Request for dismissal upsets federal judge

WASHINGTON -- Federal prosecutors cited problems with evidence Monday when they asked a judge to drop charges against a Chinese-Mexican businessman accused of importing methamphetamine to the United States.

U.S. District Judge Emmet Sullivan criticized prosecutors at a hearing on the request to dismiss the indictment against Zhenli Ye Gon: "I'm not pleased at all with anything I've heard from the United States government."

Ye Gon earned a reputation as a big bettor in Las Vegas before he was arrested two years ago.

The defendant gambled more than $125 million at Las Vegas casinos, according to a December 2008 Las Vegas Review-Journal column by John L. Smith.

Authorities said that Ye Gon was a frequent guest at The Venetian, a 2007 Miami Herald story reported. A spokesman for The Venetian on Monday declined comment. A Venetian spokesman told the Herald two years ago that company policy prohibited comment on whether someone is or has been a guest at the property.

The Venetian said one of its senior executives made a report to the Nevada Gaming Control Board "and, through the NGC, made contact with another government agency." The board cooperated with the Drug Enforcement Agency on the case, said Jerry Markling, chief deputy of enforcement.

The Venetian told the Herald that it maintains transaction records that are available to the board.

Casino gambling often has been a money-laundering technique used by criminals, said Phil Hevener, a gaming columnist at Gaming Today and editor of the newsletter Gaming Hotline. The use of casinos for money laundering was more prevalent before federal and state officials started regulating the money handling more tightly, he said.

Yet, a man with "a lot of money and wild imagination will always find a way to get stuff done," Hevener said.

Casinos cannot easily determine whether gamblers obtained their money legally, said Tony Cabot, a partner at Lewis & Roca. "It's very difficult to determine if anyone is involved in unlawful activities," he said.

When Ye Gon was arrested in 2007 in Wheaton, Md., authorities said they had seized more than $205 million in U.S. drug profits from his Mexico City mansion.

Since then, one witness has recanted, and another has refused to testify, prosecutor Paul Laymon told the judge.

Laymon said the "overwhelming reason" they were asking for a dismissal was because of their relationship with the Mexican government.

After a private discussion, the judge seemed unimpressed and ordered a further hearing on the case next week.

Ye Gon is in a federal lockup in Virginia, and he might remain there even after the U.S. charges are dismissed because of a pending extradition request from Mexico.

His lawyer, Eduardo Balarezo, said his client is happy about the government's decision, but he said that fighting extradition to Mexico remains an "uphill battle."

The judge, who has ordered an investigation into prosecutorial missteps in the investigation of former Sen. Ted Stevens, R-Alaska, said similar problems occurred in handling evidence in the Ye Gon case.

"This is very serious. This man has essentially been in solitary confinement," Sullivan said. "Someone in the Department of Justice better have a very good answer."

The judge said the prosecutors knew about the witnesses' backtracking months ago but only now decided to act. He said the government had failed to turn over exculpatory evidence to the defense in a timely fashion.

Ye Gon was charged in the United States with conspiracy to help manufacture methamphetamine for sale in the United States. He is wanted in Mexico on organized crime, drug trafficking and weapons charges.

Mexican Attorney General Eduardo Medina Mora said Ye Gon's cash was connected to one of the hemisphere's largest networks for trafficking pseudoephedrine, the main ingredient in methamphetamine.

He said the ring had been operating since 2004, illegally importing the substance and selling it to a drug cartel that mixed it into the crystal form and imported it into the United States.

Ye Gon said the chemicals imported by his company, Unimed Pharm Chem de Mexico SA, were legitimate and intended for use in prescription drugs to be made at a factory he was building in Toluca, just west of the Mexican capital.

Ye Gon's lawyer in Mexico, Rogelio de la Garza, said Mexico is pressing for the extradition because it wants to avoid repaying the money seized from Ye Gon's house.

"The bottom line is that the government wants to keep the money," De la Garza said, referring to piles of U.S. bills that the Mexican government has spent largely on building drug treatment centers.

Las Vegas Review-Journal writer John G. Edwards contributed to this report.