Valdez is believed to be the second-in-command of the Cartel de Pacifico Sur (South Pacific Cartel) run by drug lord Hector Beltran Leyva, which is fighting rivals for control of Cuernavaca and the strategic Pacific resort city of Acapulco.

In a brief army presentation to reporters, Valdez said local police chief Juan Bosco helped the gang evade capture. Bosco was later arrested by soldiers in Cuernavaca, the army said.

"The guy protecting us was Commander Bosco, he used to alert us to army and federal police crackdowns," Valdez told reporters, wearing a dark polo shirt and flanked by soldiers in body armor.

Bosco received about 15,000 pesos ($1,290) a month for tipping off the cartel, Valdez said.

The allegations about the police chief's role underscore the endemic corruption in Mexico's badly-paid municipal police forces that President Felipe Calderon has vowed to modernize, although security experts say he has yet to make good on those promises.

Cuernavaca, once better known for its swimming pools and colonial-era palace, has become an unlikely symbol of Mexico's drug war chaos since a Mexican poet's son was killed in the resort city in late March, fueling protests about the relentless drug killings across Mexico.

Thousands of people led by poet Javier Sicilia marched on Mexico City this month to condemn the violence that has killed almost 40,000 people since Calderon launched his army-backed assault on drug cartels after he took office in December 2006.

In another development, authorities in the U.S. border state of Arizona said police arrested 25 suspected members of a Mexican drug cartel, significantly hampering the group's ability to smuggle drugs and illegal immigrants from Mexico.

The U.S. Drug Enforcement Administration said the suspects -- believed to be members of the Jesus Valencia-Rodgriguez cell of the powerful Sinaloa cartel -- smuggled drugs and illegal immigrants through the Tohono O'odham Indian reservation on the Arizona-Mexico border.

Most of the suspects are U.S. citizens and the rest Mexican, said Arizona Attorney General Tom Horne, who announced the arrests at a news conference in Tucson.

They were arrested in Phoenix, Tucson and on the Tohono O'odham reservation and face charges that include smuggling, money laundering and participation in a criminal syndicate.

**Reporting by Agustin Olais in Cuernavaca and Brad Poole in Tucson; editing by Anthony Boadle