Panel I Of A Joint Hearing Of The Crime And Drugs Subcommittee Of The Senate Judiciary Committee And The Senate Caucus On International Narcotics Control

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SEN. DURBIN: (In progress from source.) I don't know that we've ever blended the two together but we have common interest in today's issue, which is "Law Enforcement Response to Mexican Drug Cartels."

Since it's the first hearing I want to thank Senator Pat Leahy for giving me the opportunity to chair this subcommittee.

Vice President Joe Biden held this gavel for many years. His former staffer and now successor, Senator Ted Kaufman, is here today. He's been invaluable in giving us tips and pointers in what we can do to make this Crime and Drug Subcommittee an effective voice in the Congress.

I also want to say that when Senator Graham and I first discussed the agenda for this Congress we quickly agreed that the problem of Mexican drug cartels would be a top priority. Over 6,200 people died in drug-related violence in Mexico last year. More than 1,000 people were killed in the month of January this year alone, including police officers, judges, prosecutors, soldiers, journalists, politicians and innocent bystanders.

Today we're going to hear firsthand testimony from two Mexican witnesses about the devastating human consequence of this violence. One of these witnesses was forced to flee his hometown Ciudad Juarez, a city of 1.5 million where public assassinations are carried out in broad daylight and more than 1,600 people were killed in drug-related violence in the year 2008.

Last month, the city's chief of police resigned after drug cartels threatened to kill a policeman every day if he remained on the job, and just this weekend nine bodies were found in a common grave outside Juarez.

Mexican drug cartels also pose a direct threat to America. According to a recent Justice Department report, Mexican drug cartels control most of the U.S. drug market and are the greatest organized crime threat to the United States today.

In Phoenix, Arizona, last year 366 kidnappings for ransom were reported, more than in any other American city, and the vast majority of them were related to the Mexican drug trade. But Mexican drug cartels aren't just a threat to border states; they are now present in at least 230 United States cities, up from 50 cities in the year 2006.

In my home state of Illinois, the Justice Department found that three Mexican drug cartels -- Federation, Gulf Coast and Juarez -- are active in the cities of Chicago and my hometown of East St. Louis, and Joliet.

According to the Drug Enforcement Administration, Mexican drug cartels supply most of the cocaine, methamphetamine and marijuana distributed in the Chicago area, and just last fall the Justice Department arrested 11 alleged members of the Juarez cartel for distributing large quantities of cocaine and marijuana in Chicago.

Law enforcement officials estimate that 10 to 24 million dollars in drug proceeds are sent from Chicago to the Southwest border each month. What are the root causes? We'll hear from our Mexican witnesses corruption may be the largest obstacle Mexico faces in its efforts to contain drug trafficking.

For example, in November, Noe Ramirez, Mexico's former drug czar, was arrested on charges of taking hundreds of thousands of dollars in bribes to pass information to the cartels. Mexico also lacks a fair and effective criminal justice system needed to combat the drug crisis. Mexican President Felipe Calderon deployed the military into regions of Mexico where law enforcement was no longer able to maintain order, but that is not a long-term fix.

Investigating and prosecuting drug and gun trafficking networks is fundamentally a law enforcement challenge that will require sustained cooperation across the border at the federal, state and local level.

Mexico and America are in this together, and there's enough blame to go around. President Calderon said last week that Mexico's drug cartel problem is exacerbated by being located next to, quote, "the biggest consumer of drugs and the largest supplier of weapons in the world." That would be the United States of America.

As this chart demonstrates and as President Obama said last week, the drugs are coming north and we're sending money and guns south. As a consequence, these cartels have gained extraordinary power. The insatiable demand for illegal drugs in the United States keeps the Mexican drug cartels in business every day. Mexican government officials estimate that approximately $10 billion in drug proceeds cross from the United States into Mexico each year in the form of bulk cash -- $10 billion.

This allows traffickers to expand their operations further into our country, pay off police and politicians, and buy more guns and weapons from the United States.

This so-called iron river of guns from the United States arms Mexican drug cartels to the teeth. The cartels purchase weapons at gun shows from unlicensed sellers who are not required to conduct background checks, or the cartels use straw buyers with clean criminal records to buy the guns they need to maintain the arsenals for their drug cartels in Mexico. According to ATF, more than 90 percent of the guns seized after raids or shootings in Mexico have been traced right here to the United States of America.

What can be done to defeat these cartels? They are the new face of crime in the age of globalization. The only effective response to this transnational phenomena is multilateral action with our allies. As President Obama said in a recent address to Congress, America cannot meet the threats of this century alone.

I look forward to hearing from our witnesses about what Congress can do to contribute to cooperative efforts by the United States and Mexican law enforcement to defeat the drug cartels. In particular we have to take action to reduce the demand for drugs in our country and stem the flow of guns and money into Mexico.

Let's take one example: ATF's eTrace system for tracing crime guns. A decade ago I started calling for a 100 percent crime gun tracing in my home state of Illinois to provide basic information to find out where these guns were coming from.

Today data collected through eTrace has allowed law enforcement to identify numerous gun trafficking routes supplying criminals. We need to do more. Even in my state, with this concerted effort, we haven't reached the level of effective cooperation that we should have.

Would it help to expand ATF's eTrace system in Mexico and Central America? It's a question we'll ask.

On a final note, the subject of guns and drugs often split us along partisan lines. When it comes to Mexican drug cartels, there's too much at stake to allow us to be divided. Democrats and Republicans need to work together to find bipartisan, common-sense solutions to this challenge.

I'm not going to recognize Senator Graham, followed by Senator Feinstein and Senator Grassley.

And I'd like to ask Senator Graham, as ranking member of the subcommittee, for his opening statement.

SEN. LINDSEY GRAHAM (R-SC): Thank you, Mr. Chairman.

As you indicated, we discussed this subcommittee's role in the Congress and quite frankly I was very encouraged and excited after our meeting that we can contribute to what I think is an important dialogue when it comes to the war on our Southern border. And like any other war, it's a war of wills. We have the will to combat the enemy forces here who happen to be drug cartels. We'll win, because our agenda for our nation and Mexico and President Calderon's agenda for his country is much more positive. You've just got to enlist the people and give them confidence to take sides and get into the fight.

In terms of the American government's response, we've sent hundreds of millions of dollars, more to follow. These are tough economic times back here at home and throughout the world, but I can't think of a better investment to make than to support our Mexican colleagues who are in the fight of their life and quite frankly the fight of our lives.

So when it comes to taxpayers' dollars being spent to help the Mexican army and police force, I think it's a wise investment in these economic down times that we live in here at home. But the world continues to move forward and I look forward to working with Senator Durbin, who has a lot of expertise in this area, to get a comprehensive approach to partner with our Mexican allies and partners to make sure that we can win a war where you get nothing for finishing second.

This is a war you either win it or you lose it, and drug consumption is a problem, the guns are a problem. But at the end of the day I do believe that we have more firepower than they do, in light of the weaponry that both governments possess. I believe that our view of the future is better than theirs.

And terrorism is a tough thing to combat, but when you can enlist the average person to jump into the fight and get on your side and honest cops and honest prosecutors, then I think we'll be well on our way to winning this.

Mr. Chairman, thank you for picking this topic as our first hearing. I don't think you could have chosen better, and I look forward to working with you on this problem and many others.

SEN. DURBIN: Thanks, Senator Graham.

Senator Feinstein?

SEN. DIANNE FEINSTEIN (D-CA): Thank you very much, Mr. Chairman. And I think you have stated the problem as well as it can be stated, and I don't want to repeat your words.

I do want to say that we need to take some steps and I'm delighted to have the witnesses before us that are here today. I'm delighted that Senator Grassley is here.

We intend to reactivate the Caucus on International Narcotics Control. I've asked Christy McCampbell, who I think many of you probably know -- she formerly headed the Bureau of Narcotic Enforcement for the state of California, worked at Homeland Security, the State Department, is now in Islamabad working for the United Nations on drugs. And she will be here in a couple of weeks, and so I am looking forward to interacting much more with the law enforcement community through Ms. McCampbell.

I received a letter after a discussion with the Mexican ambassador, and that letter I've distributed to the committee. It's dated February 4th. I have never seen deeper concern on an ambassador's face than in the discussions I had with him. He pointed out how this Mexican president has really put it all on the line to move to deal with these cartels, how vicious these cartels are and he indicated to me that within a matter of days after we talked, the Mexican government was sending 5,000 troops into Ciudad Juarez, which they are now, and I gather it is making a difference.

He says in his letter, and I'd like to quote: "In the face of this problem there is much that the United States government in general and the United States Congress in particular can do to help Mexico roll back drug syndicates. For example, enforcing existent legislation such as the Arms Export Control Act would effectively criminalize the sale of weapons to individuals whose intent is to export those firearms to countries such as Mexico, where they are deemed illegal."

And it's my understanding that we need to fine-tune this to give DEA or ATF the real authority to go in and do something, because these people who go to the Phoenix drug establishments have plausible deniability and can buy the weapon and send it to Mexico, and there's very little that our enforcement agency can do about it. That's what I'm told.

He goes on to say, "Furthermore, a return to the import ban on assault weapons, in accordance with the 1968 Gun Control Act, would prohibit the importation of assault weapons not used for sporting purposes."

As you will recall, President Clinton, in an executive order, essentially implemented that. The Bush administration did not. I mean, I have a strong believe that the Obama administration should reinstitute it.

He then goes on to say, "The reintroduction and passage of a bill to regulate .50 caliber firearms under the National Firearms Act," such as the one I've sponsored during the last legislature, "would go a long way in helping to reduce the number of assault weapons flowing into Mexico."

I am appalled that you can buy a .50 caliber sniper weapon anywhere -- it's not restricted to a federal firearms dealer, you can just buy it. And this is a weapon that will send a five-inch bullet a great distance and permeate barrier walls, so I don't quite understand why we should not have some real regulations concerning its sale.

He goes on to say, "Beyond the enforcement of existing legislation and the enactment of new provisions, three main agencies that have authority over the issue -- the Bureau of Alcohol, Tobacco and Firearms, Immigration and Customs Enforcement, and Customs and Border Protection -- are all in dire need of the resources that would enhance their interdiction and intelligent capabilities and enable them to interdict southbound weapons on the United States side of our common border and to investigate, determine and detain individuals that are building weapons from gun shows and FFL dealers so as to introduce them illegally into Mexico."

Now, this is the Mexican ambassador to the United States, and I would be most interested in hearing from our enforcement agencies specifically what they can do in this emergency. If in fact they are short-handed, what is it they need? If they need changes in law, what do they need?

It is unacceptable to have 90 percent of the guns that are picked up in Mexico used to shoot judges, police officers, mayors, kidnap innocent people and do terrible things come from the United States, and I think we must put a stop to that.

So I'd be very interested in hearing your comments.

And I thank you for your leadership, Mr. Chairman.

SEN. DURBIN: Thanks, Senator Feinstein.

Senator Grassley?

SEN. CHARLES E. GRASSLEY (R-IA): Thank you, Mr. Chairman. Thank you for holding this hearing.

Senator Feinstein has projected a very forceful and energetic work for our caucus. I intend to fully cooperate with that. I thank her for that effort and upcoming whatever it is.

And also, for the witnesses, I'll be in and out because down the hall I'm ranking member in the Finance Committee and we have a hearing going on there.

I want to also recognize, as a couple of my colleagues have, the efforts of the president of Mexico. I suppose we can always say more can be done and I'm sure this hearing will say that, but also I think we need to say thank you for what he's doing, because it seems to me that he's doing more than any other president of Mexico has.

A root cause of this increasing violence is drug cartels, commonly referred to in the law enforcement community as drug- trafficking organizations. The DTOs pollute our streets with drugs and have been waging an increasingly violent battle against each other, also with law enforcement, and many innocent victims are caught in the cross-fire.

Today's hearing is to see what our law enforcement agencies are doing to put a stop to the violence. Since 9/11, the federal government has stepped up border security at all of our ports of entry. This increased scrutiny has reduced available smuggling routes and has placed pressure on DTOs that rely on them to bring illegal narcotics, money and weapons over our border. As a result, the available smuggling routes have become increasingly valuable and the level of violence has escalated as DTOs compete for a limited number of available avenues.

Despite recent progress, the profits available from DTOs that operate the drug trade continue to rise and fuel conflict. For example, Forbes announced last week that a Mexican drug lord who heads the powerful Sinaloa Cartel was ranked at an annual list of wealthy individuals with an estimated fortune of over $1 billion.

I don't believe that any one problem is a root cause of security problems throughout the Southwest. What we need is an effective, comprehensive strategy that addresses each of the problems at the border, including drug smuggling, human trafficking, illegal immigration, bulk cash smuggling and money laundering, as well as gun smuggling.

However, to fully eradicate border violence, we cannot act alone; Mexico must change its internal political and legal framework to make it corruption-proof. Only when we focus on all these issues in concert will we begin to address the problem of border violence.

There are a number of areas that I'm interested in, first looking at law enforcement in this panel about their efforts to coordinate operations -- particularly how these agencies coordinate overlapping jurisdictions and collaborate to enforce our drug, gun and money- laundering laws.

For instance, under Title 18, Congress -- it provides for enforcement by many different partners. Congress can't legislate all the necessary details so we have memorandums of understanding filling in those blanks.

These MOUs cover virtually all issues along the border, including narcotics investigation, money laundering, weapons smuggling. Unfortunately, many of these MOUs are significantly outdated.

I've been asking both Homeland Security and Justice to update these MOUs for the last couple of years. Secretary Chertoff responded that at least one MOU needs to be updated. I've also raised the issue with Attorney General Holder and Secretary Napolitano.

Second, I'm interested in discussing efforts to cut down on criminal money laundering. I'm not going to go into detail on that; I'll put that in the record.

Finally, I'm interested in hearing about efforts under way at ATF and ICE to combat illicit arms smuggling into Mexico. I want to ask about the status of Project Gunrunner, Armas Cruzadas and the resources dedicated to combating illicit arms trade at our borders.

I think that any effort on our part must focus on interdiction of illegal weapons as well as tracing weapons used in crimes in Mexico. I want to make sure first and foremost that we are doing everything within our power to enforce the existing laws on the books. However, stopping the flow of illegal weapons is not only an American problem; our partners in Mexico also need to step up their efforts and build upon recent initiatives to interdict contraband coming into Mexico.

As I said, we cannot act alone.

I'd like to have my entire statement put in the record.

SEN. DURBIN: Without object, the statement will be made part of the record.

I thank Senators Feingold and Kaufman for waiving their right to opening statements in the interests of moving the hearing along.

We're going to turn to our first panel of witnesses for their opening statements. They'll be speaking, each of them, for five minutes. Their written statements have been submitted in advance. We've had a chance to review them and they'll be a part of the permanent record of this committee.

And at this point I'm going to swear in the witnesses, which is the custom of the committee. (Witnesses are sworn in.)

Our first witness is Terry Goddard, a consensus witness from both Democrats and Republicans. It's a reflection of the respect that we have for the job that you're doing as attorney general in the state of Arizona, and your background includes many areas of public service, including one of the most challenging -- being the major of a big city.

And you did it for a number of years, four times elected mayor of the city of Phoenix.

Since becoming the state's top law enforcement official in 2003, Mr. Goddard has, among other priorities, focused on taking actions against illegal trafficking in drugs, arms, money and human beings. He served as Arizona director for the U.S. Department of Housing and Urban Development and, as I said, mayor of Phoenix, holds a law degree from Arizona State University.

Thanks for coming from Phoenix to be here today, Attorney General. The floor is yours.

ATTY GEN. GODDARD: Thank you, Chairman Durbin, Chairwoman Feinstein, Ranking Member Graham and Ranking Member Grassley, distinguished members of the Crime and Drug Subcommittee and the Caucus on International Narcotics Control.

It's a pleasure and an honor to be here and to try to help you address an issue of critical importance to our state, the state of Arizona, and to the nation.

The comments that have already been made do better than I could to put this incredible issue into focus, and so I will omit some of the comments I was going to make in terms of setting the stage, Mr. Chairman.

But I do hope that some of our specific experiences in the state of Arizona combating the organized criminal cartels that members of this committee have already referred to can be helpful to your deliberations.

The threat posed to American citizens and communities by the Mexican-based drug trafficking organizations cannot be underestimated. It has been referred to frequently and I think accurately as the organized criminal threat of the 21st century.

Law enforcement in the state of Arizona has been on the front lines for many years. I think sometimes we feel virtually alone in taking on these vicious and very well-organized criminals.

As has been mentioned, the violence in Mexico is the result of drug cartels fighting against law enforcement, the Mexican army and each other, and it has reached unprecedented body counts of unprecedented proportions, which we have already referred to.

I would add, however, that the bloodshed has included, as Senator Feinstein noted, an appalling spike in assassinations of police officers, prosecutors and government officials. It's not just cartel- on-cartel violence that we're talking about here, and it's not just a Mexican problem, and I think that has already been made clear by members of this committee.

But what we see, although most of the body count has been in Mexico, we have violent activities in the state of Arizona and moving north of the border that certainly should be a cause for alarm.

The high profit in the trade in drugs, arms and human beings -- I would add one thing, Senator -- Mr. Chairman -- to the chart that you just showed. It is really a four-part trade and it has caused crime throughout the United States.

In the Southwest border region, we feel especially impacted. Arizona has become the gateway for drugs and human beings smuggling into the rest of the United States. Phoenix and Tucson have become gateway and destination locations for further distribution of both drugs and human beings, and as was noted in the past few years, the city of Phoenix, my city, has become known as the kidnapping capital of the United States. Over 700 kidnappings in the last two years have afflicted that city, and police believe that well over twice that number may have gone unreported. So it's a very serious problem.

Like all organized criminal activity, the cross-border crime between Mexico and Arizona is about money. I know that's no surprise to anyone here, but smuggling drugs and human beings depends upon moving vast sums of funds.

Reference has been made to bulk cash transactions in the billions of dollars, but we also have been confronting in Arizona the electronic funds transfer, which is critical to the movement of human beings. And that, I believe, also should be added to this committee's agenda in terms of concern.

The money laundering, not only in bulk cash but in electronic funds transfer, is extremely serious. We have found in Arizona that the most effective way to establish a virtual barrier against the criminal activities is to take the profit out of it -- to find some way to take the money away from the cartels. The Arizona attorney general's office has been aggressively intercepting what we now call blood wires -- those are the payments to human smugglers, or coyotes, as we know them, which is largely done by wire transfer.

Between 2003 and 2007 my office seized more than $17 million in wire transfers destined to human smugglers and in the process arrested well over 100 coyotes. Seizing the money has reduced the volume of suspect wire transfers into Arizona by hundreds of millions of dollars, but not surprisingly, it has simply been displaced into money transfer locations in northern Mexico.

My office then targeted 26 wire transfer locations in Mexico and a legal battle ensued, which hopefully will be over in the next few months. Western Union, by far the largest provider of electronic funds transfer services, and other wire transmitters could be providing valuable information about illegal money transmissions and help us put the illegal transmitters out of business, but instead of cooperation, Western Union has made every effort to prevent data disclosure and identification of criminal activity which we could be able to make from that disclosure.

In addition to the blood wire seizures, Arizona law enforcement has had other spectacular successes. In the past year, my office, together with federal and local officials, a critical partnership, has broken up a major arms trafficking operation, a coyote organization that smuggled over 10,000 persons a year across the border, another similar organization which transported over 8,000 people around the United States -- not across the border, but across the country -- a drug-smuggling enterprise that in the last four years brought 2 million pounds of marijuana into the United States with a wholesale value of over $1 billion.

Our experience in Arizona shows that we need a regionwide, binational effort to stop the sophisticated, well-organized criminals smuggling drugs, people and guns and money across our Southern border. Otherwise, these criminals will easily displace their activity into another area with less surveillance.

No single law enforcement agency, federal, state or local, acting alone has the manpower, jurisdiction or expertise to prevail against these highly organized and sophisticated criminals. Cooperation and intelligence sharing are necessary within our country and across the border.

We have also to identify and take down the whole criminal organization; that's what my office has tried to do in the prosecutions that I referred to. Just arresting and deporting foot soldiers is a waste of critical assets.

Finally, I think we can cooperate much better with law enforcement in Mexico. For far too long, organized criminals have been able to use the border as a refuge, as a shelter. One important tool is a section of the Mexican penal code called Article 4. Under Article 4, as you probably are aware, Mexican authorities may prosecute a crime committed in the United States as if it had been committed in Mexico.

My office has done a number of these prosecutions where if a gentleman is -- or if the suspect is convicted they will then be incarcerated in Mexico; the punishment will be carried out there. And last year we entered into a new effort to use Article 4 not just for arrest and trial of identified suspects but for the joint investigation where the identity of the perpetrator is not known.

One such investigation is under way right now into a cold-blooded killing in a drop house of someone named Javier by one of the smugglers -- one of the coyotes. We don't yet -- we're not yet in a position to proclaim success, but we've been working together with Mexican authorities to try to find this murderer and to bring him to justice, and I'm very hopeful that this will go a long way toward making the border transparent as to criminals who are trying to avoid apprehension.

In our fight against the drug cartels, Congress can and should play a very significant role. First you can support the leadership role already undertaken with the Merida Initiative, continue to appropriate funding to assist Mexican law enforcement efforts against the cartels. Treasury, Justice and Homeland Security can use additional resources, I'm sure, for their successful partnerships with state and local law enforcement.

HIDTA, the high intensity drug trafficking area, could expand and I think should expand its scope to include human smuggling and weapons trafficking along with drug trafficking in its mission.

We also need a regionwide, binational coordinated attack on corrupt money transmitters. We estimate that on both sides of the border there may be as many as 400 operations that in fact are breaking the money-laundering laws, but they're not being apprehended. In that effort, we need additional tools -- coordinated regulation of money transmitters on both sides of the border, regionwide data on electronic transfers to identify potentially criminal transmitters and trace all money going to them -- something that our office has tried to do but we're right now prohibited or prevented from getting that information from Western Union.

And we should lower the threshold for mandatory reporting of single-action money transfers. It currently is $10,000; I believe it could effectively be -- we'd be much more effective if it was lowered. And in this area, stored-value cards and devices are already being used to avoid our money-laundering laws. It's a huge loophole in our anti-money-laundering efforts, and I believe we can expand the definition of monetary instruments subject to reporting to include prepaid stored-value cards. At the very least, all stored-value cards should be required to be readable by law enforcement agents. Right now, they can't decipher -- if they impound a card during a stop, they don't know how much it's worth.

Violence in Mexico will not be contained unless and until Mexican drug cartels are dismantled. It is in the interest of the United States to not only assist Mexico in this effort but to step up our own activities to dismantle the criminal organizations operating across our border.

The best way to do that is to cut off their illegal supply of funds. In Arizona, we're working hard to disrupt the flow of criminal proceeds to the cartels. We're coordinating at every level of law enforcement and reaching across the border, but we can't do this alone. We face an urgent public safety challenge and we need federal cooperation, coordination and resources if we're to prevail.

Mr. Chairman, thank you very much.

SEN. DURBIN: Thank you very much, Mr. Goddard.

Our next witness, William Hoover, is here to represent the Department of Justice Bureau of Alcohol, Tobacco, Firearms and Explosives. He's assistant director of field operations. In that capacity he oversees their operations on our Southwest border. He's held many positions before, including special agent in charge of the Washington field division.

Thanks for joining us, and the floor is yours for a five-minute statement. Your written statement will be made part of the record.

MR. HOOVER: Thank you, sir.

Chairman Durbin, Senator Graham and distinguished members of the subcommittee, I am honored to appear before you today to discuss ATF's ongoing role in preventing firearms from being illegally trafficked from the U.S. into Mexico and working to reduce the associated violence along the border. I also want to thank you for your support of Project Gunrunner that you've recently shown.

For over 30 years, ATF has been protecting our citizens and communities from violent criminals and criminal organizations by safeguarding them from the illegal use of firearms and explosives.

We are responsible for both regulating the firearms and explosives industries and enforcing the criminal laws relating to those commodities. ATF has the expertise, experience, tools and commitment to investigate and disrupt groups and individuals who obtain guns in the U.S. and illegally traffic them into Mexico in facilitation of the drug trade.

The combination of ATF's crime-fighting experience, regulatory authority, analytical capability and their strategic partnerships used to combat firearms trafficking both along the U.S. borders and throughout the nation -- for instance, from fiscal year 2007 through 2008, Project Gunrunner, ATF's strategy for disrupting the flow of firearms to Mexico, has initiated 1,840 investigations. Those cases include 382 firearms trafficking cases involving 1,035 defendants and an estimated 12,835 firearms.

For an example, an 11-month investigation into a Phoenix-area gun dealer, it revealed a trafficking scheme involving at least 650 firearms, including 250 AK-47 semiautomatic rifles that were trafficked to Mexican drug cartels. One of the pistols was recovered on the person of an alleged cartel boss.

The investigation that is currently under prosecution resulted in the May 2008 arrest of three defendants and the seizure of 1,300 guns.

While the greatest proportion of firearms traffic to Mexico originate out of the United States along the Southwest border, ATF trace data has established that drug traffickers are also acquiring firearms from other states as far east as Florida and as far north and west as Washington state. A case from April of 2008 involving a violent shoot-out that resulted in the 13 deaths will illustrate that point.

ATF-assisted Mexican authorities traced 60 firearms recovered at a crime scene in Tijuana. As a result, leads have been forwarded to ATF field divisions in Denver, Houston, Los Angeles, Philadelphia, Phoenix, San Francisco and Seattle to interview the first known purchasers of those firearms. These investigations are continuing.

Additionally, drug traffickers are known to supplement their firearm caches with explosives. Our expertise with explosives has proven to be another valuable tool to use in the fight against these drug cartels.

In fact, in the past six months, we have noted a troubling increase in the number of grenades seized from or used by drug traffickers. We are concerned about the possibility of explosives- related violence impacting our U.S. border towns. We have had at least one such incident in San Juan, Texas, when a hand grenade was thrown into a crowd of about 20 patrons. ATF was able to identify the grenade and believes it is linked to a drug cartel. Moreover, we believe these devices were from the same source as those used during an attack on our U.S. consulate on Monterrey, Mexico.

ATF's Project Gunrunner includes approximately 148 special agents dedicated to investigating firearms trafficking on a full-time basis, and 59 industry operations investigators responsible for conducting regulatory inspections of federally licensed gun dealers, known as federal firearms licensees.

As the sole agency that regulates FFLs, roughly 6,700 of which are along the Southwest border, ATF has the statutory authority to inspect and examine the records and inventory of the licensees for firearms trafficking trends, patterns and to also revoke the licenses of those who are complicit in firearms trafficking.

For instance, ATF used its regulatory authority to review the records of an FFL in El Paso, Texas, to identify firearms traffickers who purchased 75 firearms that were sold to corrupt local, federal officials. Our investigation led to the arrest of 12 individuals in November and the sentences ranged from 36 months to two years.

An essential component of ATF's strategy to curtail firearms trafficking in Mexico is the tracing of firearms seized in both countries. Using this information, ATF can establish the identity of the first retail purchaser of the firearm and possibly learn pertinent information such as how the gun came to be used in the facilitation of a crime or how it came to be located in Mexico.

Furthermore, analysis of the trace aggregate data can reveal drug trafficking trends and networks showing where the guns are purchased, who was purchasing them, and how they flow across the border.

I would like to note an example of trace data, how it was used to identify a firearms trafficker. ATF's analysis of trace data linked a man living in a city along the border to three crime guns recovered at three different crime scenes in Mexico. Further investigation of that information uncovered that he was a purchaser of a fourth firearm recovered at yet another crime scene in Mexico and that he had purchased 111 AR-15-type receivers and seven additional firearms within a short time span using nine different FFL wholesale distributors as sources for his guns.

In April 2008, we seized 80 firearms from the suspect and learned that he was actually manufacturing guns in his residence. He sold over 100 guns alone to an individual who is suspected of being linked to a cartel. Investigative leads are being pursued and charges are pending in that investigation.

Chairman Durbin, Senator Graham, distinguished members of the subcommittee, on behalf of the men and women of ATF, again, I want to thank you for your support of our crucial work. With the backing of this subcommittee, ATF can continue to build on our accomplishments, making our nation more secure.

Thank you.

SEN. DURBIN: Thank you, Mr. Hoover.

Next witness is Anthony Placido. He is here on behalf of the Justice Department's Drug Enforcement Administration. He's the assistant administrator and chief of intelligence, responsible for developing the agency's global intelligence collection enterprise, previously served as special agent in charge of the New York field division and regional director of the Mexico-Central America Division -- 30 years of federal law enforcement experience.

Thank you for joining us. Please proceed.

MR. PLACIDO: Mr. Chairman, members of the committee, thank you very much for the opportunity to appear before you today to discuss this issue of importance to the nation.

If I may thank you for the kind introduction and elaborate just one item further that may be relevant to this community, I also serve as the co-chair of a group called the Anti-Drug Intelligence Community Team, or ADICT. It's an organization of 13 U.S. government agencies with counter-drug intelligence responsibilities. That group has been very heavily focused on this issue for quite some time.

My testimony today does not represent my personal perspectives alone but represents, rather, the collective judgment of DEA staff located in 11 offices throughout the Republic of Mexico as well as those of DEA agents and employees posted in 227 domestic and 123 foreign offices around the globe.

On behalf of the acting administrator, Michele Leonhart, and the nearly 10,000 men and women of DEA, I'm honored to have the opportunity to share these perspectives with you today.

Almost immediately following his inauguration as the president of Mexico, Felipe Calderon, of his own volition, initiated a comprehensive program to break the power and impunity of the drug cartels. As a consequence of that effort, there's been a sharp spike in murders and violence in Mexico. It's caused some, including Homeland Security magazine, to speculate about the likelihood of Mexico failing in its effort and for our purposes, and by extension, created a discussion about whether the violence would spill over our Southwest border at increased levels and with adverse consequences to U.S. interests.

DEA believes that the remarkable commitment of President Calderon has resulted in his government making important strides to reduce the immense power and corruptive influence of these well-entrenched drug cartels.

We assess that the increased level of violence that currently plagues Mexico represents in large measure a desperate attempt by drug traffickers to resist the sustained efforts of a very determined Mexican administration. It is not the harbinger of imminent failure.

Since the Calderon administration assumed power, the government of Mexico has made record seizures of drugs, clandestine laboratories, weapons and cash. They've arrested large numbers of defendants, including high-level representatives of all of the major cartels and, in unprecedented fashion, have extradited more than 178 of these defendants to face justice in the United States.

They've also made advances in the more difficult process of reforming their institutions and have vetted and trained police, prosecutors and jailers, established a new organized crime tribunal, and have addressed corruption as never before.

We're also seeing benefits closer to home. Beginning in January of 2007, immediately after President Calderon was installed, we began to see and have seen a 24-month sustained period of increased price and decreased purity in nearly every cocaine market in the United States. Over that two-year period, prices more than doubled, up 104 percent, and purity has fallen by almost 35 percent.

Mexican drug-trafficking organizations have been placed under unprecedented stress as a result of the sustained efforts by the government of Mexico together with DEA, the U.S. interagency, and our partners throughout the region.

We're mindful, however, that the success against these powerful criminal adversaries is far from certain and that the consequences of these transnational criminals prevailing in their bloody contest with the Calderon administration would pose devastating consequences to the safety and security of people on both sides of the border.

Through the Merida Initiative and the funding generously provided by this Congress, our Mexican counterparts have additional resources to break the power and impunity of these cartels. However, we continue to hear accounts of the horrific violence in Mexico and must assess the potential for this activity to spill over our border.

It's important to understand that violence has always been part of the Mexican drug trade and that criminal syndicates fight each other for control of a very lucrative market. DEA assesses that the current surge in violence is driven in large measure by the government of Mexico's offensive against these traffickers who, in turn, perceive themselves to be fighting for a larger share of a shrinking market.

While the cartels are fighting each other and increasingly pushing back against the government of Mexico in unprecedented fashion, neither DEA nor the U.S. interagency assesses that in the near term the cartels will deliberately target U.S. government personnel or interests or intentionally target U.S. civilians in the United States.

Defining spillover is a tricky business and in the interests of the brevity of my opening statement, I'll defer for later a more robust discussion of that, but we recognize that we are witnessing acts of true desperation, the actions of wounded, vulnerable and dangerous criminal organizations. DEA and the interagency will continue to monitor the situation closely for warnings and indications of deliberate targeting of U.S. interests beyond the established modes of trafficker-on-trafficker or criminal-on-criminal violence.

I'd like to conclude briefly by highlighting just a few of the important initiatives DEA has undertaken in cooperation with the government of Mexico, our interagency and international partners to address this problem. For 27 years DEA has been running something called IDEC, the International Drug Enforcement Conference, that brings together currently more that 90 countries from around the world and their senior-most leadership on the counterdrug front. This year that conference will be held in Mexico and Mexico will take a leadership role, will also help to build strategies and coalitions among our partners to address this.

For several years we have facilitated a series of meetings called the tripartite meetings between Colombia, Mexico and the U.S. government. Those meetings are beginning to bear fruit and we currently now have representatives of -- vetted representatives of both the Colombian and Mexican government inside the walls of the El Paso intelligence center to help us build strategies and execute plans to protect our borders.

DEA has also developed and together with our federal partners begun deployment of a system of license plate readers along the entire Southwest border that will focus on the identification of vehicles known or suspected to be transporting bulk currency or weapons into Mexico. Early results from this effort are promising and we're hopeful that this tool will prove effective in reducing the southbound flow of cash and weapons into Mexico.

Since DEA was created in 1973, the agency's hallmark has been to target those who organize, direct and finance transnational crime. Nearly two decades ago, DEA made significant advances in this regard when it created the multiagency Special Operations Division to identify connections among and between seemingly disparate investigations between distinct elements of DEA, our interagency, and international partners. This interagency coordination process has been essential in driving enforcement successes such as Project Reckoning, which targeted Mexico's Gulf cartel, and Operation Accelerator, which targeted Mexico's Sinaloa cartel.

These DEA-led operations represent the most successful joint law enforcement efforts undertaken between Mexico and the government of Mexico -- between the United States and the government of Mexico -- and together, resulted in over 1,350 arrests, the seizure of thousands of pounds of methamphetamine, tens of thousands of pounds of marijuana, more than 20,000 kilograms of cocaine, hundreds of weapons and $130 million in cash and assets.

DEA is convinced that this interagency coordination and collaboration process is essential to the effectiveness of our nation's counterdrug effort.

Finally, my colleague from Arizona mentioned a threat of money remittances and the DEA Operation HighWire through the Special Operation Division connected 89 distinct investigations targeting money remitters who are facilitating the illicit drug trafficking by moving the proceeds of U.S. drug sales back to Mexico. The operation netted in excess of $32 million in cash.

We remain committed to working with both our domestic and international partners to target the command and control elements of these transnational drug trafficking organizations to stem the flow of bulk cash and weapons south into Mexico while also working to sustain the disruption of drug transportation routes northward.

Mr. Chairman, thank you for this opportunity to appear, and I'll be glad to take questions at the appropriate time.

SEN. DURBIN: Thank you, Mr. Placido.

Slightly out of order here -- Senator Kyl has asked for a moment to acknowledge one of our witnesses.

SEN. JON KYL (R-AZ): Well, thank you, Mr. Chairman. I really appreciate your indulgence. I had intended to be here a little bit earlier so I wouldn't be as disruptive and I'll have to leave in just a moment, but I did want to put in a very good word for Arizona Attorney General Terry Goddard, and commend you for holding this hearing. You've got a very distinguished panel. I look forward to reading the testimony of all of the witnesses and had hoped to pass on some other indications of the great work that Terry Goddard has been doing on the subject in Arizona. It's a very important subject, and I appreciate the committee's consideration of it.


SEN. DURBIN: Thank you very much, Senator Kyl.

I might add that your colleague Senator McCain has also recommended Mr. Goddard's testimony, so you come here with highest recommendations.

Our next witness, Kumar Kibble, is here to represent U.S. Immigration and Customs Enforcement. He is deputy director of ICE's Office of Investigations, chief operating officer, graduate of West Point.

Please proceed. You have five minutes to give oral testimony, and then we'll ask some questions.

MR. KIBBLE: Chairman Durbin, Chairwoman Feinstein, Ranking Member Graham, Ranking Member Grassley and distinguished members of the subcommittee and caucus, on behalf of Secretary Napolitano and acting Assistant Secretary Torres, I thank you for the opportunity to discuss ICE's efforts to combat cross-border crime and related violence.

ICE has the most expansive investigative authority and largest force of investigators within DHS, but this challenge can't be addressed by any one agency. Partnerships are essential, and ICE works closely with foreign, federal, tribal, state and local agencies to secure our borders, including the agencies that my colleagues here today represent.

DHS recognizes that southbound weapons smuggling is a grave concern amid the growing violence along our border with Mexico. This violence requires a comprehensive bilateral effort, and on January the 30th, Secretary Napolitano responded by issuing a Border Security Action Directive, which focused the wide-ranging authorities of the department on the violence along our Southern border. The secretary emphasized the necessity of a broad multiagency response to attack the flow of weapons and money that continues to fuel the violence.

ICE contributes to this fight principally through two bilateral initiatives: Operation Firewall, to counter bulk cash smuggling, as well as Operation Armas Cruzadas, to counter weapons smuggling.

The ICE-led Border Security Task Forces provide a comprehensive multiagency platform to fight these particular threats. Under Armas Cruzadas, U.S. and Mexican investigators synchronize bilateral law enforcement and intelligence-sharing activities in order to detect, disrupt and dismantle these weapons-smuggling networks. Key supporting actions include use of ICE's long-standing authorities under the Arms Export Control Act, as well as newly acquired export authority that is particularly useful in targeting these weapons- smuggling networks.

To more seamlessly investigate these networks that span our common border, BESTs, ICE attache offices, a U.S.-vetted Mexican arms trafficking group, and the ICE Border Violence Intelligence cell exchange weapons-related intelligence.

For example, in August of last year, an ICE investigation developed information that was rapidly shared with Mexican investigators regarding a safe house in Nogales, Sonora used by hit men from the Vicente Carrillo Fuentes organization. A subsequent search warrant at the residence resulted in six arrests, the seizure of police uniforms, a large amount of U.S. currency, 12 weapons, and four stolen U.S. vehicles.

Intelligence stemming from single actions like this are analyzed by the Border Violence Intelligence Cell, and in December of last year, this cell in conjunction with other DHS intelligence components produced a strategic assessment focused on southbound weapons smuggling that informed our current operations along the Southwest border.

Let me share another example of how ICE partners with others, such as ATF and local investigators, in combating weapons smuggling. ICE, ATF and the San Antonio police department initiated an investigation of Ernesto Olvera-Garza, a Mexican national that at the time of his arrest in October of 2007 trafficked in high-powered, high-capacity handguns and assault rifles. He led a gun smuggling conspiracy that purchased and smuggled more than 50 weapons into Mexico. One of these weapons was recovered after it was used in a gun battle where two Mexican soldiers were killed. Olvera-Garza has pleaded guilty and is currently pending sentencing.

Altogether, since the initiation of Armas Cruzadas, DHS has seized 420 weapons, more than 110,000 rounds of ammunition, and arrested more than 100 individuals on criminal charges.

Another and one of the most effective methods in dealing with violent transnational criminal organizations is to attack the criminal proceeds that fund their operations. As we have hardened formal financial systems throughout the United States, the smuggling of bulk currency out of the country has been on the rise. ICE investigates bulk-cash smuggling as part of its cross-border crime portfolio.

ICE and CBP have conducted Operation Firewall interdiction operations and investigations with Mexican customs and an ICE-trained Mexican money laundering vetted unit. Since its inception, Firewall has resulted in the seizure of over $178 million, including over $62 million which has been seized overseas, and has resulted in more than 400 arrests.

As I mentioned before, the principal investigative platform for both Armas Cruzadas and Firewall are the eight multiagency Border Enforcement Security Task Forces, or BESTs, arrayed along high-threat smuggling corridors along the Southwest border. Created to specifically address border violence, these BESTs concentrate on the top threats within their geographic areas, including weapons, bulk cash, narcotics and alien smuggling. Since July of 2005, the BESTs have been responsible for more than 2,000 criminal arrests, the seizure of about 170,000 pounds of narcotics, hundreds of weapons, and almost $23 million in U.S. currency.

ICE is committed to stemming cross-border crime and associated violence through the deployment of the BESTs, operations Armas Cruzadas and Firewall. Partnering with others, we're using a broad range of authorities to disrupt and dismantle these networks.

I thank the subcommittee and caucus members for your support and look forward to answering any questions you may have.

SEN. DURBIN: Thank you, Mr. Kibble.

I'd like to start with the questions, and first I'd like to ask about firearms.

ICE's program to address firearms smuggling has resulted in the seizure of 420 weapons and 42 convictions. ATF's Project Gunrunner has resulted in 382 firearm trafficking cases involving over 1,000 defendants and approximately 12,800 guns. On the face of it, it sounds significant and dramatic.

We will have testimony later from Professor Dresser from Mexico, who tells us that in the professor's estimation, an estimated 2,000 weapons cross the border into Mexico from the United States every single day. If that is true -- and I welcome any comments that you might have to suggest that there's another number we should use as a starting point -- are we even making a dent in the firearms smuggling from the United States to Mexico?

Mr. Hoover?

MR. HOOVER: (Off mike) -- I'm sorry. Thanks, Tony.

I apologize.

Firearms trafficking is a huge issue. There is no question about it. We currently work with the Mexican authorities and advance them through training and education to initiate traces on all the firearms seized or recovered by --

SEN. DURBIN: Can you give me a metric? I'm looking for a metric. What do you think is the volume of weapons being smuggled into Mexico from the United States on a daily basis?

MR. HOOVER: I would not say it's in the thousands, sir. I would say it's probably in the hundreds. I would not say it's in the thousands. I can tell you that over the last two years, in 2007, we traced 6,561 weapons from Mexico. In 2008, we traced 10,977 firearms from Mexico, and to date this year, we are already approaching that 10,000 number for gun traces from Mexico.

SEN. DURBIN: This is clearly going to be an object of dispute. Brookings Institution, and I quote, says, "Some 2,000 guns cross the U.S.-Mexico border from north to south every day, helping to fuel violence among drug cartels." I think we would argue or at least agree that if it's hundreds or thousands, the best efforts that we put in it to date are really not addressing the volume of the problem when it comes to weapons smuggling. We have to look to additional ways to fortify our efforts and make them more effective.

I only have a few minutes, and I wanted to allow Attorney General Goddard to address one of the more fundamental issues here. At the base of this whole equation, this bloody, deadly equation between the United States and Mexico is our virtually insatiable appetite for narcotics. You have been caught in the crossfire of this for so many years as the leading law officer in Arizona as its attorney general.

What are your thoughts about America's drug policies and drug laws?

ATTY GEN. GODDARD: Thank you, Chairman Durbin.

My thoughts are that we're not winning the battle. The violence that we see in Mexico is fueled -- 65 to 70 percent -- by the trade, and one drug, marijuana. The interdictions that we've had and the partnership that you see here at the table have seized extraordinary quantities of marijuana, and still the United States is being literally flooded with this particular drug.

I've called for at least a rational discussion as to what our country can do to take the profit out of that one particular main horse, main force that fuels these violent cartels in Mexico. I also think, as the Wilson Institute has said, that we need to take a hard look at basically treatment on the addiction side. The United States has put a great deal of money into interdiction, but we've put very little into demand reduction, and frankly, we can have a very profound effect as a country in trying to stop the apparently insatiable demand for these illegal drugs.

We have one bright spot, and I think it needs to be commented upon. The flow of methamphetamines is down. That was by consensus of law enforcement throughout the country the number one crime problem in the United States. Among other things, the Mexican government has taken very strong efforts to stop the precursor chemicals coming into their country and going to the so-called superlabs in Mexico. They've also closed down a number of the superlabs, so as a result the flow of crystal methamphetamines into the United States is reduced.

Now, we're not at the end of the story, obviously, but between the interdiction efforts at the border and the very strong effort on the production side by the government of Mexico, we've made a huge amount of progress, and I think that bright spot needs to be highlighted, because everything else we hear is extremely depressing.

SEN. DURBIN: My time is up, but I'm going to try to ask everyone to hold to five minutes, but just to say that we are going to have future hearings related to America's policies when it comes to the arrest, criminal treatment and medical treatment of those suffering from drug addictions. We have to really look at the base -- the source --of this issue, and it's our insatiable drug appetite --some 35 million users in the United States that have created this draw and created the money that is fueling these drug cartels and this violence.

Thank you.

Senator Graham.

SEN. GRAHAM: Thank you, Mr. Chairman.

Mr. Placido, from an intelligence point of view, do you believe that the efforts of President Calderon are winning the day, or are we losing ground? How would you characterize the war?

MR. PLACIDO: Thank you for the question, sir.

I've been closely following Mexico since about 1985, and what I can tell you is in my view, the commitment and resolve of the Mexican government is unprecedented under this administration. They are making great strides to improve the situation. It is a very difficult situation, and it won't be resolved overnight. Decades of problems related to corruption and the power and impunity of these cartels cannot be resolved overnight.

But I believe this government is making progress and that the violence we see is actually a signpost of success that these cartels are actually under a level of pressure that they have never seen before. It's one of the reasons they're lashing out against each other and the government.

SEN. GRAHAM: On the area of pressure, Mr. Kibble and Mr. Hoover, how would you rate the level of corruption now versus last year in terms of pressure being applied to corrupt officials in Mexico?

Mr. Hoover?

MR. HOOVER: Sir, we have had several investigations involving law enforcement officers on both sides of the border involved in the firearms trafficking, but we have certainly -- they have been limited. I believe I mentioned that in my statement. They have been limited in that area, and we have not seen a significant increase in law enforcement officers being involved in the firearms trafficking.

SEN. GRAHAM: Mr. Kibble?

MR. KIBBLE: I basically concur with Mr. Hoover, Ranking Member Graham. We haven't seen -- we haven't noticed any trends going up or down. I mean, there's generally a steady state of corruption issues that we tend to see during the course of our investigations, and in my recent discussions with our special agents in charge along the Southwest border as recently as last week, they had indicated that they had not seen any trends worth of note in terms of that.

SEN. GRAHAM: Okay. What's the single most -- the drug consumption problem that Senator Durbin indicated is a problem, and that won't be solved overnight on our side of the border.

But in the short term, what's the most single effective thing that Congress could do, in your opinion, to aid the Mexican government in their fight?

We'll start with you, Mr. Kibble, and work our way down.

MR. KIBBLE: I think the critical -- it's the recognition that we see increasingly throughout the country that part of what fuels this violence in Mexico are the flows of weapons and money south, and we have to do more in terms of interdicting --

SEN. GRAHAM: What change in the law would you recommend, if any, in terms of the gun problem?

MR. KIBBLE: Sir, I think that we have the laws we need; we just need to more effectively and more aggressively pursue --

SEN. GRAHAM: Do you need more agents?

MR. KIBBLE: With more resources, we could do more.

MR. PLACIDO: Thank you.

First of all, I believe that this Congress, this body, has gone a long way with the Merida Initiative to help provide the resources necessary for the government of Mexico to take steps on its own. The initial phase of the Merida Initiative is really geared toward interdiction and I think that in the long term, the most important thing that we can do is to help a willing partner south of our border reform its institutions.

SEN. GRAHAM: So you don't suggest any major structural changes in our domestic law?

MR. PLACIDO: Well, I think that the Merida Initiative provided resources to the Mexican and Central American countries.

SEN. GRAHAM: I got you.

MR. PLACIDO: But there was no corresponding increase for the U.S. law enforcement agencies that have to partner with them.

SEN. GRAHAM: Mr. Hoover?

MR. HOOVER: I would agree with Mr. Placido. Any resource we can get to help us in this struggle is certainly welcome.

SEN. GRAHAM: Well, my question is, can you think of any gap in our law that we could remedy in the short term?

What about you, Mr. Goddard?

ATTY GEN. GODDARD: Mr. Chairman, Senator Graham, I would certainly like to see us toughen our money transmission rules.


ATTY GEN. GODDARD: Bulk cash can be intercepted with these agencies moving south, but wire transfer and stored-value cards present overwhelming obstacles to us. Human trafficking in particular is facilitated.

SEN. GRAHAM: Does everyone agree with that assessment?

MR. KIBBLE: Stored-value cards have remained a consistent challenge because of their ability to avoid the CIMR regulations and not to declare the currency that they're transporting out. And we see that throughout more of our investigations where we're encountering this desire by our adversaries to rely on stored-value cards.

SEN. GRAHAM: Thank you, Mr. Chairman.

Senator Feinstein.

SEN. FEINSTEIN: Thank you very much, Mr. Chairman.

Mr. Placido, you mentioned that the Merida equipment has gone to Mexico. To the best of my knowledge, it has not. The appropriation was in the omnibus just passed and we've contacted the State Department and have been told that the helicopters and surveillance aircraft will not be available till 2011. Now, this is -- I think this is something that we need to pay a lot of attention to and see if we can't up this in the priority line, so I just wanted to mention that this was of enormous concern to the Mexicans when they talked to me about this.

And I would just like to commend President Calderon. I think he has put his entire political career on this effort to fight drugs and I think he needs every single bit of our support.

Mr. Attorney General, I want to thank you for your comments. You made a list of strategic things that we could do and I want to ask you about them in a moment.

But one of the things that really has impacted our country are kidnappings. And you mentioned 700 kidnappings in two years in the Phoenix area. Tell us a little bit more about that. Tell us what it means. Tell us a little bit about the insurance companies setting up for people to insure themselves against kidnappings and the impact that this is now having in my state as well as in the San Diego area, if you would.

ATTY GEN. GODDARD: Mr. Chairman, Senator Feinstein, I'm not familiar with the insurance scandal that you just referred to so we haven't seen that in Arizona, to my knowledge. What we have seen so far has been largely involving drug drop houses and human smuggling drop houses, where the violent confrontation between members of rival gangs, rival drug-trafficking organizations and human-smuggling operations basically seize the cargo, be it drugs or human beings, and change the price or extort the people that they have under their control to get more money from them. So a human cargo or a drug cargo are very valuable commodities and they are apparently fungible. And so many of the kidnappings are as a result of this intergang, intercartel rivalry.

We've been fortunate so far not to see, for example, business leaders or other people simply held as a target of opportunity in kidnappings. It's usually been within the criminal activities. But so saying, I'm very concerned, both at the possibility of innocent victims getting caught in the crossfire, if you will -- we've had at least one instance in Phoenix where there was a home invasion where they picked the wrong house and they went after somebody who was totally uninvolved in either the human or the drug trade and assaulted that house with a number of rounds of high-velocity rounds. So we believe that the casual fallout is going to be significant if we can't do something, as this committee is considering, to try to assist Mexico in stopping it south of the border.

SEN. FEINSTEIN: Thank you.

I wanted to ask the law enforcement people about the Arms Export Control Act passed in 1976, particularly Title 18 USC 922, and whether that -- see, I'm surprised at the small numbers of guns. Let me be candid. I think Senator Durbin is absolutely right. From what I hear, it's a lot more than just a few hundred. It really is in the thousands.

And all these gun dealers that have sprung up in the areas that allow these sales -- the question is what to do about it. And I'm curious if any of you have a recommendation as to how you could be given more authority to go in there and make these arrests of people and shut down the gun dealers that are knowingly selling guns in numbers. I mean, somebody comes in for one one day and then six in a week and then another 10 in another month; it ought to be pretty clear that they are transferring weapons. So what do you need to shut it down?

Mr. Hoover?

MR. HOOVER: Yes, ma'am.

I'd like to qualify what I stated earlier when Senator Durbin asked me about the numbers that flow daily across into Mexico. I'm not sure where those institutes get their numbers. The investigations that we have and that we see for firearms flowing across the border don't show us individuals taking thousands of guns a day or at a time flowing into Mexico. And I was simply referring to the amount of weapons that we see these traffickers taking across into the border.

The FFLs that we work -- we have to remember that these firearms are legally purchased in some instances and in some instances are not. And when we have information through our outreach with these federal firearms licensees, the gun dealers, we certainly take quick action on surveilling those individuals and sharing that information not just with my partners here at the table but also with the officials in Mexico through our relationships with PGR and the various law enforcement agencies. And we provide that information as quickly as we can to those agencies to ensure we are acting on those folks that are taking those weapons across the border into Mexico.

SEN. FEINSTEIN: Yes, but clearly it's not enough. I mean, they're all over Mexico.

MR. HOOVER: Yes, ma'am.

SEN. FEINSTEIN: You know, when we're told that 90 percent of the weapons used by the cartels come from the United States, we need to shut it off.

MR. KIBBLE: Ma'am, I would just also add that, speaking specifically to the Arms Export Control Act, that historically has been a statute that has been more challenging to work with because of the "willfulness" element in terms of the licensing requirements for an exporter to obtain a license from the State Department for U.S. munitions list items.

But with the renewal of the Patriot Act in 2006, we gained smuggling goods from the U.S., 18 USC 554, which essentially was the converse of our inbound smuggling authority, which dramatically simplified and made more consistent the elements that we need to establish to show smuggling. And that has been a new authority that we've really based our Armas Cruzadas effort on to attack these weapons-smuggling networks.

Just in the past couple of months, we've elevated our operations along the Southwest border. And just in a couple of months, with some additional resources applied to this problem, we've identified a number of issues.

First off, we've interdicted more weapons than we have in entire previous fiscal years just in a two-month period. Secondly, we found that there are a lot of intelligence gaps, because whereas we do see this technique, it's called (ant ?) trafficking, in terms of the majority of the weapons are moved in amounts of one or two weapons concealed in vehicles and driven across a land border, we don't know near enough about what's happening in the air domain, in our containerized shipments. And these are all areas where, as we apply more resources to the problem, we'll get a better picture of some of the vulnerabilities and be able to better allocate resources to mitigate those particular vulnerabilities.

SEN. FEINSTEIN: Thank you.

My time is up. Thank you.

SEN. DURBIN: Senator Grassley?

SEN. GRASSLEY: Mr. Chairman, I'd like to put a statement in the record -- an article in the record relating to my questioning.

MR. : What happened to the early bird rule?

SEN. DURBIN: Excuse me just a second. (Off mike consultation.)

I'm trying to establish the appropriate protocol here -- (laughs) -- because we have several ranking members. Senator Grassley is ranking to Senator Feinstein on the narcotics control. If we could flip a coin or -- (laughter) -- whatever you like.

SEN. GRASSLEY: I could come back at 12:10 but I've got to be at a place at 11:57.

SEN. DURBIN: What would you like to do, Senator Specter, as ranking member of the full committee?

SEN. SPECTER: I'll decide that the next time I'm chairing the hearing. (Laughter.) But I recollect being ranking or something like that myself.

SEN. DURBIN: Well, in my defense I'm going to plead that your Republican staff gave us the order and I recognize Senator Grassley.

SEN. GRASSLEY: I did ask permission to put this in the record.

SEN. DURBIN: Without objection.


I've been hearing about the need to reform law enforcement authority to investigate under Title 21. Currently DEA and FBI have authority to investigate Title 21 along with a limited number of ICE agents. ICE agents are cross-designated to conduct investigations under supervision of DEA. A '94 MOU between then customs services and DEA limits the number of cross-designations. Further, I understand that efforts initiated in 2004 to update this MOU failed.

Mr. Kibble, if an ICE agent who is not cross-designated encounters narcotics in the course of another investigation within ICE's jurisdiction, what happens?

MR. KIBBLE: Sir, he would either need to reach out to a cross- designated ICE agent that could respond to the scene to handle the ensuing investigation or a DEA agent.

SEN. GRASSLEY: In other words, that ICE agent could not make that arrest?

MR. KIBBLE: No, sir. Not under Title 21 authority. No, sir.


Mr. Placido, how many ICE special agents have cross-designation authority and how do they coordinate their investigations with the DEA?

MR. PLACIDO: Thank you for the question, Senator.

There are currently 1,263 ICE agents who are cross-designated and, to my knowledge, we've never put an upper limit. That represents about 19 percent of Immigration and Customs Enforcement special agents who are cross-designated. And I don't believe that the discussion, spirited as it may have been over time, really revolves around whether ICE should have Title 21 or not. It really revolves around the question of coordinating those investigations, the investigations that I cited for you, Project Reckoning and Operation Accelerator being excellent examples. If we put more agents working counterdrug work and they don't coordinate through this SOD process, we could actually have the unintended consequence of putting more resources and having less results.

SEN. GRASSLEY: How do they coordinate, is my question?

MR. PLACIDO: Senator, frankly, we do not believe that we have the full measure of coordination within this SOD process that would include participation at the OCDETF Fusion Center. Coordinating some of the bits of information we use to connect these seemingly disparate investigations are communications devices, information that comes from financial investigations, and that has occasionally been a source of problems.


Let's go back to Mr. Kibble. Who determines which agency will investigate drug crime with a border or port of entry nexus?

MR. KIBBLE: Well, currently, sir, we're governed by the MOU that you acknowledged that was written in 1994 for seizures involving the port of entry. Cross-designated ICE agents can handle those investigations and also investigations involving smuggling or border nexus that are initiated by the agency.


Mr. Placido, has ICE asked for permission from DEA for additional personnel to have this special authority? If so, what is the status of that request?

MR. PLACIDO: Again, to my knowledge, Senator, we have never turned down requests for cross-designation.

There is no upper limit on the numbers. The issue with DEA has always been not whether they have the authority but how they would exercise it and under what conditions in terms of coordination.

MR. KIBBLE: If I could speak more broadly, Senator, to the issue, I think Tony hits on the exact question, because coordination has got to be key. We've got to figure out ways. We've always got to be working toward more effectively coordinating our efforts. But that extends beyond the Title 21 community.

I mean, we're seeing these threats converge in cross-border criminal networks so we've got to use mechanisms, such as fusion centers, such as the regional de-confliction centers that have proliferated throughout the country, and also new technological innovations, such as DOJ's N-DEx or DHS's law enforcement information sharing service.

When we get that aside, then it comes to why not leverage 5,000 additional agents, you know, with that authority? Just to kind of clarify what Tony made, there are pending requests, but really, we've always been told that we are capped at 1,475 positions.

SEN. GRASSLEY: Let me answer the question. I think common sense dictates that it'd be better to have more investigators looking for illegal drugs than not having more investigators looking at illegal drugs.

MR. KIBBLE: I would comment in this way: I mean, there are some efficiencies that are gained across the U.S. government when we can deal with the full spectrum of cross-border crime. For example, those agents that we have -- those teams that we've added to deal with weapons and cash are primarily focused on weapons for Armas Cruzadas along the Southwest border are also seizing millions of dollars in outbound currency. And they're also generating cooperating defendants that are providing information with respect to Title 21 matters.

So there are efficiencies that are gained when an ICE investigator can -- when responding at a particular event -- can deal with the full spectrum of crime that's in front of him.

SEN. GRASSLEY: Let me ask if you've considered raising the number of agents that can be cross-designated, and if you haven't, why not?

MR. PLACIDO: As I said, Senator, to my knowledge there is no upper limit on the numbers of ICE agents that could be cross- designated. But if I may give you a practical example of what I'm talking about: This year alone, the Drug Enforcement Administration will spend more than $56 million in taxpayer money to conduct court- authorized Title 3's, or telecommunications intercepts. We do that in a way that is coordinated with most of our federal partners because somebody taking even well-intentioned action that is uncoordinated can cause those monthlong investigations, the defendants to drop cell phones, defendants who we were planning to arrest to become fugitives and to leave.

And so our issue is not whether we could use more people to help us prosecute the efforts against drug traffickers, it's that those folks need to be working within a system that has been designed and crafted carefully over two decades and works very, very effectively. In fact, we see our partners at the FBI now moving their International Organized Crime Center, which deals with non-drug-related organized crime, into the construct of Special Operations Division in the OCDETF fusion center for this very purpose.

SEN. DURBIN: Thank you very much.

I will now recognize Senator Feingold and, in an attempt to rescue my career in the Senate Judiciary Committee, Senator Specter -- first Senator Feingold.

SEN. RUSSELL D. FEINGOLD (D-WI): I support that and I thank you.

I do want to thank Senators Durbin and Feinstein for calling this hearing to discuss this urgent national security matter. I thank the witnesses for being here.

First I want to note how pleased I am that we're finally starting to provide the state and local law enforcement with the funding that they need to keep us safe. This much-needed support was simply not provided during the previous administration. And for the past several years, when I've met with law enforcement personnel everywhere in my state, the conversation has always been about the severe lack of funding and the resulting rising crime rates and job losses and lack of innovation.

Of course, another issue that I'm hearing more and more about is the prevalence of Mexican-produced drugs in my state. The DEA recently released its 2000 report, including specifics about the drug situation in Wisconsin. According to the report, Mexican drug- trafficking organizations are responsible for most of the cocaine, crack and marijuana that is available in Wisconsin and they also bring methamphetamines into the state. And although Wisconsin does not contain a major hub city for Mexican drug traffickers, it is located with Chicago to its south and Minneapolis to its west and this makes cities in Wisconsin easy as secondary destinations for large amounts of drugs.

While the effects of the problem are being seen by state and local law enforcement across the country, at its core this is an issue, of course, about our border with Mexico. This problem, as we've heard today, has taken on an increasingly troubling dimension as the violence in Mexico -- (audio break) -- military personnel and, as you've said, innocent bystanders.

We must address this crisis in a proactive and coordinated manner, focusing on improving law enforcement while also supporting efforts to enhance the rule of law in Mexico. So the hearing today is very important to move this forward.

Mr. Kibble and Mr. Hoover, I'm -- I was deeply troubled to learn that the vast majority of weapons used by drug cartels in Mexico come from the United States and that the Mexican cartels are increasingly smuggling military equipment that cannot be legally sold to civilians in either country.

Would you please describe the primary source of such weapons? And what efforts are under way to enhance our ability to prevent these weapons from entering the civilian sector?

Mr. Hoover?

MR. HOOVER: As far as military firearms, sir, we have had fewer than, I believe, a dozen traces that go back to military firearms. Now, we have had some military -- United States-originated military instruments such as grenades that have ended up with the cartels. And I would like to speak to you in another hearing or another matter about that --


MR. HOOVER: -- but I can't go further into that as we are in this session.

SEN. FEINGOLD: We'll do that. We'll do that later.

MR. HOOVER: Yes, sir.

SEN. FEINGOLD: Mr. Kibble?

MR. KIBBLE: Sir, and this is more anecdotal, but we do have some investigations that have indicated that those weapons may be diverted from other regions and not necessarily coming directly from the U.S. And that's, again, something that we could discuss in greater detail in a different forum.

SEN. FEINGOLD: I look forward to doing that.

Mr. Placido, are you coordinating your efforts to train Mexican law enforcement personnel with USAID's judicial reform efforts?

MR. PLACIDO: Within the embassy there is a law enforcement country team that does include USAID, and I know that under the Merida Initiative, there is that coordination. Most of the training that DEA is directly involved in involves our vetted units that we work with in Mexico.

That portion of the training is not really closely affiliated with the USAID effort.

They tend to be focused on the judicial reform piece with the judges, prosecutors and the institutions that they represent, sir.

SEN. FEINGOLD: Would you also comment on the State Department's Merida Initiative -- which aspects of this initiative have been the most effective and where there's some room for improvement?

MR. PLACIDO: Well, I think, as Senator Feinstein mentioned, there certainly is a delay on some of the big-ticket items like helicopters and vessels, planes that are -- frankly, they require a protracted process for approval here in the United States. And then once they're approved, in terms of an exchange, these are not the kinds of items that are sitting on the shelf and they purchase one and send it down. So there has been a lag in the delivery of some of the big-ticket items that will be important in helping the Mexican government facilitate its important work.

I think the area that we've been most successful in, frankly, has been in the "soft" side, exchanging intelligence information and collaborating with one another to identify key vulnerabilities in this trade and to immobilize the command and control elements of the organizations that foment so much of this violence.

SEN. FEINGOLD: Thank you.

Thank you, Mr. Chairman.

SEN. DURBIN: Senator Specter.

SEN. SPECTER: The facts about what is going on in Mexico are staggering. They're posing an enormous threat to the United States. When we listen to the testimony and follow the press, we see that it is anarchy down there. When you have a police chief in Juarez who was forced out of office because they're killing his deputies, how much closer can you come to a total breakdown of law and order?

And when you see how much drugs are coming into this country from Mexico, threatening our young people and older people alike, I think we just have to do a lot more about it. And the agencies here have an enormous responsibility which isn't being fulfilled. Your resource is insufficient. You ought to be raising hell and bringing those demands to this committee.

I've made two trips to Mexico -- in August of 2005 and also in August of 2008. I'd been there before, but I went specially to talk to the narcotics officials, and they emphasized to me that the United States was a major cause of the problem on smuggling -- weapons smuggling. And that's something -- is our responsibility -- we ought to do something about.

And the kind of funds which have been allocated to Mexico are small compared to what we spend in other places -- looking at $400 million last year. Looking at what was done in Colombia, the United States had an investment of something like $4.5 billion. Colombia had a problem which was awful, but I don't think any worse than Mexico. The drug cartel shot up the supreme court in the early '80s.

When I traveled to Colombia I would go in in the morning and leave before sunset because U.S. citizens were being kidnapped -- a million dollars was the chief price tag. So there's really a great deal more that needs to be done.

We're going to have the confirmation hearing of the new so-called drug czar -- the Seattle Chief of Police, Gil Kerlikowske -- and that will give this committee an opportunity to really dig in and do something more. I hear people planning trips to Mexico -- American citizens -- and wondering if they really ought to go.

Governor Goddard, how serious is the problem for your citizens in a neighboring state?

ATTY GEN. GODDARD: Mr. Chairman, Senator Specter, I appreciate the promotion. I'm the attorney general, but it --

SEN. SPECTER: Attorney general?

ATTY GEN. GODDARD: My thanks, sir. The --

SEN. SPECTER: Your just one step away. (Laughter.) I may --

ATTY GEN. GODDARD: (Laughs.) Aspiring perhaps, but not there.

SEN. SPECTER: I may have understated the case by not calling you senator, or maybe that would have been less complimentary than governor. It's kind of hard to figure that out.

ATTY GEN. GODDARD: Would have been highly complimentary, Senator.

But we are facing a very serious issue. One of our universities basically for spring break said that they did not advise their students to go into Mexico.

SEN. SPECTER: How much are your citizens threatened, if at all, by what's going on in Mexico?

ATTY GEN. GODDARD: Mr. Chairman, Senator Specter, I believe they are increasingly threatened. Right now the kind of --

SEN. SPECTER: Never mind increasingly. Are they threatened?

ATTY GEN. GODDARD: Yes, sir, through kidnappings, through violent confrontations between drug dealers and human smugglers. Yes, we are threatened.

SEN. SPECTER: Let me turn to Mr. Hoover, Mr. Placido and Mr. Kibble.

You men have direct responsibilities on the smuggling issues. What kind of resources do you need to stop the smuggling?

We talked about illegal immigrants coming in from Mexico. It's a lot more serious if illegal drugs are going into Mexico -- illegal weapons are going into Mexico.

Well, my time is up and I'm not going to exceed it, but I'd like an answer in writing from each of you or maybe from your directors as to what you need to solve the smuggling problem. My conversations with the Mexican officials tell me that they think that's a tremendous part of the problem.

They'd also like to see us cut down on our demand side so that it wouldn't encourage people to smuggle drugs into the United States. But on the gun smuggling, that's right at our doorstep.

That concludes my questioning.

SEN. DURBIN: Thank you.

Senator Klobuchar?

SEN. AMY KLOBUCHAR (D-MN): Thank you very much, Senator Durbin, for holding this hearing. I also wanted to thank my colleague Senator Kaufman for allowing me to go next.

I want to thank you for all the good work you're doing. I'm a former prosecutor. I know how difficult this can be and I wanted to also say, as Feingold, Senator Feingold mentioned, we are seeing this in the Midwest as well.

We have just seen, in Minnesota, just last month federal law enforcement officials arrested 27 individuals in Minneapolis and St. Paul with ties to Mexico's powerful Sinaloa cartel. So this is not just in Arizona, as bad as it is. It is across the United States.

I wondered -- one of the things that I've been reading about is, Mr. Placido, is just that the -- there are reports that these major cartels that used to be fighting each other are now potentially joining forces in alliance, which makes it even harder to take them on, and is there any truth to that?

MR. PLACIDO: Thank you for the question. We have heard at various times over the last two years discussions about alliances and partnerships among and between rival cartels.

They've never held and they have fallen apart in the past. And what we see is you could actually group the violence in Mexico into three broad categories: intracartel violence, where members of the same criminal enterprise are fighting one another; we see a great deal of that within the Sinaloa cartel as Beltran Leyva has broken away from Chapo Guzman and Ismael Zambada Garcia, and we see intercartel violence where rival cartels fight each other, and violence between the cartels and the government itself.

One of the things that we have been very pleased about is in our discussions with the government of Mexico, they appreciate the fact that it is necessary to systematically attack all of the cartels at the same time so that we don't have the unintended consequence of creating a super cartel that doesn't have to compete with others. We think that that is going to be an important milestone as we advance on the Merida Initiative to make sure that the power and influence of these criminal organizations are decreased at similar levels. So far we see that happening.

SEN. KLOBUCHAR: Okay. Very good.

Also, we've had some discussions about the corruption and what that means, and I believe if we're really going to make this work and help President Calderon, who's taken such admirable steps, that we need to have a strong judicial system in Mexico that's not corrupt.

Attorney General Goddard, do you want to comment on how we're going to get there and any ideas you have for that?

ATTY GEN. GODDARD: Thank you, Mr. Chairman, Senator Klobuchar.

I'm pleased to do that because our group of western attorneys general is part of -- a very small part down at the bottom of the Merida Initiative trying to provide some training to the Mexican state officials who are changing the way they do criminal justice. They are going to a confrontation style much more similar to ours in terms of courtroom procedure and I think it's a very exciting change and we'll have a much --

SEN. KLOBUCHAR: What did they have before, if they didn't have -- maybe I'm just too used to confrontation style?

ATTY GEN. GODDARD: They do not have jury trials. They have criminal trials based before a judge without witnesses entirely based on sworn deposition testimony. So it is a paper trial, and unfortunately that, I believe, has had -- I don't want to be critical of a different system of jurisdiction, but nonetheless, it has tended to be nontransparent. It has tended to be fairly slow to convict some of the criminals that come before the bar. And I think the change is something that will be very positive.

There also have been some very significant efforts to help, let's say, professionalize the police forces throughout Mexico. Literally thousands of officers have been discharged because of their connections with the drug cartels. And I think, as has been said by many of the panelists here, the efforts by the Calderon administration to basically fight on every front against the threat that they're facing is extraordinary and commendable.

SEN. KLOBUCHAR: So in other words, when it was just -- when they do it just on paper it could lend itself to more corruption because it's not transparent? There's not hearings in public?

ATTY GEN. GODDARD: Senator, that's certainly my belief.

SEN. KLOBUCHAR: Okay, very good.

Last question, just quickly: the banking -- you raised that, Attorney General Goddard, how we're to get to the proceeds, to get to the money, which you all talked about, we're going to have to be able to follow those monies. As we used to say in our office, follow the money and you find the bad guys. So could you talk about how that cooperation is going?

ATTY GEN. GODDARD: In light of the discussion, Senator, it could be certainly better. For a long time we've been the only agency -- federal, state, or local -- that has done the money-transfer prosecutions in connection with human smuggling. Now, the drug transfers are very different and they largely involved bulk cash. Human smuggling involves electronic transfer.

And as I said in my testimony, we could use a lot of help in terms of interagency coordination, in terms of interstate coordination. We definitely believe all the border states ought to be involved, in both Mexico and the United States, in locating the money transmitters. We believe we know where they are, just based on the data, but our data now is three years old. Nothing from the wire transmitters has come to our -- into our hands since then. And we've gotten pretty good at being able to identify those particular transmitting agents who are corrupt.

SEN. KLOBUCHAR: Okay. Thank you very much.

SEN. DURBIN: Thank you very much.

MR. KIBBLE: I would --

SEN. DURBIN: Oh, I'm sorry. Go ahead.

MR. KIBBLE: I would just add that, I mean, speaking more broadly about money laundering and bilateral money laundering efforts in particular, I mean, the collaboration has never been better with the Mexicans, I mean, whether it be bulk-cash smuggling, whether it be trade-based money laundering, such as a black market peso exchange. I mean, we've run parallel electronic intercept operations and we exchange information real time. It's never been better.

SEN. KLOBUCHAR: Thank you very much.

SEN. DURBIN: Before recognizing Senator Sessions, Senator Feinstein has asked for our indulgence to clarify the record.

SEN. FEINSTEIN: If I may, on the funding of Merida, as I understand it, the first funding -- last year's emergency supplemental -- the omnibus then -- we just passed -- added $300 million of funding. I think you are correct, Mr. Placido, that there -- it's the big equipment, it's the helicopters and the surveillance equipment which they need and need long before 2011 when they're slated to get it.

Thank you very much, Mr. Chairman.

SEN. DURBIN: Senator Sessions?


On the question of guns, isn't it true, I guess, Mr. Hoover, that most of the gun dealers are operating legally? You do undercover operations and other things if you think they're illegal. And their guns can be bought or stolen and those tend to be the guns that are probably shipped into Mexico.

MR. HOOVER: Yes, sir. I --

SEN. SESSIONS: It's not like there's one or two gun dealers selling guns to -- by the hundreds to bad people, is it?

MR. HOOVER: If we uncover FFLs doing that we would revoke them and prosecute them. I can tell you that ATF in calendar year 2008 conducted over 11,000 inspections of federal firearms licensees and found that less than 1 percent needed to have their licenses revoked.

SEN. SESSIONS: Well, yeah, and it's just -- we've got a constitutional right to keep and bear arms and Mexico does not and so it's really not an answer to this problem that the United States is going to stop providing its citizens with guns. That's just not going to happen.

Can a non-citizen buy a gun in the United States?

MR. HOOVER: Under certain circumstances, yes, sir. An alien can purchase a firearm with proper identification. He can --

SEN. SESSIONS: What about if they're illegally here?

MR. HOOVER: No, sir, not illegally.

SEN. SESSIONS: So if a person's not -- if they're using false identification or something, that's a federal crime?

MR. HOOVER: That is, sir.

SEN. SESSIONS: Wouldn't that be a good way to help Mexico?

MR. HOOVER: Absolutely.

SEN. SESSIONS: Identify people who are here illegally that are buying guns and receiving and transporting them illegally?

MR. HOOVER: Absolutely.

SEN. SESSIONS: That would be a federal offense already. Well, I think we could look for other things we could do to help, but I just -- to me that's not the problem. We've got a lot of guns on our side of the fence and people can go and buy them whenever they want to, but we don't have the murder rate that Mexico now has.

The problem with the murder rate in Mexico, I think, as some of you have indicated, is the president is stepping up. He's taking on these cartels. He's causing violence, and if he will see this through, like President Uribe has done in Colombia, I believe he's going to be successful. And he needs to be successful, not for the United States but for the people of Mexico. He cannot allow organized criminal elements to use violence, intimidation and murder to operate in his country and be a safe, decent place that the good people of Mexico would like it to be. So I respect what he's doing. I appreciate that.

I would note that we had dramatic increases -- or decreases in violence along the area of the border in San Diego where a fence was placed. We still haven't completed all the fencing. I see recently in the Arizona Star Sunday, Border Patrol Station Chief Alan White said: "These fences are absolutely necessary. I can't look you in the eye and tell you I'm doing a good job without these barriers." So I think we need to complete what the Congress has passed and I hope this administration will do so.

Now, let me get to the thing I'd like to say. It strikes me as a prosecutor and -- Attorney General Goddard?


SEN. SESSIONS: You talk about the joint operations that have been successful. That's my idea of what works.

It seems to me -- Mr. Placido, you're the intel guy -- it seems to me that these organizations in Mexico have tentacles that reach all into the United States and it's those tentacles that collect the money and funnel it back that builds their power. Is that correct, fundamentally?

MR. PLACIDO: Yes, sir.

SEN. SESSIONS: And isn't one of the best ways we can help Mexico is to identify through intelligence, through task forces and that sort of thing and target these organizations that are collecting the money in the United States and prosecute them aggressively? Wouldn't that be a very good way to weaken the cartels in Mexico?

MR. PLACIDO: It is and it's in fact what we're doing, sir. If you look at Operation Accelerator that recently came down, a joint interagency OCDETF investigation led by DEA resulted in over 750 arrests of people predominantly in the United States affiliated with the Sinaloa cartel.

Prior to that, Project Reckoning that targeted the Gulf cartel in Mexico resulted in similar numbers of arrest as well as seizures in aggregate between both operations of over $130 million in cash that fuels that violence.

So yes, sir, we agree.

SEN. SESSIONS: So that's a continual flow of American wealth that strengthened these illegal cartels.

Mr. Attorney General, what do you think about that? You see it from a border state's perspective and you talked about some of these effective joint operations.

ATTY GEN. GODDARD: Thank you, Mr. Chairman, Senator Sessions.

The only way we've been successful has been through joint operations with local police forces and sheriffs and through the federal agencies that are here at this table and a number of others -- Border Patrol, FBI, Park Service. There is truly an extraordinary number of different federal resources that are necessary to deal with this problem. I would simply point out that the cartels are dealing in four things for sure: human beings, drugs, arms and cash. And here at the table we have different agencies that deal with arms, that deal with drugs, that deal with human beings. Somewhere else, the cash people, I suppose, are sequestered.

The only way we're going to be successful is to truly mount a comprehensive attack upon the cartels. They're doing a comprehensive attack on us through all four of these different criminal activities. I'm afraid in this country we tend to segregate by specialty the various areas that we are going to prosecute. And our experience on the border is we can't do that. We've got to cross the jurisdictional lines or we're going to fail.

SEN. SESSIONS: That, I couldn't agree more, Mr. Chairman.

Thank you, Attorney General.

SEN. DURBIN: Thank you, Senator Sessions.

Senator Kaufman.

SEN. EDWARD E. KAUFMAN (D-DE): Thank you, Mr. Chairman, and thank you, Co-Chairman Senator Feinstein. I think this is a great ideal. Clearly the hearing already has been -- helped me understand what's going on and I think that this Subcommittee on Crime and Drugs has a very ambitious schedule and I think it will be a good one and I'm looking forward to participating.

Attorney General Goddard, I think you are quite compelling on wire transfers. What could this committee do? What could the Congress do? What could federal government do to help you as an attorney general deal with these problems and make it easier for you to catch these folks?

ATTY GEN. GODDARD: Thank you, Mr. Chairman, Senator Kaufman.

I think the first thing is data. We need to know the volume. We can discriminate, within the millions -- billions of dollars of wire transfers back and forth across the border those that are most characteristic of criminal activity, but we have to have the data first and that's what we've had comprehensive and systematic efforts to avoid providing that information. I think it's going to take a certain amount of federal authority to make sure that it happens.

I think we have to change some of the definitions. We've talked about stored-value cards. It's a huge loophole that I think is already blowing a hole in our money-laundering prevention ability and we need to step up that.

And we have a, I think, too high a threshold for individual daily amounts of financial transactions, especially by electronic transfer that result in a reported incident. It's $10,000 today. I'm not going to get in the way of the legislators in terms of where it should be, but I would submit it should be much lower than it is today.

SEN. KAUFMAN: Thank you.

Representatives of the federal agencies, I don't know how you do this. I mean, the federal -- with corruption as rampant as it is in Mexico in the law enforcement community -- at least that's my understanding -- I mean, it -- does the local -- the law enforcement, even President Calderon -- have the ability to investigate and catch drug cartels with the amazing amount of corruption that's going on?

Mr. Hoover, Mr. Placido?

MR. PLACIDO: Yes, sir. Thank you for the question, Senator.

Again, as someone who has followed Mexico closely, I have to tell you I have been deeply impressed with the level of commitment to not only fighting the cartels but to cleaning up corruption in Mexico by this administration.

I think it was mentioned here earlier by the chairman, but effectively the deputy attorney general of PRG -- of Mexico's attorney general office was arrested and is being prosecuted in Mexico. That is not at the insistence of the U.S. government. That is because the government in Mexico, President Calderon, is committed to cleaning it up.

I don't want to minimize how difficult it will be. He has a large challenge in front of him, but we see them absolutely committed and they have been collaborating not only with DEA but with the U.S. Department of Justice on a project that I guess translates to cleanup, Operation Cleanup, to comprehensively address corruption not only in the attorney general's office but in the secretariat of public security and in the military. And they've arrested senior-level officials in all three of those organizations.

Their commitment, in my view, is absolutely unparalleled in the time that I've been watching this situation.

SEN. KAUFMAN: Mr. Kibble, Mr. Hoover, is that pretty much your feeling?

Mr. Placido, I understand there's a effort in this line to create kind of a national police force with even a kind of anti-drug division similar to DEA. What do you think? Is this something that's realistic? Can it work?

MR. PLACIDO: (Off mike.) How's this? Any better?

In the past in Mexico there have been any number of attempts to reorganize changing the names and the identities of the organizations involved, and while it may in fact be beneficial for them to create the so-called cuerpo de policia federal, or the federal police force, that won't be the solution. The solution is what they're doing right now, the hard work of eliminating corruption and building organizations that are credible and confident. And may I say, there are in those organizations today many courageous and heroic people who are laboring at great personal risk to help Mexico and, by extension, help the United States.

SEN. KAUFMAN: Thank you.

Mr. Hoover, just to kind of clarify the record: Are guns being shipped from the United States into Mexico part of the problem?

MR. HOOVER: Shipped into Mexico, they would be trafficked illegally. Yes, sir, that would definitely be part of the problem.

SEN. KAUFMAN: I just want to make sure that we all understand. I mean, this is a key part of the problem is guns that come from the United States into Mexico.

MR. HOOVER: Yes, sir. As indicated previously by both Senator Durbin and Senator Feinstein, 90 percent of the weapons that we trace that the Mexicans recover are sourced state -- here in the United States.

SEN. KAUFMAN: Thank you.

Thank you, Mr. Chairman.

SEN. DURBIN: Thank you, Senator Kaufman.

Senator Wyden?

SEN. RON WYDEN (D-OR): Thank you, Mr. Chairman.

I want to commend you, Mr. Chairman, also Senator Feinstein. I know both of you have a long-standing interest in this. I think it's an extremely important hearing and I want to commend my colleagues for getting into it.

Attorney General Goddard, a question for you, and I'm going to spare, I think, you other three at least for my initial kind of round, because the attorney general has been working in an area that Oregon law enforcement officials are particularly interested in and that is this matter of Article 4 prosecutions.

Article 4 prosecutions allow U.S. authorities to pursue Mexican nationals who've committed a crime -- say, a crime in Oregon or California or Illinois -- and then flee to Mexico. And in our state, law enforcement officials are dealing with a case exactly like this right now. There's been an allegation of a double murder. The accused is a Mexican national who's charged with killing his cousin and niece in January in Polk County in our state and has fled to Mexico. And Oregon law enforcement officials would like to see this individual prosecuted.

So could you tell us your experience, Attorney General Goddard, with Article 4 prosecutions?

ATTY GEN. GODDARD: Thank you, Mr. Chairman, Senator Wyden. I certainly would be happy to. I believe Article 4 is one of the important tools in the arsenal. In Arizona we have used the process on many occasions while I've been attorney general, and it goes back way before then.

It is complicated and it requires a certain amount of specialized knowledge. We have in Arizona specialized prosecutors and investigators who understand the process that is required by Article 4. It is very different from our method of criminal trial. But it does provide the opportunity in the case that you've given, and we have several similar in Arizona, where we know who the suspect is, to be able to bring it to the attention of Mexican authorities and have them tried and, if convicted, serve their sentence in Mexico.

SEN. WYDEN: Let's talk about ways to make it simpler, because I think you put your finger on it, that this is a useful tool, but at present it's just too complicated as it is presently constituted. Would it be helpful, in your judgment, to have the Justice Department, the U.S. Justice Department, involved in these cases? The Justice Department, as the program is now set up, is not involved.

ATTY GEN. GODDARD: Mr. Chairman, Senator Wyden, I'm cautious of that. As a state attorney general, we like to do things ourselves. But you put your finger on an important disparity. If Article 4's are handled by the justice department in Mexico, by the PGR, and so we have sort of the anomalous situation of states dealing with a federal agency -- I think it's worked pretty well, but it probably could be improved both in terms of understanding of the process and making it simply more available to prosecutors throughout our country.

SEN. WYDEN: Because my sense is, talking to local law enforcement officials, they certainly don't want the federal government to come on in and dictate to them various things with respect to these prosecutions, but they do like the idea of some help with coordinating the way these cases are brought. There may be instances where some training and specialized assistance is necessary. I gather that those kinds of things you would see as useful?

ATTY GEN. GODDARD: Mr. Chairman, Senator Wyden, absolutely.

I think anything that could raise the bar in this kind of joint prosecution effort and in the new area that we're just beginning to look at now, which is using Article 4 not just where we have a carefully identified suspect, which is the way it's done today, but to actually collaborate with Mexican authorities in the investigation of crime so that when we have a suspect but we don't know who they are, we could open an investigative file on both sides of the border using Article 4 and thereby, I think, significantly increase our ability to cross the border with law enforcement efforts.

SEN. WYDEN: So if you're me and you're drafting legislation because your local law enforcement officials want to get more mileage out of Article 4, what else would you consider putting in other the issues we're talking about with respect to the Justice Department?

ATTY GEN. GODDARD: Mr. Chairman, Senator Wyden, I'd be happy to work on that with some of our Article 4 folks in Arizona. I believe training, funding and the enhancement of investigations jointly on both sides of the border are tremendously helpful. Certainly Justice Department active involvement could be very helpful in coordinating what right now is an extremely diverse and, I would say, fractured effort to --

SEN. WYDEN: Well, we'll follow up with you. And just so I'm clear, this is something that you consider a useful tool, you'd like to make more use of it in the future, looking at ways to make it simpler and to expedite it would be helpful.

ATTY GEN. GODDARD: Senator, absolutely.


Thank you, Mr. Chairman.

Thank you, Senator Feinstein.

SEN. DURBIN: Thank you, Senator Wyden.

I want to thank the entire panel and just note for the record that we had 10 members of this committee come to ask questions, which is extraordinary for a subcommittee meeting and I think reflects the gravity of the issue that we are considering.

Thanks to each of you for your testimony, and I'd like to say to the attorney general of Arizona, thanks especially for coming. I think you have really issued a challenge to this committee. If this is, in fact, going to be the crime subcommittee, and we acknowledge your statement that we are dealing with the organized criminal threat in the United States today, which is coming from Mexico in these drug cartels, then this will not be the last of the hearings on the subject. There will be more.

And I'm going to invite Senator Feinstein as often as she'd like to to participate with members of her panel as well.

ATTY GEN. GODDARD: Thank you, sir.

SEN. DURBIN: My frustration from time to time with these subcommittee hearings, for those who are watching, those who are testifying, is you wonder now what's going to happen? What's next?

I think you've given us three practical, specific ideas that we're going to look into. There may be more that have come out of this testimony. But certainly, to expand the high-intensity drug- trafficking areas to include weapons and human trafficking; secondly, to lower the $10,000 reporting threshold for these fund transfers; third, to expand our efforts when it comes to stored-value cards so that they can be read and we can appreciate how much money is being transferred at any given time. Those are three things that I wrote down quickly. As we review the record, there may be more. But we'd like to work with you on that.

The last point I'd like to make is that you mention in your testimony, both written and oral, references to Western Union. When we read that yesterday, we contacted the company and asked them if they'd like to submit a written statement for the record and they may do that, and, if so, I will send it to you for your reply as well so that the record is complete.

To the other members of the panel, thank you as well. There could be written questions coming your way. We certainly appreciate your being here today. Thank you.

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