Campaign Against Corruption Makes Slow, Unsteady Progress

No one questioned Carlos Tomas Penaloza’s credentials in January 1995 when the Mexican government gave him absolute control of more than $4 billion in social security funds--the pensions of millions of Mexican workers.

Penaloza had a doctorate in economics from Georgetown University. He had served as a senior official in Mexico’s Treasury Department, at embassies in Washington and London and at several Mexican banks. He wrote two books on the Mexican economy.

As treasurer of the Mexican Social Security Institute, officials said, Penaloza was considered highly unlikely to defraud the vital institution.

But today Penaloza is in jail, charged with cheating the social security system out of an estimated $50 million. He and a stockbroker allegedly misappropriated the pension money through a complex investment scheme using a web of brokerage houses during Penaloza’s 18 months in the job.

Penaloza says he’s innocent and will prove it in court. But Mexican President Ernesto Zedillo has cited the case as a prime example of his administration’s war against official corruption--a clear warning to crooked officials, tax cheats and others here that their days of operating with impunity are over.

Curbing that corruption, officials and analysts agree, is a key to stabilizing Mexico’s economy, shoring up confidence in Zedillo’s government and enticing job-producing investment.

“The very bad news,” the president recently told an interviewer, “is the suspicion that there was a fraudulent act. . . . That is very painful. But the good news is that the institutions are functioning to detect those acts, to denounce them and to pursue criminal charges.”

However, officials conceded that Penaloza would not be in jail without the help of the U.S. Treasury Department.

For six months, federal investigators from Mexico’s comptroller’s office and National Commission on Banking and Stocks traced the complex social security transactions in parallel investigations that eventually led to Penaloza, said one official, who asked not to be named.

The proof, he said, came from U.S. investigators, who located an account with nearly $1 million in Penaloza’s name at NationsBank of Texas two weeks before his arrest.

The federal comptroller’s office that helped investigate the Penaloza case now is probing officials at all levels of government--from street inspectors to the brother and some friends of former President Carlos Salinas de Gortari. Following Penaloza’s arrest this month, Mexico’s Treasury Department imposed new measures against corruption, including stepped-up inspections for illicit wealth at the homes of public servants and business people.

Between January and May, a Treasury spokesman said, the government already had taken in nearly $400 million in fines and back taxes stemming from 3,260 such home visits.

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This week, prosecutors at the state level appeared to join the crusade, subpoenaing two former ruling-party governors in alleged corruption cases.

State investigators questioned Socrates Rizzo, who resigned in April as governor of Nuevo Leon, for nearly 14 hours Tuesday about his government’s losses in the purchase and sale of a $4-million jet--and about his possible involvement in the murder of a lawyer who represented drug traffickers there.

Prosecutors in the state of Jalisco sought an arrest warrant for Guillermo Cosio, governor there from 1990 until 1992. They say he failed to collect money owed his government for a 1991 land sale to a hotel developer who was godfather to one of Cosio’s daughters. A Mexican television network, Televisa, and the government news service Notimex reported Wednesday that a judge had found insufficient evidence to issue a warrant. Both Rizzo and Cosio have denied any wrongdoing.

Zedillo’s critics say there are two recent cases that cast doubt on the president’s commitment to consistently pursue corruption.

Prosecutors recently dropped a probe into campaign-spending irregularities involving the ruling-party governor of Tabasco. And prosecutors decided not to go after the former ruling-party governor in Guerrero, even after a Mexican Supreme Court commission stated that he helped cover up a police massacre of 17 peasants last year.