Mexico Graft Probe May Set Off Political War

President Vicente Fox may have caught the first big fish of his anti-corruption campaign--although this catch could prove to be a shark that bites back.

Auditor General Francisco Barrio said over the weekend that his office is investigating charges that executives of Pemex, the state-owned oil company, siphoned off at least $120 million and channeled it to the oil workers union in 2000.

Mexican media said federal prosecutors are going further, investigating whether the union funneled the money to the failed presidential campaign of the former ruling party.

If true, that would be a huge blow to the Institutional Revolutionary Party, which lost the presidency to Fox after 71 years in power. The PRI, as the party is known, is trying to revive after a string of electoral defeats since Fox’s decisive victory in July 2000.

Fox built his campaign on a promise to attack the corruption that he said had infected successive PRI governments and undermined the rule of law. He named Barrio, a former Chihuahua state governor from Fox’s center-right National Action Party, to the auditor general’s post with instructions to go after corruption.

During the new administration’s first year, Barrio appeared to make little progress, leaving many Mexicans with the impression that Fox would tread softly on wrongdoing by his predecessors. The suspicion was that Fox was going easy in return for support for his legislative agenda.

But the gravity of the allegations against Pemex officials suggests a tougher approach, apparently including a money-laundering probe by organized-crime investigators that allegedly has led to orders to place three midlevel PRI officials under house arrest.

PRI leaders are fighting back, suggesting that new confrontations may now loom between the former ruling party and Fox’s government.

Sen. Humberto Roque Villanueva called Barrio’s public disclosure of the probe “a political declaration of war.” Villanueva said Fox is attacking the PRI because the party refused to support his tax reform proposal, which was virtually rewritten by the PRI-dominated Congress last month.

The uproar also raised the issue of how Mexico will approach the critical issue of energy reform, another of Fox’s central campaign themes.

PRI President Dulce Maria Sauri told reporters that Fox apparently is trying to undermine Pemex so he can move toward privatizing the huge oil company. Pemex, short for Petroleos Mexicanos, was nationalized in 1938, and its status as a state-owned cash cow remains a matter of pride for many Mexicans.

Pemex has long been accused of improperly backing the PRI. During the 2000 campaign, a whistle-blowing employee in Tabasco state accused management of pressuring employees to donate to the party and work for it. Pemex officials angrily denied that accusation.

In a speech Monday, Fox insisted that he does not want to privatize Pemex, but he argued that the nation’s energy industry desperately needs to be modernized if the economy is to grow.

Barrio said in a radio interview Monday that his investigators had detected two unusual payments made in 2000 by Pemex to its union, totaling about $120 million, which he said appeared to be illegal. He said his office had turned that information over to the attorney general’s office, which had launched its own probe. Barrio said his office did not determine what the union did with the funds.

Mexican media, quoting sources in the attorney general’s organized-crime division, said the union apparently deposited the money into several bank accounts and then transferred it to PRI coffers to help pay for the 2000 campaign.

Reforma newspaper said the attorney general’s office was building a case of money laundering against those involved, including former Pemex chief Rogelio Montemayor, who was active in the losing campaign of PRI presidential candidate Francisco Labastida, and union chief Carlos Romero Deschamps.

La Jornada, which broke the story Saturday, said three senior PRI officials had been under house arrest since December in what the federal organized-crime unit was calling “Operation Crude.”