Garcia Luna in the FBI's sights

Patricia Davila Proceso (1-24-2013)

Translated by un vato for Borderland Beat

 [Translator's note: this story is relevant because one of the individuals involved, Genaro Garcia Luna, was President Calderon's head of national security and led the Calderon administration's war on drugs. Mondragon y Kalb, the other individual mentioned in the article, has taken over Luna Garcia's duties in the Pena Nieto government under Osorio Chong, current Secretary of the Interior. The former SSP ministry that Garcia Luna led has been merged with the Department of Interior (SEGOB: Secretaria de Gobernacion). In effect, these individuals are or were the top law enforcement officials in their respective administrations. The "Plan Merida" provides U.S. federal funds to Mexico for use in the war against drugs.

One further note: under U.S federal procurement statutes, a person who reports fraud in a contract paid with federal funds-- the Plan Merida funds, in this case-- is entitled to a percentage of the funds recovered by the federal government. Jose Luis Moya will probably get paid a substantial amount for reporting the fraudulent overpayment, money laundering and bribes in the purchase/sale of  patrol vehicles and related equipment in Mexico. Good incentive. --un vato]

 

 MEXICO, D.F. (Proceso).-- Since June, the Fraud Section of the U.S.  Justice Department's Criminal Division has been investigating at least 17 businesses who sold patrol vehicles and safety equipment to the federal Ministry of Public Security (SSP: Secretaria de Seguridad Publica) when it was headed by Genaro Garcia Luna, and which allegedly committed fraud  or money laundering (in the transactions).

The investigation derives from a complaint presented in the United States by Jose Luis Moya, an expert on matters of corruption and transparency who has served as advisor to certain PAN (Partido Accion Nacional) legislators.

The inquiries also implicate Manuel Mondragon y Kalb -- in charge of  federal public security in the Enrique Pena Nieto government -- in his role as former head of the Ministry of Public Security of the Federal District (SSPDF: Secretaria de Seguridad Publica del Distrito Federal), a position he held until November 29, 2012.

Mondragon at right

Garcia Luna and Mondragon --and other public security officials and former officials in the federal government and the capital city -- could see themselves implicated in that investigation as a result of their participation in the purchase of patrol vehicles and other equipment at inflated prices.

Moya has followed the trail of both officials and, in an interview with Proceso,   he explains the origin of the complaint: "One day I was alerted to the fact that Garcia Luna was placing Chrysler patrol vehicles in a warehouse on the Mexico-Pachuca highway.

I went there, took photographs of the patrol vehicles and, when I look into it, I find that before the procurement process was even started, they were already taking delivery of the units. I presented a complaint before the PFP comptroller, but nothing was ever done."

He also points out that in November of 2011, using funds from the Plan Merida, Garcia Luna acquired three Black Hawk helicopters -- valued at $20 million each-- for $45 million each.  The Ministry of the Navy (SEMAR: Secretaria de Marina) acquired three more for $28 million each.

After his failed attempts to obtain justice in Mexico, six months ago Moya presented his complaint in the United States to the FBI's Fraud Unit under the anti-corruption laws of that country.

The FBI agents asked him for copies of the purchase/sales contracts and he delivered dozens of files with thousands of invoices that he obtained through federal and local transparency law portals, thanks to the Law on Access to Information. He told them that he suspected that Mexican officials and U.S. companies had laundered money.

Moya says: "One of the agents told me: 'Let's see, let's suppose I found a person willing to pay me too much for my car.' I told him: 'Good. Except that in this case the anti-corruption law in the United Sates prohibits dealerships from earning a profit of more than 10% of the value of the vehicle.'

"The dealer is the official seller for the corporation and the moment it sold the vehicles at an excessive price, it violated the terms of the contract between the dealership and the corporation.

"When the Chrysler corporation found out that I had filed a complaint and that an investigation had been initiated, they sent an auditor to its Mexican affiliate and to the agencies involved to investigate the purchase of the patrol vehicles. He's been here for the last six months. He asked me: 'When other companies go to the bid proposal conferences, don't they complain?' I told him that they did and I showed him bid protests from several of them."

"I explained: 'Look; for example, if Chrysler Automundo was awarded the contract the purchase of one thousand vehicles for one million pesos each, to make payment, the SSP makes an electronic fund transfer  for 500 million pesos, then for another 500,000, and that's it. But the dealership gets the overpayment (in this case) and it has to perform money laundering operations in order to distribute money to the government officials, when, officially, all the proceeds are supposed to go to the Chrysler corporation's shareholders.'

"On this point, the FBI agents explained to me that if the investigation reveals that if the money was reported to Chrysler's shareholders (sic), that shows that the price was inflated and there can be sanctions on that basis, but there is no money laundering, fraud or bribery. However, the dealerships  only reported the fleet price to the [corporation]; not even the commercial price on the invoice, while in Mexico, the invoices delivered to the government agencies show the overpayments. That's the point," he specifies.

Among the companies that Moya reported to the FBI are Nissan, Yamaha, Ford, General Motors, AMESA, Whelen, EADS, Digital Ally, all of which are suppliers, or have been suppliers, to the federal or capital city governments:

"What they do is they call the company, ask for the information and review the cost of the vehicle at the factory and the importation application. The FBI calculates the damages and issues a fine.

The next step is to find the money. At this point, the company generally goes back to the FBI ans asks for a 'discount.' The FBI agrees to that in exchange for information about how the money laundering operation was carried out and who they delivered payment to," he states.

The SSPDF

In 2008, Manuel Mondragon arrived at the SSPDF. In 2010, with the argument that "it's cheaper to lease than to buy", he leased one thousand patrol vehicles pursuant to contract No. SSP/BE/ARR/574 for 1,000,023 pesos each (about $80,000.00), for which he negotiated a loan with Inbursa [a bank] in the amount of 1,230 million pesos (about $98.4 million).

The representative from the capital, Carlos Alberto Flores, president of the Legislative Assembly's Security Commission (Comision de Seguridad de la Asamblea Legislativa) requested the Tax Administration Services office (Servicio de Administracion Tributaria) to initiate an investigation and an audit for money laundering in this case.

According to the investigation (requested) by the legislator, for the purchase of a patrol vehicle in the Miguel Hidalgo precinct -- when it was headed by Demetrio Sodi-- (the government) paid 320 thousand pesos (approximately $26,000.00), which means that purchasing one thousand vehicles would cost 320 million pesos (about $26 million), almost 900 million pesos ($72 million) less than what the agency led by Mondragon paid just for leasing the vehicles.

In addition, if the acquisition had been like the one made by the Iztapalapa precinct, with Clara Brugada as its director, who paid an inflated price for the same units, the cost would also have been less. That precinct paid Roberto Campa, with the Grupo Automotriz Campa, 420 thousand pesos (about $33,600.00) for the same patrol unit, which means that one thousand vehicles would have cost 420 million pesos ($33.6 million).

In addition, Mondragon leased one thousand motorcycles for 216 thousand pesos ($17,280) each. That is, 216 million pesos ($17.28 million) for one thousand units, despite the fact that if they had purchased them even in India, where they're manufactured, they would have cost 15,950 pesos each ($1,276). In Mexico, from the distributor, the price was 33 thousand pesos ($2,640).

Mondragon also bought 12 ambulances from General Motors for one million 320 thousand pesos each (about $105,600.00). Joel Ortega (the former chief of Mexico City police) bought them from Mercedes Benz for 620,000 pesos ($49,600): "He (Mondragon) paid twice as much," Moya points out.

Ancient history

The purchasing irregularities in the SSPDF are not news. In 2000, Vicente Fox appointed Alejandro Gertz Manero -- who had served as the chief of the capital police during the Rosario Robles administration-- as head of the federal SSP.

Then it was discovered that when he he was working for the Federal District government, Gertz had purchased "at an inflated price" 2,060 Malibu patrol vehicles from General Motors Mexico.

The amount of that purchase -- stipulated in the public procurement contract No. 3001066-080 -- was 452,446,242 pesos (about $36.2 million), but the cost was increased by 29,751,746 pesos (about $2.4 million)  to pay for one year of preventive maintenance, although this item was already included in the original price.

Another irregularity was that the units were delivered without radios; these had to be purchased separately, which increased their price by 300%.

The Internal Comptroller of the SSPDF and the Federation's Chief Auditor separately investigated Gertz and his chief officer at the time, Genaro Perez Rocha. The PGR's Special Proceedings Section created case file No. 231/DDF/2004, although the investigation went nowhere.