The Rookie and the Zetas: How the Feds Took Down a Drug Cartel's Horse-Racing Empire

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Southwest Stallion Station sits on 1,300 acres of trampled grassland just east of Austin, a maze of white barns and pastures roamed by horses, goats and cattle. One morning in February 2010, a couple months after Lawson started in Laredo, he and another agent rumbled up the ranch's drive. They'd been careful to appear as horsemen, on the off chance their targets had planted a mole among the ranch's laborers. They picked a truck big enough to pass as a rancher's and made sure to wear their boots.

They stepped down from the truck and were met by Tyler Graham, the 25-year-old rancher who the tipster had claimed was bidding on horses for the Zetas. He'd been told they were coming, and told to treat them as he would a potential client, so he led them on a tour of the stables. Lawson couldn't help but run his hands across the horses' smooth coats. Compared with the $2,000 riding horses his mom kept back home, they were sculpted and immaculate. (Graham did not return calls or emails, but his story is chronicled in court testimony, and Lawson described their relationship over several interviews.)

They moved into an office attached to a barn. Lawson knew courting Graham as a source would be delicate. They had a lot in common — both were country guys trying to prove themselves in the family business — and they hit it off quickly. But Lawson didn't have anything on him, so he feared the usual talk-or-else approach wouldn't fly. At any moment, Graham could lawyer up and go quiet. He tried to make Graham feel the weight of the predicament without feeling pressure. "You're not going to like your options," he said.

Graham agreed to cooperate and told Lawson his story. He had graduated from Texas A&M a few years before, then returned to manage his grandpa's ranch. To boost profits, he'd made it a priority to beef up the breeding program. That meant scouring the industry for promising stallions and trying to persuade their owners to breed them at his ranch. "Just like you recruit an athlete," Graham said.

The year before, Graham said, he found a blue-chipper: Tempting Dash. From the moment that colt slipped into first at Lone Star, Graham wanted to be the one to breed it when it was retired into stud life. Paired with the right mares, Tempting Dash, which came from championship stock, could bring in a lot of money for the horse's owners — $5,000, $10,000, maybe more. Southwest Stallion would get a cut each time.

Graham had a line on the owner. But in the middle of the horse's run at Lone Star, the guy had mysteriously sold it to José Treviño. So Graham set about courting Treviño, talking up his breeding operation and learning what he could about him — about his growing up in Mexico, his work as a bricklayer, his wife and kids up in Dallas. He even took Treviño and his son hunting for white-tailed deer, hoping some male bonding would seal the deal. Treviño, not ready to commit, asked Graham to show up at a big auction in Oklahoma and act as a straw buyer, bidding on horses Treviño would later pay for. Graham agreed.

Soon, Graham said, wires started coming into the ranch to pay for the horses. The wires didn't cover it, though, so one of Treviño's associates showed up with a backpack stuffed with $100,000 in cash. Graham had agreed to board some of Treviño's horses, too, and eventually payments started coming in from various people and companies — all in $9,000 increments, just under the threshold that would send red flags flying at the bank or IRS.

Lawson listened and silently plotted his course. He wasn't sure how much Graham actually knew about what he'd gotten himself into. But by the time the FBI showed up, Graham had done enough Googling to understand why they had come rumbling up his grandpa's driveway: Treviño was the younger brother of Miguel "Z-40" Treviño Morales — aka the 40th Zeta, the bloodthirsty commander of Mexico's rising cartel and one of the most wanted men in the Americas.

In the little office behind the barn, a theory emerged — that Miguel Treviño was using his clean American brother to dump drug money into American quarter horses, to make some cash, clean some cash and win some horse races. Graham even pulled up a photo from the winner's circle at Lone Star, taken after one of Tempting Dash's big wins. There were José Treviño's kids, flashing "40" in hand signals. As if to say, Look, uncle, we did it.

Lawson says he saw no real score in Graham, who was under pressure to keep Southwest Stallion thriving at a time when a record drought was forcing ranchers across Texas to sell off their herds. Besides, to prove his theory right, what Lawson needed most was to know what came next — the next horse, the next race, the next auction.

Graham told him. That fall, Labor Day, was the All American Futurity in New Mexico, the highest-stakes race on the quarter-horse racing calendar. José Treviño would be there, Graham said, to buy horses and watch one of his own run. Lawson heard this and decided: He would be there, too.

Though its players stretch across the West, it's hard for an outsider to go unnoticed in the quarter-horse industry, so Lawson's nerves rattled as he rolled into Ruidoso Downs, the little town with the big track in the scraggy mountains of southern New Mexico. An auction would take place a couple days before the race, and Lawson worried that watching all day without bidding might raise suspicions. So along with cowboying up his outfit, he prepared a cover story that he was just tracking things for a friend in the business. He would use it at various times that day and later in the investigation, well enough that one guy invited him to a goat sale.

Lawson and another agent slipped into the crowd the morning of the auction. Tyler Graham was around, but aside from a few subtle nods and a quick meeting at the hotel, Lawson was careful not to be seen with him. Instead, he wandered around the arena looking for his targets. Looking for José Treviño.

Lawson had studied up on José Treviño and his brothers, whose story is well known to Texas law enforcement. They'd been born into a working class family in Nuevo Laredo, where their dad worked on a ranch. Eventually they came north to Dallas. Miguel was lured into street gangs and climbed the ranks of the Gulf Cartel and, later, the Zetas, making him the first Zeta who didn't come out of the military. Along the way, he revealed himself to be among Mexico's most ruthless criminals. Among his acts of alleged violence: ordering grenades hurled at the U.S. consulate in Monterrey, burning people in oil barrels and eating his victims' hearts.

By the time Lawson showed up, U.S. law enforcement had been tracking Miguel Treviño's movements for years. They hoped to help Mexico swoop him up along its northern border, where they believed he was living out of safe houses and his truck, always with enough cash to pay off his potential captors. In 2008, one borderland agent says, they arrived at a ranch along the border so soon after Miguel fled that his coffee was still warm.

Through it all, Lawson says, the feds looked hard at the Treviños' large extended family. But they were, for the most part, law-abiding Texans, including José, the middle of 13 children. He'd become a naturalized U.S. citizen and stayed out of trouble. His daughter, Alexandra, would soon be engaged to a United States Marine. He went to see his family in Mexico sometimes, and every time he did the feds stopped him and questioned him. They always sent him on his way.

José's bank records painted a similarly mundane picture, though Lawson avoided bank records at all costs. He'd also never worked a money-laundering case. So he brought in a team of IRS investigators, several of whom had grown up with horses themselves, to plow through the boxes.

For years, they found, José never had more than $9,000 in his account. But in 2008, according to Lawson's sources, Miguel had caught wind of Tempting Dash and ordered an associate, Ramiro Villarreal, to buy the horse and bring it to Mexico. The horse was named Huesos, or Bones, and it ran well in Mexico. So they sent it to Lone Star, under the name Tempting Dash. When it qualified, the sources said, Miguel ordered it sold to his brother José.

After the horse won, records showed, José Treviño deposited $441,855 into his personal account. He claimed he paid $25,000 for the horse, a bargain that funded his entire operation, his lawyers maintain. But the feds saw no record of a payment. They believed the Zetas had bought the horse, and were just using their clean American brother to make it appear legitimate.

Lawson trailed José around the New Mexico auction house, sneaking pictures when he could. He watched him mingle with some associates Graham had mentioned. As the horses trotted into the arena, Lawson watched them shoot photos of the board after a big sale. It was hard to tell who was buying what, but it was clear they were spending big. This is not a two- or three-horse deal, Lawson thought.

He was right. All in all they'd bought 23 horses, paid for by a Mexican businessman who the feds believed doubled as a Zeta bagman. The total bill: $2.1 million.

A couple days later, Lawson settled into the bleachers for the All American Futurity, the big race at Ruidoso Downs with a $1 million payout for the winner. He scanned the track for Mr. Piloto, a horse Graham had told him about. Like Tempting Dash, it had first been purchased by Villarreal, but once it qualified for the high-stakes race it was quietly transferred to José Treviño's company, with no record of money changing hands. Now, if the horse placed, its winnings would come back to José, cleaner than ever.

Winning horse races isn't easy, though, so the Zetas were said to take steps to increase their odds. Sometimes, sources told Lawson, they slipped their jockeys small electric devices to give their horses a jolt mid-race. Other times they paid groundskeepers to pack one part of the track tight. Or they might bribe the gate-starters, who could hold back certain horses or make sure others bumped into each other.

They'd allegedly fixed the race Lawson was sitting down to watch. Their Dallas cocaine distributor claimed he set aside $110,000 in drug proceeds and sent it to New Mexico stuffed into a pressure cooker — "the one you use for turkey," one source said — to bribe track workers and make sure Mr. Piloto won. Lawson, sitting up front, watched closely as the gun sounded, cheering and waving his betting slip.

Mr. Piloto shot out and veered way off course, "visiting the fans on the outside fence," as the announcer called it. As the rest of the pack bumped its way down the inside, Mr. Piloto, a long shot at 22-1, hugged that fence, making Lawson later wonder whether groundskeepers had packed that part of the track. (Others, including top trainer Paul Jones, dismiss that idea as impossible, and say the race was simply a mess, as some races are.) Whatever they did, Mr. Piloto overtook the field on his way home and won the race. Lawson watched as José Treviño and his associates hugged and celebrated. Treviño got on the phone. Lawson could only guess to whom, but he had a hunch about what he might be saying: We just won a million dollars.

After the race, Lawson and another agent followed Graham, Treviño and the others to a nearby resort called the Inn of the Mountain Gods Casino. He trailed them into the bar and slipped into a table across the room. While he neglected a beer, he watched the men celebrate, drinking and debating their next move: Keep racing Mr. Piloto, to make some money and prove its worth as a stud, or retire the horse and start breeding it at Graham's farm. Either way, Lawson figured, Treviño's bricklaying days looked to be over.

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Joe Tone
Contact: Joe Tone