Cartel hotel: Feds say resort tied to kingpin El Mencho faces US sanctions

Vacationers seeking a Puerto Vallarta-area getaway online in recent years might have encountered Kovay Gardens, a 22-room resort with a private beach and four swimming pools abutting the Pacific Ocean.

But federal authorities say the Mexican beachfront destination was part of a fraudulent timeshare network benefiting the Cartel de Jalisco Nueva Generacion, whose leader – Nemesio Ruben Osequera Cervantes, better known as El Mencho – was fatally shot Feb. 22 near Guadalajara as part of a Mexican military operation.

The U.S. Treasury Department’s Office of Foreign Assets Control has issued sanctions against Kovay Gardens in addition to five Mexican citizens and 17 Mexican companies linked to the network, which authorities say often targeted vulnerable older Americans.

According to a Treasury Department news release announcing the sanctions, many of the sanctioned people and entities are based in or near Puerto Vallarta, a popular tourist destination that serves as a strategic hub for the violent cartel, which the U.S. Department of State last year labeled a foreign terrorist organization for its role in international narcotics trafficking.

Among those sanctioned were resort founder Carlos Humberto Rivera Miramontes and his corporate network of 13 companies, as well as several people conducting call-center operations that allegedly helped carry out the timeshare fraud, the release said.

The sanctions mean any Kovay Gardens properties owned by U.S. persons are essentially frozen, according to Office of Foreign Assets Control. American owners of Kovay Gardens properties are required to report their interests to the office and are prohibited from engaging in any transactions involving those properties, while U.S. persons in general are further prohibited from renting or buying any resort properties while the sanctions remain in effect.

Violations are subject to civil and possible criminal penalty.

Calls from USA Today to the resort were repeatedly cut off, and the resort's website shows no availability for reservations through January 2028, the furthest future date to which its booking calendar extends. The resort is likewise unavailable on travel sites on which it remains visible.

Federal officials say the sanctions illustrate how the cartel’s illicit revenue streams went beyond drug trafficking, generating proceeds for the organization through activities such as timeshare fraud and fuel theft.

“Terrorist drug cartels like CJNG consistently victimize Americans for profit,” Treasury Secretary Scott Bessent said in the statement.

Mexican cartels have fleeced American victims for hundreds of millions of dollars through timeshare fraud over the decades, treasury officials said, targeted them through call centers staffed by English-speaking telemarketers. Heightened efforts by U.S. authorities have increased awareness and reports of suspicious activity by U.S. financial institutions, they said.

The CJNG cartel seized control of timeshare fraud schemes in the Puerto Vallarta area around 2012, the Treasury department said, conducting sometimes years-long scams resulting in the victims’ “financial and emotional devastation.”

Timeshare owners were subject to various scams from the moment they signed a contract, the department said.

At Kovay Gardens, northwest of Puerto Vallarta in the Mexican state of Nayarit, the alleged fraud worked like this: Robocalls lured potential buyers to presentations laced with deceptive sales tactics, while credit cards were systematically overcharged, the department said. Customer databases were shared with boiler-room operations conducting timeshare resale, re-rent or investment scams in which victims were asked to pay advance fees or taxes before receiving funds supposedly owed to them – but which never came, the department said.

Revictimization schemes often followed in the form of scammers impersonating lawyers offering to help victims recover lost funds for upfront fees or acting as government officials demanding fines for engaging in suspicious transactions, the Treasury department said.

“This vertically integrated timeshare fraud model allows CJNG to efficiently and repeatedly victimize Kovay Gardens timeshare owners, who are often U.S. persons,” the Treasury department said.

About 6,000 Americans reporting losing nearly $300 million from 2019 to 2023 to timeshare fraud in Mexico, according to the treasury department release. The losses are likely an underestimate, it said, with the vast majority of scams going unreported due to victim embarrassment or other reasons.

In 2024, USA Today reported that the cartel had taken over much of the timeshare market in Cancun in addition to Puerto Vallarta.

Authorities said the CJNG’s timeshare fraud operations in Nayarit state are controlled by operatives on behalf of Audias Flores Silva, the cartel’s regional commander. The State Department is offering $5 million for information leading to his arrest and/or conviction.

The cartel controls much of Guadalajara and the outskirts of Jalisco in addition to the states of Colima and Michoacan, rivaling the notorious Sinaloa Cartel run by Joaquin “El Chapo” Guzman, who is serving a life sentence in prison.

Reporter Greta Cross contributed to this story.