Nazario Moreno was shot dead by police in December 2010 during one of the most spectacular battles of President Felipe Calderon's six-year offensive against drug gangs, but his spirit lives on in the criminal underworld that made him.

Soldiers raiding criminal safe houses in the western state of Michoacan have recently found altars topped with three foot high statues in the image of Moreno, shown in golden medieval armour and carrying a sword. A local verse dedicated to the dead trafficker invokes him as a supernatural force.

"Give me holy protection, through Saint Nazario, Protector of the poorest, Knights of the people, Saint Nazario, give us life," goes the "Prayer to Saint Nazario".

Now calling themselves the Knights Templar, after the medieval military order that protected Christian pilgrims during the Crusades, members carry a code book decorated with pictures of cloaked knights with red crosses.

And police have even seized 120 plastic helmets allegedly used by the gang in initiation ceremonies.

The Knights Templar is the most bizarre cult-like group to have sprung up since Calderon declared war against Mexico's drug cartels in late 2006, triggering a series of turf wars that have killed more than 55,000 people.

Nowhere has his government struck harder than in Michoacan, shattering the leadership of Moreno's quasi-religious cartel La Familia - only for remnants to regroup in a yet stranger guise.

Propaganda from the cartel blends a curious mix of Michoacan regionalism, Christianity and revolutionary slogans.

But the quirks do nothing to diminish the violent threat posed by the Knights Templar, whose beliefs appear to extend from paying tribute to the Pope to brutally murdering their rivals and extorting local businesses.

One of the biggest traffickers of crystal meth to the United States, the cartel has an army of around 1,200 gunmen, according to a report by Mexico's military intelligence.

Knights Templar gunmen are believed to be behind most of the 480 drug-related murders in Michoacan in the last 18 months, including dozens of decapitated or dismembered victims.

Calderon launched his army-led crackdown in Michoacan, his home state, a few weeks after taking office and it has been a focus of his national campaign since then.

So the ability of Moreno's followers to regroup as the Knights Templar after his death serves as a powerful reminder of the task awaiting Calderon's successor, Enrique Pena Nieto, when he takes office in December.

The Knights Templar are also blamed for the worst attack on a multinational company in recent years. In May, assailants torched more than 30 trucks and two warehouses in Michoacan belonging to PepsiCo's Sabritas, a leading potato chip brand.

Messages signed by the Knights Templar were printed on plastic sheets strung up in 10 towns, saying they launched the attack because federal police had hidden in the Sabritas trucks to arrest one of the cartel's top fugitives.

"The companies are sources of employment for Michoacan society and we respect their labour," read the gang's message. "But they must limit themselves exclusively to their business or they will be punished."

PepsiCo officials deny that Sabritas let the police ride in its trucks, and say they don't know why they were targeted.

MORENO'S RISE AND FALL

The roots of the Knights Templar lie in the network of smugglers built up by Moreno, police reports show.

Moreno was born in 1970 in a seething valley known as the Tierra Caliente, where traffickers have long grown marijuana and opium poppies.

Working as a labourer in the United States in the 1980s, Moreno converted to evangelical Christianity and when he returned home he spread his version of the gospel within the drug trade.

In 2006, Moreno named his cartel "La Familia Michoacana" and sent adverts to newspapers claiming his troops were good Christians who defended their kind even if they smuggled drugs.

La Familia was given a boost by the rising crystal meth trade, with smugglers bringing in precursor chemicals to Michoacan's bustling Pacific port of Lazaro Cardenas.

Federal police finally caught up with Moreno in 2010, when he was handing out Christmas presents of washing machines and cars in a festival in the village of El Alcalde.

Elias Alvarez, the police commander who headed the strike on Moreno, said the 2,000 officers involved in the attack ran into hundreds of gunmen who blocked roads with burning cars and trucks.

"They have look-outs so they were waiting for us. We drove into the town and they were was a wall of some 40 trucks and they attacked us," Alvarez said. "It was a very hard battle."

In hours of fighting, five officers were killed, but police shot dead more than 50 gunmen, Alvarez said. The gangsters carried many of the bodies, including Moreno's, into the hills.

As police didn't find his corpse, rumours abound in Michoacan that Moreno is still alive and may even be behind his own cult, even though there is no evidence to back up the speculation. Alvarez says he is certain that Moreno is dead and that the trafficker has a marked grave in the mountains.

KNIGHTS TEMPLAR

Following Moreno's demise, one of his top lieutenants and a former rural school teacher called Servando Gomez took over the organization and renamed it as the Knights Templar.

However, other operatives kept the name La Familia and became bloody rivals of the Knights, fighting them in pitched battles. One shoot-out this month between the two groups in the State of Mexico, which borders the capital, left 10 dead.

Within the Knights, Gomez oversees a council of 12 deputies responsible for areas such as drug production, trafficking and spying networks, according to the military report.

In Michoacan state capital Morelia, a business leader said that companies large and small have to pay up to the cartel.

"There are shops, gas stations, avocado growers, taxis and even iron mines making extortion payments here," said the businessman, who asked that his name not be used.

The Knights owe their strength to support in the Tierra Caliente where many civilians do business with them or work as their spies, said an undercover military intelligence officer.

"They help people out by giving them presents like bags of cement. Many people in the area are against authority anyway. Others help the Knights Templar out of fear," said the officer, who spoke on condition of anonymity.

The Knights' elaborate ceremonies and codes also help keep the troops in line, the officer said.

The exact religious beliefs of the Knights are unclear. While the traffickers had been Evangelicals under Moreno, the name "Knights Templar" is closer to the Roman Catholic Church.

Furthermore, when Pope Benedict visited Mexico in March, the Knights displayed signs calling for peace in his honour.

The Knights' infamous code book, which soldiers have seized in raids, lists 53 commandments that members must obey.

Some justify their movement with a cause. "The Knights Templar will establish an ideological battle and defend the values of a society based on ethics," says order number 12.

Others concern discipline and organization.

"Any knight who betrays the Templars will receive the maximum punishment,