Updated at 11:35 a.m. Thursday with information about how both officers left the Dallas Police Department.

Cash flowed through Alfredo Navarro Hinojosa's nightclubs, and on some weekends, so did hundreds of baggies of cocaine, according to a federal indictment filed this week.

Two Dallas police officers used their positions to benefit Hinojosa, his 40 clubs across North Texas and his illegal activities, which included money laundering and profiting from customers who bought drugs at his businesses, according to the indictment.

Hinojosa; the officers, who worked for him while off duty; and eight others were indicted.

Exterior of Medusa Dallas in Dallas on Thursday, Dec. 7, 2017. (Rose Baca / Staff Photographer)

The officers, who have since left the department, pleaded guilty to lying to the FBI before this week's indictment. They face up to five years in prison.

Court records allege that the officers used their law enforcement jobs and connections to keep Hinojosa, 57, and his employees out of trouble and attempted to impede local and federal criminal investigations.

Wiretaps recorded the officers chatting about their illegal activity on behalf of Hinojosa, as well as Hinojosa talking about drug sales and money laundering, according to court records.

Senior Cpls. Edward Villarreal, 48, of Carrollton and Craig Woods, 60, of Dallas were Dallas officers for more than 20 years before they left: Villarreal in 2015 and Woods this year.

Villarreal resigned under investigation for a road rage incident, Dallas police said. No further information was immediately available about that inquiry. Woods was not the subject of an open internal affairs investigation when he retired in March.

Woods was a member of the canine unit. Villarreal was assigned to financial investigations.

Senior Cpl. Craig Woods with his police dog El in 2013. (Louis DeLuca / Staff Photographer)

Woods' attorney, George Milner III, declined to comment Wednesday. Attorneys for Hinojosa and Villarreal could not be reached for comment Wednesday.

The nightclubs that Hinojosa owned included Far West, Medusa, the OK Corral in Dallas and the OK Corral in Fort Worth. His businesses brought in about $107 million in revenue between 2014 and 2016. They were open Fridays, Saturdays and sometimes Sundays.

Dealers sold as many as 200 baggies of cocaine each weekend, raking in hundreds of thousands of dollars, court records say.

Hinojosa and his managers didn't sell drugs, court records say. But stopping the sales, Hinojosa said in the recordings, would have meant less profit at his clubs.

"They want it [cocaine] right here. They don't want to go looking downtown," Hinojosa said, according to court records.

Hinojosa and the clubs' managers handpicked dealers to sell cocaine in the bathrooms, court records allege.

Hinojosa has agreed to plead guilty to conspiracy to manage a drug premises and conspiracy to launder money, court records show. He has also agreed to forfeit a Ferrari, a Range Rover, a Hummer, a Mercedes-Benz, a motorhome and $200,000. He faces up to 20 in prison on the drug charge and up to five years on the money-laundering charge.

The indictment says Hinojosa used shell companies to hide the source of the large amount of cash paid to his businesses.

Officers' roles in Hinojosa's enterprise

Court records lay out some, but not all, of the allegations against the officers.

Woods told the FBI in June 2015 that he didn't know about "any officers changing, downplaying or falsifying reports," court records say. But Woods then called Villarreal at his off-duty job at Far West in May 2015 and discussed how they did just that, court records say. Villarreal served as Hinojosa's supervisor of security.

In that conversation, court records say, Woods told Villarreal he had witnessed an incident in which a bouncer "got this one guy down between two trucks and was whipping his ass with a flashlight." The man was not conscious.

"Woods told Villarreal he had written up the report as if it was an injured person and no one knew what happened to him," the court records say. "Woods and Villarreal discussed how Far West and Hinojosa now owed them, as a result of the false report."

Edward Villarreal

Villarreal called Hinojosa the same day to talk about the beating. Hinojosa, who had watched the beating, told Villarreal that the bouncer went outside and "beat the [expletive]" out of the guy. Villarreal allegedly told Hinojosa that he had been involved in making sure the report said the victim was an injured person and not an assault victim.

"You know as long as the police write it up ... that's the way it happened," Villarreal told Hinojosa, according to the court records.

In February, an FBI agent and a Dallas police detective asked Woods about the report and he denied writing it. "Woods stated he did not write the report, had never written a police report and did not know how to write police reports," court records say.

Hinojosa and others also asked Villarreal for help when legal or criminal matters arose that affected Hinojosa, his employees or clubs, according to court records. The records say that in April 2015 Villarreal told Hinojosa and Martin Salvador Rodriguez, who was also indicted this week, that Rodriguez was under FBI surveillance and about the investigation. Rodriguez, 55, of Dallas, was charged with managing a drug premises.

"Villarreal knew that providing this information to Hinojosa was in violation of his duties as a Dallas Police Officer and breached the trust bestowed upon him as a law enforcement officer," the records say. "Villarreal further realized that this action could have obstructed the FBI's investigation by alerting a target of the investigation of the existence of the investigation."

Villarreal allegedly continued to update Hinojosa about the investigation, about who was being followed and which Dallas City Council members he believed had spurred a grand jury investigation into the clubs.

According to the court records, Villarreal told Hinojosa: "They just know there's a lot of money involved and Mexican and narcotics, maybe drug cartels. ... They don't know anything about nothing ... so you got detectives that don't know anything about you."

He then added, "I can get in trouble — if they think I'm warning you."

Eventually, the FBI asked Villarreal if he had told anyone about the investigation. Villarreal lied in May 2015 and said he had not, court records say.

Others charged

Seven others are charged in the 33-count indictment: Miguel Casas, 47, of Dallas; Humberto Baltazar Novoa, 39, of Dallas; Eloy Alvarado Montantes, 36, of Grand Prairie; Jose Omar Santoyo Salas, 32, of Arlington; Erick Johan Lopez Cuellar, 30, of Fort Worth; Raul Nunez, 25, of Grand Prairie; and Cesar Mendez, 27, of Dallas.

Novoa worked with Hinojosa and promoted bands. He is charged with conspiracy to launder money and making a false statement in an immigration document. The two worked with bands that traveled to and from Mexico. The indictment alleges that the men tried to launder money for at least one band.

The indictment alleges that Montantes, Salas, Cuellar, Nunez and Mendez were involved in drug distribution. Casas was charged with managing a drug premises.

Mendez’s attorney could not be reached for comment. It was not clear if the others had attorneys yet.