|Central American University - UCA
Number 412 | Noviembre 2015
The rise and fall of the Rosenthal Clan
Last month the US Treasury Department
accused three members of the Rosenthal clan,
one of Honduras’ most powerful families,
of drug trafficking and money laundering.
The patriarch of that family is ranked as
the fifth wealthiest man in Central America.
How did the Rosenthals make their fortune?
What’s behind the resounding fall of their empire?
A few notes to help readers understand
the importance of this happening and
imagine the possible repercussions for
Honduras and the region as a whole.
Ismael Moreno, SJ
On October 7, the US Department of Justice reported that Jaime Rosenthal, his son Yani Benjamín Rosenthal Hidalgo and his nephew Yankel Rosenthal had been fingered as drug traffickers and that the Treasury Department’s Office of Foreign Assets Control (OFAC) was accusing the Banco Continental, center of many of the powerful Rosenthal group’s businesses, as one of the most significant money laundering networks in Central America. The day before this announcement, Yankel Rosenthal was arrested and handcuffed while going through immigration at the Miami airport during one of his routine visits to the city. He was taken to New York to stand trial there. Yani Rosenthal voluntarily turned himself in to the US justice system in New York on October 28th.
A well-known secret
The news of the Rosenthals’ connections to drug trafficking, especially to the family cartel known as Los Cachiros, was no surprise in Honduras. It was a well-known secret that their bank had been moving dirty money for years. Trustworthy testimonies by ordinary people abound about the discovery of bulging amounts of income with no record of the issuing entity when they would update their Banco Continental account. We learned of one woman who discovered a deposit of 200,000 lempiras in her bank booklet and immediately went to the manager of that branch to return the money. “Don’t worry lady,” the manager assured her, “you didn’t have that money before and now you do. Don’t worry about where it came from; just worry about using it for your own good.” Things like this tended to happen in places where the drug barons reign. It was one of the ways they maintained the people’s support.
Yankel: The “black sheep”
The news that Yankel Rosenthal was detained in Miami was nothing new either. His direct connection to dirty money was also a well-known secret. According to rumors, the family patriarch himself, Jaime Rosenthal, considered him the “black sheep of the family” because “he even became a Conservative,” referring to the political commitment he took on with the presidential candidacy of the National Party’s Juan Orlando Hernández.
Yankel has backed Hernández for the last three years, funding his victorious campaign and drumming up votes for him. As president—and evidently owner—of the Marathon sports club, San Pedro Sula’s thriving soccer team and one of Honduras’ four soccer classics, Yankel also contributed to the emergence of the Royal Society of Tocoa team in alliance with Los Cachiros, to whom he was linked in so many businesses that the only thing left was to seal a blood pact with them.
Like Los Cachiros
What made poor people shudder, and wealthy people and politicians even more so, was a poster published by the US Treasury Department with the faces of Jaime Rosenthal, his nephew Yankel and son Yani similar to the one it had published a year before with the faces of the Rivera Maradiaga family, drug lords from the Cachiros cartel. Yani Rosenthal, minister of the presidency during the Zelaya government, a former presidential candidate and chair of the Liberal caucus of 13 National Congress members, was the man with the most promising political future in the Rosenthal family. The poster tagged all three as belonging to a drug-trafficking and money-laundering network through the Banco Continental, the fourth most prominent bank in Honduras, after FICOHSA, Atlántida and Occidental.
This poster stirred up an intense tizzy among the different economic and political elite. It also caused uncertainty and anxiety among the close to 12,000 employees of the different Rosenthal businesses and more than 25,000 employees of other businesses linked one way or another to Banco Continental’s financial movement and part of the powerful Continental Group. Among others, these include a meat packing company; several cattle ranches; a home construction company; a cable TV and internet company; timber, cacao, African palm and sugar cane plantations; a cold cuts company; a cement factory; an insurance company; a TV channel; a newspaper and even a huge crocodile nursery. And the tizzy was warranted, because all of them were seized by Honduras’ Administrative Office of Seized Assets (OABI).
Nobody knows for sure what exactly led to the Rosenthal debacle, but none doubts its links to the previous Cachiros debacle. The information the two main Cachiros, Javier and Leonel Rivera Maradiaga, surely divulged after fleeing Honduras for their lives and turning themselves in to US government authorities, must have been determinant in connecting the Rosenthal family to the structures linked to Honduras’ drug business.
The anxiety of many Honduran politicians and businessmen is increasing even more as they await new actions because not only Los Cachiros but also the Valle, Negro Lobo and other extradited drug traffickers have formed a regular symphonic choir. For every name they “sing” to the US authorities, their sentences are reduced or some sort of benefit is added to their captivity in the US prisons. Each day, politicians and businessmen awake wondering whether they are next on the list of those to be arraigned, extradited or seized by order of the United States.
Los Cachiros betrayed
Why did Los Cachiros fall? Everybody knows the answer. That cartel fell because Honduran politicians betrayed them to the US Drug Enforcement Agency (DEA) after having been their allies in the lucrative drug trafficking business.
Without exception, the history of local Honduran politics has never been anything more than a continuous chain of betrayals and disloyalties, starting with the people who surrounded Francisco Morazán back in his days to those who today evoke that same hero to live with exactly the opposite values of those for which Morazán fought and died. It has always been this way, from the battles between Nationalists and Liberals to their 2009 alliance to stage the coup against liberal Manuel Zelaya. Los Cachiros were betrayed by Honduran politicians, pure and simple.
And according to their symphonic cantata, Los Cachiros determined—or at least contributed to—the Rosenthal’s fall. But who exactly inside Honduras betrayed Los Cachiros? Put another way, who else is going to fall? Marvin Ponce, a man from peasant stock who is a unique personal adviser to President Juan Orlando Hernández and makes over US$4,000 a month by being next to Hernández, working to stir up environments, float trial balloons or take the population’s pulse on different issues, is reputed to have a “boca suelta” (loose-tongue). Ponce told envío that at least 15 of the country’s best-known people are still to fall.
Dragged in by the mafias
Jaime Rosenthal Oliva, unquestionably one of the country’s most prominent people, is not nouveau riche. He was already vieux riche when he was dragged in, as were others, by the mafia tidal wave that has created the nouveau riche. That same tide created and later ended the reign of Los Cachiros, drug lords who imposed their law in the northern coast until last year.
After amassing a fortune through myriad businesses during the second half of last century, the Rosenthal family, caught up in the dynamism surrounding the State’s deteriorated institutional framework and the excessive greed for money permeating all areas of the economy into which they diversified their fortune, got in bed with the drug traffickers in this century. It was that decision that led to the collapse of their fortune. To a certain extent, they were victims of an elite that always treated them with distrust and as strange competitors, but to an even greater extent, they had it coming. Many people in Honduras have perceived the Rosenthals as stingy, greedy and eager to increase their fortune no matter the cost.
The fact that don Jaime and his relatives were involved in dirty business doesn’t seem to be the issue for anybody, perhaps because by the time of their connections with drug trafficking, the protagonists were more his sons and other relatives than the patriarch himself. It is yet to be seen whether the fall of their emporium and extermination as prominent businessmen and politicians in Honduras and Central America is due solely to their alliance with Los Cachiros or other factors were added.
Austere and thrifty
Born in 1936 in San Pedro Sula, Jaime Rosenthal learned about work and study from his father, Yankel Rosenthal, after whom Jaime’s nephew is named. As a child he did chores around his father’s store while studying in one of the city’s best schools. While the chores were irrelevant, it was a lesson in learning to earn a living by the “sweat of his brow” as stated by the Jewish Torah. As a good son of a penny-pinching Jew, he also learned to save his earnings.
After high school, his father sent him to the United States to study engineering and business. Upon his return in 1958, he took over leadership of his father’s businesses. The sixties were the years when the Rosenthal’s fortune took off. From the start, Rosenthal diversified his capital. In 1974 he founded the Banco Continental, symbol of his success in business.
Up until his downfall in October, he would be the first in the office and would stay taking care of business until 5 pm, be it a workday or a holiday. Employees say he always dressed simply and was not known to be excessive in any way. “A fortune is made by saving and through austerity,” he would say to friends and employees alike.
Son of a wandering Jew
His father had come to Honduras in 1929 after a 10-year trip starting in faraway Romania. He was accompanied by his compatriot Jacobo Weizemblut. The two men went from country to country, and to this day nobody really knows the reason for their pilgrimage.
On their way through El Salvador, they met two sisters, whom they married: Jacobo to Maria Oliva and Yankel to Ester Oliva. It is said that the two sisters were from a successful coffee-producing family in Santa Ana and that their father, Domingo Oliva, an opponent of Maximiliano Hernández who was already shaping up as a dictator, preferred leaving his daughters in the hands of those two well-mannered, educated Jews than have their lives consumed by the turbulence of the approaching conflict.
The final destiny the two men aspired to was never intended to be Honduras, a strange and inhospitable country. Their compass was pointed towards the United States, where many Jews were starting to see economic success. However the capitalist crash of 1929 held them up in Honduras for a while. As time went on they decided to settle in the then-prosperous city of San Pedro Sula, where Arabs were already doing good business with the money the banana companies put in circulation. These Arab families had arrived decades before, fleeing wars and since some of them carried passports from Turkey, a country that welcomed Arab refugees, they remain nicknamed “the Turks” to this day.
They put all their eggs
in the bank basket
It is said that Yankel’s first business in San Pedro was a small store called Siga la Flecha (follow the arrow), where one could buy anything from bolts to liquor to castor oil for indigestion. Later, he purchased a store called Barret from an Englishman. He invested all his savings in it until turning it into the most famous store in San Pedro Sula. Much larger, Barret was a continuation of Siga la Flecha in that it also sold bolts, but in bulk, not by the unit. It also sold rum, wine and a broad range of medicines. That store, which entered the new century with prestige, has now has also been seized by the OABI.
The Rosenthal emporium, built upon those bolts and decades of saving capital, literally collapsed from one day to the next, between October 7 and October 20. Its reign in the northern Honduran coast, with headquarters in San Pedro Sula, crumbled like a sand castle. They paid a high price for the strategic error of putting all their eggs in one basket: putting their “legal” capital together with that resulting from their relationship with Los Cachiros and other mafias.
A well-known anecdote—be it true or apocryphal— is the response don Jaime always gave people. He insisted that none of the more than fifty family businesses were his. “The meat packing company, don Jaime”? “It’s not mine, it’s the bank’s.” “And the Cofradia ranch, don Jaime?” “It’s not mine, it’s the bank’s.” “And the sugar refinery, don Jaime?” “That’s not mine either, it’s the bank’s.” “And the cacao plantations, don Jaime?”... Everything belonged to the bank. “And the bank, don Jaime?” “Yes, that’s mine. That’s the only thing I have.” The long arm of the US law knew where to grab. It went for the bank and the rest collapsed.
25 years controlling
the Supreme Court
The Rosenthal clan is renowned for being hoarders. And that reputation is not apocryphal. Through the bank, Jaime, his sons, his only brother and his brother’s son Yankel, were happy to give out mortgage loans, which enabled them to obtain properties, businesses and ranches through foreclosures. It was said that “they are the owners of half of the northern coast.”
Tied to this enterprising capacity was their stinginess and visceral tendency to manipulate the law so their own interests would always come out unscathed. There’s a story about a lawyer, once elected as a Supreme Court justice, who was proud to have climbed to that position through his professionalism, competence and honesty. Only two days after taking office, when he answered a phone call he clearly heard don Jaime’s voice on the other end of the line saying without any hesitation: “Welcome to your new position. You should know that I, Jaime Rosenthal, put you in that position. I expect you to come over to celebrate and be informed of the services I expect you to provide us.”
Everybody in Honduras knows that Jaime Rosenthal was constantly present in the political world for 25 years, several times as the Liberal Party presidential candidate. In one occasion, during the eighties, he became Vice President, accompanying José Azcona.
Everybody also knows that his objective wasn’t to become President but to achieve the necessary quota of power when positions are distributed within the State institutions so nobody would challenge his control over the Supreme Court. He achieved this for 25 years and nobody can say the Rosenthals ever lost a court case in Honduras. Nor can anybody who presented a legal case against the Rosenthals claim they ever won.
“We quickly get fired”
It’s also said that the Rosenthals were experts in hiring people and keeping them employed without ever ensuring them their labor rights. Even after working for some time in any of their many businesses, nobody could feel secure of leaving with their benefits recognized.
Many employees have told about leaving one of the businesses without ever seeing any of their labor rights guaranteed. A few years ago, David Romero Murillo, a reporter from the Rosenthal’s national newspaper, El Tiempo, managed by Jaime’s son Carlos, suddenly showed up in the human rights area of the Jesuits’ Reflection, Research and Communication Team in El Progreso.
He was very anxious: “I need someone to at least listen to me. I work for a newspaper that claims to have a position favoring workers’ rights, but my rights have never been granted in the 20 years I’ve worked as news editor. Carlos Rosenthal quickly fires whoever tries to organize a union and represses any complaints.” Two years later, David Romero died after getting fired from the newspaper. It’s not clear whether the owner found out that he had gone for human rights advice or continued trying to raise awareness among his fellow workers so they could organize a union.
It’s said that lawyers were hired in the Rosenthal businesses for the sole purpose of protecting the owners from any employee lawsuit and to prepare grounds for firing employees who had worked for more than ten years to avoid having to grant them any of their labor rights.
Long before the Rosenthals were accused of their connections to drug trafficking, they had already made their fortune based on two factors. One was dedication to work of don Jaime and his family. And the other was the manipulation of Honduran laws to ensure that nobody, no matter how much power they might have, could come out ahead in any conflict with them.
The end of El Tiempo
On October 27, while President Juan Orlando Hernández was on an official visit to Germany requesting support for his project to fight impunity and defend human rights, El Tiempo, founded in November 1970 and headquartered in San Pedro Sula with branches in Tegucigalpa and La Ceiba, printed headlines announcing that this would be its last edition. Its 300 employees had already gone three weeks without pay.
The closing of thatt newspaper is only one of the “collateral damages” caused by the US’s open war against Honduras’ main drug traffickers. Its closing is good news for Hernández’s government because it had been the most ardent opposition to his self-centered, militaristic policies and corruption cover-ups.
El Tiempo was the only written medium with national circulation that firmly opposed the 2009 coup against Zelaya, repeatedly demanding reparation of the damaged constitutionality ever since. It was also the only large newspaper to oppose re-militarization of the country and President Hernández’s effort to legalize his own continuous reelection. And it was the only mass written medium to question head on the Organization of American States’ mediocre role by backing the false national dialogue convened by President Hernández. Finally, it was the only one to accompany
the indignant people’s torch-lit marches opposing corruption and demanding the creation of an International Commission against Impunity similar to Guatemala’s CICIG in Honduras, and the only one to question replacing the commission being demanded with an entity controlled by the President himself, the most abhorred person by those who oppose all the corrupt and unpunished people in our country.
Jaime Rosenthal’s arrest
in the 60s and his oath in jail
Those who know him say Jaime Rosenthal has a justly earned fame of being an businessman with a progressive, nationalist and social vision. In the late sixties, those traits placed him in conflict with the Arab business sector, which at the time controlled commerce and politics in San Pedro Sula. This conflict was especially strong with Jorge Larach, owner of La Prensa, the main national newspaper. Already an entrepreneur at that time, Jaime worked with La Prensa but his position in favor of the workers led to fights with the paper’s editorial division, which backed General López Arellano’s military regime. Don Jaime ended up imprisoned in the dungeons of San Pedro Sula, along with hundreds of laborers.
The veteran grassroots and union leader Carlos Humberto Reyes, who shared a small cell reeking of urine and excrement with him, says Rosenthal swore that when he got out of jail he would invest part of his capital to start a newspaper that would go toe to toe with La Prensa. He fulfilled his oath in 1968.
The origin of El Tiempo is thus that confrontation between the vision of a bourgeois businessman sensitive to social and union problems and the voracious greed of other businessmen, who all along have lived by leeching the State, taking advantage of public resources, reluctant to acknowledge any type of social demands. Despite the newspaper’s ethical and social origins, however, the relationship Carlos, the newspaper’s boss, had with the workers was rife with the same stinginess and severity of the Arab bourgeoisie.
JOH is under control
The end of the Rosenthal reign has brought tension to the daily environment in the halls of power in Honduras. The elite are feverishly scrambling to collaborate with President Juan Orlando Hernández (known as JOH) and “the Embassy” (read US Embassy), hoping for forgiveness in advance for betraying each other so they themselves can come out unscathed.
The winds are still blowing in Hernández’ favor, as he currently controls the political and business leadership. Meanwhile, the Embassy and the US government have him and his team under control.
If it was a well-known secret that the Rosenthals were deeply involved with illicit drug money, the history of Juan Orlando Hernández and his people with different sectors of organized crime is just as well known. It is no longer unusual to find photographic testimonies, trails left behind by many of those busted for drug or other criminal activities of their personal relationship with the President. Many pictures implicate the current President in the history of organized crime in this country. Among others It happened with the Valle gang, with the mayors of Yoro and Sulaco.
“The die is cast”
Those who have been following the whole process of the catastrophic downfall of the Rosenthals insist that Juan Orlando Hernandez’s future has been determined. He will fall victim either to some US government agency and its anti-drug policy once he’s of no use to them, or to any one of the drug-trafficking friends he betrayed, because they may forgive a slip-up, but never a betrayal by an ally.
For now, Juan Orlando Hernández is still a useful chip within the US strategy and that will enable him to live inside a personal security bubble. As long as he continues to collaborate, as it appears he’s been doing, his protective bubble will expand. But this beneficial situation has its limits. Once the US agencies act upon some kind of information that can do without the Honduran government and/or should social rejection of JOH threaten major instability in the country, the United States won’t think twice about pulling out its support for the government and establishing new alliances with others in the country. At that point Juan Orlando Hernández will face two threats: US justice or that of the drug lords he betrayed.
The US doesn’t take the
JOH government into account
For the time being, the President continues to play like a winner. “What happened during these days has nothing to do with Honduras,” said Hernández during his first appearance on a nationwide broadcast after the accusation broke in the US. “It is an issue between the Rosenthal family and the US justice system.” The first statements by the National Banking and Insurance Commission (CNBS) were equally out of touch with reality, as were those of the Honduran Council of Private Enterprise (COHEP). The day after the US implicated the Banco Continental in money laundering, the CNBS reported that the bank would continue with its activities and that this problem was “isolated and not systemic.” Only after a meeting on Sunday evening, October 11, in which Ambassador James D. Nealon’s voice was decisive, was the CNBS forced to order the liquidation of the Banco Continental.
Since that time JOH has claimed the US government’s decisions and actions against the Rosenthals as his own. Yet the contradictions and inconsistencies in different public statements made by Hernández government officials as well as representatives of business guilds have as a backdrop an irrefutable reality: the rampant distrust the US government has towards the Honduran government around security issues even though Honduras is officially a close US ally. Decisions around narco-business in the country are made without taking it into account, even without informing it. The Rosenthal’s bust took other bankers, leaders of business guilds and government officials close to the presidency, including the President himself, by surprise
Meanwhile, Ambassador Nealon knows the Honduran leader’s weaknesses and knows how to play to them. During his statements about the Rosenthal case, the freezing of their bank accounts and the forced liquidation of the Banco Continental, Nealson congratulated the Hernández government for its agility in acting “in favor of justice.”
The Valle and Sabillón cases
This has not been the only case of the Honduran government being kept out of the loop. For the past year and a half, Honduran authorities hardly participated in most of the actions organized by the DEA that led to the extradition of other drug dealers, including the voluntary surrender of Los Cachiros. When two of the brothers heading that mafia gave themselves up in the US, the news got to Honduras through foreign sources and was followed by a nervous silence in all government spheres.
The arrest of the Valle brothers in the western part of the country in October 2014 was an odd case. Knowing that General Ramón Sabillón, the general director of the Police, was the only high official who had reached that position without getting sullied by organized crime, the DEA established a personal alliance with him until it achieved the capture of Los Valle. Among other things, the DEA is said to have gotten Sabillón to dismiss the then-minister of security. When the security minister informed other high Police and Army officers of what had happened, they immediately placed Sabillón in retirement and stripped him of his personal security personnel, thus exposing him to the drug trafficking groups he had confronted with a firm hand so they could settle scores.
“As if we have ebola”
The Rosenthal Oliva and Rosenthal Hidalgo families are in no position to comply with the labor commitments they have with their former employees. Nor does it seem to be particularly important to them. By the end of October, the biggest concern for don Jaime and his children, Yani, Carlos and Patricia, was to stay out of jail. Extradition of at least one of them was the talk of the town. That is very likely why Yani stepped up and turned himself in.
The Rosenthal’s circle of friends has shrunk to the minimum while many of those who formally did business with them or participated with them in political and social activities have disappeared. “They treat us as if we have Ebola,” the patriarch complained to one of those scarce friends who visited him on one of the few properties the OABI hasn’t yet seized.
The end of the
thread in this tangle...
What does the future hold for the Rosenthal family? What repercussions will their bust have on Honduran society? It’s too early to draw any firm conclusions. All possible scenarios are vague because “the end of the thread in this tangle is yet to be found.
One possible scenario is the almost total extermination of the Rosenthals as business owners and politicians after being marked with the indelible ink of being drug traffickers. This stigma will follow them the same way it followed Cain when God marked him so he would be identified as the killer of his brother, a Biblical story the Rosenthal family read throughout its life.
This stigma comes not only from the Rosenthals’ connections with drug trafficking, but also for being part of a bourgeoisie with nationalist and progressive traits, one that decided to invest and produce within the country. This leaves them out of step with the rest of the country’s oligarchic elite, who are servile to the multinationals, fearful of investing and risking production capital within the country and always parasites of the State. The permanent quarrels between the Rosenthals and the Arabs, who currently lead this parasitic oligarchy, have come to an end with this war of extermination.
Neither more nor less
criminal than the others
The Rosenthals are neither more nor less criminal, more nor less involved with drug money than the Arabs and other members of the Honduran business elite. The other Honduran banks launder just as much money as the Banco Continental did and possibly more, but they have more capacity than the Rosenthals did to negotiate with criminals, the banking sector and US capital.
During informal social gatherings a few months before this disastrous October for don Jaime, he is reported to have said that to only attack the Banco Continental for laundering dirty money would be discriminatory because not a single Honduran bank doesn’t do it. What happened shows that the correlation of forces went against the Rosenthals. If US justice agencies had to sacrifice someone, it should be the Rosenthal clan.
They could also recover
The other scenario could be a medium-term recovery by the Rosenthals, which would involve winning a multi-million dollar lawsuit against the State of Honduras for illegal actions against them. If this were to happen, the Rosenthals would not only recover their capital and businesses, but Yani Rosenthal would recover his political capital and could successfully channel it towards a presidential candidacy.
This scenario would involve a legal, political and economic confrontation with the oligarchic sector headed by the Arabs as well as a confrontation with the political group led by Juan Orlando Hernández.
It’s too soon and the scenarios are still shaky. It is not yet even known if there will be more accusations and extraditions. Will measures be taken against other banks? What role is President-businessman Juan Orlando Hernández playing today?
What is known is that part of the investment and loans portfolios for agricultural projects will be managed by BANRURAL from Guatemala and that, according to those in the know, Juan Orlando Hernández will be Honduras’ main stockholder, which makes one wonder whether the strike against the Rosenthals was also a way to smooth the way for him to become a businessman and banker capable of competing against the Honduran and Central American oligarchy.
the United States
What we have clearly seen is that all political, business and financial paths, as well as those of organized crime, are still subordinated to US security policies.
These paths are either yet to open wider or are still foggy. Uncertainty rules in Honduras. And, like always, it especially torments the daily lives of the most impoverished, who are never taken into account in decisions, never consulted, always ignored, excluded and dismissed, even though they are the ones who end up bearing the heavy burden of everything the national elite and the US government do and undo.
Ismael Moreno, sj, is the envío correspondent in Honduras.