Going Against the Cartel

LOFTIN C. WOODIEL

“He knows who I am. He knows my schedule, where I am at any time during the day, as well as the names and ages of my family members. He knows the schools my children attend and the market where my wife shops on Thursday afternoons. He is all too close to me yet I know nothing about him — not even his name. I am afraid for the lives of my family and my own.”

Believe it or not, I heard this terrifying account from an insurance claims adjuster, as he was relating an encounter he had during a routine visit to the scene of a car crash — and I was about to discover it was not an isolated incident. Why would someone threaten insurance claims adjusters and their families?

The Mexican drug cartels were ruthless, killing anyone who interfered with their operations accidentally or intentionally. Armed conflicts between the cartels and the Mexican government, and among the rival cartels, permeated the fabric of our work and social structure. At the time of this case, three cartels competed for jurisdiction over our city: the Gulf Cartel, Los Zetas and Los Negros. The Gulf Cartel had dominated the drug trade for years. It hired corrupt, elite, former military soldiers to serve as its private army, eliminating anyone who stood between the cartel and its mission. However, these brutal military elite soon realized they could logistically run drug trafficking operations on their own and spun off as a separate cartel, Los Zetas. It quickly became the most feared cartel and a rival of their former employers in the Gulf Cartel. Los Negros formed to counter Los Zetas and Mexican security, law enforcement and military forces.

Finding dead bodies in our neighborhood streets was no longer unusual, as the three cartels and the government fought. To be killed by a stray bullet or marked as an unfortunate witness was a tragic but common side effect of being in the wrong place at the wrong time. The cartel members acted like organized crime families and sought to fill their coffers with drug money and profits from any illicit activity that presented itself as worthy.

The Cartel Climate

My employer, Poco Coche Rojo, was one of the largest private organizations in Mexico. It was a wealthy and profitable insurance company owned by a foreign car manufacturer as part of its financial services corporation. Poco Coche Rojo (which translates to “little red car”) was a full-service operation offering auto, home, business and other forms of insurance to thousands of customers in hundreds of locations throughout Mexico. Five years ago, our headquarters city, Aguas Profunamente, was considered the safest major city in Mexico. In fact, our metropolitan area was publicized as the second safest city in all of Latin America. There was a saying that the cartel leaders lived in Aguas Profunamente but never worked where they lived. However, that changed rapidly, and the following years brought turf battles among competing drug cartels. It became evident that our city was in the midst of a fierce battleground and that our police forces had become corrupt and could not be relied on to protect and serve the shell-shocked citizens. The Mexican military commonly closed roadways and conducted car-by-car searches of the passengers and their belongings. Army personnel surrounded major hotels and businesses and searched every floor. Heavily armed patrols were all around the metropolitan area, but average residents were no safer because of it.

The security environment in Aguas Profunamente presented a persistent and serious challenge for Poco Coche Rojo, and special safety measures for our field agents were no longer an option; they were a necessity. Insurgents were engaged in a sustained campaign against businesses. Kidnapping posed a severe and persistent threat to ranking nationals and foreign staff. It was clear that the government did not have control of the cartels and their threats. Failure throughout all levels of government and in private institutions became evident, as violent crime rates rose and scams targeting businesses and foreigners were common. There was a high level of incidental risk to our staff and especially our travelers and expatriates as a result of the random cartel violence. In the midst of all this chaos, we struggled to continue “business as usual.”

Acceptable Expenditures

Last spring an auditor at Poco Coche Rojo named José Garza had identified a loss column in the financials labeled “acceptable expenditures” and examined it in depth. After a lengthy review, José found the expenditures were quietly attributed to organized crime payments. The audit trail revealed that the cartels had expanded their enterprises beyond the drug trade to include taking insurance company profits via car thefts and staged accident claims. Organized criminals intimidated and coerced employees at Poco Coche Rojo to certify claims that were obviously staged and fictitious. Year-on-year figures demonstrated that false claims cost the company in excess of $7.6 million with an additional $500,000 a year in extortion expenditures.

In Mexican cities like Aguas Profunamente, insurance companies dispatched field claims adjusters to the scene of auto thefts and accidents. Police were not sent to such incidents as a general rule unless there was a death or extreme road blockage. After José's audit revealed the troubling payments to drug cartels, my supervisor tasked me with interviewing claims adjusters to understand their experiences in the field. I had been hired by Poco Coche Rojo six years earlier as a security and compliance consultant, and I had conducted staff interviews countless times at the company. Over the years, I gained the trust and respect of the employees, and they were usually forthcoming in my interviews with them. After meeting with all the claims adjusters at my local office, I learned that at least a handful of them had been assaulted and threatened with future harm if they did not approve and pay the cartel members' fraudulent claims in full.

Based on the results from my local interviews, corporate investigators, myself included, interviewed all of Poco Coche Rojo's field adjusters throughout the region to determine the extent of the extortion and fraudulent claims. After meeting with more than 100 staff members, it was evident that these occurrences were not isolated. A majority of the adjusters told stories of being greeted by “bad people” when they arrived at the scene of reported thefts and accidents. An individual would present identification information and, in the case of alleged accidents, photos of the damaged cars with recommended repair costs. The cars were never at the scene. Although the situations were obviously suspicious or fraudulent, the cartel member at the scene typically asked the field adjuster questions like these, which a field adjuster related to me during an interview:

“You are Rodrigo Jimenez, yes?”

“Yes,” the adjuster replied.

“You are the husband of Lucinda and the father of Matteo who attends university, Louisa who goes to the neighborhood school for girls and little Clara who attends Gato Nursery School?” the cartel member asked.

“Yes, but what does that have to do with your claim?” demanded Rodrigo.

“Your wife sure enjoys driving her 2009 red convertible to the Pueblo Market on Thursday afternoons, doesn't she? It would be a shame if something were to happen to her on the way to the market one afternoon,” the cartel member stated ominously.

With a conversation of this nature, the deal was sealed. On the rare occasions that field adjusters did not cooperate, assaults and kidnappings were realities. When the adjusters did cooperate, I learned through my interviews that they did not report the incidents to company management for fear of losing their jobs or, worse, the lives of loved ones. It takes very few of these violent repercussions to ensure complete compliance by the field adjusters. Too many headless bodies were found alongside the roadway for anyone to pretend the threats were empty.

Coercion of Poco Coche Rojo's employees did not end with the field adjusters but also affected our regional claims agents, as I soon found out. After interviewing all the field adjusters, I decided to move up and question agents at our regional centers.

Poco Coche Rojo operated six regional centers in Mexico. If an agent thought a claim was suspicious, he or she would have the claimant come to the nearest regional claim center to meet and explain it in person. The regional claims centers had many points of entry and exit, and none of them had surveillance or physical security measures in place; cartel members could come and go as they pleased. The interviews I held with 75 regional claims agents revealed that it was extremely common for them to be threatened and coerced while on company property in a similar fashion as the field adjusters. The claims agents were consistent in the facts they related. A cartel member would approach the agent in a manner clearly intended to gain the element of surprise, either while the agent was doing paperwork in the office or in a casual environment, but almost always while he or she was alone. One agent explained to me, “One minute I was in my office by myself and the next minute a man was there. The message was clear and direct: Pay or suffer the consequences. More than once I had a knife pressed against my skin where no one else could see.” Another agent evaluated the threats he experienced in these words: “There are far too many bullet-riddled automobiles in our adjacent salvage lot with bloodstained interiors for us not to take these situations seriously.” The combination of so many building exits, the private offices of adjusters and sufficient time for cartel members to state their case made it conceivable that threats were delivered, received and a claims check was written without anyone else in the building knowing it happened. Indeed, this occurred many times.

No arrests were made in these cases. Staff at Poco Coche Rojo, like most Mexican citizens at the time, did not trust law enforcement personnel because the level of corruption eliminated any hope that the police were not on the cartel's payroll. The federal officers were considered to be somewhat reliable, but they had more pressing matters to attend to. The military, while invested with arrest authority, were more concerned with the violent crimes that frequently occurred in mass numbers. For federal agents to become involved, the needs of our staff members were going to have to multiply drastically. In light of all these factors, the corporate objective was simply to mitigate the financial loss while protecting our employees.

Strange Bedfellows

We at Poco Coche Rojo realized that we could not be the only company facing this problem with the cartels. Our security director, Vicente Zamora, initiated a collaborative meeting with his peers from the three other leading insurance companies — Escudo Claro, Seguridad Social and Protección Verde. His “security summit,” as we nicknamed it, revealed that staff members at the three other companies were experiencing similar issues, confirming our suspicions. However, the security director from one company, Protección Verde, was content with the extortion and considered the cartel expenses and harassment simply the price of doing business in Mexico. Verde's security officer left the meeting with concerns that even speaking in the collaborative meeting would cost his employer collateral damages. The directors from the three remaining agencies, the largest in their number of policies and revenue, banded together to establish a common strategy to fight back against the cartel. After they agreed on a plan, Vicente reached out to trusted federal police officers and army commanders. He briefed them on the ideas generated during the security summit, and they offered their support for the plan.

Collectively, Vicente and his two counterparts drafted policies and procedures to meet the overall needs of the three companies. The plan was to present a standardized and consolidated front in dealing with the threats from cartel members. Each security officer would then go back and refine the tactics as necessary within his company's corporate structure. From these policies and procedures, we at Poco Coche Rojo developed training programs for field adjusters and claim agents that focused on detecting, investigating and documenting fraudulent claims related to the cartel. I helped develop the training initiatives and drafted how to communicate the new approach to staff members. The fact that our efforts supported the employees' duties and that the project was a team effort requiring common action drove home the message that both management and each employee were in this change together — we had a point of mutual, pledged support. We placed special emphasis on the potential for workplace violence and defusing hostile situations.

The Plan in Action

Cartel members began to see changes when the three major insurance companies started issuing informational warnings during every field adjuster's first contact with the “victim” of a car theft or accident at the scene. Cartel members onsite were given written notices stating that the insurer was now placing increased due diligence on investigating all automobile claims. The notice clearly stated that, while the field agent would take any and all information that witnesses provided at the scene and include it in the report, the decision to release funds would not be made until a thorough, third-person investigation was completed. The notice explicitly said that the field agent had no sway in the outcome of the investigation and identified the legal options of the insurance companies should fraud be detected or should harm come to their employees. Although a mere written notice does not typically deter fervent criminals, they often move like water flowing through the points of least resistance — in this case, to Protectión Verde. Poco Coche Rojo, Escudo Claro and Seguridad Social enjoyed a significant decline in threats to our field adjusters after we began issuing notices. We could only assume that Protectión Verde saw an inverse spike in run-ins with the cartels.

For the next phase of Vicente's strategy, our regional claims centers underwent security enhancements. Because the final determination to pay or reject claims happened at the centers and checks were issued there, they represented the last point of illegitimate influence for the cartels. We needed to tighten controls so that cartel members could not walk in and out as they pleased. After the security enhancements, monitored cameras first detected visitors to a regional center as they approached the compound perimeter. Armed guards — whom we had thoroughly vetted from a pool of trusted contacts in police and military organizations — then identified all who entered the compound. If the visitors passed this first step of clearance, they were allowed to park in our secured lot. At this point cars were inspected for explosive devices and other weapons. Visitors entered the claims center through one consolidated entrance, where they were greeted by another security guard in a separate area that had no access to the claims agents or the financial resources held within.

The security guard in the entry area was positioned in an adjoining office and communicated with the guest using an intercom; the guard's office was made of bulletproof glass. The guard notified the claims agent that an identified guest had arrived. While seated in the quarantined area, awaiting the arrival of the claims agent, guests' actions were monitored by surrounding cameras and one or more plainclothes security agents who were in charge of our day-to-day security operations. These agents were also vetted former police managers or army officers. After the claims agent greeted the visitor in the quarantined area, if the agent determined the visitor was legitimate, the guest was escorted through locked doors into a group claims area where digital monitoring continued.

When the meeting was over, the visitor was escorted out. In addition to wall-to-wall monitoring and control, we installed duress buttons throughout the building in appropriate locations, and security forces would respond immediately to calls from these buttons. At any time, a guest could be removed by request or force, if necessary. The bottom line was that absolute identification and control over visitor movement reduced the number of surprise visits from cartel members operating with anonymity, in secluded spaces, with freedom to coerce our staff members into furthering their fraudulent purpose. As a result of these security measures, we saw a sharp decline in criminals attempting to access our regional claims centers.

David Beats Goliath

While the collaborative actions of the three major insurance companies and the individual actions of Poco Coche Rojo were not totally foolproof, they provided solid evidence that one can fight the cartel and win not because we were stronger in force, but because we were smarter in planning and executing our strategies. All the policy and procedural changes we implemented, plus the cost of training and security reconstruction, were completed for less than Poco Coche Rojo's projected six-month loss to cartels. The ongoing salaries and benefits of security personnel to manage and maintain operations represented only a fraction of what the cartel members were taking from us every month.

At the time of my departure from Poco Coche Rojo, cartel activity had been removed from the expenditure column; no doubt, the cartels are now enjoying a feast from another point of least resistance. The big win in this endeavor was our ability to alleviate the stress and fear experienced by staff members. The confidence of Poco Coche Rojo employees that they were safe and in a violence-free work zone allowed them to concentrate on their jobs and thus increased productivity.

About the Author

Loftin C. Woodiel, Ph.D., CPP, is a graduate professor of criminal justice at Missouri Baptist University. He has 20 years' experience in international corporate security leadership serving the financial services and transportation industries as well as ten years' experience years in law enforcement operations. Dr. Woodiel is an avid researcher, writer and public speaker.