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February 21, 2010 at 12:00a.m.

Lethal business takes aim at middle America

Los Angeles Times

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

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

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

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

Accent on customer service

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

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

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

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

The Xalisco strategy

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

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

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

Addiction mounts in Ohio

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

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

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

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

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

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

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

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

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