Debtor's Prison

Manuel Osete has been in jail for 27 months, with no release in sight. His crime? He didn’t commit one.

NOGALES--He's spent 27 months and counting behind bars at the Santa Cruz County Jail. No end of captivity in sight. This may well be the old man's last address.

Prisoner 44845, Manuel Osete, is a fit, if pale, 72-year-old man who doesn't blend in. He is surrounded by "kids," the drug offenders, the drunken-driving and domestic-violence suspects. Ironically, the kids generally get out after a couple of weeks, either on their own recognizance or on bond.

No one--except Osete--is sentenced here for more than a year. Osete calls the jail home. To date, it has cost $55,000 to keep Osete behind bars--and the setting suggests he's a danger to someone.

Conversations with visitors are conducted on the phone through thick safety glass. Contacts are limited to 15-minute chats on Sunday afternoons. Newspapers and magazines aren't allowed. For his rare appearances in court, he is taken to Tucson in shackles. Time outdoors is limited to about 30 minutes a week, less than what death-row inmates generally receive.

"I get up every day and ask myself, "Just what am I doing here?'" he said.

So what crime is Osete charged with?

He isn't charged with a crime.

"The other inmates ask me what I'm here for," Osete said. "I tell them, 'Divorce,' and they get a good laugh."

Tony Estrada, the Santa Cruz County sheriff, has watched over Osete since Dec. 19, 2002 and, well before that, met the prisoner's estranged wife as she distributed homemade "Wanted" fliers and went from one law enforcement agency to another to push for his arrest.

"What I can say about this man's case," he said, "is this--there's a lot of emotions involved."

Osete is creature of the border, one of 5,000 to 10,000 well-to-do Mexicans who come and go daily between Nogales, Sonora, and this, its sister city, or Tucson.

Like Osete, who had a condo on North Swan Road, ownership in a Tucson restaurant and clients for his Mexican-based foundry throughout Arizona, this group is bilingual, educated in schools of its choice, with homes, businesses and social lives in both countries.

Osete, an engineer, was one of six children born to a pioneer family, and he prospered in this international setting. His father, also Manuel, came to Nogales in 1928, where he founded Banco de Nogales (later Banco Mexicano) and set the stage for his children and grandchildren's successes. He left them with considerable inheritances at the time of his death in 1961, including, among other assets, equal parts of property on Calle Carbo, on which the foundry would later be built.

Unlike many well-to-do families, the Osete siblings have eschewed politics for commerce. All live comfortably: Raul, a brother, sells real estate and operates a private cemetery. A sister, Elsa, lives in Mexico City. Sisters Carlota and Laura are married and live in Nogales, Sonora. Another sibling, Enrique, who lived in Monterrey, died. The next generation of Osetes has also prospered, most close to home.

Osete, his wife, Sylvia, and children Martin, Carmen and Pilar, were never lacking. The children attended private schools. The family traveled frequently, not only through Mexico and the United States, but to Europe, the Middle East and Africa, as well.

As late as 2002, Osete was still the deal-maker, driving (in one of a dozen autos) to Hermosillo, Mexico City, Guadalajara, Tucson and Phoenix. The foundry, which started operating in 1982, employed as many as 90.

Osete paid scant attention to this jail as he traveled to business pow-wows, parties, fine restaurants--and sometimes, to the arms of another woman.

That was another universe--27 months, $1.2 million and a luxurious life ago.

"Vengeance found refuge in the legal system," he says. "That's what this is about. This is my punishment."

No, it is not punishment, the law says. That is not allowed. The purpose of civil contempt in DR-98-0014 Osete v. Osete, is to coerce, not punish.

This drab jail, host to Osete's non-punishment, consists of several large cells. Osete shares his with 17 others. Each day is like the previous: Up at 6. Cleanup. Breakfast. TV. Cards. Lunch. TV. Chess. Dinner. TV. Lights out at 10 p.m.

Sundays offers a highlight: visitation day. Friends and family come in for chats through the glass. Visiting time is supposed to be just 15 minutes, but Osete's seniority seems to have softened the rules, and visitors often are accorded double that.

According to the legal system, this 800-plus day routine is the way Osete wants it. That is what two superior court judges--Pima County's Richard Nichols and Santa Cruz County's Roberto Montiel (since retired)--have ruled. In December, U.S. Federal District Judge Raner Collins affirmed that this is the way Osete wants it.

In their terminology, Osete holds the "jailhouse key." He just needs to turn it--producing $833,000--and he can walk away.

"It's that simple," says Osete. "It's also that impossible. There is no key. There is no money."

There is also not much Osete can do to prove he doesn't have the money; the civil contempt charge grants ongoing authority to judges to keep a person in jail until he complies with an order.

To Osete, that looks like an eternal sentence.

Osete's civil contempt is based on his failure to appear at alimony proceedings in a lawsuit filed by Sylvia, his estranged wife, and to turn over records demanded by the court. During that trial, a parade of witnesses testified to his wealth and accused him of hiding assets.

Osete appeared twice at the onset of the trial and then--claiming his wife and son, Martin, had stolen seven boxes of documents necessary for his defense--stopped attending. "I was helpless," he said. "They peeled out documents showing my company received millions of dollars. They never presented information about what was spent to create the income."

Over a period of months, the courts--based on information that Osete earned $500,000 a year--awarded $10,000 a month in alimony to Sylvia and divided the couple's assets in half.

Osete requested the documents, which he said contained 37 years of records, but received only incomplete copies. The boxes had been seized by Sylvia with a Mexican attorney from offices in Nogales, Sonora, Osete said.

Only a fraction of the assets assigned to Sylvia by the Arizona court were in the United States, however, where tracking money is usually simpler than in other nations. The rest were in Nogales, Sonora.

Osete stopped attending the trial, resolved that he would lose without proper financial records, but still made a naïve final stab at a solution. Since judges decide things, he reasoned, he would write Judge Nichols directly.

An alimony settlement of $10,000 per month was way beyond his means, he wrote the judge, but--as long as he was working--he would be able to pay Sylvia $5,000 a month, along with $2,500 bonuses in May and December, provide her a new car every four years and take care of other bills.

The letter made no difference, however, and Osete's absence from the courtroom ignited a streak of decisions against him.

The judge ordered forfeiture and sale of property owned by the couple in the United States, placed liens on income produced by the foundry (a ruling that effectively shut down the foundry, whose clients were all in Arizona) and issued the first of two civil contempt orders.

Among the items tucked into the sum Osete was ordered to pay his estranged wife: $13,750 for money from the "marital community" misspent during 1996 and 1997.

The recipient of that misspent money was Norma Felix Gonzalez, a first cousin of Sylvia. She was the paramour.

"Sylvia wants money," Osete said. "But this is still about revenge."

Were rulings from the Pima and Santa Cruz County Courts enforced to the letter, the cost of this divorce to Osete would be $3 to $4 million.

Court-ordered seizures have already channeled an estimated $1.2 million in cash and property to Sylvia Osete. (A list provided by Osete was sent to Stelissa Scott, the estranged wife's attorney in Tucson, who responded: "These do not accurately reflect the amount she has received." However, Scott did not offer another figure and refused to speak with a reporter for this story.)

But virtually all of the $1.2 million has come from assets in the United States. What has landed Osete behind bars is property just two miles south of here--in Mexico. And that is where the Arizona court turned after awarding Sylvia half of the marital assets and alimony in the United States.

Anyone familiar with property ownership in Mexico knows how tangled it can be. Title insurance, a staple in U.S. property transactions, is not offered in most of Mexico because of disputes in land tenancy. Exorbitant sales taxes (and quotas on land ownership) make registries of public property a national puzzle.

Each property analyzed by the Arizona courts was, to some degree, enmeshed in uncertain ownership scenarios that included family, friends of the Osetes, previous owners and third parties known as presta-nombres, literally "loaned names."

Appraisals in Superior Court of a dozen parcels in Mexico were offered by a single expert, Gildardo Tellechea, of Nogales, Sonora, who appeared on behalf of Sylvia Osete.

Those appraisals were higher than the market, but that was not the critical issue, Osete said. Rather, what followed in the courts were rulings that Manuel and Sylvia were exclusive owners.

In fact, Manuel said, they were not even partial owners of some of the properties. Sylvia, he said, had been aware of those details for 40 years. But the murkiness of ownership did not faze the Arizona courts, which--ignoring Mexican law--confidently proclaimed property to be "in the marital community" of Manuel and Sylvia.

"How the court decided it had jurisdiction in another country, knowing as little as it did, was stunning--and it was false," said Osete. But having vanished from the judicial arena, Osete had no way of protesting--and the awards and interest continued to pile up.

Though he didn't appear in court, Osete continued to come into the United States regularly, not familiar--as most Americans are not--with the charge of civil contempt.

Unlike criminal contempt--in which a crime must be proved beyond a reasonable doubt and any punishment carries a finite sentence--civil contempt is open-ended. It does not require a crime, but rather it seeks to force, or coerce, a response from those that ignore a court order. Do what the court says, and you're free. Ignore the court, and you're behind bars.

Osete, facing civil contempt, says he has no money and that he's in a debtor's prison. The court says he does.

Whether the court's reach into Mexico was sound international jurisprudence or a combination of arrogance and ignorance is an issue that can be argued either way. But what is clear to those that know Mexico is this: Even if the properties in Mexico were indisputably owned by the Osetes, the Arizona courts would not have been able to seize or embargo them. And none of the properties at issue are in the couple's name.

That means that the Arizona judiciary must find creative ways to enforce their decisions.

Judges can't order a foreign court to enforce their rulings, but they have "broad latitude" to use whatever tools they think will bring money back where it belongs, said Jay D. Adkisson, an expert on concealed assets and fraudulent wire transfers with Riser, Adkisson LLP, of Dallas.

But these orders, he added, "often assume that assets abroad can be repatriated with no problem."

Osete is not alone in the world of those incarcerated for civil contempt.

Journalists in the United States, for example, increasingly face threats of civil contempt for refusing to reveal sources--though few actually wind up behind bars.

The few cases that do bring about indefinite jail sentences have also wound up with celebratory status. Two cases offer primers into that world.

The first involves Stephan Jay Lawrence, who has been jailed on civil contempt since 1999. Lawrence incurred personal debts of $20 million while working for Bear Stearns, a New York brokerage firm. Before a judgment was entered against him, Lawrence transferred $7 million to a trust in Mauritius Island and filed for bankruptcy.

A judge ordered Lawrence to turn over the trust's assets, but the defendant claimed he lost controlling interest in the trust when he was removed as a beneficiary--and was unable to give the court money or information.

According to Gideon Rothschild, a New York lawyer who follows the case, Lawrence believed that by relinquishing control of the money, he would force the bankruptcy court to eliminate the contempt charge. The judge, however, ruled Lawrence had "self-created" that scenario and believed Lawrence controlled--or would eventually control--the money.

The second case involves H. Beatty Chadwick, a Pennsylvania lawyer who--as a result of refusing to turn over $2.5 million to an ex-wife--has been in jail for nine years.

Chadwick has insisted the money was lost in a failed investment, but a string of judges have ignored that claim and ordered him jailed until he returns the cash. Like Osete, Chadwick has seen his liability increase, to $4.2 million.

In each of these cases, judges are required to act using the following guidelines: An individual may be jailed in order to coerce him to comply with the court's order. This incarceration should not amount to punishment, for that requires a crime. Coercion becomes punishment when a defendant can't comply.

What does that mean to Osete? "It means I have no ability to show I have no ability to pay anything," he said. "If I had committed a crime, at least I'd have a release date."

Sylvia Felix Elias, then 58-years-old, had been married to Manuel for 37 years when she sought separation on April 24, 1997. It is unclear when Sylvia became aware of an affair that her husband was carrying on. (She declined, through Scott, her lawyer, to be interviewed, as did Martin, her son.)

At roughly the same time that Sylvia filed for separation in Pima County, she filed for divorce in Mexico, where the couple had been married. (American law does not require a marriage take place in the United States in order to rule on separation and alimony issues.)

In the Arizona courts, Sylvia alleged that her husband, once aware of her separation intentions, moved assets to Mexico where they would ostensibly be out of her reach.

In Nogales, Mexico, the Juzgado de la Primera Instancia asserted its jurisdiction as well, hearing testimony--ignoring evidence presented from Pima County proceedings--and ordering Osete to pay his estranged wife the peso equivalent of $800 a month.

What happens when competing legal systems, not surprisingly, offer different results? It's often a free-for-all, jurists say. Courts have the option of recognizing one another's decisions or ignoring them. They generally choose the latter--and did so in this case.

Osete appeared at the Mexican trial where, he said, judges dealt with actual expenses and examined invoices and checks. "They asked Sylvia for receipts, and she was able to demonstrate that she spent the $800 a month," Osete said. Before deciding not to speak with a reporter, Martin Osete said his father bribed Mexican judges to produce a low alimony figure.

Osete, oblivious to decisions made about his finances in Pima County and then Santa Cruz County courts (Sylvia had requested a change of venue), continued regular trips to Arizona from 1997 until Dec. 19, 2002.

That day, a U.S. Immigration and Naturalization inspector at the port of entry here checked Osete's name in a computer and told him he would need to go to a secondary inspection to "resolve" an issue. Osete thought he was going to face a pat-down or a search by drug-sniffing dogs, he said.

Instead, he was arrested. Resolving that issue at secondary inspection "has taken some additional time," Osete said.

It will probably take lots more.

Scott, Sylvia's lawyer, repeatedly seeks an increase in Osete's bond and has opposed release under any circumstances except full payment. Osete would "run to Mexico" and "mock this court as he has done before," she said. Osete, she said, "believed he would do his six months in jail and then walk away a free man."

Turning the "jailhouse key," originally a $500,000 expense, now costs $833,000.

In a series of jail interviews, the engineer in Osete emerges. In both languages, he speaks in detail about the foundry and a polystyrene plant that he disassembled in Ciudad Obregon and started to operate in Nogales, Sonora.

The jail is an odd place for this lecture as Osete spontaneously imparts a short-course about how a 3-millimeter shim corrected a problem on water- and air-cooled injection molds to manufacture packing crates for grapes. He is anxious to talk about other engineering challenges he has faced.

But the methodical, analytical mind stops with the technical. When it comes to his situation, the engineer is vexed. There is no step-by-step plan to approach the problem of civil contempt, just a mish-mosh of legal and personal appeals. There is no interest in reading judges' opinions or legal treatises that might inject freedom into his life. There is no thought of using free legal resources available to all inmates. Nor was there ever consideration devoted to seeking out an expert lawyer.

Enrique Gonzalez, the Nogales attorney contracted by the Osete siblings (before they dropped him in favor of Tucson law firm

Karp, Huerlin & Weiss, P.C.) , had been diligent but ineffective. This was his first defense of a civil contempt case, and a review of his arguments offers little in the way of inspiration. A translation of legal documents from Spanish to English performed by Gonzalez' office bordered on gibberish. Gonzalez, an affable lawyer who handles common criminal cases of the "kids" that surround Osete, refused to speak to a reporter.

The engineer views the U.S. legal system as "a mystery."

"I never dreamt about how far courts can reach into our lives," he said. Asked if he would appear in court or hire a lawyer today under identical circumstances, he answers, "Yes, I would."

He adds: "I want it clear that I have never hidden. Since 1997, I continued to cross into the United States regularly, daily sometimes. I got hit by a drunken driver in Tucson, and I went for medical care. I had heart surgery in Tucson and went there regularly. I'm a Mexican national, and I have to go to (U.S.) Immigration every six months to get permission to be here. My whole life has been coming and going in this area. I am not a "flight' risk, like they say. What am I fleeing from--I got a divorce. Does anyone grasp that the reason I didn't go to court was because I couldn't defend myself? I needed the boxes that Sylvia and Martin took from my office."

Osete doesn't attempt to refute the image depicted of him during trials, when Judges Nichols and Montiel heard about a cheating, conniving, dishonest man who, when sued, spirited assets abroad and hid them with siblings.

Methodically, he offered explanations for accusations made during the trial:

· To the charge that he illegally wired $420,000 from a foundry bank account back to Mexico: Sylvia his wife and son, Martin, tried to forge a signature and cash a check at Bank One for $100,000. "The money was not mine; it belonged to providers and to family," he said.

· To the charge that he used a pseudonym in Mexico. "I did. All of my finances were being frozen by the courts. It was the only way I could continue working."

· To the charge that he hid assets in names of friends. "These were legitimate deals, and I could demonstrate that if I had my financial records."

But these explanations make no difference at this point. If there is a legal path to freedom other than the $833,000, it will not surface here. At this jail, designed for temporary stays, there is no library, anyway. Asked why he is in jail, Osete reasons that Judge Nichols is "probably angry that I didn't show up in his courtroom."

But however ineffective, the appeals continue.

In his most recent appeal, in December, Gonzalez argued in federal court that his client's bond exceeded that set for Ken Lay, the chief executive officer of Enron Corp., who faced criminal charges and was responsible for the loss of tens of millions of dollars. Osete's estranged wife has received more than enough money with which to live and is free to pursue civil remedies that everyone else follows to collect a debt, he said--but his client doesn't have the cash.

Just prior to that hearing, the Osete siblings, in another innocent stab at their brother's problem, wrote a letter directly to U.S. District Judge Collins:

"Your honor, we know you as a just judge with ample criteria," it reads, "this is why we dare to write you this letter, to uphold the conduct of Manuel, that in his lifetime has been a well-behaved person, without any criminal records, he has been a good son, a magnificent brother, a good husband and an incomparable father."

Neither efforts by the siblings nor the lawyer made any inroad. The ruling from Collins on Dec. 7 was anything but sympathetic.

"The test to determine whether the confinement no longer is coercive is whether the contemnor has shown that there is no "realistic possibility' or "substantial likelihood' that continued confinement will accomplish its coercive purpose," the decision read.

Since Osete didn't demonstrate that confinement won't force him to turn over the money, "(T)his court holds that Petitioner's confinement is coercive rather than punitive and continued incarceration is justified until Petitioner complies with the court orders."

The negotiating tack with Sylvia Osete hasn't been eliminated.

In October, Osete's siblings made an offer through Gonzalez. The four surviving siblings and the wife of Enrique, the deceased brother, would donate their one-sixth shares of the foundry property, which had been appraised for $1.2 million, in exchange for Sylvia's promise to drop additional claims. That move would mean their brother's release.

The response from Scott, Mrs. Osete's attorney, was a rejection--with an eye-opening counter-offer.

Mrs. Osete would accept the property, but still wanted Osete to pay the $833,000, the standing amount of the bond.

In exchange for that payment, the lawyer said: "Sylvia will relinquish possession and control of all documents and other evidence which could be used against Manuel in any civil action or by the Mexican authorities."

Osete's reaction: "Hush money. I pay up, and they hand over evidence of a "crime.' It's extortion, plain and simple, but it's no different than every step until now. I didn't show up for a trial. This is a divorce case."

If they have information about a criminal act in Mexico and haven't reported it, Sylvia Osete and her lawyer could find themselves afoul of Mexican law. Withholding information on a criminal act in that country is, itself, a crime, according to several Mexican lawyers. Such an action might be construed as "encubrimiento" (criminal concealment) or "complicidad" (conspiracy, or being an accomplice to a crime).

What is the area that might interest the Mexican authorities?

Osete believes the italicized and bold typography in "all" is a bargaining chip, or more correctly, a threat. It is a message that Sylvia and her lawyer, who learned about Osete's Mexican alias when he was arrested, have a new weapon.

"There's nothing else it can be," he said. "My finances are my finances, and there's nothing there except information that will confirm what I maintained all along. The word "all' means they will run to prosecutors in Mexico and get me in trouble."

Since the original separation trial in 1997, Osete has pleaded for his boxes--the original seven taken from his office--which, he insisted, would have been the key to his defense.

Now, he said, his estranged wife and her lawyer hold for ransom the very evidence that might truly establish his worth before the court and which would then undermine the original judgment.

At the same time, Sylvia and her attorney threaten to turn him in to "Mexican authorities" using the same sequestered files--files which now carry nearly a $1 million price tag.

"If I'd had my boxes, I would have gone to court," Osete said. "I could have refuted everything. When do I get access to them again? When it's time to buy my way out."