A Mexican Crackdown Or Just Pr?

Arrests of rogue businessmen may be simply political damage control

Most Mexicans cheered when fugitive executive Gerardo de Prevoisin, 57, was escorted off a plane from Switzerland and whisked away to a Mexican penitentiary on Sept. 24. The sight of the former chairman of AeroMexico in handcuffs was a welcome one in a country where indicted businesspeople often roam free, enjoying their luxury sedans and yachts. De Prevoisin now awaits trial on charges of embezzling $61 million in company funds.

He is the latest target of a well-publicized government campaign to bring high-flying white-collar criminals to justice. Having stuck Mexican taxpayers with the estimated $120 billion tab for the bailout of the country's troubled banking system, President Ernesto Zedillo's administration is under strong pressure to go after rogue bankers and executives who may have absconded with some of those millions. There have been several extraditions, though not a single conviction so far.

But in Mexico, politics and the law are heavily intertwined. Critics charge that the long-ruling Institutional Revolutionary Party (PRI) is less interested in meting out justice than in boosting its credibility ahead of the next presidential election in July, 2000. Meanwhile, some party officials are concerned about the potentially damaging revelations that could come out in any trials; two of the accused men claim that they funnelled some $33 million into the PRI's campaign coffers for the 1994 election that swept Zedillo to power. "A good number of people who are being prosecuted for fraud have or had close relations with the political system," says Jose Ramon Cossio, dean of the law school at the Autonomous Technological Institute of Mexico (ITAM). "That's what is delicate."

Take the case of Carlos Cabal. Back in 1991, President Carlos Salinas urged the banana grower from Tabasco state to buy one of 18 state-run banks then being privatized. Cabal and fellow investors picked up Banco Union for $285 million and later acquired Banca Cremi, another medium-size bank.

He then launched into a lending and buying spree, including the acquisition of Florida-based Fresh Del Monte Produce for $520 million. Just three years later, the government took over Cabal's businesses, which by then were near bankruptcy. Authorities charged that Cabal had loaned himself and his cronies hundreds of millions of dollars through phony companies. But before they could charge him with $700 million in fraud, he fled the country.

What followed was a four-year manhunt that ended in Australia, where Cabal had been masquerading as a well-to-do wine and cheese dealer from the Dominican Republic. The fugitive banker, whose extradition trial is expected to wind up before yearend, says that he is being "persecuted" because he fell out of favor with the party that has ruled Mexico for the last 70 years.

Cabal, 42, claims he made $25 million in contributions to the PRI in 1993-94. Party officials acknowledge receiving more than $15 million but say this was within the legal limit at the time. "If I ever cooperated with the system, it was because it was the only way to do business in Mexico," says Cabal in reply to questions sent by BUSINESS WEEK to the Melbourne prison where he's being held. To back up his claim that he is the victim of a political witch-hunt, Cabal's lawyers have marshalled witnesses from around the world. Meanwhile, a top Australian public relations firm has created a slick Web site (www.carloscabal.com) that bills his case as "the script for an international political thriller."

De Prevoisin could also cause problems for the PRI. He claims to have donated $8 million of AeroMexico's money to the PRI in 1994. He maintains that major Mexican companies, such as AeroMexico, were pressured to make campaign contributions to the party.

These embarrassing revelations could dent the PRI's performance at the polls come July. More dirty laundry may surface if the Supreme Court sides with the opposition-dominated Congress and forces the government to turn over the records from Cabal's Banco Union. The government contends that the country's banking secrecy laws prevent it from releasing the records, which purportedly document Cabal's campaign contributions. The Supreme Court is expected to rule on the matter by January.

What angers Mexicans most is that Cabal and company, who can afford to retain the country's best attorneys, may outmaneuver the Mexican legal system and escape conviction. "Bit by bit, the impression has formed that people with a lot of money can beat the justice system in Mexico," says Cossio, the law-school dean.

A case in point is Angel "The Divine" Rodriguez, 40. He fled Mexico in 1995 after his bank, Banpais, and his insurance company, Asemex, were seized by the government. Charged with $200 million in fraud, Rodriguez was nabbed as he lounged on his yacht off the Spanish island of Ibiza in 1996. Since extradition in 1998, he has not so much as set foot in a Mexican prison and lives comfortably at his home in a posh Mexico City suburb.

NO BAIL. Yet another businessman, Jorge Lankenau, 55, has not been so lucky. The former owner of Banca Confia now sits in a jail in Monterrey awaiting trial because of a state law that denies bail to individuals accused of serious financial crimes. Lankenau is charged with causing more than $100 million in losses at Confia through irregular transactions.

Prosecutors are under extreme pressure to win conviction of these fugitives. But the attorney general's office is hard-pressed to come up with cases that stand up to the legal challenges of highly paid defense lawyers. Some of the government's legal work has been sloppy; a district judge recently threw out a key money-laundering charge against Cabal because prosecutors filed it after the statute of limitations had expired. "When you have a solid case based on facts, these things don't happen," says Cabal's lawyer, Alberto Zinser.

Rafael Espino, the Finance Ministry's chief investigative prosecutor, acknowledges that there have been some missteps. But he says the government is serious about putting white-collar criminals behind bars. "One way or another, they eventually will have to pay for their misdeeds," he says.

At his inauguration five years ago, President Zedillo pledged to reform Mexico's justice system. But while he has revamped the Supreme Court, he has been unable to clean up the country's corrupt police forces or make the courts more efficient.

Now, in pushing for corruption trials that could dish up more dirt on the PRI, Zedillo runs the risk of further discrediting his party and presidency. But in a country rapidly moving away from one-party rule, he has no choice but to offer more accountability. Mexican voters, fed up with decades of corruption by the ruling political and economic class, are demanding it.

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