AS the sun rose over the mountains circling Los Reyes, a town in the Mexican state of Michoacán, one morning in March 2009, a caravan of more than 300 heavily armed law enforcement agents set out on a raid.

All but the lead vehicle turned off their headlights to evade lookouts, called “falcons,” who work for La Familia Michoacana, the brutal Mexican cartel that controls the drug trade. This time, the police weren’t hunting for a secret stash of drugs, guns or money. Instead, they looked to crack down on La Familia’s growing counterfeit software ring.

The police reached the house undetected, barreled in and found rooms crammed with about 50 machines used to copy CDs and make counterfeit versions of software like Microsoft Office and Xbox video games. They arrested three men on the spot, who were later released while the authorities investigate the case. “The entire operation was very complicated and risky,” says a person close to the investigation, who demanded anonymity out of fear for his life.

Mexican drug cartel peddles Microsoft Office and Xbox games