THE HEROIN ROAD

Sugar Cane Farmers From a Tiny Mexican County Use Savvy Marketing and
Low Prices to Push Black-Tar Heroin in the U.S.

A Lethal Business Model Targets Middle America

First Of Three Parts

Immigrants from an obscure corner of Mexico are changing heroin use
in many parts of America.

Farm boys from a tiny county that once depended on sugar cane have
perfected an ingenious business model for selling a semi-processed
form of Mexican heroin known as black tar.

Using convenient delivery by car and aggressive marketing, they have
moved into cities and small towns across the United States, often
creating demand for heroin where there was little or none. In many of
those places, authorities report increases in overdoses and deaths.

Immigrants from Xalisco in the Pacific Coast state of Nayarit,
Mexico, they have brought an audacious entrepreneurial spirit to the
heroin trade. Their success stems from both their product, which is
cheaper and more potent than Colombian heroin, and their business
model, which places a premium on customer convenience and satisfaction.

Users need not venture into dangerous neighborhoods for their fix.
Instead, they phone in their orders and drivers take the drug to
them. Crew bosses sometimes call users after a delivery to check on
the quality of service. They encourage users to bring in new
customers, rewarding them with free heroin if they do.

In contrast to Mexico's big cartels -- violent, top-down
organizations that mainly enrich a small group -- the Xalisco
networks are small, decentralized businesses. Each is run by an
entrepreneur whose workers may soon strike out on their own and
become his competitors. They have no all-powerful leader and rarely
use guns, according to narcotics investigators and imprisoned former dealers.

Leaving the wholesale business to the cartels, they have mined
outsize profits from the retail trade, selling heroin a tenth of a
gram at a time. Competition among the networks has reduced prices,
further spreading heroin addiction.

"I call them the Xalisco boys," said Dennis Chavez, a Denver police
narcotics officer who has arrested dozens of dealers from Xalisco
(pronounced ha-LEES-ko) and has studied their connections to other
cities. "They're nationwide."

Their acumen and energy are a major reason why Mexican heroin has
become more pervasive in this country, gaining market share at a time
when heroin use overall is stable or declining, according to
government estimates.

The Xalisco retail strategy has "absolutely changed the user and the
methods of usage," said Chris Long, a police narcotics officer in
Charlotte, N.C., where competition among Xalisco dealers has cut
prices from $25 to $12.50 per dose of black-tar heroin. "It's almost
like Wal-Mart: 'We're going to keep our prices cheap and grow from
there.' It works."

Xalisco bosses have avoided the nation's largest cities with
established heroin organizations. Instead, using Southern California
and Phoenix as staging areas, they have established networks in Salt
Lake City; Reno; Boise, Idaho; Indianapolis; Nashville; and Myrtle
Beach, S.C., among other places. From those cities, their heroin --
called black tar because it's sticky and dark -- has made its way
into suburbs and small towns.

In Ohio, where Xalisco networks arrived around 1998, black tar has
contributed to one of the country's worst heroin problems. Since
then, deaths from heroin overdoses have risen more than threefold, to
229 in 2008, according to the Ohio Department of Health. The number
of heroin addicts admitted to state-funded treatment centers has
quintupled, to nearly 15,000.

In Denver, fatal heroin overdoses rose from six in 2004 to 27 in 2008
after Xalisco networks became established.

The dealers have been especially successful in parts of Appalachia
and the Rust Belt with high rates of addiction to OxyContin, Percocet
and other prescription painkillers. They market their heroin as a
cheap, potent alternative to pills.

There are no official estimates of how much money Xalisco networks
make, but narcotics agents who have busted and interrogated dealers
say that a cell with six to eight drivers working seven days a week
can gross up to $80,000 a week.

Among the idiosyncrasies of Xalisco dealers is that they generally do
not sell to African Americans or Latinos. Instead, they have focused
on middle- and working-class whites, believing them to be a safer and
more profitable clientele, according to narcotics investigators and
former dealers. "They're going to move to a city with many young
white people," Chavez said. "That's who uses their drug and that's
who they're not afraid of."

Xalisco networks have expanded despite federal investigations in 2000
and 2006 that sent almost 300 people to prison.

Only in recent years have narcotics agents grasped the full reach of
the system and its origins in Xalisco, which lies at the foot of
volcanic mountains where opium poppies grow.

The county consists of the town of Xalisco and 20 villages with a
total population of 44,000 -- about the size of Los Angeles' Silver
Lake neighborhood. Landless sugar-cane workers, eager to grasp their
version of the American Dream, provide a virtually endless supply of
labor for the heroin networks, one reason the system has proved so
hard to eradicate.

The rise of the Xalisco networks is a peculiar tale of dope, poverty
and business smarts that connects a remote corner of Mexico with vast
stretches of America's heartland.

Max Tells His Story

Two pioneers of the Xalisco model met in the early 1990s in the
Northern Nevada Correctional Center, where they were serving time for
drug offenses. One of them agreed to discuss the system's beginnings
and its spread on the condition that he be identified only as Max, an
alias he said he used as a heroin dealer.

Max said he was familiar with the U.S. heroin trade and that his
partner, a native of Xalisco, had access to supplies of black tar and
workers from his hometown. When the two were released from prison,
Max said, they set up a heroin ring in Reno.

At the time, dealers sold heroin from houses, which police could
easily target. Max and his partner had a better idea: Dealers could
circulate in cars and receive instructions via pager (and later by cellphone).

Soon a system evolved: Drivers carried heroin doses in their mouths
in tiny uninflated balloons, each about the size of a pencil eraser.
Addicts dialed a number, as if ordering pizza. The dispatcher would
page the driver with a code indicating where to meet the addict.

If drivers were busted, the small amounts of heroin and the absence
of paraphernalia reduced the risk of lengthy prison sentences. To
avoid attracting attention, they dressed modestly, drove beat-up cars
and never carried weapons.

From Reno, the partners expanded to Salt Lake City, Denver, Honolulu
and other cities.

Max said the heroin was manufactured in Xalisco. According to court
records, dealers and investigators, the Xalisco entrepreneurs paid
the Arellano-Felix cartel for permission to take it across the border
in Tijuana.

The heroin wound up in the Panorama City apartment of a couple from
Xalisco, who repackaged it and sent it to the networks via courier or
Federal Express, according to federal court records.

Max, who went to federal prison for his role in the scheme, said one
reason the system did not evolve into a cartel controlled by one
person or family is that Xalisco County is made up of ranchos, small
villages famous for their independent spirit and intense rivalries.

"We're real envious of each other. Families cannot work together," he said.

Still the system was there for anyone to use. It also appeared in
Southern California, where many Xalisco immigrants live. It's unclear
whether those dealers copied Max and his partner or came up with a
similar system on their own.

Returning frequently to Xalisco, immigrants compared notes on how to
improve the business model. As word spread, more farm boys went north
to see how it was done. Youths hired as drivers would learn the
business, then go back home and secure their own supplies of black
tar. They returned to the United States as crew chiefs.

"Whoever gets the customers, it's because he's got better stuff or
better service," Max said. "Nobody tells anybody what to do."

New Business Model

In the summer of 1995, Ed Ruplinger, a sheriff's narcotics
investigator in Boise, noticed Mexicans tooling around town selling
heroin packed in small balloons hidden in their mouths.

After arresting a few of them, Ruplinger found they were from a place
he'd never heard of: Nayarit, Mexico. Tapping their phones with court
approval, he discovered most of the calls were placed to a man named
Cesar "Polla" Garcia-Langarica in Ontario, Calif.

"He was the first McDonald's in town, so to speak," Ruplinger said.

Almost all of his calls were to people in Xalisco, later identified
as his assistants.

Ruplinger determined that Garcia-Langarica also had cells in
Portland, Ore., Honolulu and Salt Lake City. He overheard him saying
he'd moved into Boise because competition from other Xalisco networks
had forced him out of Denver.

Boise wasn't Garcia-Langarica's for long either. One of his former
drivers became a competing crew boss. Still, "they were not shooting
each other in the street," Ruplinger said. "They'd know each other.
It was just a job. I kept realizing that this is huge."

In 1998, officers raided apartments in Boise. Five of
Garcia-Langarica's employees pleaded guilty and received prison
terms. Garcia-Langarica, who was also indicted, remains a fugitive.

In Portland, black-tar heroin had been dealt on downtown streets by
Hondurans or Guatemalans -- until the late 1990s. Then, police
noticed that new dealers, all from Nayarit, were making deliveries by
car all over the city.

In 1999, Multnomah County Health Department workers, examining
coroner's reports, found that deaths from black-tar heroin overdoses
had more than doubled since 1996, to more than 100 a year. An ad
campaign urging junkies not to shoot up alone helped drive down that
figure, although lately it has crept back to the levels of the late '90s.

In Portland and elsewhere, competition among Xalisco dealers and the
resulting lower prices changed the nature of the heroin trade. No
longer were burglaries and holdups the measure of a city's heroin
problem. Junkies could maintain their habits cheaply. A spike in
overdoses was the mark of black-tar heroin's arrival.

"The classic picture of a heroin addict is someone who steals," said
Gary Oxman, a Multnomah County Health Department doctor who conducted
the study of overdoses. "That disappears when you have low-cost
heroin. You could maintain a moderate heroin habit for about the same
price as a six-pack of premium beer."

It was the same in other cities where Xalisco dealers settled. In
Denver, addicts say the cost of a dose of black tar has dropped as low as $8.

In the Utah County suburbs of Salt Lake City, it was more than $50 a
dose in the early 1990s.

"Now we're seeing it for $10 to $15 per balloon," said Bruce
Chandler, program services manager for the county's Foothill Treatment Center.

Eastern Expansion

Until the late 1990s, Mexican black-tar heroin was available only
west of the Mississippi. To the east, Colombian powder heroin predominated.

But over the last decade, production of Mexican heroin has climbed
rapidly, reaching an estimated 18 metric tons in 2007, while
Colombian output has dropped, partly because of U.S.-funded efforts
to eradicate Colombian poppy fields, according to the 2009 National
Drug Threat Assessment issued by the U.S. Justice Department.

As a result, "Mexican criminal groups are expanding Mexican heroin
distribution in eastern states, where previously only South American
heroin had been available," the report said. Estimates of Mexican and
Colombian heroin production in the report suggest that black tar now
accounts for two-thirds or more of the U.S. heroin market.

According to narcotics agents and former dealers, Xalisco immigrants
drove black tar's eastward expansion, moving into Columbus and from
there to parts of rural Ohio and Pennsylvania and to Nashville and Charlotte.

In many of these places, heroin had been rare. Addicts more commonly
used prescription pain pills.

Black tar is cheaper than pain medications. Xalisco dealers exploited
that advantage and pushed relentlessly for new customers. Addicts in
Columbus say they offered rewards for referrals to new users: eight
or 10 free balloons of heroin for every $1,000 in sales an addict brought in.

Typical of these heroin entrepreneurs was a youth who called himself
Manny Munoz-Lopez. He began as a driver in Columbus and rose to
become a cell leader when others sold their networks and returned to Mexico.

In 2006, he expanded to the suburbs of Pittsburgh, where police say
he took the name Julio Ramirez. Prosecutors say he recruited junkies
at methadone clinics to be salesmen as well as customers.

Gary Palacios, now serving a prison term in Pennsylvania for selling
heroin, said he became Ramirez's wholesaler for north Pittsburgh.
Ramirez shook up the local market, he said. Before, dealers waited
for users to come to them. Ramirez's drivers actively sought out
customers. For every 20 balloons an addict bought, Ramirez gave five
free ones, Palacios said.

Pittsburgh junkies had been using diluted white powder from Colombia.
"We brought that tar up and . . . the junkies fell in love," Palacios
said in a telephone interview. "It was way cheaper and way more powerful."

In 2007, state narcotics agents busted the ring, arresting Ramirez,
Palacios and others. Ramirez, sentenced to seven to 15 years for
conspiracy to distribute heroin, did not respond to a letter
requesting an interview.

"They really created a market that didn't exist before they got
here," said Marnie Sheehan-Balchon, the deputy state attorney general
who prosecuted the case.

Xalisco networks soon were operating across the Eastern United
States. In Charlotte, Chris Long noticed them when he became a
narcotics investigator in 2001, and he has been arresting dealers ever since.

"They're all from Xalisco," Long said.

Expanding from Charlotte, they carved out territories in Greenville,
N.C., and Charleston and Myrtle Beach, S.C.

"It will not go away," said Will Kitelinger, a Myrtle Beach narcotics
agent. When a driver is arrested, a replacement arrives within two
weeks and is quickly up to speed, he said. "They literally know where
the customers live and go to their houses and introduce themselves."

Xalisco's Sanchez family turned Nashville into a distribution hub,
according to federal investigators and an indictment. In 2006, they
dispatched a young driver named Hector to Indianapolis to conquer new
territory.

"We were looking to expand the heroin market to more places in the
United States," Hector said by phone from the federal prison where he
is serving time for conspiracy to distribute heroin. He was
interviewed on the condition that his last name not be disclosed.

"They told me 'We're going to give you three ounces to go to
Indiana.' You want to begin in a place that's clean and you make it grow."

Hector said he paid his drivers, all from Xalisco, $1,000 a week plus
expenses. He soon had dozens of customers and was ordering new
supplies every four days, he said.

"It was some of the strongest I've ever seen," said Floyd Warriner, a
longtime drug user from Indianapolis who is serving a 10-year federal
prison term for conspiracy to distribute heroin.

More than 50 Sanchez workers were arrested in a nationwide bust in
2006. But the Xalisco networks continued to proliferate, and their
product began to appear in communities where users weren't prepared
for its potency.

Among them was a small town in West Virginia, 160 miles south of
Columbus, where before the fall of 2007, few people had ever heard of
black-tar heroin.

[sidebar]

ABOUT THIS SERIES

Times staff writer Sam Quinones is the author of two books about
Mexico, where he lived for 10 years. For this series, he traveled to
Colorado, Idaho, Ohio, West Virginia and Xalisco, Mexico, to track
the spread of black-tar heroin. He interviewed police narcotics
officers, federal drug agents, prosecutors, public health officials,
addiction experts and imprisoned former dealers and addicts across the U.S.

Sunday: Pushing heroin into the heartland.

Monday: Black tar packs a deadly punch.

Tuesday: Drug money transforms a backwater.

latimes.com /blacktar

An audio slide show and other resources are available online.