Andy Reanos-Moreno built an extensive trafficking enterprise in the Bay Area, keeping San Francisco awash in fentanyl and other drugs.
A savvy businessman, Reanos-Moreno cut a deal with his troupe of Tenderloin street dealers, according to court papers. He rented houses and apartments throughout Oakland for them to live in, and in exchange, his apparatchiks agreed to buy their supplies exclusively from Reanos-Moreno—an arrangement that allowed him to keep tens of thousands of dollars on hand.
Reanos-Moreno, considered a major Bay Area trafficker, was arrested in 2019 and sentenced in June to six years in prison, joining a long string of local dealers who have been taken off the streets in the last three years. But despite the law enforcement crackdown targeting San Francisco, the supply of deadly fentanyl into the city is surging to levels not seen before, according to federal and local officials.
The telltale indicator is the plunge in the price of a gram of fentanyl in the Tenderloin. It sold for about $35 in July, down from about $70 two years ago.
“That’s a huge change,” says Wade Shannon, who worked as the special agent in charge in the U.S. Drug Enforcement Administration’s San Francisco Field Division before retiring at the end of August. “And it just means the market is getting flooded with synthetic opioids.”
The boom in supply, which also plagues other major American cities, suggests that the overdose crisis won’t end anytime soon. The death toll has been rising, more or less steadily, in tandem with the supply of opiates and their synthetic opioid counterparts for two decades.
It’s been widely chronicled that the first wave of the opioid epidemic started in the 1990s, driven by the explosive growth in the supply of prescription pills like oxycodone provided by major corporate drugmakers and pharmacies that later faced successful lawsuits in San Francisco and elsewhere. Although the federal government eventually dialed back distribution of prescription opioids, they have been replaced by growing supplies of fentanyl products, both powder and fake pills posing as pharmaceuticals.
“We have learned that controlling supply is really essential,” says Keith Humphreys, professor of psychiatry and behavioral sciences at Stanford University and an adviser to federal health officials on substance abuse treatment. “When opioids are widely available, and when they are cheap, there will be more addiction and overdose.”
Fentanyl’s Big Profits
The fentanyl supply is soaring partly because it’s a synthetic product, making it more profitable and easier to produce than organic opiates like heroin.
Fentanyl’s costs—mainly inexpensive chemicals called precursors that the DEA says are sourced primarily from China and shipped to Mexico for production—are relatively low. Heroin, on the other hand, requires land, farmers and machinery to grow and harvest poppies, driving up prices.
“In making fentanyl, you don’t need a farmer, you don't need good weather, you don't need land, you don't need anything that drives up the costs of heroin,” Shannon says. “That’s a huge advantage.”
In the Bay Area, a kilo of cut fentanyl powder sells wholesale for only about $4,500, reflecting the cheap production costs, according to the DEA. Heroin, by comparison, goes for $14,000 to $25,000.
The remarkable profit on fentanyl comes from the retail markup.
A fentanyl pill wholesales in San Francisco for $3.50 but goes on the street for $20 to $30, a profit margin that incentivizes dealers to accept the risk of arrest by selling dope in the Tenderloin and SoMa.
DA Jenkins Cracks Down
The urgent question is can the city, and the nation, tamp down the menace of fentanyl that’s profitable for the Mexican cartels that produce it.
In August, just a month after her appointment as San Francisco’s district attorney, Brooke Jenkins made fighting fentanyl a priority in an ongoing effort in the city to clean up the Tenderloin. Jenkins announced that she would take a harder line than her recalled progressive predecessor, Chesa Boudin, by allowing prosecutors to seek pretrial lockups and longer sentences for fentanyl dealers.
Jenkins’ tougher stance sparked concerns of a new war on drugs, locking up more street dealers, many of them recent immigrants from Honduras, who will be quickly replaced by others like them. Critics of efforts to cut the fentanyl supply say the answer is reducing demand by funding a list of programs, from drug treatment to job placement. But these services take time to work and fail when opioid users resist them, which is not uncommon, substance abuse experts say.
On Tuesday, three San Francisco supervisors introduced a resolution to back programs, including a possible supervised drug consumption site, to encourage people with addiction to get help.
“Criminalizing the supply does nothing to abate the demand,” San Francisco Public Defender Mano Raju told The Standard in an email. “Instead of bringing back the inhumane and racist war on drugs, we should use our public resources to invest in treatment, housing, job training, and employment.”
The Supply Chain
San Francisco and much of the U.S. gets most of its fentanyl from Mexico, where two powerful cartels, Sinaloa and Jalisco New Generation, manufacture the drug in clandestine labs, according to a 2020 DEA intelligence report. These heavily armed and technologically sophisticated criminal groups operate in Mexico with near impunity from the law.
The government of President Andres Manuel Lopez Obrador has backed off from aggressively confronting the cartels in a bid to reduce rampant violence in Mexico. Repeated calls from DEA Administrator Anne Milgram for the country to curb opioid production hasn’t made much of a difference.
“The cartels are so well armed, largely with U.S. weapons, that it has gotten extremely difficult to go after them,” says Bryce Pardo, an expert in fentanyl trafficking and drug policy at RAND Corporation, a global policy think tank. “Mexico will occasionally close down a lab but they don’t have an appetite to confront the cartels. So the flow of fentanyl is increasing across the border.”
The uptick has been dramatic, as measured by seizures at the southern border. This year is on pace to top 2021’s record haul of 10,600 pounds of fentanyl by U.S. border and customs agents—a fourfold increase over 2019, according to federal data.
As the latest in a series of illegal drugs to cross into the U.S. from Mexico, fentanyl benefits by piggybacking on the established trafficking networks of heroin, cocaine and methamphetamine that are also controlled by cartels.
Traffickers send most of the fentanyl destined for the Bay Area through the official ports of entry in California since they are on the fastest travel routes north. And customs agents, overwhelmed with the heavy flow of cars and pedestrians, don’t have enough detection technology and time to stop much of the illicit cargo.
Shannon says the fentanyl, which is typically accompanied by methamphetamine and smaller amounts of other drugs, is then brought to stash houses in Los Angeles, Riverside and San Bernardino counties. Wholesalers—often working for the cartels—break up the dope into smaller and less detectable packages for transit by couriers.
In July, DEA seized a record one million fentanyl pills valued at $15 to $20 million at a stash house in Inglewood, showing the magnitude of the trafficking in Southern California.
The East Bay Distribution Hub
Some of the cargo then moves north in cars on Interstate 5 to regional distributors in the East Bay, one of the largest fentanyl hubs in the country, according to Alameda County Sheriff’s Office spokesperson Sgt. Ray Kelly.
Kelly says more than half the distributors in Alameda County are immigrants from Honduras. Hunger and poverty, worsened by a long drought and two devastating hurricanes, have forced thousands of Hondurans to flee their country, often with help on their journey from the same cartels that traffic fentanyl.
As part of the deal, Kelly says, the Hondurans often agree to deal drugs as a way to pay the cartels several thousands of dollars for smuggling them over the U.S. border.
Working out of as many as 50 stash houses across the bay in Oakland and other East Bay cities, the dealers prepare the fentanyl for sale in San Francisco, a major retail center, by adding a variety of colors like green or yellow to the powder in what the feds say amounts to a marketing gimmick. Dealers pitch certain colors like “rainbow” as more potent, though DEA analysis shows that’s not the case.
The $200 a day street dealers typically earn provides a strong incentive to stay in the fentanyl business long after they have repaid their debt to the cartels.
“These Honduran dealers are really pawns in the big scheme of things,” Kelly says. “And the money is getting kicked up to organized crime.”
A Series of Fentanyl Busts
Officers in the Bay Area have been seizing larger and larger shipments of fentanyl. In April deputies in Alameda found 92 pounds of the opioid during raids in Oakland and Hayward that were likely bound for San Francisco.
DEA agents have been gathering big loads too. The amount of fentanyl powder confiscated in the San Francisco region grew by 60% to 80 kilograms in the 12 months ending in April compared to the prior year, and the upward trend has continued through August, according to the agency.
But the impressive busts have done little to curb supply or demand.
“I would love to say that our seizures of fentanyl—20 to 30 pounds at a time on many occasions—have shrunk the supply,” Kelly says. “But they have not. We are overwhelmed, just overwhelmed with fentanyl.”