First the cartel cut its teeth with drug trafficking. Then avocados, property and construction companies. Now, a Mexican criminal group known for its brutality is moving in on older people and their timeshares.
The operation is relatively simple. Cartel employees posing as sales representatives call up timeshare owners, offering to buy their investments back for generous sums. They then demand upfront fees for anything from listing advertisements to paying government fines. The representatives persuade their victims to wire large amounts of money to Mexico – sometimes as much as hundreds of thousands of dollars – and then they disappear.
The scheme has netted the cartel, Jalisco New Generation, hundreds of millions of dollars over the past decade, according to US officials who were not authorised to speak publicly, via dozens of call centres in Mexico that relentlessly target American and Canadian timeshare owners. They even bribe employees at Mexican resorts to leak guest information, the US officials say.
The scam represents the latest evolution of the Jalisco New Generation, which is entrenched in both illegal and legal sectors of the economy. With little more than a phone and a convincing script, cartel employees are victimising people across multiple countries.
And even those employees are vulnerable to the cartel’s ruthlessness.
In May, the remains of eight young Mexicans who worked at a call centre owned by the cartel 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 they can to their family by selling off assets. Several victims interviewed by the New York Times said the money they had lost to scammers exceeded the value of their initial investment in timeshares in Jamaica, California and Mexico.
“I’m old, just like these clients,” said Michael Finn, founder of Finn Law Group in St Petersburg, Florida, which has represented thousands of people facing various forms of timeshare fraud. “We tend to be trusting when someone calls chatting us up and selling us these dreams.”
Finn realised how serious this type of fraud was becoming four years ago, when he received a call from a desperate woman whose mother had wired $1.2 million, her entire life savings, to Mexico to sell her timeshare.
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The timeshare industry is booming, with $10.5 billion in sales in 2022, a 30 per cent jump from the year before, according to the American Resort Development Association. Nearly 10 million American households own timeshares, the association said, spending an average of about $22,000 (€20,200) for their investment on top of annual fees of about $2,000. Most timeshares are beach resorts.
The sector’s growth coincides with a 79 per cent rise over the past four years of timeshare fraud complaints received by the FBI. But for scams that originate in Mexico, the FBI can investigate only if it gets the local authorities’ co-operation. And US law firms cannot file lawsuits because they do not have jurisdiction in Mexico.
Over the past five years, American timeshare owners were bilked out of $288 million, according to the FBI, through various types of scams, including those run by the cartel. The real number is most likely about $350 million, as about 20 per cent of those defrauded never register a complaint.
“The victims don’t want to come forward because they are embarrassed and hide it from their families,” Finn said.
In October 2022, a retired couple – James (76) and his wife, Nicki (72) – said they received a call from a supposed property agent at Worry Free Vacations in Atlanta, offering to broker the sale of their timeshare in Lake Tahoe, California, to a wealthy Mexican businessman. They asked not to publish their last name as they were “very embarrassed” about being defrauded.
As their daughters grew older, the family had stopped using the holiday spot that it bought in the 1990s for some $8,000, so the couple jumped at the opportunity to sell.
The scam started with smaller fees, James said – a few thousand dollars here and there meant to settle Mexican government registration costs for “cross-border transactions”. The fees grew heftier as he was told he was being fined by the Mexican authorities for various violations and could be extradited for breaking the law unless he paid. At one point, James said, the scammers even persuaded him to invest in a new commercial property in Mexico.
About two dozen payments later, the couple have wired nearly $900,000 to various bank accounts in Mexico, according to bank records.
Scams that go as far as this are not that uncommon, according to the FBI. The agency says that, typically, victims like James and Nicki are wiring the money to bank accounts held by associates of the Jalisco New Generation cartel.
The couple said they had depleted their life savings and were now in debt. They said they even borrowed about $150,000 from one of their daughters and sold James’s childhood home, but have not seen a single cent in return.
“I’m sure that if I were asking them, they’d say, ‘How could you be so stupid?’” James said of his daughters. “And I asked myself that same thing. I used to think I was fairly intelligent.”
The scammers identified themselves as sales representatives and an official at Mexico’s Central Bank, emails show, and kept promising that if he paid only “one more fee”, everything would be cleared and his money released.
Yet after every payment, a new fee was piled on.
In a statement, the Mexican Central Bank said it was aware that timeshare fraud was being committed in its name and warned people away from falling for the scam.
Late last year, James started to receive desperate messages from alleged representatives who claimed their colleague was jailed in Mexico after trying to settle James’s case.
“Please, do everything that you can, to get my friend/boss back home. He misses his family so much and hearing him feels awful, you’re the only hope for this to be resolved,” a recent email read. “The pending amount to be paid is: $157,786.61.”
James said he was considering taking out a second mortgage to pay the amount, until his daughters stopped him.
While the scam targeting timeshare owners is financial, in Mexico it can be deadly.
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The eight Mexicans found dead on the outskirts of Guadalajara last year all worked at a call centre in the heart of Guadalajara run by the Jalisco New Generation cartel, American officials said. Local prosecutors said when they searched the centre, 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 centre, they found it was closed, with a police vehicle parked outside. The building was in an upscale neighbourhood, across the street from a park. Parents walked by, taking their children to school.
Héctor Flores, the founder of the Light and Hope Collective, which combs through Jalisco state looking for the bodies of the disappeared, said he knew of about 30 people who had disappeared from call centres since 2017. But there are most likely more, he said, as many families do not come forward out of fear.
The state prosecutors’ office did not respond to requests for comment.
The Jalisco New Generation cartel, which was founded about 15 years ago, has grown into one of the most powerful cartels in Mexico. In recent years, it has expanded into the legal sectors of the economy, including selling avocados to the United States.
In Puerto Vallarta, a cartel stronghold and popular beach town, Mexican hotel workers are routinely pressured by the criminal group to leak guest information, according to James Barnacle, the FBI deputy assistant director overseeing financial crimes.
Barnacle said hotels and timeshare companies in Mexico were aware of the leaks and the US government had warned them to start clamping down.
Of particular concern to US officials is the Vidanta Group, one of the world’s largest timeshare resort companies based in Mexico. Its owner, Daniel Chávez Morán, is a friend and an adviser to Mexico’s president. Many of Vidanta’s clients have been victims of timeshare fraud, according to a US official who was not authorised 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 received a call from a supposed New York property company offering him about $500,000 for it. After sending various wire payments to Mexico, he has lost $100,000 with nothing in return, Willard said.
Once he realised he was never going to see his money again, Willard contacted the FBI. “They said there wasn’t much they could do as the money was all in Mexico,” he said.
Willard said he tried to file complaints with the Better Business Bureau and the district attorney in New York against the companies that scammed him. “I never got a response from anyone other than ‘I’m sorry, you should have been more diligent.’”
Barnacle admits that US law enforcement agencies are basically powerless to counter these frauds beyond public messaging.
“People exploit your data all the time,” said Barnacle. The cartel doesn’t “have to invest in a product that they have; they just got to pick up the phone or send an email to people, and, you know, trick them into giving up their money”.
So far, the US Treasury Department has imposed sanctions on 40 Mexican companies and about a dozen people for timeshare fraud, but few arrests have been made. And as soon as a front company or bank account is shut 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 runs are using valid addresses and are legitimate business. “They could be freezing these accounts for suspicious activity.”
During the two weeks that James, the timeshare owner who lost nearly $900,000, was speaking to the New York Times, he slowly realised he was never going to see his money again. His wife, Nicki, is livid, having warned him from the very beginning.
“You know, when you work for so many years and save so you can enjoy your senior years, and then have it just ripped away from you,” Nicki said, “it’s just not right.”
They went from starting their retirement very comfortably to now wondering if they need to apply for part-time jobs. Nicki is recovering from cancer, and their expenses are piling up.
“Am I going to have to go work at Walmart now?” Nicki said. – This article originally appeared in The New York Times
