In May 2019, delivering on his central campaign promise to target corruption in Mexico, Mexico President Andrés Manuel López Obrador’s administration launched an investigation into Emilio Lozoya Austin, former CEO of Mexican state-owned oil and gas company Petróleos Mexicanos (“Pemex”) for alleged fraud, money laundering, and bribery. The allegations revolve around Pemex’s 2014 purchase of a rundown and abandoned fertilizer plant for $475 million US from Altos Hornos de México (“AHMSA”), one of Mexico’s largest multinational companies. Mexican prosecutors are alleging that the plant’s price was severely inflated and that bribery played a role in securing the transaction.
This is not the first time Lozoya has been accused of accepting bribes. In 2017, three former Odebrecht S.A. executives accused Lozoya of receiving $10 million in bribes, $4 million of which were allegedly received in 2012 while he was a top campaign official for former President Enrique Peña Nieto’s presidential campaign, and the rest in 2013 and 2014 while he was the head of Pemex.1 In December 2016, as part of a multi-billion dollar plea bargain with U.S. authorities, Odebrecht admitted to paying nearly $800 million in bribes to officials in a dozen countries across Latin America and Africa to secure public contracts.2 While Odebrecht did not name the Mexican state company which it alleged paid $6 million in bribes in 2013 and 2014, Pemex was reportedly the only federal entity to sign a contract with Odebrecht during the period. Public records showed that while Lozoya was head of Pemex, Odebrecht won four engineer and construction contracts from Pemex totaling $1.5 billion.
Lozoya denied ever participating in any corrupt act and encouraged authorities to investigate any possible corruption between Pemex and Odebrecht. Former President Peña Nieto similarly denied any allegations into corruption. Lozoya was promoted to CEO of Pemex after President Peña Nieto won the presidential election in 2012 and resigned in 2016 after 12 straight reported quarterly losses.3 Then Mexico Attorney General did not file any charges against any former or current Pemex officials, however, current Mexico Attorney General Alejandro Gertz Manero announced last month that he would be bringing a criminal prosecution case into Odebrecht within 60 days in light of “recently gathered information.”4
At the request of Mexican prosecutors, on May 26th, a federal judge issued arrest warrants for Lozoya and Alonso Ancira, CEO of AHMSA, and froze their bank accounts. Two days later, Ancira was arrested in Spain by Interpol police for charges related to the fertilizer plant. On June 5th, Judge Luz Maria Ortega ruled that Lozoya’s allegations did not merit preventative incarcerations and suspended the arrest warrant against Lozoya and his family.5 On June 17th, Judge Ortega rescinded her ruling regarding the arrest of Lozoya, but he has not been arrested to date.6 Interpol has also issued a red notice against Lozoya at the request of Mexican authorities, meaning that he could be arrested in any of the 190 countries where Interpol has jurisdiction.
What This Means For You
These investigations into companies — and the executives of those companies — doing business in Mexico is a strong signal that the current administration intends to make good on its promise to fight corruption in Mexico. Companies investing or doing business in Mexico should pay renewed attention to their compliance programs and the implementation of anti-corruption best practices. While this is President Lopez Obrador’s first major anticorruption prosecution, recent news of current investigations into other potentially corrupt acts surrounding former President Peña Nieto’s administration suggests that we can expect to see more probes into other alleged corruption activities of companies doing business in Mexico.