Documents Tie Mexican Mogul To Company At Center Of Fraud Probe (#GotBitcoin?)

Presidential ally is linked to Europe-based entities with large shares in Fertinal, whose sale to state-owned Pemex is under investigation. Documents Tie Mexican Mogul To Company At Center Of Fraud Probe (#GotBitcoin?)

A prominent ally of Mexico’s president who is one of the country’s richest businessmen has financial ties to companies that owned significant shares in a fertilizer maker at the center of a burgeoning national corruption scandal.

Ricardo Salinas Pliego, who heads a business empire with assets in banking, broadcasting and retail, is linked to Europe-based entities that held large shares of Grupo Fertinal, according to people familiar with the matter and internal corporate documents reviewed by The Wall Street Journal.

Fertinal was sold to Mexican state-owned oil company Petróleos Mexicanos, or Pemex, in 2016 for $635 million including the retirement of debt, a price a government fiscal watchdog later determined to be inflated by nearly $200 million.

In March, President Andrés Manuel López Obrador announced a federal investigation into the deal after Pemex filed a fraud complaint with prosecutors accusing the institutions that financed the purchase—including Banco Azteca, of which Mr. Salinas Pliego owns a majority share—of knowingly inflating Fertinal’s value. Recently, the Journal reported that Mexican prosecutors were preparing to bring corruption charges against a former chief executive of Pemex for accepting $2.8 million in bribes related to the Fertinal purchase, according to a person with knowledge of the investigation. The executive, who has been at large since May, previously denied any wrongdoing.

Prosecutors haven’t accused Mr. Salinas Pliego of any crimes in connection with the purchase. He has long denied being a shareholder in Fertinal, which was “technically bankrupt” when Pemex bought it, according to a subsequent government report on the deal. He says he was just a creditor through Banco Azteca, which had lent the troubled fertilizer producer $406 million starting in 2008. The bulk of the purchase price paid by Pemex went to paying off that debt at full value, an unusual move when buying a troubled company.

The purchase, which closed the day before Fertinal’s debt with Azteca came due, has proven extremely costly for Pemex. A March 2017 independent audit commissioned by Mexico’s Finance Ministry—which controls Pemex—found that Fertinal had $15 million in assets at the time of the purchase. The government’s own 2017 audit concluded that Fertinal’s plant would require $315 million in repairs and upgrades to meet security, environmental and operational standards.

Mr. Salinas Pliego not only benefited from the Fertinal deal on the debt side, but may have also profited on the equity side, given the connections shown by the documents reviewed by the Journal. They link Mr. Salinas Pliego, through a complex web of holding companies registered in tax havens, to a Swedish-registered company known as NPK Holding AB, which owned 24.4% of Fertinal at the time of the sale. Another holding company with ties to Mr. Salinas Pliego, Belgium-domiciled Base Rock BVBA, owned another 4.5% of Fertinal’s shares.

The documents suggest that Mr. Salinas Pliego—a key private-sector ally of Mr. López Obrador, who was elected in a landslide last year on promises to eradicate corruption—may have benefited covertly from the sale of Fertinal at an inflated price.

There is no indication Mr. López Obrador knew of Mr. Salinas Pliego’s ties to the companies with stakes in Fertinal.

Mr. Salinas Pliego, who according to the Bloomberg Billionaires Index has a net worth of $13.4 billion (second among Mexicans only to telecom mogul Carlos Slim ), heads the leftist-nationalist president’s business advisory council. And in January, Banco Azteca won a lucrative, no-bid contract to issue debit cards to poor Mexicans as part of one of Mr. López Obrador’s signature social-welfare programs.

Mr. Salinas Pliego has a history of conflicts involving his wide-ranging business enterprises. In 2006, for example, he and another executive paid $8.5 million in fines to the U.S. Securities and Exchange Commission and were banned from serving as officers of any U.S. public company to settle civil charges that they improperly earned more than $100 million in a related-party transaction involving TV Azteca , Mr. Salinas Pliego’s broadcaster, and the cellphone carrier Unefon. He neither admitted nor denied wrongdoing as part of the settlement.

Now and separately, the Fertinal deal is under the scrutiny of U.S. authorities. The Justice Department and the SEC have assigned staff to investigate whether any bribes were paid to secure the high price Pemex paid for Fertinal, according to people familiar with the matter and law-enforcement communications reviewed by the Journal. Because Pemex bonds are traded in the U.S., any improper payments could constitute a violation of the Foreign Corrupt Practices Act, a U.S. anticorruption law.

Mr. Salinas Pliego declined to be interviewed for this article. Luciano Pascoe, a spokesman for Grupo Salinas, described Fertinal as a success story and said Mr. Salinas Pliego’s conglomerate had “no participation” in the company beyond Banco Azteca’s loans. He said Mr. Salinas didn’t have a stake in NPK Holding “in a personal capacity.”

Representatives of Mr. López Obrador didn’t respond to questions concerning Mr. Salinas Pliego’s role in the Fertinal deal and status as an adviser to the president.

At a press conference in late July, Mr. López Obrador defended Mr. Salinas Pliego after Mexican newsmagazine Proceso published a story about ties between the billionaire and Fertinal.

“There is a complaint” against Fertinal, Mr. López Obrador said. “What there isn’t is a complaint against Salinas Pliego.”

If financial authorities want to investigate Mr. Salinas Pliego, the president shouldn’t interfere, said Luis Pérez de Acha, a lawyer who worked on Mr. López Obrador’s first presidential campaign in 2005. “It would fracture López Obrador’s entire discourse against corruption to protect anyone who is corrupt,” he said.

The story of Fertinal involves connected businessmen making the kind of insider deals that Mr. López Obrador has spent much of his political career opposing and has vowed to stop as president.

The company has its roots in the wave of privatizations that swept Mexico in the 1990s. In 1992, state-owned fertilizer concern Fertilizantes Mexicanos, or Fertimex, was sold to Italian-Mexican businessman Fabio Covarrubias, who became its chief executive.

Six years later, the Mexican government acquired a 47% stake in the company, rebranded as Grupo Fertinal, as part of its rescue of Banco Unión, a failed lender where Mr. Covarrubias had served as a vice president and that owned Fertinal shares.

In 2006, Mexico sold its stake in Fertinal in a public auction to two companies incorporated in Belgium, according to government records: NPK Chemical Investments BVBA and NPK Chemical Holdings BVBA.

Both companies were represented by a lawyer named Miguel Irurita Tomasena, according to the documents reviewed by the Journal. Mr. Irurita has served on the boards of multiple companies controlled by Mr. Salinas Pliego, including his flagship public company, Grupo Elektra . Corporate registry documents show that in 2012, the two NPK entities were merged into one company, NPK Holding AB, and registered in Sweden, a country known for its strong corporate-privacy protections. Mr. Irurita couldn’t be reached for comment.

NPK Holding remains cloaked in mystery, as do the identities of its beneficial owners. Housed for years in a glass-walled office tower between railroad tracks and a seaport in the Swedish city of Malmö, the company doesn’t appear to have employees or even a real office. Over the years, documents show, NPK has invested in several companies run by executives who have held positions in Mr. Salinas Pliego’s businesses.

In late 2015, just before Pemex announced it would buy Fertinal, NPK Holding transferred power of attorney over its affairs from a Swedish representative to two Mexican lawyers, one of whom had previously represented a wireless-communications company owned by Mr. Salinas Pliego.

Another, unrelated transaction shows an additional connection between Mr. Salinas Pliego and NPK Holding. In 2007, a Mexican company known as Surmaq SA purchased a large piece of land near the Cancún airport for around $2 million. NPK Holding, the Fertinal shareholder, owns Surmaq through two Luxembourg-based holding companies, according to financial records registered in Luxembourg and Sweden reviewed by the Journal.

Documents and interviews with people involved in the transaction, however, show that Mr. Salinas Pliego, through an investment firm he owns personally, is behind Surmaq, linking him further to NPK Holding, which as a major Fertinal shareholder benefited from the chemical company’s sale to Pemex.

The seller of the airport land, Mexico City-based investor Francisco de Paula León Olea, had planned to build an exhibition center on the site. He said he turned to a friend, former Fertinal chief executive Mr. Covarrubias, for financing.

After Mr. León pitched the exhibition-center idea, Mr. Covarrubias told him, “‘Forget about this project, Ricardo wants to buy the land,’” Mr. León said in an interview.

Although Surmaq was the buyer on paper, Mr. León says he understood he was selling the land to Mr. Salinas Pliego. During negotiations for the land sale, Mr. León met with several lawyers who records show had previously represented Mr. Salinas Pliego. He said he was even invited to dinner with Mr. Salinas Pliego but was unable to attend. Mr. Salinas Pliego’s spokesman didn’t respond to a request for comment on the deal.

Last year, attorneys working for Surmaq filed a petition with the government of Quintana Roo, the Mexican state where Cancún is located, to remove records related to the land deal from the public registry.

The legal fees for the petition were paid by a company called Lusad Administrative Services, which is also listed as the land’s owners, according to transaction documents filed with the state. Lusad, in turn, is half-owned by Mr. Salinas Pliego through an investment vehicle called L1bero Partners LP, according to internal corporate records.

Over the years, Mr. Covarrubias, the former Fertinal chief executive, has said he doesn’t know whether or not Mr. Salinas Pliego was a shareholder. But he told investors in a conference call in September 2010—soon after Banco Azteca began lending to Fertinal—that Mr. Salinas Pliego had helped “rescue” the chemical company, according to the Mexican newspaper Reforma, a possible reference to Banco Azteca’s role as a lender to Fertinal.

“I can’t say he’s a shareholder, but I can tell you that he fixed the company, he’s involved,” Mr. Covarrubias said, according to the report. Mr. Covarrubias didn’t respond to a request for comment sent through his son. Documents Tie Mexican Mogul,Documents Tie Mexican Mogul,Documents Tie Mexican Mogul,Documents Tie Mexican Mogul

Probes Reveal Central, US-Based, International Banks All Have Sticky Fingers (#GotBitcoin?)

U.S. Market-Manipulation Cases Reach Record (#GotBitcoin?)

Wall Street Fines Rose in 2018, Boosted By Foreign Bribery Cases (#GotBitcoin?)

Our Facebook Page