A man authorities described as a key lieutenant in the Arellano Felix cocaine ring pleaded innocent Monday to federal drug and money-laundering charges.

Everardo Arturo Paez-Martinez (pictured, left), 34, was arraigned before Magistrate Cynthia Aaron, following an unprecedented decision by the Mexican Supreme Court to uphold his extradition from Mexico to San Diego -- 3 1/2 years after his arrest.

Paez-Martinez was flown to San Diego late Friday night by under heavy guard by DEA agents. Mexico extradited him under a landmark court ruling allowing it to ship citizens north for prosecution.

"Mexico is ready to be complete (drug war) partners with the U.S.," Assistant U.S. Attorney Gonzalo Curiel said.

The prosecutor said that the decision to extradite Paez-Martinez shows drug smugglers that they "have no safe haven in Mexico."

"They can run but they can't hide," Curiel said outside the U.S. District Courthouse.

Paez-Martinez, also known as "Kitti" and "El Morro," was charged in a superseding indictment with being the principal administrator of a continuing criminal enterprise, conspiracy to import cocaine, importation of cocaine, conspiracy to distribute cocaine, distribution of cocaine and conspiracy to launder drug trafficking proceeds.

He faces life in prison if convicted, Curiel said.

Paez-Martinez was ordered held without bail pending a hearing Thursday afternoon before Aaron.

According to the indictment, beginning in at least the fall of 1988 and continuing until May 1996, Paez-Martinez directed an operation responsible for smuggling tons of cocaine from Mexico, across the U.S.-Mexico border, for distribution in San Diego and Los Angeles.

Curiel said that Paez-Martinez enjoyed a "close relationship" with Benjamin Arellano Felix and Ramon Arellano Felix, and had "significant responsibilities" in the AFO.

Paez-Martinez is one of 14 Mexican suspects who have used court appeals to avoid extradition for years.

But in a January decision applying only to the United States, Mexico's Supreme Court said the country has the "discretionary power" to send citizens north to face justice, provided they are sentenced under Mexican guidelines.

Since Mexico does not apply the death penalty, the ruling apparently means that no extradited suspect could be executed in the United States.

Although nobody has a good estimate of how much money Mexico makes from drug smuggling, the White House estimates that about half of the $65 billion in drugs that Americans buy each year come through Mexico.

The drug trade is so pervasive that it has corrupted law enforcement from top to bottom. Police assigned to drug duty are routinely arrested for collaborating with the smugglers, and in 1996 Mexico's newly appointed drug czar was found to be on the payroll of the late drug lord Amado Carrillo Fuentes. Former Gen. Jesus Gutierrez Rebollo remains in jail.

The United States also has asked for the extradition of another suspected AFO lieutenant, Ismael Higuera-Guerrero, who was arrested a year ago and is now jailed in Mexico City. The Arellano Felix brothers remain at large.

Curiel said that their organization is thought to be responsible for much of the cocaine smuggled into the United States.

In 1996, Juan Garcia Abrego, who held U.S. citizenship, was extradited to the United States to face charges he led a drug-smuggling organization based on Mexico's Gulf coast. He was convicted and sentenced to 11 life terms in prison.

The extradition of Paez is the third major blow to the Arellano Felix organization in little more than a year and proves the "resolve" of the Mexican government to fight drug traffickers, Curiel said.

Mexican authorities arrested Higuera-Guerrero, described as the group's chief operating officer, after a shootout near Ensenada last May. Jesus Labra, another alleged high-ranking member, was arrested in Tijuana in March 2000.

The United States has asked that Higuera-Guerrero be extradited after he is prosecuted in Mexico. It has not yet requested extradition for Labra.