Cartel Watch

The Forest Guardians Who Beat Back Mexico's Cartels

Mexico’s drug lords aren’t satisfied with gang wars and narcotics trafficking. Their corruption runs deep in rural life. But some folks fight back.

MORELIA, Mexico — One day in the late spring of 2012, Mexican police pulled over Efrén Olivares Valdez and told him he was delivering his truckload of raw pine resin to the wrong refinery. The grandfatherly driver, a leader of his indigenous tribal community, knew that the officers acted as enforcers for the murderous Knights Templar crime cartel.

“Look, sir, the refiner in Morelia has already paid for this,” Olivares told the policeman inspecting his papers. Ignoring his protests, the officer told him to deliver the cargo to a rival refinery in Ario, in the opposite direction. Faced with an unknown and possibly deadly fate, Olivares turned his truck around and did as he was told.

In this part of Mexico, where everybody knows the cartels, and everybody knows what they can do to you, even businesses that have no connection to drugs have to bend to the will of the narcotraficantes—or run risks that are difficult and dangerous to calculate.

The pine resin business has been for many years the main livelihood of people living in the lush and deservedly famous forests of Michoacán. In living memory they were famous as homes to deer, puma, yellow-headed parrots, and various reptiles, great and small. In one part of the state, a special reserve has been set aside for the stupendous migration of the monarch butterflies that come by the millions each year to Michoacán, arriving, more or less punctually, at the beginning of November on the Day of the Dead.

Much of that natural beauty and diversity has been threatened by cattle ranching, mining, legal and illegal lumbering of precious wood, and the hunting of rare animals to kill or capture for sale.

Efrén Olivares and his people are not part of that.

Pine resin harvesting is an ecologically sustainable business that provides a livelihood for thousands of rural families. A single tree can produce resin for 80 years, keeping people employed for generations. Forest workers, called tappers, make cuts into the pine tree bark for the resin to drip into small containers—a procedure roughly similar to tapping maple trees for the sap that is boiled to make pancake syrup. The resin is transferred to larger containers, and delivered to community collection points by backpack, mule, or pickup truck. From there, it is sold to distilleries that refine the liquid resin into solid rosin.

Chemical companies buy the rosin as base ingredients for food, soft drinks, cosmetics, household products, and industrial adhesives. A byproduct of the distillation process, turpentine, is either sold in its raw form as a solvent, or further refined into household and industrial cleaners and disinfectants.

Companies in Mexico and abroad pay the distillers, and if the distillers pay a fair price to the tappers, they can survive. If they are chiseled or cheated, they cannot.

For years, Efrén Olivares and his ejido, or community, had sold their resin at market rates to the Pinosa refinery in Morelia, the beautiful colonial capital of Michoacán. Now it was with something like a sense of doom that Olivares let the officers escort him to the end of their jurisdiction. They had radioed ahead to their counterparts in Ario to await the load of 40 barrels.

“We knew that the refinery was with the Templarios,” Olivares told The Daily Beast. As he passed through the plant gates, another group of gunmen, armed with AK-47 assault rifles, took control of his truck. “It’s my property now,” said Martín Ornelas Pineda, the plant owner. “If you want to continue working, you’ll have to work with me.” (Ornelas, currently serving a prison term after his arrest on weapons charges, was not available for comment.)

The Ario refinery was well known as one of five in Michoacán under a network called Unored, which Ornelas founded and led, and which multiple sources in Michoacán in sworn statements and in interviews with The Daily Beast, identified with the Knights Templar. Now Unored would receive resin shipments from Olivares’s community for a cut-rate price extorted from the tappers.

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People are poor here, and much of the police, legal and judicial system has been corrupted, infiltrated, and sometimes taken over entirely by the cartels. So those who want to end the extortion look for allies where they can. Some have taken the law into their own hands, others have begged foreign corporations they believe buy rosin from the cartels—in this case a specific American multinational corporation—to help them out. In that, they were grievously disappointed.

Several Unored refineries allegedly supplied rosin to Eastman Chemical of Kingsport, Tennessee, an international corporate behemoth with annual revenues of $9.5 billion.

So the producers worked together, gathering evidence, including facts about the hijacking of Olivares’s truck, to show a pattern of criminal activity. Another resin distiller, not connected with the network, retained the husband and wife law firm of Joseph diGenova and Victoria Toensing (yes, the former federal prosecutors connected with the Benghazi hearings, with Toensing now heading lawyers for Trump) to help the pine tappers of Michoacán present their case to Eastman, pleading with the company to stop buying from suppliers tied to the Knights Templar.

Eastman assured Mexican producers in 2012 that it had investigated the pine workers’ complaints and found nothing. “We take all allegations of potential supplier misconduct seriously,” Eastman spokesperson Candi Eslinger told The Daily Beast in a June 16 email. “Eastman has engaged two independent, reputable firms to investigate the potential involvement of certain Eastman suppliers in criminal activity in Mexico, and we found no credible evidence supporting those allegations.”

Eastman Vice President and Assistant General Counsel David Woodmansee responded to the complaints at the time. He said that the company would start its own investigation and then reported back that it had found nothing to the allegations.

Eastman apparently never questioned its own plant manager in Uruapan, Michoacán’s second largest city. “When I was plant manager, I was aware that Eastman Uruapan purchased rosin from the Unored companies,” Marco Antonio Chávez said in a sworn statement taken by Toensing as part of a civil action in the United States to get Eastman to cease and desist. Chávez, who swore under oath that the company knew all along about the Unored suppliers, had worked at the same facility for 24 years.

In his statement, Chávez listed the supplier companies and responsible Eastman officials by name. “Eastman was aware of the Unored connection to members of organized crime,” Chávez swore. “In fact, organized crime’s connection to Unored and the resin industry in Michoacán was common knowledge as it was widely reported in the local and national media.”

Woodmansee referred all inquiries to spokesperson Candi Eslinger, who said, “Eastman continually monitors the performance of its suppliers and will take appropriate action if credible evidence demonstrates that any supplier, whether in Mexico or elsewhere, is affiliated with criminal activity.”

Eastman did not respond to direct questions about its investigations in 2012 and 2013, or the measures it has taken since 2010 to ensure that its suppliers are not associated with organized crime.

In 2014, after failing to convince Eastman, a family of pine extract producers formally requested the Securities and Exchange Commission (SEC) in Washington to get Eastman to stop. The SEC is the independent federal agency responsible for investigating publicly traded companies for alleged corrupt practices.

Julio Rodríguez, president of the National Resin Industry Union of Mexico, was the first to warn Eastman executives in Tennessee. On March 5, 2012, he informed Eastman Chemical that its Uruapan plant—then under Chávez’s management—was buying rosin from the Unored group of criminal-linked distilleries. Rodríguez asked Eastman to stop.

Woodmansee responded to Rodríguez a week later that the company “had no knowledge” of the problem but would get to the bottom of it. He said that Eastman hired an international law firm with offices in Mexico City to investigate, and instructed the lawyers to contact Rodríguez. The following month, Woodmansee said that the lawyers contacted “all” of Eastman’s suppliers in Mexico, which would have included the Unored refineries, and that “no evidence was found” to support the allegations.

But that does not square with what the former plant manager in Uruapan told Toensing in his sworn statement. “When I left Eastman Uruapan in April 2013,” said Chávez, “it was still purchasing rosin from Unored companies.”

Eastman did not respond to repeated requests for comment about Chávez’s allegations. It would not say whether its investigators had interviewed its former plant manager after the company was accused of buying criminal cartel-supplied materials.

In his most recent letter to Eastman, on March 31 of this year, Rodríguez said that organized criminals murdered more than two dozen indigenous pine workers and family members, and raped and kidnapped others. He pleaded with Eastman again to cut off the corrupt rosin suppliers.

Eastman spokespersons did not respond to requests to comment about the Rodríguez letter and the allegations it contained.

Fredo Arias-King, president of a Texas-based company that buys turpentine from resin distillers in Michoacán, said that his firm, T & R Chemicals, refused to buy from any suppliers connected to Unored or the cartels. It was Arias-King who hired DiGenova and Toensing to investigate.

In an interview with The Daily Beast, Arias-King said he provided sworn declarations to the fraud section of the U.S. Department of Justice, and the Foreign Corrupt Practices Unit of the Enforcement Division of the SEC, seeking civil action.

The lack of action from Eastman, Arias-King said, devastated Mexico’s rural pine workers, who could not turn to local authorities for help. He said he is frustrated that U.S. officials are silent about their response to his complaints.

But Toensing does not find that extraordinary. “It’s a usual procedure for the government not to get back to the complainant,” she said. “It doesn’t mean that they’re doing something or not doing something.”

“Not only did the cartels damage the pine workers’ livelihoods by stealing their income from producing resin, but they clear-cut thousands of acres of pine forests that deprived families of a lifetime’s worth of income,” said Arias-King. He and his family have provided three million pine seedlings to the indigenous community of Cherán toward restoring nearly 30,000 acres of ruined forests.

Tappers like Olivares sold their resin to Pinosa, an established, eight-decade-old distillery owned by Arias-King’s family in Morelia, which pays market rates.

When the Knights Templar tried to shake down Pinosa to force it to pay protection money, the company refused. Instead, it took out newspaper ads offering to pay tappers full market prices for pine resin.

“We knew this was going to upset the cartels, but our goal was to tell the tappers what the real market price was, and to encourage them to be brave against the criminals,” Arias-King said.

In July 2012, armed arsonists burned the block-long Pinosa distillery to the ground. After that, Arias-King flew to Tennessee to meet with Eastman executives to lay out the evidence and try to persuade the company to cut off the cartel. He said that in August 2012, he met personally with Woodmansee.

Eastman blames Arias-King for the controversy, brushing off the allegations as business competition. “At an in-person meeting with Mr. Arias-King in 2012, Eastman requested that Mr. Arias-King make all source information including boxes of documents that he claimed to possess available to Eastman to assist in its investigation, and he declined to do so,” Eslinger told us.

“Eastman didn’t seem to want the facts they had said they wanted. They refused to receive the evidence,” said Arias-King. “I took photos, newspaper articles, police reports, security camera videos, sworn eyewitness testimonies, and other specific information about how the crime cartels had infiltrated the resin industry in Michoacán,” he said. “When I passed it across the table to them, they wouldn’t even look. It’s as if they touched it, they lost their plausible deniability.”

Emails show that Arias-King invited Woodmansee to meet in September, 2013, in the presence of neutral professionals from the Pine Chemicals Association, which represents the industry. Woodmansee responded in a one-sentence email: “No, we are not interested in your proposal.”

Arias-King continues to retain DiGenova and Toensing to investigate, but he and his family-owned businesses lack the resources to challenge the multibillion-dollar international conglomerate. “At this point we are not contemplating a civil lawsuit for damages against Eastman,” he insists.

“Originally all we wanted was for Eastman to stop buying from criminal suppliers,” said Arias-King. “If Eastman had not bought rosin from the cartels that stole and extorted pine resin, the cartels would have stopped.”

The bottom line: if the impoverished pine tappers of Michoacán thought they could get help from a multi-billion-dollar corporation in the United States in their battle against the cartel, they were sorely disappointed.

Change has come here—but it came when people took the law into their own hands.

Townspeople in Cherán overthrew their corrupt town government, drove out the police who were in league with the cartels, and set up self-defense forces.

“We took the police weapons and built our own forest guard,” David Romero, a Purhepecha tribal council leader in Cherán, told The Daily Beast. “We lost 23 of our people. But we drove out the corrupt officials and the cartels.” Other local groups raised their own vigilante forces to battle both cartels and crooked authorities.

The cartels had controlled virtually the entire Michoacán state government and police forces. Rodríguez and Arias-King say that they filed 32 complaints with state police and prosecutors, to no avail. But the citizen-based vigilante movements spread.

When national authorities finally did move in to restore some semblance of law and order in 2012, they arrested the governor and other officials, and they deputized Cherán’s “forest guard” as legitimate local police. The national government sent in military units and federales to combat the cartels in Michoacán, sometimes battling gangster-controlled state police units.

Local news reports confirm that a Mexican army patrol arrested Ornelas after stopping his vehicle and discovering an AK-47 and other illegal weapons, and blanket-sized signs called mantas that gangsters display to make their demands public. Ornelas, who had taken Olivares’s hijacked pine resin, is still in prison. The arrest came just days before Arias-King met with Eastman executives. The Ario refinery that Ornelas controlled went out of business after his arrest.

Resin and rosin prices returned to market levels, Michoacán pine producers say, thanks to the combination of local resistance from citizen armed self-defense forces and the action from President Enrique Peña Nieto, which broke the cartel grip on Michoacán by 2014. After federal authorities arrested the governor, they imposed an administrator to run the state for two years.

But organized criminal violence remains, and the pine workers, who eventually handed in their arms to the government, are worried that the cartels will return in force.

Now other cartel groups are vying for control of Michoacán as the Knights Templar are trying to reassert themselves. Recently, gangsters showed off their new firepower by shooting down a police helicopter, killing four.

In the future, the pine tappers of Michoacán will likely need all the allies they can get. But it looks they’ll just have to pray that American corporations don’t write them off for the sake of easy profits.