Ex-Covington man in Honduran prison, accused of $300M fraud

COVINGTON, La. (AP) - In May 2013, orthopedist Mario Zelaya gave an emotional news conference alongside St. Tammany Parish Sheriff Jack Strain. Two masked men had broken into Zelaya's Covington-area house and tied up his wife, 9-year-old son and three adult male relatives for three hours while stealing jewelry, guns, cash and a car.

Zelaya, who wasn't home at the time of the home invasion, choked up as he called the perpetrators "cowards" and boosted the reward to $40,000, a record for St. Tammany Parish.

Zelaya also recounted how he and his family had left his native Honduras to escape rampant crime. According to the U.S. State Department, the Central American country has the world's highest murder rate.

Less than a year later, Zelaya was on the run, accused of robbing Honduran taxpayers of more than $300 million.

His eventual capture was a major story in his home country, and was hailed by the Central American country's current president, Juan Orlando Hernández, as evidence of the success of efforts to fight corruption.

Zelaya's rise began in June 2009, when former Honduran President Manuel Zelaya - no relation - was ousted in a coup after his opponents accused him of angling to change the country's constitution, according to the British newspaper The Guardian. A de facto government took over until elections could be held later in the fall. That election was shunned by international observer groups, but was accepted by the United States.

The winner, Porfirio Lobo, took office in 2010.

Shortly afterward, he appointed Mario Zelaya to a top post in the country's national health service, known as the Honduran Institute of Social Security.

Under Lobo, crime and corruption - already well known in Honduras - mushroomed, said Dana Frank, a professor of history and a Honduran specialist at the University of California, Santa Cruz.

Honduras operates as a constitutional democracy, with an elected president and a single-chamber congress. But since the coup, the country's leaders have clamped down on individual freedoms, including freedom of speech, Frank said.

Lobo's administration and the current one "just threw the rule of law out the door," she said.

MOVING TO COVINGTON

Beginning in 2011, Mario Zelaya is alleged to have entered into a scheme to accept $2 million in bribes from a Honduran consulting company known by the acronym COSEM.

Officials from COSEM sent more than $1 million to Covington-area banks where Zelaya's brother, Carlos, used it to buy properties including a used-car dealership and condominiums, according to documents filed by U.S. Attorney Kenneth Polite's office in federal court in New Orleans.

The following year, Mario Zelaya, still executive director of the Honduran health service, brought his family to the Covington area. They settled in the middle-class subdivision known as River Oaks.

Honduran elites have long had an affinity for New Orleans due to economic ties from the banana trade, Frank said.

The sheriff said after the home invasion in May 2013 that he didn't believe it was random. The men seemed to know something about the family's Honduran background and wouldn't let the victims speak Spanish to one another, Strain said.

The men eventually left in Zelaya's wife's Mercedes with a small amount of cash, some jewelry and several guns, Strain said. The car was found abandoned in Pearl River.

Zelaya said his family chose to return to Honduras after the home invasion.

In early 2014, a Honduran court ordered Zelaya arrested on charges alleging that he had stolen more than $300 million in taxpayer money. The thefts allegedly included unjustified purchases, exorbitant contracts, airline tickets, travel and hotel stays for board members and other methods, according to a November story in La Prensa, a Honduran newspaper.

A HIGH-PROFILE MANHUNT

The story detailed some of the findings of a commission charged with examining the thefts, quoting the commission's report as saying Mario Zelaya was at the center of the scheme.

As soon as a court ordered him arrested, Zelaya fled, sparking a manhunt across Honduras and fueling wild speculation in Honduran media about his whereabouts, according to a September report from the wire service Agence France Press. Some in the Honduran media suggested he had left the country; others asserted he had been assassinated because he knew too much.

After nearly eight months on the run, Zelaya was arrested during a predawn raid in Honduras' El Paraiso region, near the Nicaraguan border, government officials said at the time. His time on the lam seemed to have taken a toll on him - he looked haggard in the first photos published after his capture.

Zelaya's attorney claims his client actually was arrested in Nicaragua, and Frank said this is widely believed inside the country.

The arrest was huge news in Honduras and brought congratulations from U.S. Ambassador James Nealon, who described it in a tweet as "another blow against impunity. Keep going with anti-corruption efforts!"

The manhunt and public spectacle of Zelaya's detention serve another key political aim for the Honduran administration, Frank said: Since the names are easily confused, keeping Mario Zelaya and the word "corruption" on people's tongues helps the ruling party discredit Manuel Zelaya's opposition party, even though they're unrelated.

SEIZING ZELAYA PROPERTIES

Mario Zelaya remains in custody, awaiting trial. The Honduran government already has seized nearly three dozen properties, including, according to La Prensa, homes, farms, land, bank accounts and armored luxury cars.

The U.S. Justice Department filed a motion in federal court in New Orleans to seize nine properties owned by Mario and Carlos Zelaya in Covington and Mandeville. If the motion filed Jan. 13 is granted, the government plans to sell the properties and send the proceeds to the Honduran government, said Anna Christman, spokeswoman for the U.S. Attorney's Office.

Carlos Zelaya still works at the car dealership - C&M Motors on U.S. 190 south of Covington - according to two employees. But he was not on two visits by a reporter and did not respond to notes and numerous phone calls.

In the meantime, four men were arrested for the home invasion in Covington. Three have been convicted and sentenced. William Ledoux got a seven-year suspended sentence for helping plan the crime, authorities said. The two convicted of going into the house got long sentences: 60 years for Jonathan Hudson and 300 for Beau Ledoux, sentenced as a repeat offender.

Christopher Allo, allegedly the mastermind, is scheduled for trial next month.

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Information from: The Advocate, http://theadvocate.com