HomeNewsAnalysisThe Stalled Money Laundering Case against El Salvador’s ‘Chepe Diablo’
ANALYSIS

The Stalled Money Laundering Case against El Salvador's 'Chepe Diablo'

CHEPE DIABLO / 6 NOV 2014 BY HÉCTOR SILVA ÁVALOS EN

The financial records and bank accounts of Texis Cartel leader Jose Adan Salazar Umaña are full of holes, according to audits linked to a tax evasion probe against him, but the money laundering case against him remains frozen.

After reviewing Salazar Umaña's accounts, the Attorney General’s Office (FGR) found "evidence that allows the existence of activities related to money laundering to be deduced.” On September 23, the FGR ordered an investigation to “prove the existence of the crime of money and asset laundering,” according to case records.

The investigation was publicly announced by Attorney General Luis Martinez in August this year. However, nothing has happened since then.

The order appears in case file 47-2014-1/EGU, which was opened in the 10th Examining Magistrate’s Court of San Salvador. These judicial proceedings were for tax evasion, which prosecutors called “one of the acts that generates money laundering.”

A version of this article originally appeared in Factum and was translated and reproduced with the author's permission. See Spanish original here

The audits uncovered how Salazar Umaña’s avoided paying taxes. According to investigators:

Thanks to the financial audits that were performed on bank accounts or accounting records, it was found that within their assets they moved large amounts of money, the origin of which could not be justified. That is to say, we are faced with capital from an unknown source (…) The explanations provided by those audited lack logic, because the operations they mentioned are unreasonable or without apparent lawful meaning, and were rejected by the Tax Administration.

Salazar Umaña, also known as “Chepe Diablo,” came out unscathed from the investigation by agreeing to pay millions of dollars to El Salvador's treasury department (known in Spanish as the Ministerio de Hacienda) in order to pay off his tax debt.

Sources from the FGR claimed that the office's Organized Crime Unit had already prepared a money laundering accusation against Chepe Diablo and two alleged associates: Juan Umaña Samayoa -- the mayor of Metapan -- and Wilfredo Guerra Umaña, the son of the mayor and head of the agro-import company Gumarsal, which belonged to the Texis Cartel. There was even a list of documents to seize that would prove the money laundering had taken place. However, no court has yet issued an indictment for the money laundering case. Only the Attorney General’s Office has confirmed that the investigation into the crime boss is still happening.

SEE ALSO: Texis Cartel News and Profiles

In the audits attached to the case file, there is evidence of unjustified increases in assets held in bank accounts, whose income came from “unknown sources”; unexplained acquisitions in shares through the hotel association Hotesa -- which Salazar Umaña owns; inexistent debts; undocumented operations; and other tricks.  

In 2010 alone, Chepe Diablo, who the US government has labeled an international drug trafficking kingpin, took in $1.4 million in earnings that do not have a justifiable origin. It is important to note that this money was not part of the taxes that he failed to pay -- for which he has already been fined by the justice system -- but rather, money that he failed to declare and whose origin he has been unable to explain. The latter is, according to Salvadoran Criminal Code, classified as money and asset laundering.

In May this year, a court ruled that Salazar Umaña and Hotesa had to pay slightly over $1 million in fines for the taxes that hadn’t been paid and those that had been generated by this undeclared income. Chepe Diablo complied, on time and in cash.

An auditor from the Salvadoran treasury connected to the Texis Cartel case and familiar with the case explained what was at play on condition of anonymity, in order not to obstruct the investigations:

“It is textbook -- the Attorney General’s Office should have immediately prosecuted those people for money laundering, because in the law it is clear that when someone recognizes [tax] evasion for unjustified earnings, this immediately constitutes the crime of money laundering,” he said.

Since the tax evasion cases started in the San Salvador courts, and since various journalistic publications have linked the group to money laundering and drug trafficking, Gumarsal has denied any relationship with Salazar Umaña. However, it is a fact that at noon on May 23, 1997, in the offices of notary Sigfredo Edgardo Figueroa Navarrete, Chepe Diablo, his son Jose Adan Salazar Martinez, and Guerra Umaña each contributed 25,000 colones (slightly under $3,000) to create the agro-import company Gumarsal.

Cash Payments

The tax evasion case against the Texis Cartel includes proof that the three suspects and two companies involved in the investigation made payments to an office of El Salvador's treasury department. These documents provide details of the amount paid each time, as well as the date, the ID number of the taxpayer, and the form of payment -- cash each time.

In total, according to the summary attached to the file, Gumarsal paid $1,327,860.47; Wilfredo Guerra paid $393,037.08; Juan Samayoa paid $135,636.24; and Salazar Umaña and Hotesa paid a combined total of $1,056,707.43.

On September 5 this year, the attorney Blanca Noemi Ayala de Reyes, head of the Tax Crimes Investigation Unit of the Finance Ministry, sent communication 10014-NEX-0603-2014 to the FGR’s Organized Crime Unit. This details the payments made by Salazar Umaña ($467,949.77 and $335,784.91) in quotas paid between June and August. All of the payments were made in cash -- which is unusual for payments of these sizes, according to sources consulted in the judiciary, treasury and FGR.

Sources from the Finance Ministry explained that “cash” can include paper money and cash checks, which are backed up by current accounts. Everything is, in short, liquid money -- not assets, properties or other guarantees.

SEE ALSO: Chepe Diablo Profile

In June this year, shortly after the White House named Salazar Umaña a “kingpin,” a US federal official confirmed from Washington that the Treasury Department had found suspicious the “large quantity of money” that “Chepe Diablo” couldn’t justify. Agents linked to those investigations said that the inquiries involved the entire Texis Cartel group -- including the Metapan mayor, Gumarsal, Hotesa and Guerra Umaña.

Money with Unclear Origins

In the lengthy legal proceedings against the Texis Cartel, there are written records that caught the attention of the United States and that the criminal group, according to federal agents in Washington, cannot justify.

The tax audits performed on Chepe Diablo in 2010, for example, show that an unjustified increase in income of $753,289.39 entered bank accounts that had not been registered for accounting purposes. According to Finance Ministry experts, this lack of registration makes it more difficult to trace them. That same year, in another financial movement, Salazar Umaña purchased from himself shares in Hotesa for a total of $299,300.72, which also qualified as unjustifiable income according to auditors.

Chepe Diablo also ventured into real estate. In 2011, between the acquisition of properties and loans granted with mortgage guarantees, the Texis member generated unjustified revenue in the amount of $280,500.  

The largest increase in 2011, however, was deposited formally in the financial system: in 2011, Salazar Umaña reported unjustified deposits of $600,761.91 to accounts in the Banco de America Central ($567,967.49) and the Banco Hipotecario ($32,794.42). In the Hipotecario, according to the auditors, Chepe Diablo deposited unjustified income of $208,899.10 in a bank account that was registered for accounting purposes -- account number 005000000535.

There is another odd transaction: it involves, according to officials, the payment of a nonexistent debt to a transnational company that does exist.

Salazar Umaña told auditors that on August 18, 2008 he received a loan of $350,000 from the company Chevron Caribbean Inc., which at that time was supplying him with gasoline for the construction of the Sevilla hotel, property of Hotesa. Chepe Diablo registered that debt until November 26, 2011, more than three years later, but he didn’t present any document to prove the existence of the debt. “It is believed to be nonexistent,” wrote the officials in regards to the transaction, next to a diagram detailing how the transformation of illicit money occurred in that case.

In sum: the money laundering case against the Texis Cartel is still on hold, despite the suspicions treasury officials voiced in the tax evasion case files, and the recommendation of the Attorney General’s Office itself. 

*Silva is a journalist who worked for 15 years in La Prensa Grafica of El Salvador. Since 2012, he has been a fellow at the Center for Latin American and Latino Studies at American University. A version of this article originally appeared in Factum and was translated and reproduced with the author's permission. See Spanish original here.

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