Treasury Dept. Seeks to Isolate Businesses Said to Be Owned by Drug Dealers

By Mary Jordan
Washington Post Foreign Service

ROSARITO, Mexico -- The Oasis Beach Resort and Convention Center in this coastal town south of Tijuana, usually crammed with Americans seeking sun, was
nearly deserted this week, after a rare order by the U.S. government forbidding U.S. citizens from spending money here.

The Treasury Department recently declared the waterfront Las Vegas-style hotel, with its marble lobbies and decorative lions framing doorways, a front for drug
kingpins Ramon and Benjamin Arellano Felix, the elusive brothers believed to control a massive cocaine pipeline into the United States.

Starting yesterday, any U.S. citizen spending money at the hotel, 18 miles south of the U.S. border, is subject to fines of up to $1 million. Fines are to be determined
on a case-by-case basis, depending on the customer's knowledge and intent.

The move against the well-known hotel is part of a broader Treasury Department order issued Jan. 31 that publicly identifies 10 Mexican businesses and 14
individuals as fronts for the Arellano Felix brothers. The other businesses include a large pharmacy chain, a property management company, an electronics store and
a parking company. All known U.S. assets of these companies have been frozen, and U.S. companies are forbidden from doing business with them.

The management of the Oasis has publicly denied any involvement in drug trafficking and referred calls to its legal department, which could not be reached for
comment. Several years ago, the Mexican government attempted to seize the hotel's assets. But a court here released the assets, saying the government had not
proven the Arellano Felix brothers were the true owners.

The Treasury Department move represents the first time the U.S. government has used the 1999 Kingpin Act to publicly identify Mexican companies as money
laundering operations for major drug traffickers. The order is viewed here as part of a more aggressive approach by the Bush administration to squeeze the financing
of drug traffickers who have evaded Mexican and U.S. Drug Enforcement Administration manhunts for years. However, by many accounts, the flow of drugs to the
United States has been unabated in recent months, because a large share of law enforcement manpower has been diverted to the war on terrorism.

"It's the financial war on the drug trade," said a Treasury Department spokeswoman, Tasia Scolinos. "We operate from the assumption that most U.S. citizens and
U.S. companies do not want to financially support companies tied to major drug trafficking operations. So we are trying to make people aware of companies [that]
are fronting for drug organizations."

In recent days, U.S. Customs agents have been handing out fliers to American citizens crossing the border into Baja California, warning them not to patronize the
newly listed "front companies for drug kingpins." Customs agents planned this week to begin seizing any medicine from the Farmacia Vida Suprema drugstore chain
in the anti-drug drive.

The blacklisting of the hotel, pharmacies and other businesses puts the Mexican government in an awkward position. Officials here said it gives the incorrect
impression that the U.S. government is making tough moves against "the brothers," as they are known here, and that the Mexican government is not.

Eduardo Ibarrola, Mexico's deputy attorney general for international affairs, said, "it is one thing for U.S. officials to use intelligence information and put them on a
list," and quite another for Mexican government to get evidence that will stand up in court.

A Tijuana parking company on the Treasury Department list, Valpark, is owned by the family of the tourism minister of the state of Baja California, Alejandro
Moreno. Through a San Diego public relations firm representing him, Moreno called the allegations that his company is related to the Arellano Felix brothers
"completely baseless."

Employees at a Vida pharmacy in Tijuana, one of those targeted, this week estimated that about one-third of their customers came from north of the border, taking
advantage of the cheaper prices for antibiotics, Viagra, Retin-A anti-wrinkle cream, and other items.

On a busy Saturday, maybe 100 customers are U.S. citizens, said employee Rodolfo Mota, who works at a Vida branch store on a main shopping street in Tijuana
called Avenida Revolucion. Mota said "the first I heard of any connection to drugs was when I heard on the news Americans can no longer shop here. Of course this
will hurt business."

Many medicines, such as penicillin, that require a prescription in the United States, are sold without a prescription in Mexico. And Vida pharmacies -- like hundreds
of pharmacy stores a few minutes walk south of the border -- cater to Americans, displaying advertising signs in English and accepting dollars instead of pesos.

In the small beach town of Rosarito, 17 miles south of Tijuana, workers said they fear the Treasury Department order will cost jobs. They also said blacklisting these
companies will not hurt the billionaire Arellano Felix brothers, but will put hundreds of working-class Mexicans out of work.

"The U.S. is doing this so people don't come to Mexico and spend their money here," said Juan Jose Lopez, head waiter at a restaurant in the Oasis. "They're having
problems in Las Vegas and some of their own tourist places, and they want people to spend the money up there."

"They're making us the next Cuba," he said, referring to the longtime U.S. economic embargo on the Communist-run island. "Where else are they going to tell
Americans they can't spend money. Who's next?"

On a recent night at the Oasis, there was no one in the fancy Italian restaurant, and it was nearly impossible to find any guest. Down the road, at the Rosarito Beach
Hotel, Bob and Arlene Hribar, of Apple Valley, Calif., said now that they knew the U.S. government has said the Oasis is connected to drugs, they would not go
near it.

"I wouldn't condone drug traffickers by staying there," Bob Hribar said.

                                               © 2002