Mexico City Official Found Dead as New Scandal Unfolds : Transportation: Fraud charges involving bus system, union surface. Head of department takes own life.

President Ernesto Zedillo faced a transportation scandal Monday as the Mexico City transport chief shot himself to death on the same day authorities revealed an alleged $8 million in fraud involving the bankrupt municipal bus system and its union.

Bus drivers thrown out of work by the bankruptcy took to the streets to protest the weekend roundup of half a dozen union leaders on warrants stemming from a 4-year-old lawsuit.

The scandal has national repercussions: Not only is the capital’s government a federal agency, but the combative bus drivers union has close ties to leftist causes, including the rebels in the southern state of Chiapas.

The scandal began to unravel Saturday when city officials announced that the Ruta 100 municipal bus system was “no longer viable” and had been bankrupted by mismanagement. The heavily subsidized bus system transports 2.8 million passengers a day, according to government figures.

City officials decided to shut down the bus system this week when schools, many government offices and private businesses are closed for Easter break and transportation demand is minimal. School and long-distance buses are being commissioned to provide service until a new--probably private--system can be devised.

Shortly after the bankruptcy announcement, arrest warrants were issued for nine union leaders stemming from a lawsuit filed in 1991 by union pensioners over the administration of a trust fund. Six of them, including union counsel Ricardo Barco, were arrested over the weekend.

At dawn Monday, Luis Miguel Moreno, the city’s transportation secretary, was found dead in his office in the fashionable Zona Rosa with two bullet wounds in his chest. The bullets apparently were from the service revolver of his bodyguard, a city police officer. A government official confirmed that it was a suicide.

A few hours later, city Administration Director Jesus Salazar outlined $8 million worth of questionable transactions--including real estate deals, funding for cultural activities and expense reimbursements--that allegedly occurred between the municipal bus authority and union officials between 1992 and 1994.

No city officials have yet been accused of any wrongdoing.

The audit that turned up the irregularities, Salazar said, “was based on Mayor Oscar Espinoza’s promise to manage the city’s resources with honesty and efficiency.”

But Fernando Garcia, a member of the political action committee of the bus drivers union, said, “They just want to cut off the union’s head in order to privatize the bus system.”

In addition, he accused the government of political motives because of the food and clothing that the union has provided to the Zapatista National Liberation Army in Chiapas. The union has also been rumored to have given the rebels arms, a charge Garcia denied.

The bus drivers have repeatedly clashed with the city government, in large part because of their leaders’ support for leftist causes. Barco, the union counsel, is a leader of the Independent Proletarian Movement, which helps organize many of the almost-daily anti-government marches that Espinoza has tried to halt because they tie up traffic.

He has also organized numerous marches in support of the Zapatistas.