“Largest Foreign Bribery Case in History” Claims New Scalp: Former Pemex CEO

His lawyer suggests if the price is too high, he may be willing to take his friend, former president of Mexico, down with him.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Emilio Lozoya, a former chief executive of state oil company Petróleos Mexicanos (Pemex), was issued with an arrest warrant on Wednesday for financial irregularities, in particular his alleged dealings with scandal-plagued Brazilian construction firm Odebrecht.

Lozoya, formerly a one-time senior election campaign advisor to Mexico’s former president, Enrique Peña Nieto, is accused of receiving “tips” from Odebrecht worth some $10 million in exchange for his support in obtaining public work contracts. The money allegedly passed through shell companies in the British Virgin Islands before coming to rest in private bank accounts belonging to Lozoya in Switzerland, Liechtenstein, and Monaco.

Lozoya is one of countless public figures and business leaders in over a dozen Latin American and African countries, including Venezuela, Colombia, Argentina, Peru, Angola and Mozambique, to be accused of having his pockets lined by Brazil’s largest construction company. Some of those figures have even ended up in jail, including the former CEO of Odebrecht, Marcelo Odebrecht, and former Brazil president Luiz Inacio Lula da Silva, who is accused of accepting money from Odebrecht for his family’s vacation home.

The scandal has done extensive damage to Brazil’s state-owned oil behemoth Petrobras and has so far cost Odebrecht $2.6 billion in fines, $2.39 billion of which went to Brazil, $93 million to the U.S. and $116 million to Switzerland.

But in Mexico the investigation into Lozoya’s alleged acceptance of financial inducements seemed to be going nowhere — perhaps no surprise given the former attorney general, Raúl Cervantes Andrade, is a very close friend of President Peña Nieto, who is in turn a very close friend of Lozoya’s. But now that Mexico has a new government and a new attorney general that have pledged to combat corruption at Pemex, that friendship may be about to be seriously tested as Lozoya threatens to drag Peña Nieto with him through the dirt.

“Nothing in this country moved unless there were instructions from the president,” Lozoya’s lawyer, Javier Coello said on Wednesday, adding that the ministries of finance, economy and energy all had seats on the company’s board.

Lozoya was CEO of Pemex from 2012 to 2016, during which time the company underwent a dramatic deterioration in its already poor financial performance. By early 2016 the group’s total sales had plummeted by 21%, its annual operating losses had soared to an eight-decade high of almost $30 billion, and its total debt load had grown from $64 billion in 2012 to $106 billion now.

Obviously, this was not all one man’s fault. Between 2014 and mid-2016 the price of oil plummeted, crippling the finances of many oil producing economies. The Mexican peso lost almost a third of its value against the dollar during this period.

There are a host of other reasons for Pemex’s decline, including chronic mismanagement, lack of vision, severe budget cuts, shrinking oil reserves, lack of investment resulting in poor or obsolete infrastructure, negligence and the huge tax burdens the government imposed on it in the years preceding Mexico’s oil reforms, while lavishing foreign companies with massive fiscal incentives to invest in Mexican oil fields. But there’s an even bigger reason: corruption.

Simple, plain, white-collar corruption. Or what we like to call Petro-Plunder.

A perfect case in point was the decision by Pemex’s senior management to splash out $665 million on the repurchase of two fertilizer plants that Pemex had sold to private investors many years earlier, one of which was not even close to being operational — and in fact still isn’t — while the other one operated well below capacity. This week, Alonso Ancira, the owner of the Mexican steel company that sold the inoperative plant back to Pemex, was arrested in Spain for selling the firm at a price ten times higher than its real value.

Before the purchase of the fertilizer plants, international auditors warned Pemex’s board of their dire state, but the company went ahead with the purchase anyway. Such reckless lavishness was a constant feature of Lozoya’s tenure as CEO of Pemex. As Wilbur Matthews, founder of Texas-based Vaquero Global Investment, told Reuters, “The way they were conducting business in … [those] years did not make any sense at all.” Unless, of course, their prime, or sole, guiding principle was self-enrichment.

In the short space of just three and a half years the ranks of senior managers and administrators on the company’s payroll tripled. Despite Pemex’s growing losses those managers awarded themselves generous salary rises and lucrative perks, including three executive planes and a helicopter, and 911 company cars and SUVs.

The planes and helicopter, personally requested by Lozoya himself, were supposed to be deployed in the fight against the mass theft of oil by armies of amateur opportunists and some of Mexico’s most ruthless and organized drug gangs, which is now a multi-billion dollar business in Mexico; instead, they were reportedly used to shuttle Lozoya and his fellow executives to and from luxury resorts in Mexico and the United States, at public expense (since Pemex is state-owned).

Now, Lozayo, no longer protected by his connections to government, could finally pay a price for the white collar crimes he is alleged to have committed. And if his lawyer’s latest comments are any indication, if that price ends up being too high, he may be willing to take his friend, the former president of Mexico, down with him. By Don Quijones.

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  21 comments for ““Largest Foreign Bribery Case in History” Claims New Scalp: Former Pemex CEO

  1. Javert Chip says:

    Wow! Stealing & corruption at a Mexican (Brazilian, Venezuelan…fill in the blank) oil company.

    Is there a time in history when this hasn’t been going on?

    • Mike G says:

      Prosecuting bribery and corruption at a state-owned oil company anywhere is like giving out speeding tickets at the Indy 500.

  2. Rowen says:

    So basically he thought he was Eddie Lampert?

  3. Ted says:

    It’s quite sad to read about all this as an Engineer that visited PEMEX many times in the late 90’s. albeit at a pretty low level (gas turbine controls and instrumentation). The goings-on at higher levels were none of my concern but, in the end, it all has to turn to crap for us lesser mortals … :(

  4. pablo escobar says:

    Wow Madoff gets busted in Mexico, who would have known? Who could have guessed?

    Then you wonder why so many are willing to swim the rio-grande for a better life in the United-Slavery-States-Amalgamated, typical end of life gov federalized assets going ‘full russian’.

    Gringos will be heading south, once the easy money quits flowing to the pipeline/shale racket in the USSA, the grass always looks greener on the other side of the prison wall.

  5. kleen says:

    “The scandal has done extensive damage to Brazil’s state-owned oil behemoth Petrobras and has so far cost Odebrecht $2.6 billion in fines, $2.39 billion of which went to Brazil, $93 million to the U.S. and $116 million to Switzerland.”

    The Operation Car Wash in Brazil uncovered the biggest corruption scandal in the History of this world.
    If you you are not familiar with it, it is worth reading about it. And the findings are still ongoing.

    Just search for Operation Car Wash, Brazil or Operacao Lavajato.


    • Paulo says:

      Wow, unbelieveable. It begs the cynical question, is this happening everywhere?

    • Javert Chip says:

      I dunno…the Russian Sochi Olympics are pretty stiff competition: it’s estimated $50B (USD) was stolen or whatever you want to call it.

      The Russians are so much better at this than the Brazilians: Russian guys with bad skin just take the money and walk away. Nobody even pretends to worry about “enthusiastic prosecutors”.

      For comparison, $50B stolen in the Russian economy equates to $500B (or $0.5 trillion) in an economy the size of the US. Now THAT’S some serious stealing.

      • kleen says:

        Maybe, but what’s interesting is that the Brazilian corruption was actually exposed and dozens of high level officials are in jail.

        So, it’s the biggest corruption scandal ever to be exposed. I’ve never seen so many going to jail. Usually it goes unpunished and the corruption lives on…

    • Jac\k2 says:

      And all this time I thought that we here in canada had a big juicy scandal brewing with one of own multinationals–sh*!

  6. Lemko says:

    Excellent article!

    • Randolf says:

      I agree. Don Quijones is an excellent reporter.
      I wonder if he’s any relation to Jorge Cajones?

  7. WES says:

    The only question I have is who is better at stealing oil from pipelines; Nigerians or Mexicans?

    • Javert Chip says:

      Yea, and why does all my money end up in that Nigerian prince’s bank account?

    • Randolf says:

      Mexicans are really good at it except sometimes . . .
      “TLAHUELILPAN, Mexico — Hidalgo state Gov. Omar Fayad says the death toll from a pipeline explosion in central Mexico has risen to 66.

      Over 85 other people on Saturday were listed as missing a day after a massive fireball erupted at an illegal pipeline tap in the small town of Tlahuelilpan, about 62 miles (100 kilometers) north of Mexico City.”

      Final death toll 160 and a whole bunch of people burned black.

  8. Randolf says:

    I hope Vicente Fox’s name pops up in the morass. He’s a real slimeball.

  9. Caio says:

    You could say they are “allies”, maybe, but you shouldn’t say a politician has a “friend”.

  10. Brant Lee says:

    So the dollar stays strong only because the rest of the world is even more corrupt? It’s gotta give you pride in America.

  11. WSKJ says:

    Thx, DQ- for keeping us up on corruption around the world- and commenters for the rest of the stories, and humor.

    I think we in the USA have figured out the antidote to corruption:

    maintain 2 political parties which are always at each other’s throats; and sooner or later, anything, with a hope of being a big corruption story, will out. Sure you will have plenty of careless, and not-strictly-perfect behavior, dredged up as likely crimes; and you won’t notice government actions that really should be scrutinized, but that’s the price you have to pay.

Comments are closed.