UNDERCOVER ANTI-DRUG OPERATION STRAINS U.S. TIES WITH MEXICO

MEXICO CITY -- A flap over an undercover money-laundering operation by
American customs agents has escalated into a full-scale diplomatic
altercation that has strained the close ties between the United States and
Mexico.

The feud took a new turn Friday with the publication here of a letter from
Sen. Trent Lott, the Senate majority leader, to President Ernesto Zedillo.
In the May 26 letter the senator expressed his "deep disappointment" over
recent comments by Zedillo that the operation violated Mexican law and
sovereignty as well as several bilateral cooperation agreements.

Lott said he was "astonished" by Zedillo's criticisms, which he said added
to a string of "broken promises" by Mexico in the fight against
international narcotics trafficking.

Top Mexican officials were infuriated by the letter. Jesus Reyes Heroles,
Mexico's ambassador in Washington, blasted back on May 29 with a five-page
response defending Mexico's anti-drug record and renewing the attack on the
undercover operation, which was code-named Casablanca. That letter was also
released Friday.

Tensions between the two countries flared last February after Gen. Jesus
Gutierrez Rebollo, a top-ranking army officer who was in charge of Mexico's
anti-drug program, was arrested on charges that he collaborated with the
most powerful drug trafficker. Americans officials were appalled to
discover that drug organizations had infiltrated Mexican justice at such
high levels. A stormy debate in Washington forced the Clinton
administration to postpone its annual assessment of Mexico's narcotics
enforcement progress.

In this case, however, Mexico is driving the dispute. The last time Mexico
objected this bitterly to an American action was in 1990, when American
agents seized a Mexican medical doctor in Mexico and took him to the United
States to stand trial in the killing of an American anti-drug agent. The
doctor, Humberto Alvarez Machain, was later freed by an American court.

More than 100 people, including some 30 Mexican and Venezuelan bankers, and
three large Mexican banks have been charged with laundering more than $110
million in narcotics proceeds as a result of the three-year undercover
operation by the U.S. Customs Service. U.S. officials called it the most
successful operation of its type ever undertaken by American law enforcement.

But Mexican officials were embarrassed by the operation, which seems to
have exposed much more extensive money-laundering through Mexican banks
than they had acknowledged. It also deepened popular suspicion in Mexico
about the financial system at a time when Zedillo is trying to push major
banking reforms through a skeptical Congress.

American officials did not inform Mexico about the operation while it was
under way in order, they said, to protect undercover agents and secret
informants. The agents had a number of meetings with suspects in Mexico
and, through a front company based in Los Angeles, relayed orders to
Mexican bankers from Colombian drug lords.

In a speech in May, Zedillo called the operation "inadmissible because it
tramples on our laws." Mexico has said that it will demand the extradition
for trial here of American customs agents who held meetings in Mexico as
part of the operation.

Lott wrote: "Mr. President, this is not 'inadmissible' or a 'violation' of
your sovereignty. It is a decisive action against ruthless criminals."

Ambassador Reyes Heroles called Operation Casablanca "an act of a criminal
nature similar to the crimes it was supposed to uncover."

Last week President Clinton called Zedillo to explain why American law
enforcement decided to leave Mexican authorities in the dark. But Mexican
officials have dismissed the American statements as inadequate.

Copyright 1998 The New York Times Company

Checked-by: Richard Lake