Scandal Casts a Cloud Over a Proud City and an Industrial Dynasty

For years, residents of this brawny industrial city bragged of having more in common with their neighbors in nearby Texas than with their co-nationals in the politics-infested capital, whom they deride as “chile eaters.”

Here, hard-working employees are at their desks by 8:30 a.m. Lunch is often a quick bite, not a four-hour gabfest. And the national government itself has long been viewed by many Monterrey residents with suspicion--if not downright hostility.

So folks here are understandably shocked at the news that Mexico’s unprecedented political corruption scandal has reached into the city’s most prestigious industrial dynasty, the Garza Sada family.

Adrian Sada, a white-shoe Monterrey banker and scion of a clan as elite as the Rockefellers and Carnegies, has been linked to the murky, multimillion-dollar business deals of Raul Salinas de Gortari, brother of ex-President Carlos Salinas de Gortari.

It is the first local whiff of the explosive scandal, though Sada has not been charged with a crime. But the latest development highlights a historical shift that has dismayed Mexico’s business capital.

Once about as compatible as oil and water, northern industrialists and the federal government became close allies under the business-friendly Salinas. Critics say the result is a dangerously incestuous relationship, one that reflects broader political change in Mexico.

“The Monterrey entrepreneurs were always very careful about the image they projected here in the city,” said Maria de los Angeles Pozas, a political scientist and author of a book about the Monterrey business elite. “They projected, generally, an image of honesty and hard work. That’s why this is so shocking.”

Sada is one of a handful of leading Mexican businessmen who have been identified as quietly arranging cozy multimillion-dollar business deals with Raul Salinas--even as they were participating in the huge privatization program carried out by his brother.

The scandal has raised questions of whether the businessmen granted Salinas financial favors in exchange for preferential treatment in bidding for privatized companies.

Mexicans have been stunned as top businessmen have been called to testify before investigators probing Raul Salinas’ mysterious $100-million fortune.

One of the biggest surprises: the slender, immaculately coiffed Sada.

*

Starting in the last century, his progenitors helped develop much of Mexico’s steel, glass, cement and other heavy industries. Even today, their influence is palpable in this city--where streets are named Garza Sada and a white monument to Eugenio Garza Sada stands on the leafy campus of the Monterrey Technological Institute, a Mexican version of MIT that the industrialist helped found.

Today, members of the Garza Sada dynasty run four of Mexico’s top 10 publicly traded companies.

Many Monterrey residents still express pride at the industrialists’ no-nonsense ways, strong sense of civic commitment and stiff-necked resistance to meddling by Mexico City.

“Their greatness was based in the fact that they never became enraptured with their wealth . . . they helped their community,” wrote Irma Martinez de Maldonado, a columnist for the Monterrey daily El Norte. “Perhaps that’s why it’s so painful to see the names of well-known and respected people publicly linked to dirty money.”

Sada, a 51-year-old businessman, denies committing any improprieties. In newspaper ads this month, he said Salinas sent $15 million to his Swiss bank account to invest in a “business project.” Without mentioning any dates, Sada said he returned the money after the project didn’t pan out.

*

In 1992, Sada and a group of associates beat out other contenders to buy the country’s third-largest bank, Serfin, from the government. Sada remains the bank’s president.

The banker denies any quid pro quo. His business dealings with Raul Salinas, he said, were “strictly a personal activity.”

However, last week an opposition party, the Democratic Revolution Party, called for a congressional investigation into the Serfin privatization.

And according to the newspaper El Financiero, which revealed Sada’s business dealings with Salinas, Serfin granted the president’s brother a $600,000 line of credit after the privatization. The newspaper said investigators suspect that Salinas used his influence so that Sada could buy the bank.

Officials at Serfin declined to comment, citing bank secrecy laws. Sources close to the bank, however, confirmed the line of credit, saying Salinas used a quarter of it, later paying back the loan.

In a rare display of public rancor within the family, one of Sada’s cousins has openly declared that deals like the suspect $15-million investment would never have happened in the old days.

“There has been a change of values,” Rogelio Sada, an opposition party activist who is estranged from Adrian Sada, said in an interview with The Times.

“Certain businessmen became excessively close” to the government, he said. Earlier Garza Sada businessmen, he added, “were more just, more upright, extremely honest. They were true moral leaders.”

For decades, the independent-minded Monterrey industrialists had an arm’s-length relationship with presidents who proclaimed the leftist ideals of the 1910-17 Mexican revolution.

In 1973, relations grew so tense that industrialists accused the left-wing government of fomenting the violence that cost the life of Eugenio Garza Sada, who was killed by leftist guerrillas.

So it was a relieved business class that welcomed Carlos Salinas as president in 1988. Emphasizing his roots in the Monterrey region, he won over the industrialists, promising to accelerate Mexico’s transition to a free-market economy.

He even had an unofficial ambassador to the city’s business class--his brother.

Setting himself up in a sprawling dove-gray mansion in Monterrey, Raul Salinas was a hit at elegant parties, acquaintances say. The charming presidential sibling reportedly shared the interests of the city’s bluebloods: horses, hunting, yachting.

“He came with a plan that seemed to us very reasonable and positive--to offer help in working out business problems,” said Jose Antonio Fernandez, another member of the extended Garza Sada family, who heads Femsa, a major beer and soda manufacturer.

*

Raul, Fernandez emphasized, never asked him for money.

The Salinas connection became so close that several Monterrey magnates attended a secret dinner with the president in 1993 at which Mexico’s billionaire businessmen were asked to contribute $25 million each to the ruling party.

The dinner, when later publicized, became a national scandal. What, asked critics, would the businessmen expect in return for such generosity?

“You have to remember the context of three years ago. Our relations with the authorities were very different,” said Federico Sada, Adrian’s brother, who runs Vitro, another family company. “Three years ago . . . the authorities were very respected.”

*

How times have changed. Today, Raul Salinas sits in a Mexico City jail, charged with ordering the murder of a politician. He is also accused of illegally amassing at least $100 million while serving as a medium-level government functionary. Officials suspect at least part came from drug traffickers.

These days, rumors fly around Monterrey of the deals Raul Salinas cut with business. His nickname: Mr. 10%, for the share he allegedly took in deals involving the government.

The revelations have helped to destroy the reputation of Carlos Salinas, who left office in 1994 and now lives in virtual exile in Ireland.

Pozas, the political scientist, says Raul Salinas’ ties to the Monterrey elite illustrate a tidal shift in this country’s politics.

She noted that for decades, the ruling Institutional Revolutionary Party, or PRI, regarded peasants and union workers as its base. Big business was regarded with suspicion--and the feeling was returned.

“This modification of the hegemonic groups in the country, the increasingly close relationship with the government, means there’s a political change in Mexico,” Pozas said. “The populism that the PRI maintained, the ideas from the Mexican revolution of 1910, are dying.”

*

Some insist these relations were never as distant as they seemed. Even while Mexico had an economy protected by high tariffs, they note, the government was generous in granting permits and privileges to many Monterrey industrialists. Those industrialists, in turn, often supported the government.

Santiago Trevino, head of the American Chamber of Commerce here, said the shocking thing wasn’t that business cut deals with the president’s family.

“The shocking thing is that it’s in the newspaper,” he said.

But others say the get-rich Salinas years have tarnished an industrial class once admired for its independence and social conscience.

During the Salinas era, wrote Martinez de Maldonado, “the elite went crazy in their adoration of the golden calf. Anything went as long as it added zeros to your fortune.”