On small subsistence farms in the hardscrabble region of Sinaloa, Mexico, peasant families tend a crop of corn, beans and – increasingly – poppies.
The poppies are the cash crop. The flowers and the opium they produce are the first step in an elaborate international supply chain that ends in a needle full of heroin pumped into the arm of an addict 3,000 miles away.
The gooey sap harvested from the flowers’ seedpods is sold to gangsters for a few hundred dollars per kilo, just over 2 pounds. The sap is processed into extremely pure, powdered heroin, shipped into the United States, diluted and packaged for resale.
Eventually it winds up in the bloodstream of someone like Marissa Vieira, a 23-year-old Sanford mother who almost died from an overdose in July. At each step in the process, the value grows until a kilo of heroin that was worth $5,000 in Mexico or Colombia is now worth as much as $400,000 when sold in single doses on the streets of Maine.
At its most basic level, the heroin trade is like any other business, adhering to fundamental market economics: Limited supply and insatiable demand drive up prices, rivals compete for market share and Mexican cartels have a near-monopoly on the importation of their product into the United States.
But because it is illegal, the drug market also operates without regulation, quality control or price limits. The costs associated with bringing any product to market grow exponentially when that product is drugs: Labor costs are higher. Automation is negligible. Transportation and distribution are dangerous, both physically and legally.
For the multinational cartels and gangs that deal in heroin, however, the risks are worth the cost. The market for their product has never been more lucrative – and the results never more devastating.
Vieira says she never cared where the heroin she was putting in her arm originated.
“I never knew where it was coming from,” she said. “Most people don’t.”
As the heroin market siphons billions of dollars from U.S. communities, it’s also ravaging families, regardless of race, gender or socioeconomic status.
In Maine, the number of people seeking treatment more than tripled from 1,115 in 2010 to 3,463 in 2014. Overdose deaths in that same period spiked from 16 to 100. In July, Portland had 14 suspected heroin overdoses during one 24-hour period, resulting in two fatalities.
A Maine Sunday Telegram review of court documents and interviews with local, state and federal law enforcement officials as well as drug trade experts show how international crime syndicates and violent inner-city drug gangs are using conventional business principles to target Maine as an emerging and lucrative market.
PRODUCTION – WHERE IT ALL STARTS
Over the years, production of heroin has shifted from South America to Mexico, with cartels adopting Colombian drug-processing techniques to refine less potent “black tar” heroin into the white powder heroin sought after in the highly profitable Northeast market.
Several areas of Mexico controlled by the cartels now produce a large percentage of the heroin sold in the U.S. The cartels have also been linked to the illicit manufacture of fentanyl, a powerful opiate sometimes added to heroin to boost its potency, and sometimes sold on its own as heroin.
According to the U.S. Drug Enforcement Administration, in 2014 Colombian farmers had about 2,700 acres of poppies under cultivation. Mexico had 42,000 acres planted, capable of producing 46 tons of pure heroin. It takes about 1 acre of poppies to produce 1 kilo of heroin. Federal authorities estimate they seized a total of 4,760 kilos of heroin in 2013, almost twice the amount seized just five years earlier.
Many farmers in Mexico have switched from growing marijuana to growing poppies, because marijuana is less profitable now that it is legal in some U.S. states, and is far bulkier and more difficult to smuggle than heroin.
For their effort, farmers are paid a varying amount, from as much as $900 to as little as $100 for a kilo of opium paste, according to reports. Depending on the morphine content of the opium, it can take between 7 and 10 kilos of paste to make a single kilo of heroin.
Labs in Mexico refine the morphine into nearly pure heroin, which is then pressed into kilo bricks – about half the size of a ream of copy paper – and transported to smugglers who move the drugs into the United States.
Only a small proportion of Mexican heroin is captured inside that country, according to the State Department’s 2015 International Narcotics Control Strategy Report. Widespread corruption makes it difficult to stem the flow of illegal drugs at its source, with cartels enforcing their rule through bribery and violence, which has persuaded many authorities to look the other way or even act on behalf of the cartels, tipping them off to government raids.
Local residents are inclined to protect the cartel operations out of economic need. Growing poppies is one of the only reliable sources of income in impoverished areas of Mexico, where the average monthly household income is 13,239 pesos, or $843 U.S., according to the National Survey of Household Income and Expenditures.
The biggest challenge to the cartels is their own competitors, who are equally ruthless. Drug violence in Mexico alone is estimated to have claimed more than 60,000 lives between 2007 and 2014.
THE JOURNEY ACROSS THE BORDER
As the heroin makes its way north, an army of U.S. law enforcement officials works to stop the drug at the border, but only a fraction ever gets confiscated. Increasingly, the cartels are finding ever more creative ways to smuggle it in.
Heroin is smuggled with shipments of cut flowers to Miami. Embedded inside couches shipped by freighters bound for suburban furniture stores. Sewn into clothing. Swallowed and smuggled in the bellies of human “mules” who then fly or walk across the border into the U.S.
In April, a Border Patrol agent patrolling east of Calexico, California, got a call from a Homeland Security employee monitoring one of the agency’s night-vision cameras mounted on towers along the border. They had spotted a person walking in a field with a large object who then flagged down a car and headed toward Calexico.
When Border Patrol agents pulled over Jonathan Elias and Brayan Valle, they found 28 pounds of heroin in the trunk of the car. They also found the controller to an aerial drone that Valle was using to fly drugs over the border fence into the U.S.
One favorite smuggling technique of Joaquin “El Chapo” Guzman, head of the Sinaloa drug cartel, was a network of underground tunnels spanning the U.S.-Mexico border, with openings into nondescript warehouses in both countries. The tunnels worked so well for transporting drugs, Guzman used the same method to make a daring escape from prison earlier this year.
Then there are the secret compartments in tractor-trailer trucks and ordinary cars, millions of them crossing the border every year, some with drugs hidden in acid-proof compartments inside automotive batteries, tires and gas tanks. Earlier this year, a motorist who had just used a “trusted traveler” lane to enter the U.S. with less than normal scrutiny, was pumping gas in California when he spotted metal cylinders attached to the bottom of his car. He thought it was a bomb. Police found 13.2 pounds of heroin someone had surreptitiously attached and planned to collect later.
The United Nations Office on Drugs and Crime estimates 22 metric tons of heroin – $8 billion worth – is imported and consumed in the U.S. each year. The U.N. estimates U.S. authorities seize only about 9 percent of the heroin that makes it into the U.S.
“Every step that you go northward increases value,” said Enrique Desmond Arias, Latin American expert with George Mason University’s Terrorism, Transnational Crime and Corruption Center. Arias’ expertise is in the cocaine trade more than heroin, but he says the two drugs share similarities.
“The most dramatic increase in value is across the U.S.-Mexican border,” he said. “That’s where the real value is.”
HIGHER RISKS MEAN PUMPED-UP PRICES
The value of a kilo doubles or triples at each stage of the distribution chain, the kind of markup only found with illegal products. Producers, smugglers, distributors and dealers each jack up the price of the product so that a crop that costs pennies to grow is worth $20 for a single diluted dose.
Jonathan Caulkins, an economist at Carnegie Mellon University who has studied illegal drug markets, said the value of illicit drugs is driven by risk and inefficiency. The kilo that cost a few thousand dollars in Mexico or South America can cost a wholesale dealer roughly $25,000 once the heroin comes across the U.S. border.
“Whenever a person does a profession that involves risk, then their monetary compensation gets pumped up to compensate for those risks. Deep-sea divers doing construction on underwater oil platforms are paid more than a person on land,” Caulkins said.
Illegal markets are inefficient and costly because they must be clandestine, Caulkins said. It costs much more to pay a cadre of people to break up drugs into smaller quantities and put it in baggies by hand than it costs a sugar company to use machines to produce and fill the small packets of sugar on a restaurant table.
On the street, where the price increase is most dramatic, a drug dealer might make 10 sales in an hour even in a busy market, Caulkins said. That’s significantly fewer sales than a legitimate retailer is likely to see over the same period of time.
A drug dealer also absorbs the added risk of being arrested and sent to jail, as well as deadlier risks from competitors.
“There’s a fair amount of dealers shooting and killing each other – fights over turf, business deals gone bad that they can’t take to a judge to adjudicate,” Caulkins said.
As a cost comparison, Caulkins analyzed the street value of heroin compared to silver, another valuable commodity with limited availability.
Based on 2013 data on import prices in the United Kingdom, silver cost about 38 cents for half a gram when ready for export from its source country. By comparison, a similar amount of money would net a 0.2-gram dose of heroin in its source country.
By the time it reached the United Kingdom, that half-gram of silver sold for 42 cents, a markup of about 9 percent. The 0.2 grams of heroin sold for $17.15, a markup of 3,745 percent.
To maximize profit and ensure reliable inventory, the cartels are expanding their involvement in the heroin trade.
Rather than settle for a few thousand dollars per kilo to smuggle the drug from South America into the United States, the cartels now produce and smuggle the drug and sometimes carry out wholesale distribution inside this country.
“That’s really a manifestation of the evolution of supply chain management – expanding distribution channels and applying them to heroin distribution,” said J. David Canarie Jr., an attorney and adjunct business professor at the University of Southern Maine and Saint Joseph’s College. The cartels’ increasingly vertical integration, where producers bring product directly to consumers and focus on customer service to retain them, is a popular business model in other retail industries.
“Many of the business principles that would apply in ordinary business practice you’re seeing apply in drug distribution,” Canarie said.
HOW THE ROAD LEADS TO NEW ENGLAND
For years, the primary sources of Maine’s heroin were the Massachusetts cities of Lowell and Lawrence.
In one typical case, Jerri Martinez-Tejeda, a dealer in Lawrence originally from the Dominican Republic, arranged regular shipments of heroin from the southwestern U.S. to New England.
Martinez-Tejeda contacted “German,” his supplier in Mexico, and ordered 10 kilos of heroin at a cost of $25,000 per kilo, according to DEA wiretaps monitoring his activities.
He then hired another man to drive the drugs from Southern California to Lawrence, paying him $1,000 per kilo up-front and $2,000 per kilo on delivery. He threw in a bonus of $4,000 to ensure the man would be willing to drive for him in the future.
“Once across the border, these drugs in general terms travel the interstate system from larger cities to smaller cities, from smaller cities into towns and hamlets,” said Timothy Desmond of the Boston office of the U.S. DEA, which oversees federal enforcement operations in Maine. The heroin travels hidden in trucks – like Martinez-Tejeda’s supply – or carried in duffel bags on interstate buses.
Historically, heroin has arrived in this state by means of “day trippers” – Maine addicts who drive to Lawrence or Lowell with a few hundred dollars and the phone number of a contact.
There, they purchase heroin for $40 to $60 a gram, or in “fingers,” 10-gram cylinders that look like a stick of sidewalk chalk and sell for between $200 and $500. They keep some for themselves, and sell the rest.
Fingers are a common form of heroin at that stage, said Maine Drug Enforcement Agency Cmdr. Scott Pelletier. They can be broken down into single-dose packets, called “tickets,” of about a tenth of a gram, packaged in the torn-off corner of a baggie, a fold of paper or a single-serving butter container.
One “ticket” is a single dose that sells for $5 in New York but can be marked up to $20 in Maine; many regular users of heroin require more than one to stave off withdrawal symptoms.
Although not as common as it once was, the small envelopes holding single doses of heroin sometimes come stamped with images representing batch names like Black Lotus, Lady Gaga and China White, an attempt at product branding intended to let users know which heroin comes from which batch and, presumably, has the same potency.
DRUG FLOWS NORTH, MONEY FLOWS SOUTH
In recent years, as drug gangs recognize the potential in the rural communities of northern New England – at the very end of the U.S. pipeline – more heroin is coming here directly from New York City, which has become the major distribution hub for the drug in the Northeast. Most of the heroin is diluted and repackaged there.
James Hunt, supervisory agent in charge of the city’s DEA office, said one-third of all DEA heroin seizures in the country take place in New York.
In May, the largest heroin seizure in New York history netted 70 kilos of heroin branded with the name Rolex, discovered in a hidden compartment under the floor of a Chevrolet Suburban. As part of the same investigation, $2 million and another 10 kilos were found in stash houses around the city.
One dealer, Jose “Hippie” Mercedes, who was arrested in that bust, organized monthly shipments of heroin from Culiacan Rosales, Mexico, an area controlled by the Sinaloa cartel, according to the DEA. Authorities would not give details on the volume of each shipment.
Police in New York also have raided a number of “mills,” where small armies of workers use coffee grinders and blenders to mix pure heroin with adulterants like lactose or quinine. It is then re-pressed into 1-kilo bricks of lesser purity to be sold to the next level of distributor, often a criminal street gang in a major city.
Sometimes the mills break down kilos into 10,000, 20,000 or even 40,000 single-dose glassine bags depending on the purity of the heroin. That can transform the value of a single wholesale kilo of heroin from $25,000 at the U.S. border to $150,000 on the streets in New York or more than $400,000 in Maine.
It’s that huge potential payoff that is enticing out-of-state dealers to bring bigger quantities of heroin here from New York or secondary hubs like Boston, Philadelphia and the Connecticut cities of New Haven and Hartford. Unlike the Dominican drug gangs of Lawrence and Lowell, who don’t set foot in Maine, New York dealers bring bulk amounts of 50, 100 or sometimes 300 grams of heroin at a time, the equivalent of big box stores that can offer lower prices by dealing in quantity and keeping a streamlined distribution network.
Instead of requiring Mainers to drive south to pick up a few hundred dollars’ worth of heroin at a time, drug dealers are transporting bigger shipments to Maine in rental cars or by couriers using commercial buses. Once here, they will arrange with a local addict to use an apartment in exchange for free heroin. The resident spreads the word and sometimes orchestrates the sales while the dealer works from a back room, doling out doses from the bulk supply.
In 2014, 16 percent of all drug trafficking arrests in Maine were of nonresidents, though officials say they don’t have comparative data from previous years.
Maine represents a lucrative market for heroin sales. A gram of heroin that fetches $30 or less in New York can sell for as much as $120 in Maine, driving entrepreneurial dealers to leave the fierce competition and saturated markets of bigger cities for the fertile ground of northern New England.
A dealer who is successful in Maine might then replicate the model, recruiting assistants to broaden his market, like a corporate franchise. For a $5,000 stake in a drug operation, the profits for a low-level dealer can quickly grow to $20,000 or more, a potentially huge payday, especially for someone with few job skills beyond a willingness to take risks and disregard the body count.
“People who don’t have good prospects in the legal labor market are being lured into selling (drugs) by the fast money,” Caulkins said. “Selling the drugs is addictive also, almost the way taking it is. It’s easy money until they’re arrested or shot, but lots of sellers are young men with an immortality complex.”
And as the drugs flow north, the money makes the return trip south. In some cases, a single criminal organization will move cash out of Maine at a rate of $25,000 a week. Eventually, the drug proceeds are smuggled back into Mexico in million-dollar bundles.
Law enforcement officials say drug cartels didn’t just cash in on existing heroin markets in places like Maine. They consciously built a market by increasing the supply and the purity of heroin. High-potency heroin can produce euphoria from smoking or inhaling nasally, making it attractive to young people who might reject needles – until the addiction has taken hold.
“Needles still gross me out,” said Vieira, who started by snorting heroin and only became an intravenous user because she could get more of a high out of a smaller dose.
In jail, Vieira said she’s stayed clean but her past still weighs on her.
“I hate being a disappointment to my parents,” she said. “I’ve caused my family a lot of pain and grief.”
The fallout left behind from the trail of heroin is the increasing numbers of overdose deaths, drug-affected babies and gang-style violence, all unprecedented in the state’s history.
“They are just like any other entrepreneur in this state with one exception,” John Morris, commissioner of the Maine Department of Public Safety, said recently when describing out-of-state heroin dealers. “They’re ruthless.”