Mexico Nabs Thieves Who Siphoned Millions of Dollars of Gas

MEXICO CITY – They bleed the fuel lines just about anywhere, drug cartel members and other criminals, sucking millions of dollars of Mexican petroleum from makeshift taps hidden in sheds or on remote desert stretches, with thousands of gallons ending up in U.S. refineries.

Mexican police busted gas thieves twice this week, said Carlos Ramirez, spokesman at Mexico's state oil monopoly Petroleos Mexicanos, or Pemex.

In a colonial village a few hours west of the capital, police caught nine people Thursday who had siphoned more than 17,000 gallons of fuel from a pipeline into waiting tanker trucks. On Wednesday, just one hour south of the California border near the popular beaches of Rosarito, police plugged three different taps, including one that was operating inside a small, wooden shack.

But those busts will do little to plug a stream of stolen petroleum products, millions of dollars worth of which is smuggled across the border and sold to U.S. refineries, according to the U.S. Justice Department.

While Mexican authorities try to patch the leaks, U.S. officials are tracking proceeds from various Texas bank accounts and taking a close look at several Texas companies to quell the theft at their end. To date, the companies identified are small fuel distributors, not the major U.S. refiners.

Houston-based Trammo Petroleum president Donald Schroeder, the first to be convicted as part of a cross-border investigation, agreed to pay a $2 million fine to the U.S. government while he awaits a December sentencing. In addition, on Tuesday U.S. officials handed their Mexican counterparts a separate $2.4 million refund check from Trammo to partially compensate Pemex for its losses.

Schroeder pleaded guilty to buying and reselling stolen condensate, a liquid hydrocarbon that refiners can blend with crude oil as they produce fuel and other products.

Mexico's federal police commissioner, Rodrigo Esparza, has said the Zetas, a fierce drug gang aligned with the Gulf cartel, used false import documents to smuggle at least $46 million worth of oil in tankers to unidentified U.S. refineries. Mexico froze 149 bank accounts this year in connection with that crime.

U.S. federal officials say further arrests are expected, and U.S. Immigration and Customs Enforcement officers have served 10 federal search warrants on bank accounts in Texas.

In May, the U.S. government seized $102,525 from San Antonio-based Valley Fuels Ltd. saying, in court records, that ICE investigators had "confirmed that the gas condensate sold by Valley Fuels had been stolen from Mexico." Valley Fuels president Stephen Pechenik responded in court records, denying that the funds had anything to do with a conspiracy to buy or sell stolen oil.

In response to an inquiry from The Associated Press, Valley Fuels said in an e-mail this week that it has been deluged by news media calls for comment. "As much as we would like to tell our side for the world to hear, our attorneys have advised us to 'No Comment,"' the company said.

Its Web site says Valley Fuels' business is to buy, sell and move petroleum and petroleum products worldwide. The company says it also specializes in "structuring transactions that offer the best possible value to our suppliers while at the same time providing the lowest cost to our customers."

Court records show another $40,000 was seized from Continental Fuels Inc., whose Web site lists a Houston address. That seizure has not been contested. Continental Fuels, which also deals in the distribution of petroleum products, did not respond to phone and e-mail requests.

John Auers, senior vice president at Turner Mason & Co., a Dallas-based petroleum consultancy, said it's unlikely any major U.S. refiner knowingly bought stolen products.

One possible way stolen condensate could find its way to a refinery is if it was "laundered" through a smaller processing company and then shipped to one of the big refiners, Auers said.

A small plant that buys and distills condensate — and then sells to refiners — might not be as rigorous as a major refiner checking a shipment's origins.

"We're talking about very small volumes of material," Auers said. "In small volumes, that stuff can move through these (small processing plants). ... I don't think any of this stuff would have gotten into the finished petroleum product market without it somehow being laundered in between — sort of like laundering dirty money."

Auers noted that stolen gasoline would be even more difficult to sell because imports are heavily regulated.

"Any reputable refiner ... would have to first have detailed paperwork from the importer," he said. "I have a hard time believing any refiner in the U.S. would not be able to see through stolen gasoline or stolen diesel."