South Florida Sun-Sentinel Palm Beach (Sunday)
Drug cartel’s new line: Timeshares
US, other retirees invited to sell, then charged endless fees
GUADALAJARA, Mexico — First the cartel cut its teeth with drug trafficking. Then avocados, real estate and construction companies. Now, a Mexican criminal group known for its brutality is moving in on seniors 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 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 U.S. officials who were not authorized to speak publicly, via dozens of call centers in Mexico that relentlessly target U.S. and Canadian timeshare owners. They even bribe employees at Mexican resorts to leak guest information, the U.S. 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 victimizing 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 center owned by the cartel were discovered in 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 money to their families 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 California, Jamaica 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 realized 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.
The timeshare industry is booming, with $10.5 billion in sales in 2022, a 30% jump from the year before, according to the American Resort Development Association. Nearly 10 million American households own timeshares, the association said.
The sector’s growth coincides with a 79% 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’ cooperation. And American law firms cannot file lawsuits in Mexico without retaining a licensed Mexican lawyer.
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% 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 real estate 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 vacation 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 reviewed by the Times.
Scams that go as far as this are not that uncommon, according to the FBI. The agency says that, typically, victims 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’ 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 reviewed by the Times 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.
In Puerto Vallarta, a Jalisco New Generation cartel stronghold and beach town, Mexican hotel workers are routinely pressured by the criminal group to leak guest information, said James Barnacle, the FBI deputy assistant director overseeing financial crimes. Barnacle said that hotels and timeshare companies in Mexico were aware of the leaks and that the U.S. government had warned them to start clamping down.
Of particular concern to U.S. officials is the Vidanta Group, one of the world’s largest timeshare resort companies, based in Mexico. Its owner, Daniel Chávez Morán, is an adviser to Mexico’s president. Many of Vidanta’s clients have been victims of timeshare fraud, according to a U.S. official who was not authorized to speak publicly.
Barnacle admits that U.S. law enforcement agencies are basically powerless to counter these frauds beyond public messaging.