U.S. SAID TO BAR DRUG PROBE OF MEXICAN DEFENSE CHIEF

WASHINGTON - Early last year, as undercover U.S. Customs agents neared the
end of the biggest investigation ever conducted into the illegal movement of
drug money, bankers working with Mexico's most powerful cocaine cartel
approached them with a stunning offer.

The agents, posing as money launderers from Colombia, had insinuated
themselves deeply into the Mexican underworld, helping the traffickers hide
more than $60 million.

Now, money men working with the cartel said they had clients who needed to
launder $1.15 billion more. The most important of those clients, they said,
was Mexico's powerful defense minister.

The customs agents didn't know whether the money really existed or if any of
it belonged to the minister, Gen. Enrique Cervantes, officials said. But
having heard about American intelligence reports pointing to corruption at
high levels of the Mexican military, the agents were mystified by what
happened next.

Rather than continue the undercover operation to pursue the deal, Clinton
administration officials ordered to shut it down on schedule several weeks
later. No further effort was ever made to investigate the offer, and
officials said prosecutors have not even raised the matter with the suspects
in the case, who have pleaded guilty and are cooperating with the
authorities.

"Why are we sitting on this kind of information?" asked the former senior
customs agent who led the undercover probe, William F. Gately. "It's either
because we're lazy, we're stupid, or the political will doesn't exist to
engage in the kind of investigation where our law-enforcement efforts might
damage our foreign policy."

Senior administration officials denied that foreign policy influenced their
decision to end the operation, saying they were moved primarily by concerns
for its security. They also emphasized that the agents were unable to verify
the Mexican traffickers' claims.

Other officials of the administration, which has based much of its Mexican
drug strategy on collaboration with Cervantes, said they are confident that
he is above reproach. A spokesman for the Mexican Defense Ministry, Lt. Col.
Francisco Aguilar Hernandez, dismissed the traffickers' proposal as
self-serving lies.

But a detailed account of the case -- based on confidential government
documents, court records and dozens of interviews -- suggests that U.S.
officials walked away from an extraordinary opportunity to examine
allegations of the official corruption that is considered the main obstacle
to anti-drug efforts in Mexico. For nearly a decade, American officials have
been haunted by the spectacle of Mexican officials being linked to illicit
activities soon after they are embraced in Washington. And just weeks before
the customs investigation, known as Operation Casablanca, ended last year,
administration officials received intelligence reports indicating that the
Mexican military's ties to the drug trade were more serious than had been
previously thought.

But when faced with the possibility that one of Washington's critical
Mexican allies might be linked to the traffickers, the officials gave the
matter little consideration. They said they opted for a sure thing,
arresting mid-level traffickers and their financial associates and at least
disrupting the money laundering system that drug gangs had set up.

To reach for a general, they said, would have added to their risks with no
certainty of success.