Ever wonder what happens to the bling?

AMERICAS NEWS JULY 20, 2009

For Sale: One Leopard-Skin Rolex and Maybe Some Frozen Sharks
All Were Seized From Drug Lords in Mexico, Along With a Secret Hot-Tub Lair
By JOHN LYONS

MEXICO CITY -- When a Mexican drug lord gets busted, what happens to his emerald-encrusted pistols?

The answer lies at a little-known branch of the Finance Ministry that manages the over-the-top mansions, armor-plated Hummers and other assets seized in the Mexican government's escalating war on drug cartels. The agency is called the Asset Administration and Disposal Service, or SAE as it's known for short in Spanish.

"You realize that the mansions in movies like 'Scarface' aren't exaggerations," says Omar Yaffar, a 36-year-old manager at the agency. "The real thing can be more amazing."

Mexico's Narco-Bling

(Omar Torres/AFP/Getty Images)

One recent Thursday, Mr. Yaffar went to check out a house the agency is about to take over from Mexico's Federal Police, who last year surprised a group of Colombian drug traffickers as they partied in the chalet-style hideout. If the defendants are convicted, their lair likely will be auctioned off.

The three-story house is like Hansel and Gretel meets Pablo Escobar, replete with gingerbread-like carvings featuring Christian and Buddhist figures, goats, fish and other animals. The grounds are a labyrinth of garden trails among man-made ponds fed by waterfalls. The compound also has stables, a suit of armor and a disco with stripper pole.

Some of the traffickers were caught in a cave-like underground hot-tub complex about the size of a backyard swimming pool, featuring faux stalactites and a fireplace. A glass skylight allowed bathers to gaze up at lions or a pair of albino tigers that dwelled in a cage on the roof.

"Some people have barking dogs living next door, but imagine lions," says Mr. Yaffar.

Police at the scene said the neighbors apparently never complained about the lions' roars, perhaps because they thought better of tangling with the big cats' owners. The alleged traffickers' menagerie -- including not only lions and tigers, but panthers and one gorilla -- was donated to zoos.

From the outside, alleged drug figure Zhenli Ye Gon put up a modest facade. Mr. Ye, a Chinese-Mexican businessman whom U.S. and Mexican authorities have charged with knowingly providing precursor chemicals to the methamphetamine trade, lives on a quiet lane in Mexico City's wealthy Lomas neighborhood. His three-story home, largely hidden from the street, was built to look like it has only two.

Inside his home, investigators found $205 million in cash hidden in a secret room hidden behind Mr. Ye's dressing-room mirror. When he was arrested, he had just received a shipment of Versace dinnerware to go with his Baccarat wine glasses and Lalique Champagne flutes, all of it still in boxes.

Mr. Ye denies the charges, and U.S. prosecutors have moved to scrap their case against him, which would open the way for extradition to Mexico to face similar charges. Mr. Ye's lawyers say he plans to fight extradition.

His lawyers also say they are pleased with the SAE's stewardship of Mr. Ye's property, which their client can recoup if his name is cleared. But they are less happy that the Mexican government already spent the $205 million seized from him, as is permitted under Mexican law.

The globalized drug trade can put SAE agents in tricky diplomatic situations. When a delegation of Chinese investigators interested in the case came to Mexico, Victor Aznar, a senior SAE official, said it was all he could do to keep the Chinese from pocketing dragon statuettes and other objects during a tour of the house.

"They kept pleading with me that it was evidence they needed to take back to China," says Mr. Aznar. "I politely told them, 'no.' "

Officials at the Chinese embassy in Mexico didn't return phone and email messages seeking comment.

SAE agents deal with an astonishing variety of goods, from Boeing DC-10 aircraft used to ferry drugs, to herds of cattle grazing on a trafficker's ranch. In July, when customs officials discovered a shipment of cocaine hidden in the bellies of frozen sharks, the officials called the police to pick up the drugs. The SAE was called in to deal with the sharks.

The sharks (which remain frozen) may be sold to fish markets if it can be determined that they are safe to eat, and were fished legally. Otherwise they will be destroyed.

A peek inside a SAE vault is a primer in Mexican narco-bling: A Rolex watch and band custom-jeweled to resemble leopard's skin; De La Cour watches featuring skull or marijuana-leaf motifs; a pair of gold pistol grips with raised eagle busts adorned with diamonds and emeralds.

Perhaps reflecting proximity of death for many drug traffickers, often the jewels have religious themes, such as a palm-sized gold and diamond necklace ornament depicting St. Jude, the patron saint of hopeless causes.

Works by some of Mexico's most important artists, such as Diego Rivera and Rufino Tamayo, also sit in the vault, awaiting auction. Proceeds from the auctions are evenly divided among the attorney general's office, the health ministry and the court system.

The fact that the artwork, jewels and cars seized by police have made it into a government vault marks a change from the past. As recently as the 1990s, before the SAE was created, assets seized by police had a way of disappearing, government officials say. The SAE also manages and disposes of assets from corporate bankruptcies and illegally imported goods like knockoff clothing.

Police seized Zhenli Ye Gon's home and $205 million in a secret room. (Associated Press)

The agency is considered a model of efficiency and transparency, according to experts on Mexico's economy. Regular auctions of confiscated goods happen at upscale hotels, and over the Internet using eBay's online auction software. Defense lawyers for alleged drug traffickers say even their clients like the agency: They now have a better chance of recovering their belongings if they win their legal cases.

Some alleged drug traffickers attempt to buy back their stuff. To prevent this, the agency doesn't accept cash and keeps a registry of buyers.

Ricardo Hernandez, a 36-year-old SAE agent, says he is still unnerved by what he saw at a house in one of Mexico's roughest neighbors, where kidnappers held the sister of a famous Mexican singer.

The dingy house was decorated as a monument to evil. A painting of the Last Supper hung on the wall, the faces of Jesus and his disciples distorted in horrifying ways, he said. One room appeared to be a shrine to Santa Muerte, a grim reaper figure worshipped as a saint by Mexican criminals. Bizarre elf figurines were placed about.

"I don't like seeing kidnappers' houses," Mr. Hernandez says. "That really affected me."

SAE agents, dressed in white shirts and ties, usually stand out at crime scenes among federal cops wearing bullet-resistant vests and ominous ski masks to hide their identities.

That doesn't mean they never see action. In 2006, Mr. Yaffar traveled in a convoy of armed federal police to take control of five ranches in Sonora, a northern state, whose owners had been arrested.

When they arrived at the first ranch, they found it still occupied by armed men. One officer thrust an assault rifle into Mr. Yaffar's arms. "If they come at us, start firing," Mr. Yaffar recalls being told.

Luckily, the men were arrested with no shots fired.

The other four ranches were occupied only by some cattle that had wandered in from neighboring ranches. That brought a new challenge, Mr. Yaffar says: Persuading the police officers to help him clear the cows off the property.

Write to John Lyons at john.lyons@wsj.com