PRESIDENT'S BROTHER DENIES MAKING CARTEL DEAL

Powerful Drug Gang Offered to Fund Zedillo Project, Allegedly Tried to Buy
Bank to Launder Cash

MEXICO CITY, March 20—Alleged money launderers for Mexico's largest drug
mafia offered to finance a hotel construction project two years ago for the
brother of President Ernesto Zedillo, according to Rodolfo Zedillo.

The president's younger brother, who is an architect and heads a Mexico
City construction company, said in a letter released late last night that
he never entered into business arrangements with the two men, who since
have been named in a federal investigation that is revealing how deeply the
Cuidad Juarez cartel penetrated Mexico's business sector.

The attorney general's investigation has provided the first concrete
evidence that a cartel had tried to buy a bank and that its reach had
touched President Zedillo's family.

The probe has found that the Juarez cartel, headed by Amado Carrillo
Fuentes until his death last year, attempted to buy a stake in a struggling
Mexico bank to launder proceeds from their drug-trafficking operations.

Law enforcement officials have estimated that as much as $30 billion in
drug proceeds are laundered annually through Mexican businesses, banks and
money-exchange houses. Mexico only enacted strict money-laundering laws
last year and has yet to prosecute a major money-laundering case.

On Thursday, authorities arrested Juan Alberto Zepeda Novelo, a senior
executive for one of Mexico's largest construction companies, on
allegations that he funneled the drug money through his accounts on the
cartel's behalf to make the bank-shares purchase appear legitimate.
Zepeda's company, Bufete Industrial, has denied any wrongdoing.

Documents published Thursday by Publico, a Guadalajara newspaper, revealed
that the construction company executive's son, Juan Zepeda Mendez, and an
associate, Jorge Bastida, approached Rodolfo Zedillo and offered to finance
his hotel construction project in downtown Mexico City.

Neither Zepeda nor Bastida, whose whereabouts are unknown, could be reached
for comment.

The newspaper published a copy of an agreement to build the hotel which had
been signed by Bastida and Juan Carlos Fernandez Garcia, who had power of
attorney to negotiate business deals on Rodolfo Zedillo's behalf.

In a letter written in response to the newspaper's article, Rodolfo Zedillo
said, "I want to make perfectly clear that neither I nor the company that I
represent, ever carried out any type of financial operation with these
people [Bastida or Zepeda]."

Zedillo said that after being approached by the two men, he asked his
lawyers to investigate their financial records. He said his attorneys
recommended against the deal. A Zedillo administration official said
Rodolfo Zedillo obtained other financing for the project.

The Zedillo administration official said, "The president has told his
relatives to watch what they do and to obey the law."

Zedillo's predecessor, Carlos Salinas de Gortari, has become one of the
most reviled figures in Mexico, based in large part on his brother Raul's
use of his proximity to the president to make millions of dollars in
business deals, many of which are now under investigation by U.S., Mexican
and Swiss officials. Carlos Salinas is living in exile in Ireland and his
brother is in prison in Mexico.

Insofar as the Juarez cartel's efforts to purchase Banco Anahuac, a small
Mexico City bank, prosecutors are investigating allegations that Zepeda and
Bastida bought controlling shares of about $10 million in the bank in two
transactions in 1995 and 1996.

Three weeks after the traffickers bought the controlling interest, Mexican
banking authorities refused to let the deal go through.

"A portion of the capital of the Anahuac Financial Group was found to
belong to Amado Carrillo Fuentes' organization," the attorney general's
office said in a statement this week. It is unclear whether the banking
commission knew of the drug-trafficking connection when they stopped the
deal.

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