Auditor Portal: clear act of corruption. Auditor Portal: clear act of corruption.

Billions were diverted with shell companies

Investigation reveals massive fraud by federal agencies

Eleven federal agencies diverted over 3.4 billion pesos (US $192 million) of government funds through shell and illegal companies between 2013 and 2014 in a massive fraud that totaled more than 7.6 billion pesos (US $426 million), according to a joint investigation by a digital newspaper and an anti-graft group.


Published under the title, “The Master Fraud,” the investigation by Animal Político and Mexicanos Contra la Corrupción y la Impunidad (Mexicans Against Corruption and Impunity) found that illegal contracts worth more than 7.6 billion pesos were issued during the period and the final destination of over 3.4 billion pesos of the amount is unknown, although government officials pockets’ are the prime suspects.

More than 50 officials are implicated in the swindle.

Contracts were issued to 186 companies but only 58 of them actually exist or had been established in accordance with the law, the investigation found, the remainder appearing to be shell companies or with irregularities that included not having an address, never having been registered or simply not existing at all.

In effect, 128 companies that either didn’t exist or didn’t have the capacity to undertake the work they were supposedly contracted for received public funds. One example was a company that supposedly sold shoes receiving a multi-million-peso contract to redesign the social security customer service system for government workers.

Another element of the fraud was the use of universities for channeling the funds.

The investigation charges that rather than giving the money directly to the phantom companies it was siphoned through eightpublic universities that were allegedly contracted to provide services. Under Mexican law, universities are exempt from the competitive tendering process usually required for government contracts.


However, while in theory it is legal to contract universities to provide services, in the cases investigated they didn’t actually do anything apart from passing the money on after taking their cut or “commission.”

The universities involved in the scam included the Autonomous University of México state, the Autonomous University of the state of Morelos and five universities in Tabasco. Together they skimmed just over 1 billion pesos in commissions from the 73 agreements they signed with federal agencies.

The remainder of the more than 7.6 billion pesos were used to contract services at inflated prices.

The Secretariat of Social Development (Sedesol), the development bank Banobras and state oil company Pemex were the worst offenders.

The CEO of Pemex at the time, Emilio Lozoya, is already embroiled in a corruption scandal involving the Brazilian firm Odebrecht. The former head of Banobras, Alfredo del Mazo, is set to take over as governor of the state of México after winning election in June.

Sedesol — headed at the time by current Agrarian Development Secretary Rosario Robles — has come under particular scrutiny because the diverted funds would otherwise have been used for social programs to help the country’s most impoverished and vulnerable people.

Other agencies implicated include the Secretariat of Communications and Transport (SCT), the Secretariat of Public Education (SEP) and the Secretariat of Economy (SE), among others.

The extensive investigation led the two organizations to six states where the shell companies were supposedly based. To establish their allegations, they made over 500 requests for information, reviewed thousands of documents, conducted more than 100 interviews and visited more than 100 addresses of supposed companies and shareholders.

Their findings are supported by the Federal Auditor’s Office (ASF), which in fact has warned since 2013 that government agencies were breaking the law by contracting universities for services they were not capable of providing.

Chief Auditor Juan Manuel Portal said that, “It’s a clear act of corruption” and “It’s a mechanism not just for the diversion of [funds] but for the disappearance of public resources.”

He said that the heads of the guilty agencies are responsible even if they didn’t sign off on the agreements that allowed the diversion of funds to occur. Portal urged agency heads to not allow other officials to sign off on such large quantities of public money as they are the ones who are ultimately responsible for it.

He said penalties must be imposed on the agencies responsible and they must comply with established requirements.   He also said there was no justification for the complicity of the universities and that authorities must also take legal action against them.

The ASF has already filed 15 allegations with the federal Attorney General’s office (PGR) related to the diversion of funds but federal agencies have continued with the scheme.

Animal Político and MCCI claim that the fraud amount could actually be much higher. The federal government has signed 2,061 agreements totaling over 31.6 billion pesos with universities since 2010 when Felipe Calderón, who introduced the scheme, was president.

Authorities say they are investigating the fraud claims.

Source: Animal Político (sp)

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  • Comptr Fixer

    No kidding? This can’t be.

  • jdwfinger

    Viva Mexico #1

  • Rob Mellors

    So, what’s new? Robin Hood where are you when you’re needed?

  • Güerito

    I hope no one is surprised by this.

    With so much focus on the obscene corruption of the state Governors, one might think such large-scale theft was limited to the state level.

    But the same thing has been going on at the federal level and on an even larger scale. The only question was if and when the federal cases would be exposed.

    Claudio González Jr., the founder of the anti-corruption group that worked with Animal Político to release this report, was one of those targeted by the federal government in the malware/spying scandal. Several businesses and organizations he founded have been targeted with federal tax audits.

    His father, a prominent businessman, was recently threatened by EPN, who warned him, “Your son needs to stop being so critical of the government. Civil society should not spend so much time talking about corruption.”

    A Scion of Mexico Fights Corruption, and Becomes a Target

  • Pat

    There are many more stories of corruption this year as the Federal Auditor’s Office (ASF) catches up with their investigations. The law should be changed that there be ongoing audits conducted in every Federal agency that spends public money. The ASF can’t keep up hence we only hear of frauds committed 3 or 4 years ago.

    • Güerito

      There have been more corruption cases recently because a) there’s a hell of a lot more corruption going on and b) Mexico is finally getting some independent journalists and investigators exposing the corruption and getting the word out in the newer media, mostly internet based.

  • mariache

    In Mexico? really?

  • kallen

    What do you expect from a country run by narcos?

  • Commander Barkfeather

    In many US and international companies, securing a position of high security or financial authority is contingent upon passing a polygraph test. This may be something Mexico would like to consider, assuming of course, you could find enough uncorrupt legislators to further passage of such a proposal.

    • Parque_Hundido

      It’s pseudoscience. You might as well hire an astrologer.

  • Güerito

    Mexico’s $400 Million Swindle: An Interview With Animal Político’s Tania Montalvo

    Written by Tristan Clavel and Victoria Dittmar Friday, 08 September 2017

    “What we’ve uncovered so far for 2013 and 2014 appears to be the largest documented embezzlement scheme in Mexican history. And since 2010, approximately 2,000 agreements have been signed, whose total value we estimate at 31.5 billion pesos (early $1.8 billion USD).

    We don’t how much of that money was embezzled. What we did realize is that this is only the tip of the iceberg of possible embezzlement schemes involving much larger sums, with a similar modus operandi.”