development. Honduras’ economy has long depended on foreign capital to spur growth. First mining and then bananas became the heart of an economy that was mostly foreign owned. Later economic diversification, spurred by foreign assistance and remittances, became the center of a sputtering system that is more about facilitating the movement of foreign capital than improving the ability to generate capital locally.

Large scale drug trafficking fits into this economic system. It is part of the service economy. The biggest groups are essentially facilitators, moving illegal cocaine from one end of the country to the other. Its returns are giant remittances that are plowed back into various parts of the economy and political system. The size of the drug business makes it a formidable participant in Honduran society, so much so that it is playing a role in the development of the economy and in party politics.  

This is evident in the case of the Cachiros, who have established strong ties to the three main categories of elites in this country: the transnational, the traditional and the bureaucratic. These intersections are common throughout the country. The traditional elites, whose wealth is concentrated in land-based projects such as coffee and cattle, mostly intersect with criminal groups in the political realm, where these elites have surged in recent years to challenge Honduras’ long-time powerbrokers, the transnational elites. These transnational elites are more diversified and their needs are different, but some of them intersect and possibly interact with the criminal groups in the economic realm, most notably in the financial sector. The bureaucratic elites cross over with the Cachiros in state business and security matters.

This relationship between the Cachiros and the transnational elites is most clearly illustrated by the business dealings between the Cachiros and the Continental Group, the powerful conglomerate owned and run by the Rosenthal family. It is difficult to know what motivated the relationship between the Continental Group and the Cachiros, aside from business. On the surface, this may appear self-evident. The banking industry, for example, seeks capital; the criminal interests have vast amounts of capital. This capital, and the transactions it implies, gives banks a powerful incentive to shirk the due diligence and “know your customer” practices encouraged by international regulators.66

For their part, the Rosenthals denied they shirked any of their responsibilities. They said the bank’s due diligence turned up nothing that would impede the bank from doing business with the Rivera Maradiaga family. What’s more, they claimed they broke all relations with the group when the United States Treasury declared the Cachiros targets in 2013. “We had no reason to believe that they were as devious as they turned out to be,” Jaime Rosenthal told InSight Crime.

“Because there was no document or anything that said they were involved in drug trafficking,” Patricia Rosenthal added.

The same is true with the relationship between the Continental Group and the Cachiros outside of banking. InSight Crime has no evidence, for example, to suggest that the relations between the Cachiros’ cattle ranching operations and any meat packing plant was nefarious in nature or went beyond the simple reason that one had a product to sell and the other had a product they wanted to process. In fact, the overlap between the Cachiros and the Continental Group could be passed off as circumstantial: the two families could run in the same circles and simply have mutual business interests.  

At the same time, though, it is clear the Cachiros and the Rosenthals are not from the same circles -- not even close. The two families do not come from the same region or from the same economic strata. The Cachiros’ background of cattle rustlers and drug traffickers puts them in a completely different social class as the owners of one of the largest conglomerates in Honduras. What’s more, there is nothing to suggest that the Cachiros were major political and business players prior to their surge in earnings from trafficking cocaine across Honduras in large quantities.

The incentives that bring the Cachiros in proximity with the Rosenthal family need not be obvious to be attractive. Criminal-owned businesses often have multiple purposes. In order to conceal illicit proceeds, for example, organized crime can offer significant financial incentives to legitimate businesses and clients. In the case of the financial industry, the trade-off could be in the large amount of money they put into their accounts or the amount they pay to move the money through those accounts.

Organized crime groups may also offer their clients or partners steep discounts on their products. Although the Rosenthals said they did not receive any discounts for buying cattle from the Rivera Maradiaga family, the Cachiros reportedly employed this practice in their hardware stores in Tocoa, which were known in the area for selling cheap but high-quality products. In these cases, both the criminals and their clients see the transaction as a win: the clients get cheap products or large amounts of capital, and the criminals launder their proceeds and achieve a competitive advantage in the market. This competitive advantage extends to all their businesses.

The Rivera Maradiaga family was also an important economic player. In essence, by dealing with the Rivera Maradiaga family, the Continental Group was allied with a significant economic conglomerate that provided it with capital and new business opportunities, as well as economic and political connections. The Rosenthals, for instance, said the Rivera Maradiaga family was the most important distributor of milk in Honduras and one of the most important purveyors of cattle. All of these factors make the Continental Group more competitive, allowing it to expand its hold on some of the most important industries in the country. The relationship with Continental Group, in turn, offered the Cachiros a means by which it could launder its proceeds via numerous, cash-heavy businesses. In all of this, the bank is the key. If the bank does not do its due diligence, then all the other activities can move as much of the illicit proceeds as necessary through its doors.

The connections also gave the Cachiros a higher social standing. This bid for legitimacy worked. The Cachiros, as the chief of the police in Tocoa told InSight Crime, were seen as “señores del pueblo,” i.e., legitimate businessmen and unofficial brokers of the public interest. When the Rivera Maradiaga family launched one of its latest ventures, a gasoline station and mall, the area’s elites were in attendance, including Ramón Lobo, the former congressman and brother to ex President Porfirio Lobo.67 When their businesses were targeted for seizure by the government, there were large protests in Tocoa.

“If there was something the Rivera Maradiaga brothers had it was loyalty from the people. They always treated their workers well, and they didn’t try to scare everyone. They were cold-blooded killers with their enemies, but with the locals they were always acting in solidarity and were very generous,” one intelligence official told La Prensa.68 

The number and range of shared business interests certainly raises questions about whether the Rosenthals were aware of the Cachiros’ illicit activities. However, Honduras offers little disincentive for developing these ties. Whispers about the Cachiros’ licit and illicit proceeds stretch back years, but neither the press nor the government spoke publicly against them. Even after the US Treasury put the Cachiros on its “kingpin” list, then-President Porfirio Lobo made only one limited, indirect public reference to the group.

“There are a lot of units that are investigating all these [criminal] groups, incuding this group. These should be the units that know about these different [criminal] groups,” the president said.69 

When InSight Crime met with them, the Rosenthals also portrayed themselves as victims. They claimed they did not have the resources or the wherewithal to check all of their clients’ background and said that should be the government’s job.

“Our obligation should be, if there was a person who was responsible, that if we got information, we could give it to that person, and they could review it. They had the capacity to review it and say, ‘It’s not true. It’s an urban myth,’ or, ‘It’s true. Don’t do business with them,’” Jaime Rosenthal responded. “But what we have now is that they are waiting for us to determine who is a criminal and who is not a criminal. That is what the state is for, what the government is for. That is not the bank’s role, not the individual [citizen’s] role. That is why the state was created.”

At one point, the Rosenthals actually asked for assistance from the United States government to help it do due diligence. “In Banco Continental, S.A. we are and want to be very careful about our business and our customers, and since Grupo Continental is involved in many businesses including agro-business, we have to be especially careful about the people with whom we do business,” a March 2012 letter written by Jaime Rosenthal to the US Embassy read. “To us a clean name is very important and since the DEA and the US Embassy are the best informed people in Honduras, we will very much appreciate it that we can confirm with DEA some of the names of our customers to make sure that we will not get involved in any business that can damage the name of our family."70

Regardless of how much the Rosenthals knew about their partners’ illicit activities, they also had a legitimate and valid excuse for not withdrawing from these relationships: there are no criminal charges against any member of the Rivera Maradiaga family in Honduras that would directly prohibit the Continental Group from doing business with the Cachiros.

That grey area -- where the legality is in question but nothing is proven -- is large in Honduras and allows elite actors to continue to work with suspected illicit interests. Indeed, the judicial institutions, oversight committees and regulatory agencies are notoriously lax, incompetent and corruptible in Honduras. In most instances, this permits elites to shape and bend the rules so they can maintain the status quo. In this instance, it gives the transnational elites plausible deniability and the ability to adjust to a new economic and political reality -- the growing power of organized crime and rival elites -- that might otherwise put their interests at risk. As Jaime Rosenthal told InSight Crime, “We have not done anything illegal.”

CachirosEliteNetwork

What motivated the relationship between the Cachiros and the traditional and bureaucratic elites is more difficult to establish empirically. Current and former politicians appeared to act as emissaries for the group: helping them legalize and legitimize their economic holdings; ensuring favorable legislation for their business interests; and protecting them, their families and their close allies from prosecution. Perhaps the clearest advantage for the criminal organization was its ability to affect how public funds were allocated in their area of influence. The prospect of building roads, for example, was very attractive for the Cachiros on many levels. With public works projects, they could obtain a lucrative contract, which also allowed them to provide local employment and build up their social capital. It was also a means by which they could launder illicit proceeds, provide kickbacks to political operatives and help with campaign contributions.

However, the relationship between the Cachiros and these elites was much more profound than simply trading favors. While there were the expected elements of political payoffs, the alliance between large organized crime groups and traditional and bureaucratic elites has had an impact that lasts much longer than the government contracts they can secure. These illicit actors are shaping a state in which the principal source of capital accumulation is dependent on this mixture of illicit and government capital, and the political power financed by it. This is especially acute in countries like Honduras because, as noted, the earnings of these criminal organizations can be significant, and because their investments and spending in the local economy can rival local and national government expenditures.

The result is to contort the economic-political calculus and catapult a hybrid elite built around these licit and illicit operations. The basis of this nefarious alliance is not new. The political system in Honduras has always been financed by the wealthy. The political parties have long been beholden to these campaign financiers, doing their bidding by giving tax exonerations, granting no bid contracts, limiting regulation and undermining the justice system. The new system’s beneficiaries and financiers, however, expect these and other favors, including the promise to limit criminal investigations pertaining to money laundering, drug trafficking and homicides, among others, and the ability to partake in the corruption and nepotism so prominent in government business dealings.

The new model reinforces itself in various ways. Criminal groups operate with impunity and assistance of local politicians. The groups use this economic might to exert influence on the political process by supporting these same politicians or by propping up political parties. The candidates and parties are beholden to these criminal groups, and support favorable legislation that opens business opportunities for the alliance, and lobby for measures that limit security force operations. The politicians -- and their bureaucratic allies -- also take advantage of these relationships to strengthen their own hand, extracting resources from government coffers or using their influence to further their own economic and political interests.

The implications of these alliances are broad. Various economic and political movements seem to be developing around the influx and movement of illicit capital. And while on one level this capital fits within the larger historical scheme of Honduran economic and political development, there are some important differences from what has gone before. What separates this period from others is the illicit nature of this capital and the dangers it poses to democratic governance. Illicit capital skews the economic and political playing field, and undermines the democratic process through the corrupting influence of money, and the threat of the use of force. 

The situation has led to considerable tension. As noted above, some elite groups have chosen to align themselves with the generators of this illicit capital. There appear to be clear benefits to these connections and very few disincentives. The clearest incentive is the access to this huge influx of foreign capital. Since there is little risk of prosecution, there appear to be few downsides for the elites. As long as there are no formal charges against these illicit actors, the elites in question have plausible deniability.

But what about those who resist? Crossing the criminal actors carries with it multiple risks that go beyond the loss of financial backing. The Cachiros, for example, expect a lot from their political allies, and relations with congressional representatives have been contentious at times. As noted earlier, their support for one representative was contingent on many things, including his ability to install an ally in the Security Ministry. The congressman’s subsequent assassination illustrates just how high the stakes are. As noted in the case of the assassination of Juan Gómez Meléndez, the stakes appear to be equally high for the criminal groups. By fleeing to the United States, the Cachiros may have escaped the wrath of the elites. 

The process is playing out in real time, so it is difficult -- and might be premature -- to gauge the reach and power of these converging interests, the exact substance of their alliances or relations with criminal organizations, and the way in which these two interact on the various social, political and economic planes. What we can say, however, is that the calculation of whether or not to align one’s interests with criminal groups has shifted. From the elites’ perspective, saying no to these alliances may have worse implications than saying yes. This is, in part, due to the perception that in Honduras, politics is a zero-sum game. As evident from the rising debt, the amount of public resources and foreign capital coming into the country cannot feed the appetite of these elites.

Thus, the discussion is not about right or wrong in Honduras but survival. The situation appears to be reaching the point where all the elites are facing the same dilemma: align their interests with the narco-powers surging in the country, or stand by as these powers assume control of the country’s most important economic and political levers. In the end, dirty money provided by illicit criminal groups and businesses may mean the difference between winning and losing a political campaign, securing or not securing an important contract or business venture, and maintaining or losing a privileged position in Honduran society.

*This report was written by Steven Dudley. Dudley, Javier Meléndez -- who acted as coordinator for research for this project -- along with researchers from the Centro de Investigación y Promoción de los Derechos Humanos (CIPRODEH) and the Asociación para una Sociedad más Justa (ASJ), assisted in the investigation and production of this report. Map by Jorge Mejía Galindo. Graphics by Andrew J Higgens.

Endnotes

[1] Tiempo, “Honduras: ¿Se entregó jefe de Los Cachiros a EE.UU.?,” 31 January 2015.

[2] La Prensa, “Jefe de los 'Cachiros' se entregó al Gobierno de EUA,” 3 February 2015. Available at: http://www.laprensa.hn/sucesos/791366-410/jefe-de-los-cachiros-se-entreg%C3%B3-al-gobierno-de-eua

[3] Tiempo, “Honduras: ¿Se entregó jefe de Los Cachiros a EE.UU.?,” 31 January 2015.

[4]Tiempo, “FFAA: Manejamos que se entregó jefe de los Cachiros,” 4 February 2015.

[5] InSight Crime interview with US officials who asked to remain anonymous because they were working on the case, Washington DC, February 2015.

[6] Tiempo, “Oscar Álvarez: Personas que tienen vínculos con 'Los Cachiros' deben estar muy preocupados,” 5 February 2015.

[7] Tiempo, “Cachiros se entregaron a autoridades estadounidenses a cambio de protección para sus familias,” 12 February 2015.

[8] La Prensa, “DLCN: exdiputado asesinado era testaferro de ‘Cachiros,’” 9 February 2015. Available at: http://www.laprensa.hn/sucesos/793289-410/dlcn-exdiputado-asesinado-era-testaferro-de-cachiros

[9] El Heraldo, “Honduras: Matan a exgobernador y exdiputado de Colón,” 22 January 2015. Available at: http://www.elheraldo.hn/pais/787911-364/honduras-matan-a-exgobernador-y-exdiputado-de-col%C3%B3n

[10] La Prensa, “Los ‘Cachiros’ y la caída de su imperio,” 9 February 2015. Available at: http://www.laprensa.hn/honduras/793305-410/los-cachiros-y-la-ca%C3%ADda-de-su-imperio

[11] Elizet Payne Iglesias, El puerto de Truxillo: un viaje hacia su melancólico abandono (Tegucigalpa, 2007), p. 307.

[12]Ibid, p. 169.

[13]Ibid, p. 172.

[14] Ibid, pp. 329-336.

[15]Jorge Alberto Amaya, Los árabes y palestinos en Honduras: 1900-1950 (Tegucigalpa, 1997).

[16] Charles D. Brockett, Public Policy, Peasants, and Rural Development in Honduras, Journal of Latin American Studies, Vol. 19, No. 1  (May, 1987), pp. 69-86, Cambridge University Press.

[17] See more about Facussé family in introduction to the Honduras case studies.

[18] Tocoa’s population was 14,815 in 1974; by 2001, it was 61,370. See: Secretaria de Gobernación y Justicia, “Municipalidad de Tocoa, Departamento de Colón: Diagnostico Institucional y Financiero” (Tegucigalpa, 2005), p. 7.

[19] Three InSight Crime researchers traveled to the area during the time period in which the investigation took place. For security reasons, they wish to remain anonymous.

[20] This report is based on numerous interviews with residents in the family’s area of influence, as well as with Honduran and international law enforcement sources. These sources chose to remain anonymous out of fear, or so as not to inhibit ongoing investigations. 

[21] InSight Crime interview, Honduran police intelligence official, Tegucigalpa, 24 February 2010.

[22] According to the United Nations Office on Drugs and Crime (UNODC), cocaine seizures in Central America went from 17 tons in 2000, to 97 in 2006. See: Claudio Damián Rodríguez Santorum, et al., “Transnational Organized Crime in Central America and the Caribbean: A Threat Assessment,” UNODC, September 2012, p. 19.

[23] Otto Vargas, “Sicarios persiguieron a hondureño hasta matarlo,” La Nación (Costa Rica), 8 July 2004. Available at: http://wvw.nacion.com/ln_ee/2004/julio/08/pais19.html

[24] Ibid.

[25] Ibid.

[26] From a list of deaths in the Honduras penitentiaries signed by Honduras’ security secretary, obtained by the author.

[27] US State Department, “Drug plane burned on prominent Honduran’s property,” 19 March 2001. Released by WikiLeaks. Available at: https://wikileaks.org/cable/2004/03/04TEGUCIGALPA672.html

[28] Official accusation by the Nicaraguan government, obtained by InSight Crime.

[29] Geoffrey Ramsey, “Departure of Honduras Security Minister a Victory for Corrupt Cops,” InSight Crime, 12 September 2011. Available at: http://www.insightcrime.org/news-analysis/departure-of-honduras-security-minister-a-victory-for-corrupt-cops

[30] Honduran intelligence sources said police aspiring for the Colón post had to pay their superiors in the police a one-time $5,000 entry fee.

[31] InSight Crime interview, Honduran police intelligence official, Tegucigalpa, 24 February 2010.

[32] Charles Parkinson, “Cachiros Knew about Honduran Police Operation: Official,” InSight Crime, 10 October 2013. Available at: http://www.insightcrime.org/news-briefs/cachiros-knew-about-honduras-police-operation

[33] InSight Crime calculates this number using a rough estimate of the difference in the value of a kilogram of cocaine when it enters Honduras and when it exits Honduras: $2,000.

[34] Steven Dudley, “US Pushes Honduras to Crack Down on Cachiros,” InSight Crime, 19 September 2013. The $800 million figure comes from the country’s police chief at the time. It also only refers to the seized assets. It should be noted, however, that there were numerous and contradictory estimates of the value of the seizures from other sources. The US ambassador to Honduras, Lisa Kubiske, said on her Twitter account the seized assets were worth at least $500 million. An official at the Honduran Attorney General’s Office said the assets were worth considerably less than Kubiske's estimate. When questioned on the record about the seized assets, US Treasury officials declined to estimate.

[35] InSight Crime interview with OABI official who wished to remain anonymous, 25 April 2014.

[36] After the US Treasury put them on the Kingpin List in May 2013, the group’s cattle business was disrupted, and meat prices in the region rose significantly, according to Tocoa residents interviewed for this study.

[37] La Prensa, “Gasolinera y apartamentos les incautan a los Cachiros,” 30 November 2014. Available at: http://www.laprensa.hn/sucesos/772656-410/gasolinera-y-apartamentos-les-incautan-a-los-cachiros
 

[38] Security companies facilitate organized crime via the procurement of weapons and their ability to camouflage illicit activities, such as the reception and accompaniment of drug loads, as they are fully licensed security services.

[39] InSight Crime interview with US official who wished to remain anonymous, 4 April 2014.

[40] El Heraldo, “Los Cachiros grabaron videos espía para proteger sus vidas,” 27 April 2015. Available at: http://www.elheraldo.hn/pais/834710-331/los-cachiros-grabaron-videos-esp%C3%ADa-para-proteger-sus-vidas

[41] InSight Crime interview with government investigator who asked to remain anonymous as the case is still technically open against the bank, Tegucigalpa, 25 May 2015.

[42] A government consultant spoke to InSight Crime investigators on the condition of anonymity. The consultant’s story was confirmed by foreign intelligence officials.

[43] Última Hora, “Banco Central manejara fideicomiso de tasa de seguridad,” 27 July 2012. Available at: http://ultimahora.hn/node/7130#sthash.XqGvbIjg.dpuf

[44] United States vs Jaime Rolando Rosenthal Oliva, et al., released 7 October 2015. Available at: http://www.insightcrime.org/images/PDFs/2015/RosenthaletalIndictment.pdf

[45] US Treasury, “Treasury Sanctions Rosenthal Money Laundering Organization,” 7 October 2015. Available at: http://www.treasury.gov/press-center/press-releases/Pages/jl0200.aspx

[46] InSight Crime interview with Jaime Rosenthal and Patricia Rosenthal, San Pedro Sula, 2 June 2015.

[47] Banco de Occidente has also come under some scrutiny. The government investigator cited earlier said that Cachiros used the bank for some its banking. And the Valle Valle criminal organization, which operated from the state of Copán, used it for “about half” of its banking needs, he said. The investigator added that the Valle Valle group also did “about half” of its banking with Continental Bank.

[48] See list of initiatives here: http://coalianza.gob.hn/v2/?page_id=143

[52] InSight Crime interview, Oficina Administradora de Bienes Incautados (OABI) official who wished to remain anonymous, Tegucigalpa, 25 April 2014.

[53] Ibid.

[55] Steven Dudley, “How a Good Soccer Team Gives Criminals Space to Operate,” InSight Crime, 11 June 2014. Available at: http://www.insightcrime.org/news-analysis/how-a-good-soccer-team-gives-criminals-space-to-operate#response

[58] La Prensa, “Soy el rey del pueblo,” 25 July 2011. Available at: http://www.laprensa.hn/especiales/381733-273/soy-el-rey-del-pueblo

[59] For more on Alexander Ardón, see: Douglas Farah and Carl Meacham, “Alternative Governance in the Northern Triangle: Finding Logic within Chaos,” Center for Strategic and International Studies, September 2015. Available at: http://csis.org/files/publication/150911_Farah_AlternativeGovernance_Web.pdf

[60] As outlined in the introduction to the Honduras case studies, bureaucratic elites is a reference to elites that draw from their government posts or political seats to gain influence and power. As described in the introduction to the Honduras section, they are often a hybrid, drawing resources from their status as landholders or businessmen, but using their control of important government posts they gained either via election or designation to set the agenda on security matters, among other important issues. 

[61] InSight Crime interview with Julián Pacheco, Tegucigalpa, 16 February 2015.

[62] Observatorio de la Violencia, “Boletin Enero-Diciembre 2014,” February 2015. Available at: http://iudpas.org/pdf/Boletines/Nacional/NEd36EneDic2014.pdf

[63] Rights Action, “Human Rights Violations Attributed to Military Forces in the Bajo Aguan Valley in Honduras,” February 2013. Available at: http://rightsaction.org/sites/default/files/Rpt_130220_Aguan_Final.pdf

[64] Radio America, “Campesinos incendian finca de palma africana en el Bajo Aguan,” 1 May 2013. Available at: http://radioamericahn.net/campesinos-incendian-finca-de-palma-africana-en-el-bajo-aguan/

[65] See: http://conexihon.hn/site/noticia/derechos-humanos/derechos-humanos-conflicto-agrario-y-minero/honduras-guardias-privados

[66] This reality is all too evident in Honduras where, on the day authorities were seizing the Cachiros’ assets, the US ambassador to the country was lecturing members of financial sector about money laundering and illicit capital financing political parties. See: La Prensa, “Kubiske: Dinero ilícito de campañas arriesga proceso electoral,” 19 September 2013.

[67] La Tribuna, “Inauguran en Tocoa uan moderna estacion de servicio,” 3 January 2012.

[68] La Prensa, “Los ‘Cachiros’ y la caída de su imperio,” 9 February 2015. Available at: http://www.laprensa.hn/honduras/793305-410/los-cachiros-y-la-ca%C3%ADda-de-su-imperio

[69] El Heraldo, “Presidente de Honduras: Seguridad 'debe conocer' sobre Los Cachiros,” 2 June 2013. Available at: http://www.elheraldo.hn/sucesos/622527-219/presidente-de-honduras-seguridad-debe-conocer-sobre-los-cachiros

[70] A copy of the letter was provided to InSight Crime by the Rosenthals. 

The research presented in this investigation is the result of a project funded by Canada's International Development Research Centre (IDRC). Its content is not necessarily a reflection of the positions of the IDRC. The ideas, thoughts and opinions contained in this document are those of the author or authors.

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