Ex-Mexico Police Chief, Oil Executive : Corruption in Spotlight at Trials of Former Officials

Arturo (Blackie) Durazo seemed like a natural target for prosecution in a campaign against high-level corruption in Mexico--natural but, as it turns out, not easy.

Durazo was an obscure federal policeman whose career suddenly blossomed in 1977 when a childhood friend, Jose Lopez Portillo, became president of Mexico. Lopez Portillo named Durazo--a portly man with bulldog jowls and, some say, bulldog instincts--as Mexico City’s police chief.

On his salary of $1,000 a month as police chief, Durazo was somehow able to build himself a country house outside the capital and a beach house on the Pacific coast, both in a style that might best be described as Early Nero.

In its case against him, the government charges that he put $7 million into foreign bank accounts.

The visibility of Durazo’s wealth was also his downfall. In 1983, when Miguel de la Madrid succeeded Lopez Portillo as president and decided to punish some glaring examples of corruption, the government went after Durazo.

But after extraditing Durazo last year from the United States, where he had been arrested, the Mexican government now finds itself involved in a slippery court case. Almost all the witnesses against Durazo retracted the testimony they gave in the extradition proceedings. The charges against him--extortion and illegal possession of arms--look weak. The trial has dragged on for more than a year and no end is in sight.

Rather than the triumphant symbol of a high-level delinquent brought to justice, the case has become a major embarrassment of De la Madrid’s “moral renovation” campaign.

To some extent, the problem is due to circumstances. Mexico can try Durazo only on the two charges that were specified in his extradition from the United States.

At the same time the government seems unwilling to delve too deeply into the rot of corruption. In the Durazo case, the prosecution has relied almost entirely on the testimony of his former associates, who seem to have grown defiant with the return of their old boss to Mexico.

In a second sensational case of corruption, that of Jorge Diaz Serrano, the former head of the giant government oil company Petroleos Mexicanos (Pemex), the government won a conviction in a $34-million kickback trial, even though the evidence presented seemed to be less than airtight. Despite the verdict, Mexican observers speculated about a cover-up.

“Who approved all this spending?” economist Jorge Castaneda said the other day. “Who was supposed to be watching out for it? Some of the same people who are in power today.”

Political columnist Margarita Michelena said: “One has to remember something about the government of Mexico. It is a government of accomplices.”

Watchdog Agency

With the two main show trials clouded by controversy, the De la Madrid government has been trying to show the public that whatever happens in court, the government is on the lookout for similar misdeeds--through the comptroller general’s office, De la Madrid’s own creation.

At stake is whether De la Madrid can claim a lasting triumph over corruption or merely be remembered as one of many national leaders who wrestled with the problem but never pinned it to the mat.

Throughout Mexico’s history, several Mexican leaders have tried to reduce or eliminate corruption. Benito Juarez, whose stubborn fight against a 19th-Century French invasion helped to forge Mexican nationalism, was known as incorruptible--and he ran his treasury in a way that justified the reputation.

The long rule of Porfirio Diaz--from 1876 to 1910 with only a four-year break in that span--was different. Ties between graft and politics became closer. Diaz, with a policy known as “bread or stick,” allowed his supporters to enrich themselves in office while ruthlessly suppressing his opponents.

After the 1910 revolution, a promise to crack down on corruption became common to presidential campaigns. Even the relatively clean administration of Lazaro Cardenas was followed in 1940 by a promise of the next president, Manuel Avila Camacho, to promote stronger “public morals.”

First Serious War on Graft

The influence-peddling of Miguel Aleman in the late 1940s and early 1950s led his successor, Adolfo Ruiz Cortines, to institute 20th-Century Mexico’s first serious war on graft. Ruiz Cortines confiscated the holdings of some members of Aleman’s inner circle and forced public officials to submit financial statements upon taking office and again on leaving.

None of this wiped out corruption, but some limits were set, at least until the terms of Luis Echeverria and Jose Lopez Portillo, from 1970 through 1982. In that period, the size of the Mexican government increased, and so did corruption.

Although Lopez Portillo called corruption the “cancer of this country,” he reportedly Caught the disease. A complex of four mansions outside Mexico City is popularly assumed to attest to his unexplained wealth. Mexicans call the location of the estate the “Hill of Dogs,” a sardonic reference to Lopez Portillo’s broken pledge to defend the devalued Mexican peso “like a dog.”

By the end of Lopez Portillo’s term, public disgust with official greed had risen to an all-time high. Citizens routinely referred to bureaucrats as a “pack of thieves.” De la Madrid coined the phrase “moral renovation” and pledged to right past wrongs.

In terms of throwing light on corruption, the trials of Durazo and Diaz Serrano have been unprecedented. The Durazo extradition proceedings, for example, detailed a pyramid of payoffs that led directly to Durazo’s office.

According to evidence presented, low-level policemen were forced to pay a portion of the bribes they collected to superiors, who in turn passed the money up to Durazo through his personal secretary, currently a fugitive. Failure to pay monthly quotas meant dismissal or banishment to the riot squad, “a place of castigation,” as one witness put it.

Gifts of Gold Coins

At Christmastime, witnesses testified, Durazo demanded gifts of gold Mexican coins. According to testimony, police officers were forced to sell tickets to wrestling matches that never took place; police labor was used to build Durazo’s houses.

The houses were remarkable expressions of impudence. The one in El Ajusco, on Mexico City’s outskirts, is graced by quasi-Roman statues, a New York-style disco, a race track, a 23-car garage, artificial lakes and a firing range. It now has been turned into a national “Museum of Corruption.”

The beach house, on a hill overlooking the bay in Zihuatenejo, is adorned with Roman columns that frame a large portico and frescoes that depict frolicking nymphs, cupids and naked Herculean men. Ornate mirrors adorn the ceilings. The swimming pool is lined with mosaic tiles. Neighbors call the place “the Parthenon.”

One cannot be prosecuted for having questionable taste--but, for the moment, Durazo is not even being prosecuted for many other alleged misdeeds commonly attributed to him by the Mexican press, including the mysterious killing of a gang of Colombian drug dealers.

Under terms of a treaty between the United States and Mexico, Durazo, 64, can be tried only on the charges that were brought against him in the extradition proceedings.

Durazo has been held in jail here, as is customary in felony cases, since his trial began more than a year ago. The extortion charge against him is based on testimony that underlings were forced to pass money to him. However, since the trial began in April, 1986, only one of 30 witnesses against Durazo has stuck to his story. The rest say they testified under duress, that they were threatened with torture or jail or both.

Witness Statements Questioned

The reversals suggest that either government prosecutors forced witnesses to lie or that, having told the truth earlier, the witnesses now feel bold enough to take it all back. Some of the witnesses say they gave Durazo money at times when they were not serving with the police force.

The charge of illegal possession of arms seems almost frivolous. Durazo had the authority to have all kinds of arms. Those cited in the charge are mostly useless collectors’ items.

The prosecutor in the Durazo case and the one witness whose testimony has been consistent say that “thugs” hired by Durazo attacked and beat them. From his jail cell, Durazo said the charges are untrue.

Ironically, while one judge is stumbling through a maze of retractions and flimsy evidence meant to convict Durazo, another has quickly decided that Durazo was defamed by the sole unwavering witness against him.

That witness, Jose Gonzalez, was once a Durazo bodyguard. He wrote a best-selling book about his former boss called “Lo Negro del Negro Durazo” (“The Dark Side of Blackie Durazo”). Earlier this year, a judge awarded half the profits from the book to Durazo, who had sued to safeguard his “honor.” An appeal is pending.

Acquittal Predicted

Durazo, through his lawyer, Juan Velasquez, refused to be interviewed by The Times. Velasquez predicts acquittal. He attributes Durazo’s wealth to “business dealings.”

Prosecutor Juan Miranda, speaking through a split lip, a remnant, he says, of the Durazo-ordered pummeling, said that despite the retractions, chances are good for a guilty verdict. Under Mexican law, he said, testimony once given has more weight than a later retraction. He shrugs off the contradictions in testimony as “details.”

Meanwhile, delays in the kickback case of Jorge Diaz Serrano case had reached the point of scandal until a Mexico City judge convicted him in early May. He was sentenced to 10 years in prison and fined $54 million for fraud in connection with the purchase of two oil tankers for Pemex, the government’s oil company.

The trial lasted well beyond the one-year legal limit for such proceedings in Mexico. Charges filed since the trial began, alleging an $18-million kickback on the purchase of diesel turbines, could take even longer to resolve.

The federal prosecutor’s office declined to discuss the trial or verdict. The government did, however, outline its case in an unusual public pamphlet meant to answer critics of the trial. It blamed delays on Diaz Serrano’s defense maneuvers.

Overpriced Tankers

The pamphlet said the tankers were overpriced by $34 million and that Diaz Serrano went ahead with the deal anyway without telling overseers in other ministries. The deal was arranged through a third-party corporation in Liberia, one that presumably could be used to rake off part of the sale proceeds, the pamphlet says. It adds that the Liberian firm apparently existed only on paper; it had a capitalization of only $500.

The government apparently has no idea what happened to the money Diaz Serrano is said to have realized from the deal. Although Diaz Serrano was convicted for fraud, which the law defines as “unlawful gain,” no effort was made to show how he may have profited from the deal.

Also, the prosecution made no effort to call as witnesses, or file charges against, officials of the Belgian shipbuilding company that sold the ships or the officials of the Liberian corporation.

Last week, the prosecution claimed that it was not the government’s idea to charge fraud, but the judge’s. The judge declined comment.

Diaz Serrano has been held in a jail in south Mexico City since 1983. The only signs of his wealth and former position are the beige designer jogging suit he wears, his high-powered lawyers and the tennis lessons that he gives inmates to pass the time. The government has seized much of his property, including a collection of Mexican and French paintings. If his conviction stands up through the appeals process, his property will probably be appraised, confiscated or sold to pay off the fine.

Divorced and Remarried

While in jail, Diaz Serrano divorced his wife and remarried.

Diaz Serrano once ran a profitable oil-drilling company. He moved easily among important politicians, and grew to political prominence himself. In the 1970s, he accepted an appointment from President Lopez Portillo to head Pemex.

It was a heady time for the Mexican economy. Technicians discovered that Mexico’s oil reserves rivaled the largest in the Middle East. The findings were hailed as the key to Mexico’s future. Such was Diaz Serrano’s role in expanding oil production that he was among the half-dozen or so “veiled ones” mentioned as a possible successor to Lopez Portillo.

But as oil prices plunged, so did Diaz Serrano’s fortunes. De la Madrid took office in 1983 and had Diaz Serrano arrested on charges of arranging a kickback on the purchase of the two oil tankers. The news--and pictures of Diaz Serrano under armed escort--caused a sensation.

Diaz Serrano, a little grayer at 66 but otherwise unchanged from his appearance as the very model of a wealthy Mexican businessman, contends that he is innocent and deserves praise for his work at Pemex.

“Oil production grew as never before,” he said in a recent interview. “Yet I am to pay for the country’s economic problems.”

Ships Were Hard to Find

If the ships cost a lot, it was because it was hard to find ships during the oil boom, he contends. He dismisses anything unusual in the deal as the result of a detached management style.

“I was not a policeman,” he said. “I was head of the oil company. I ordered two boats. The technicians found them. I just signed the papers.”

There has been no investigation of the myriad other deals carried out while Diaz Serrano headed Pemex. As early as 1980, an audit of Pemex spending revealed $130 million in “unexplained irregularities”--ranging from undocumented sales abroad to payouts without receipts.

Before the guilty verdict, many Mexicans mused that Diaz Serrano, guilty or not, is no more than a “sexennial prisoner,” destined to stay in jail during the six-year presidential term as a show of government strength. They may be right. Diaz Serrano has already served almost four years in prison and will probably get four years taken off his sentence for good behavior. That means he that has but two years left in jail and that release could come about shortly after De la Madrid leaves office.

Along with the trials of Diaz Serrano and Durazo, the De la Madrid government has banked on the vigilance of the comptroller general’s office to put teeth into the moral renovation campaign. De la Madrid established the office at the outset of his term. It was designed to oversee government spending and enforce new laws against accepting bribes.

Public Servants’ ‘New Image’

“We are giving a new image to the role of the public servant,” said Enrique del Val, the comptroller’s sub-secretary for judicial affairs.

Some success has been achieved in eliminating overt corruption. For example, it is generally no longer necessary to pay a bribe to get a driver’s license.

The government published volumes of statistics aimed at showing that the comptroller’s office has been effective against bureaucratic misdeeds. This year, auditors have investigated 650 complaints of fraud in bids on government contracts and found that about half of the contracts were illicit. Complaints about customs operations at Mexico City’s airport prompted a report in February that the airport is a “site of frequent corruption.”

Not long ago, a dozen federal police officers were dismissed for soliciting bribes from truck drivers, and 40 postal workers were fired after complaints that money sent to Mexico from the United States was being stolen.

But the comptrollers’ reach is limited, and for the most part the office still depends for information on auditors in the agencies that it is meant to control. And it has little to say about what state governments do.

Massive Canal Project

In the state of Sinaloa, a massive canal project begun by a previous government ended with only a few of the proposed canals completed. One canal connects ranchland belonging to Antonio Toledo Corro, who was governor at the time, to the Pacific Ocean. According to local press reports and to government officials, federal dredging machinery and funds were used to build that canal. But there has been no investigation of the project.

In Monterrey, the newspaper El Norte sent out undercover reporters, who received “training” from policemen on how to solicit bribes.

Hazy budgeting practices also make accounting of government spending difficult. For instance, in the 1987 federal budget, the amount allocated for “reconstruction and decentralization” is 16 times what it was in 1986.

The amount, the equivalent of more than a billion dollars, is larger than that received by any single ministry. And the money is consigned not to any particular ministry but for “discretionary use” by the government. In Mexican terms, this is a “noncontrolled item,” according to a study prepared by the economist Rogelio Ramirez de la O.

“This hardly represents a respectable standard of budgetary policy,” Ramirez de la O wrote. “The thought cannot be ignored that while noncontrolled items have been a major problem of budgetary control in recent years, they also represent a good excuse for the government to allocate large amounts of resources to particular ends under the disguise of transfers.”

‘Advanced a Lot’

Nonetheless, the government insists that what it has done has reduced graft.

“We have advanced a lot,” Ignacio Pichardo, the comptroller general, said. “One cannot measure progress just by the number of people in jail. Most important is to have a change of attitude.”

The challenge has become more pressing in the face of the growing drug traffic. A new breed of international criminal waves a lot of money at officials already accustomed to taking bribes. In at least one state, Sinaloa, the drug trade got altogether out of hand despite five years of “moral renovation.”