Authorities Charge Two High-Level Government Banking Officials with Fraud, Money-Laundering & Extorsion

SourceMex Economic News & Analysis on Mexico, October 17, 2001 | Go to article overview

Authorities Charge Two High-Level Government Banking Officials with Fraud, Money-Laundering & Extorsion


In the continuing saga of corruption in Mexico, authorities arrested two high-level government banking officials on charges of fraud, money-laundering, and extorsion. Arrested were Eugenio Gonzalez Sierra, deputy director of the savings protection agency (Instituto de Proteccion al Ahorro Bancario, IPAB), and Leon Alberto Schietekat Ballesteros, research director at the foreign trade bank (Banco Nacional de Comercio Exterior, BANCOMEXT).

The two officials, detained in early October, will remain in custody for at least 90 days while the government's anti- corruption agency (Unidad Especializada Contra la Delincuencia Organizada, UEDO) investigates the charges.

Sources at the Procuraduria General de la Republica (PGR) allege that Gonzalez Sierra and other IPAB employees conducted a series of transactions to transfer illicit funds between Mexican and foreign banks. Gonzalez Sierra is said to have laundered more than US$1 million through a European institution.

The UEDO, a unit of the PGR, is investigating seven other IPAB employees who may have been involved in the operations.

Officials accused of soliciting bribes

Investigators are also looking into complaints from the engineering company Grupo Mexicano de Desarrollo (GMD) that Gonzalez Sierra offered to "clean up" the company's irregular operations through the IPAB in exchange for a bribe of US$1 million.

Canadian auditor Michael Mackey, who had been hired to audit IPAB's predecessor, the Fondo Bancario de Proteccion al Ahorro (FOBAPROA), had listed GMD as having received an "irregular loan" through Banco Inverlat. In August of this year, a congressional committee approved the release of a list of beneficiaries of FOBAPROA (see SourceMex, 2001-08-15).

Rather than accept Gonzalez Sierra's offer, GMD chief executive officer Diego Ramos Gonzalez alerted the UEDO, which set up the sting operation that led to the arrest of the two banking officials.

Schietekat Ballesteros allegedly acted as an intermediary between Gonzalez Sierra and GMD executives and was also said to have been involved directly in some money-laundering operations.

IPAB denied direct responsibility in the illicit transactions, saying they were conducted without the knowledge of agency executives. "The events have been a deep affront to the institution, which is why it urges judicial authorities to carry out the investigations within the framework of the rule of law, leading to the application of the sanctions imposed by law," said IPAB officials, who pledged full cooperation with the investigation.

Integrity of bank-rescue agency comes into question

But the indirect implication of IPAB in the scandal has led some members of Congress to ask for an overhaul or even elimination of the agency. "The arrest of Eugenio Gonzalez Sierra is evidence that the IPAB is surrounded by corruption," said Deputy Marti Batres, coordinator of the delegation for the center-left Partido de la Revolucion Democratica (PRD) in the Chamber of Deputies. The PRD has long criticized the IPAB and its predecessor the FOBAPROA as having been created to serve the interests of rich bankers and other businesses.

Congress and the private sector have questioned the effectiveness of the IPAB. Mario di Costanzo Armenta, a private consultant who has conducted a review of the institute, told reporters that the IPAB has failed in its mission to significantly reduce the debt of 700 billion pesos (US$75.

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Authorities Charge Two High-Level Government Banking Officials with Fraud, Money-Laundering & Extorsion
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