Americans fall prey to Mexican cartel timeshare scam
The first call came in December 2011. It was a real estate broker from Mexico offering an exciting opportunity: A buyer wanted to pay Stephen, a financial manager from the Midwest, $65,000 for his timeshare in Cancún – far more than the $47,000 he had spent on it six years earlier.
Stephen agreed. He loved his twobedroom condo, with its view of the Caribbean and an entrance lined floor to ceiling in marble. The concierge treated his family like royalty.
“We felt like kings and queens,” Stephen said.
He had originally bought two weeks a year so his children could spend time near the ocean. As they grew older and joined sports teams, there was less and less time for family vacations.
The telemarketer’s call seemed fortuitous.
But there was one catch: Stephen, then 54, would have to first cover a Mexican federal tax of $3,900 that would be held in escrow and credited back to him when the deal closed.
Looking back, that was the first sign he was getting duped by a telemarketing scam, one that would end up costing him nearly $1.8 million as he tried time and again to sell his timeshare.
“It’s almost like an addiction,” said Stephen, who asked that only his first name be used because he doesn’t want his employer to know. “I kept thinking the next person was going to help me get out of it.”
According to a U.S. government investigation, thousands of Americans – many of them elderly – have fallen prey to a complex scheme involving one of Mexico’s most violent cartels.
‘The victims are limitless’
The Jalisco New Generation Cartel, commonly known as CJNG, started its timeshare fraud business in Puerto Vallarta and has now largely taken over the Cancún timeshare market as well. It has at least two dozen call centers that contact U.S. owners of property in those two cities, as well as other areas popular with North American retirees, including Acapulco.
Condo timeshares are seemingly hawked on every corner in many Mexican resort towns. People on vacation buy in, only to find later that they’re paying for time they don’t use and are looking to sell.
“You have these people that are desperate,” said Brian Rogers, head of the consumer advocacy nonprofit Timeshare Users Group, which provides information on how to avoid scams. “The victims are limitless.”
Based on the investigation, a U.S. government official estimated the fraud from Mexico-based companies at hundreds of millions of dollars a year.
“It’s more cash in hand than they make from drugs,” said the official, who spoke on condition of anonymity. “The overhead is really low for this.”
Few of the telemarketing firms have been criminally charged, partly because the business shape-shifts, abandoning shell companies and bank accounts as authorities identify them, then quickly creating new ones.
The U.S. Treasury department has sanctioned 40 Mexican companies associated with the Jalisco cartel and its telemarketing scam, but few people have been arrested.
Over the past five years, the Federal Bureau of Investigation has received an average of 1,400 complaints per year related to timeshare fraud from Mexico. And the number is growing, said FBI Deputy Assistant Director James Barnacle.
One of the most prominent cases was brought in 2019 by the U.S. Attorney’s Office for the Eastern District of Louisiana, which indicted six Mexican men for defrauding dozens of Americans out of $20 million. Four of the six – including the head of the company and an accountant – were convicted, with sentences ranging from five years in prison to 18 months.
Ruthless, entrepreneurial cartel perfects the timeshare scheme
The Jalisco cartel is known for its brutality, with regular headlines documenting beheadings, torture and deadly gun battles against Mexican military forces. It’s also known for its business acumen and ability to diversify revenue streams.
As with its well-oiled drug trafficking operations, the cartel has turned defrauding American citizens with timeshares into a science. U.S. investigators said the group refined its schemes over time, learning with each iteration what was most likely to persuade Americans to send money to Mexican banks.
The cartel hires call center workers who speak perfect English and teaches them to convince unsuspecting Americans that they are steps away from freeing themselves of their timeshares, which often charge maintenance fees owners no longer want to pay.
The money flows through Mexican banks, which cannot be counted on to take a stand, according to Spencer McMullen, an attorney based in Guadalajara whose office sees an average of one timeshare fraud case a month.
“Mexican banks are not doing their job,” McMullen said.
Workers are expected to make calls to Americans every day from 6 a.m. to 9 p.m., working in shifts, according to government officials.
One of those calls was to Filomeno Medina, 73, a retired United Airlines employee who in 2022 was told a buyer would pay $50,000 for 10 weeks of his timeshare in Cancún.
Like Stephen, Medina was told he had to first pay a capital gains tax and a federal tax. Then they said they sent the buyer’s check via FedEx but it was held up at the border, and he would have to pay a fee for it to be released.
“You’re taking Mexican money out of the country so you have to pay some fees,” Medina said the callers told him. They asked for $30,000 and Medina wired the money.
By the time he hired a lawyer to sue for the funds, he had wired a total of $80,000 to Mexican banks, emptying his savings and 401(k).
A sinister scam takes an even darker turn
Stephen was contacted again in 2013 by another person saying someone wanted to buy his timeshare.
At first, this buyer seemed more legitimate than the last, he said – until they didn’t. Like Medina, Stephen was asked to pay capital gains taxes and a customs fee to release the buyer’s payment. He wired $240,000 before figuring out that he was being scammed.
He reported the company to the FBI’s Internet Crime and Complaint Center, which confirmed the company was fraudulent. Stephen ignored further calls and the company eventually stopped contacting him.
Eight years later, in 2021, Stephen received a call from a woman who said she was part of a law firm bringing a class action lawsuit against Mexican banks for knowingly accepting wire transfers on behalf of fraudulent companies.
The lawsuit was being reviewed by the Mexican Supreme Court, the woman told him, and Stephen was due damages and restitution that would eventually total more than $6 million.
Stephen researched the law firm. Everything seemed in order. The attorney general of Mexico was involved as well, the woman told him, and so was the Financial Intelligence Unit.
After he paid tens of thousands in clerk fees, printing fees, docket fees, court of appeals fees, interpreter fees, honorary court costs, a court tax and an exit tax on the settlement – as well as more than $100,000 more directly to the government entities – things got even more serious.
Stephen was told he had been flagged for money laundering by Interpol, because he had sent so much money to Mexican bank accounts.
As proof, the attorney sent him a copy of his passport with a red flag notice attached. His restitution would be withheld until he paid to be removed from that list, she said. He paid it.
And he was on the U.S. Interpol list too, which would mean tens of thousands of dollars more. Fearing arrest back home, he paid that, too – but then thought to call Interpol headquarters in the U.S., only to find out there was no record of him being flagged.
The scam, spanning more than a decade, had spiraled into multiple complex operations involving 99 wire transfers, more than 150 people and at least 12 Mexican bank accounts, with Stephen making the final payment in December, according to documents reviewed by USA TODAY and The Courier Journal.
By late last year, Stephen had paid Mexican telemarketing scammers just shy of $1.8 million, according to the records.