Mexico Stifles Graft Cases Before National Election
Posted June 10, 2018 10:40 p.m. EDT
Updated June 10, 2018 10:42 p.m. EDT
MEXICO CITY — Mexico’s government has enough evidence to charge officials connected to one of the biggest corruption scandals in Latin American history. But it is refusing to bring charges because they might hurt the governing party before presidential elections, according to three people with direct knowledge of the case.
The scandal involves the Brazilian construction giant Odebrecht, which has admitted to paying nearly $800 million in bribes up and down Latin America to secure government contracts in a dozen countries. Fallout from the investigations has touched nearly every nation in the Americas where the company operated, with presidents impeached, officials arrested and national politics upended from Peru to Panama.
But there have been two notable exceptions: Venezuela, an international pariah with an authoritarian government, and Mexico, where two separate federal investigations have stagnated.
The criminal cases sit trapped in a legal limbo common to politically sensitive investigations in Mexico, where corruption remains one of the greatest impediments to the country’s fledgling rule of law.
Corruption scandals have plagued the government of President Enrique Peña Nieto from practically the moment he took office. His wife purchased a bespoke home from a government contractor on favorable terms, marking the beginning of his slide in popularity.
More scandals emerged, including the mysterious disappearance of 43 teachers college students, the use of sophisticated spyware purchased by the government to monitor journalists and human rights lawyers, and allegations that top officials embezzled public funds to pay for party electoral campaigns.
The lack of progress in the Odebrecht case has been a sore point in Mexico since late 2016, when the company admitted to U.S., Swiss and Brazilian authorities in a multibillion-dollar settlement that it had paid $10.5 million in bribes to Mexican officials.
One of the Mexican investigations — begun by a special prosecutor, and generating documents reviewed by The New York Times — identified a close aide to Peña Nieto as a suspect. But the inquiry was still in its infancy when the prosecutor was fired by the government in October.
Since then, the case has made few advances, with even basic information requests languishing for months, according to two other people who have reviewed the latest case files.
But the stronger investigation in Mexico, begun early last year by the attorney general’s office, amassed enough evidence months ago to charge suspects, according to three individuals who have reviewed the case or been briefed on it. The political pressures are too great, they said, for the case to move forward.
The suspects worked for Mexico’s national oil company, Petróleos Mexicanos, known as Pemex. In its settlement with other countries, Odebrecht acknowledged paying millions in bribes to officials at the Mexican oil company. And Mexico’s former attorney general, Raúl Cervantes, who personally oversaw the case during his tenure, even traveled to Brazil to discuss the evidence authorities had gathered there.
Cervantes’ decision to take such an active role in the case caught the attention of many inside the attorney general’s office — and far beyond it. Some hoped it was a sign that the scandal would not be ignored. Others feared that because the attorney general is appointed by the president, his independence could be compromised.
The attorney general’s office did not respond to repeated requests for comment.
Nothing has happened in Mexico — at least not to Mexican officials. The nation has issued an administrative sanction against Odebrecht, prohibiting it from doing business in the country for the next several years.
But no Mexican officials have been charged with accepting bribes, and Cervantes, who stepped down last fall, has said publicly the investigation was complete.
Since then, his successor, the acting attorney general, Alberto Elías Beltrán, has contradicted him, claiming that the case is continuing, so he cannot share the details of what has been learned.
In reality, the case has been shelved, the three people with knowledge of it said. Already suffering from multiple corruption scandals and rising violence nationwide, the governing Institutional Revolutionary Party cannot risk another scandal surfacing before the presidential elections in July, they said.
While delaying or halting prosecutions may also hurt the governing party’s reputation, the calculus makes sense, critics say: Ultimately, the outrage over any cover-up may be less damaging to the party than exposing more corruption at a trial.
“This scandal goes beyond affecting the president’s reputation, which is already damaged,” said Eduardo Bohórquez, one of the architects of the country’s anti-corruption system, which has been enshrined in the Constitution. “Not charging anyone in this case is about the future of the party.”
“With another scandal like this, the entire political machinery and its funding could fall apart,” he added. “That’s bigger than just the elections — it is about the survival of the party itself.”
The investigation has largely confirmed what is known, according to the individuals who have reviewed the files: that millions of dollars in bribes were paid to offshore accounts to secure infrastructure contracts. A portion of the contracts, bribery payments and money transfers revealed by the Brazilian government and Mexican news organizations are corroborated in the case files.
But the Mexican investigators did not significantly expand their inquiry to search for new contracts or payments that may have been missed by Brazilian authorities, according to the individuals with knowledge of the case.
Since details about Mexico’s role in the Odebrecht scandal first began leaking in 2016, the information has centered on one of the president’s top aides and closest allies, Emilio Lozoya Austin. Lozoya was a member of the president’s campaign team in 2012, and later was named head of Pemex after the president came to power. He has denied any wrongdoing, and his lawyer says there is no hard evidence that he accepted bribes. At first, Lozoya was not named in documents. In December 2016, as part of the $3.5 billion settlement with Swiss, Brazilian and U.S. authorities, Odebrecht officials admitted to paying $10.5 million in bribes to Mexican officials from 2010 to 2014, without specifying the names of the officials who received it.
The revelation set off a firestorm in Mexico. Responding to public pressure, the government of Mexico began an investigation in January 2017.
As Cervantes, the former attorney general, worked quietly behind the scenes, Mexican news organizations and an anti-corruption group, Mexicans Against Corruption and Impunity, aggressively pursued the lead.
First they obtained a legal document in Brazil in which a top Odebrecht executive claims Lozoya requested a bribery payment of $5 million in 2014. Then, another outfit obtained court testimony from three top Odebrecht officials claiming that Lozoya had in fact received more than $10 million in bribes.
The officials testified that they had met with Lozoya on numerous occasions in Mexico to facilitate the arrangement. During those meetings, according to testimony from the head of the Mexico office for Odebrecht, Lozoya handed him an account name and number where the money could be directed.
In 2012, when Peña Nieto was running for office, Odebrecht made payments to British Virgin Islands accounts given to them by Lozoya totaling more than $3.1 million, according to the testimony of the company officials.
At the time, Lozoya was the international coordinator for the campaign and wielded significant influence with the candidate. Odebrecht officials, in their sworn testimony, said that payment was meant to buy good will with Peña Nieto, who was leading in the polls and appeared likely to become the next president.
Javier Coello Trejo, Lozoya’s attorney, vehemently denied any wrongdoing by his client, as Lozoya himself has done since the scandal first erupted. Coello, who has had access to the government’s main case file, said there was not a single piece of hard evidence connecting Lozoya to the money or corroborating the testimony from the Odebrecht officials.
“These accounts have no connection to my client,” he said. Mexican prosecutors could have had an even stronger case, with more evidence from Brazilian authorities, according to the people with knowledge of the case. But unlike most of the nations affected by the scandal, Mexico refused Brazil’s request not to prosecute Odebrecht or its officials, potentially frightening witnesses and preventing them from testifying in full, the people said.
There could also be more bribes than initially acknowledged. Documents and account transfer records revealed in the Mexican media suggest that the bribes to Mexican officials may have been as high as $16 million, far more than stipulated to by the company in testimony to the U.S. Justice Department.
As more revelations about the case emerged in the Mexican media, the nation’s special prosecutor for electoral crimes, Santiago Nieto, decided to open his own federal investigation in August. The focus was to assess whether the funds said to have been solicited by Lozoya were used to finance Peña Nieto’s presidential campaign.
But the case was quickly gummed up by bureaucracy and fights with Lozoya’s lawyers. Indeed, the attorney general’s office sometimes seemed intent on stalling the progress, according to Nieto and a review of the case file, which was obtained by The Times.
In one request, Nieto’s office asked to retrieve bank account information in Brazil, the Virgin Islands and Switzerland, in an effort to corroborate the money transfers that had been reported in the news media.
The request was filed in October to an internal department of the attorney general’s office, which had to approve it.
A few days after, Nieto was fired. He claims the firing was politically motivated, because he planned to investigate allies of the president and the potential use of illicit funds in his campaign.
The government denied that, saying Nieto crossed an ethical line by discussing an investigation when he gave an interview on the topic days earlier.
Since Nieto’s departure, according to people familiar with the case, the investigation has all but stalled. More than seven months later, his request for information about international bank accounts is still languishing in the attorney general’s office, according to one of the people familiar with the case.
“The Odebrecht scandal has become a sort of accountability litmus test for the countries that were tainted by it,” said Sen. Patrick J. Leahy, D-Vt., who has long criticized Mexico’s justice system. “Mexico today is in the midst of a heated presidential campaign. This is the Peña Nieto government’s opportunity to show that no one is above the law.”