The new target of a Mexican drug cartel? Seniors and their timeshares

First the cartel cut its teeth in the drug trade. Then avocados, real estate and construction companies. Now a Mexican criminal group known for its brutality is attacking seniors and their timeshares.

The operation is relatively simple. Cartel employees posing as representatives call timeshare owners and offer to buy back their investments for generous sums. They then demand upfront fees for everything from placing ads to paying government fines. The representatives persuade their victims to transfer large amounts of money to Mexico – sometimes hundreds of thousands of dollars – and then they disappear.

The scheme has made the Jalisco New Generation cartel hundreds of millions of dollars over the past decade, according to U.S. officials not authorized to speak publicly, through dozens of call centers in Mexico that ruthlessly target U.S. and Canadian timeshare owners. They even bribe Mexican resort employees to leak guest information, U.S. officials say.

The scam represents the latest evolution of the Jalisco New Generation, which is anchored in both the illegal and legal sectors of the economy. With little more than a telephone and a convincing script, cartel operatives victimize people in multiple countries.

And even those workers are vulnerable to the cartel’s ruthlessness.

Last May, the remains of eight young Mexicans who worked at a cartel call center were discovered in dozens of plastic bags in a ravine on the outskirts of Guadalajara, a city in Jalisco state.

The cartel typically preys on older, retired people who want to leave as much money as possible to their family by selling assets. Several victims interviewed by The New York Times said the money they lost to scammers exceeded the value of their initial investment in timeshares in Jamaica, California and Mexico.

“I’m old, just like these clients,” says Michael Finn, founder of Finn Law Group in St. Petersburg, Florida, who has represented thousands of people facing various forms of timeshare fraud. “We tend to trust when someone calls us and sells us these dreams.”

Mr. Finn realized how serious this type of fraud was becoming four years ago when he received a call from a desperate woman whose mother had transferred $1.2 million, her entire life savings, to Mexico to sell her timeshare.

The timeshare industry is booming $10.5 billion in sales in 2022, a 30 percent increase from the previous year, according to the American Resort Development Association. Nearly 10 million U.S. households own timeshares, the association said, spending an average of about $22,000 for their investment, on top of annual fees of about $2,000. Most timeshares are beach resorts.

The industry’s growth coincides with a 79 percent increase in the past four years in timeshare fraud complaints received by the FBI. But for scams that originate in Mexico, the FBI can only investigate if it gets the cooperation of local authorities. And U.S. law firms cannot file civil lawsuits because they have no jurisdiction in Mexico.

According to the FBI, American timeshare owners have lost $288 million over the past five years to various scams, including cartel scams. The actual number is most likely around $350 million, as about 20 percent of those cheated never file a complaint.

“The victims don’t want to come forward because they are ashamed and hide this from their families,” Mr Finn said.

In October 2022, a retired couple – James, 76, and his wife, Nicki, 72 – said they received a call from a so-called real estate agent at Worry Free Vacations in Atlanta, offering to broker the sale of their Lake Tahoe timeshare, California, to a wealthy Mexican businessman. They asked that their last names not be published because they were “very ashamed” of being scammed.

As their daughters grew older, the family had stopped using the vacation spot they bought for about $8,000 in the 1990s, so the couple jumped at the chance to sell it.

The scam started with smaller fees, James said — a few thousand dollars here and there meant to offset Mexican government registration fees for “cross-border transactions.” The fees increased when he was told he was being fined by Mexican authorities for several violations and could be extradited for breaking the law unless he paid. At one point, James said, the scammers even convinced him to invest in a new commercial property in Mexico.

About 20 payments later, the couple transferred nearly $900,000 to various bank accounts in Mexico, according to bank records reviewed by The Times.

According to the FBI, scams that go this far are not that unusual. The FBI says victims like James and Nicki typically transfer the money to bank accounts of associates of the Jalisco New Generation cartel.

The couple said they had used up their savings and were now in debt. They said they even borrowed about $150,000 from one of their daughters and sold James’ house, but didn’t see a dime in return.

“I’m sure if I asked them they’d say, ‘How can you be so stupid?'” James said of his daughters. “And I asked myself the same thing. I always thought I was quite intelligent.”

The scammers identified themselves as representatives and officials at Mexico’s Central Bank, emails obtained by The Times, and continued to promise that if he paid just “one additional fee,” everything would be settled and his money would be released.

But after each payment, a new fee piled up.

In a statement, Mexico’s Central Bank said it was aware that timeshare fraud was being committed in its name and warned people not to fall for the scam.

Late last year, James began receiving desperate messages from alleged reps claiming their colleague was jailed in Mexico after trying to settle James’ case, according to recorded calls and emails reviewed by The Times.

“Please do everything you can to get my friend/boss back home. He misses his family so much and it feels terrible to hear him. You are the only hope that this gets resolved,” said a recent email. “The outstanding amount due is: $157,786.61.”

James said he was considering taking out a second mortgage to pay the amount until his daughters stopped him.

Although the scam targeting timeshare owners is financial in nature, it can be deadly in Mexico.

The eight Mexicans found dead on the outskirts of Guadalajara last year all worked at a call center in the heart of Guadalajara run by the Jalisco New Generation cartel, US officials said. Local prosecutors said so When they searched the center, they found a mop with red stains, blackboards with foreign names and details of timeshare memberships.

When New York Times reporters recently visited the call center, they found it closed and a police vehicle parked outside. The building was in an upscale neighborhood, across the street from a park. Parents walked by and took their children to school.

Héctor Flores, the founder of the Light and Hope Collective, which is scouring Jalisco state for the bodies of the disappeared, said he knew about 30 people who had disappeared from call centers since 2017. But there are most likely more, he said. , because many families do not come forward out of fear.

The prosecutor’s office did not respond to requests for comment.

Founded about fifteen years ago, the Jalisco New Generation Cartel has become one of the most powerful cartels in Mexico. In recent years it has expanded into legal sectors of the economy, including the sale of avocados to the United States.

In Puerto Vallarta, a cartel stronghold and popular beach resort, Mexican hotel employees are routinely pressured by the criminal group to leak guest information, said James Barnacle, the FBI’s deputy assistant director who oversees financial crimes.

Mr Barnacle said hotels and timeshare companies in Mexico were aware of the leaks and the US government had warned them to take action.

Of particular interest to U.S. officials is the Vidanta Group, one of the world’s largest timeshare resort companies based in Mexico. The owner, Daniel Chávez Morán, is a friend and advisor to the Mexican president. Many Vidanta customers have fallen victim to timeshare fraud, according to a U.S. official who was not authorized to speak publicly.

Vidanta did not respond to requests for comment.

Pete Willard said he bought his Vidanta timeshare in 2015. Six years later, he got a call from a supposed New York real estate company offering him about half a million dollars for it. After sending several bank payments to Mexico, he lost $100,000 without getting anything in return, Mr. Willard said.

Realizing he would never see his money again, Mr. Willard contacts the FBI

“They said there wasn’t much they could do because the money was all in Mexico,” he said.

Mr. Willard said he tried to file complaints with the Better Business Bureau and the New York district attorney against the companies that defrauded him. “I didn’t get a response from anyone other than, ‘I’m sorry, you should have been more diligent.’”

Mr. Barnacle admits that U.S. law enforcement agencies are effectively powerless to stop this fraud beyond public reporting.

“People misuse your data all the time,” says Barnacle. The cartel doesn’t have to “invest in a product they have; all they had to do was pick up the phone or send an email to people and trick them into giving up their money.

So far, the U.S. Treasury Department has imposed sanctions on 40 Mexican companies and a dozen people for timeshare fraud, but few arrests have been made. And as soon as a front company or bank account is closed down, new ones are created.

Mexican “banks are to blame,” said Spencer McMullen, an American who practices law in Chapala, Mexico, adding that they often do not check whether the accounts the cartel controls use valid addresses and are legitimate businesses. “They could freeze these accounts due to suspicious activity.”

During the two weeks that James, the timeshare owner who lost nearly $900,000, spoke to The Times, he slowly realized he would never see his money again. His wife, Nicki, is furious and warned him from the start.

“You know, when you work and save for so many years so you can enjoy your last years, and then it’s just taken away from you,” Nicki said, “that’s just not right.”

They went from having a very comfortable start to retirement to wondering whether they should apply for a part-time job. Nicki is recovering from cancer and their costs are piling up.

“Should I go to work at Walmart now?” Nicki said.

Emiliano Rodriguez Mega contributed reporting from Mexico City.