by Andrew M. Levine, Kara Brockmeyer, and Marisa R. Taney

In recent years, anti-corruption enforcement has become increasingly globalized.  New anti-corruption laws have proliferated, along with deepening commitments to enforcing such laws.  Sometimes, like in Brazil, active enforcement has followed promptly after the adoption of new laws.  Other times, as in the case of Mexico, the journey from enactment to enforcement has proven more challenging. 

Amidst much fanfare, Mexico adopted its new National Anti-Corruption System in mid-2016.  Many hoped Mexico would seize the opportunity and shortly thereafter pursue significant anti-corruption enforcement.  But key posts within the anti-corruption system remained unfilled, and no significant enforcement ensued.

After two years of relative inaction, Andrés Manuel López Obrador campaigned successfully for President of Mexico in significant part based on a promise to eliminate the cancer of corruption.  He took office in December 2018 and filled a number of significant positions, including appointing Mexico’s first-ever independent Attorney General, who in turn appointed a Special Anti-Corruption Prosecutor.  At the same time, notwithstanding lofty campaign promises, an absence of immediate enforcement along with some of President López Obrador’s public statements tempered expectations about full implementation of the new regime.

Over the last few weeks – especially given the arrest warrant issued for the former head of Petróleos Mexicanos (“Pemex”) – new questions have arisen and expectations again have been piqued regarding the potential vigor of Mexican anti-corruption enforcement.  In relatively short order, differing viewpoints have emerged.  Some believe that Pandora’s box has opened and that Mexican enforcement authorities will have no choice at this point but to scrutinize past acts of corruption, in addition to future ones.  Others believe that these developments ultimately may be isolated in nature and perhaps the by-products of short-term political considerations.  A recent address by President López Obrador’s chief legal advisor suggests a middle position:  the Attorney General’s Office will pursue vigorously acts of potential corruption already within that office’s investigative pipeline, but otherwise will focus its investigative efforts on future misconduct. 

In any event, critical questions persist regarding how and to what extent the Mexican government will enforce its new anti-corruption regime.  This article puts those questions into context by considering developments relating to Mexico’s fledgling anti-corruption system, relatively new administration, and recent enforcement developments. 

I.  Mexico’s New Anti-Corruption System

On July 18, 2016, Mexico’s former President Peña Nieto ratified and published new legislation amending Mexico’s anti-corruption framework.[1]  This sweeping reform created four new laws:  the General Law of Administrative Liabilities, the General Law of the National Anti-Corruption System, the Organic Law of the Administrative Justice Federal Court, and the Federal Accounting and Accountability Law.  It also amended the Federal Criminal Code, the Organic Law of the Attorney General’s Office, and the Organic Law of the Federal Public Administration by the Mexican Federal Congress.  Relevant changes included broadening the range of chargeable anti-corruption offenses and facilitating more meaningful prosecution of such crimes.

These new laws, known together as the National Anti-Corruption System, also:   institute disclosure requirements for public servants; impose severe penalties for corruption-related offenses; incentivize the implementation of corporate compliance programs and cooperation with authorities; and provide for coordination among federal, state, and local government institutions fighting corruption.  The laws also create critical new governmental posts for ferreting out and prosecuting corruption, including the position of a Special Anti-Corruption Prosecutor.

In late 2018, as a supplement to these domestic enhancements, Mexico became a signatory to the United States-Mexico-Canada Agreement, a tripartite treaty that contains an entire chapter on anti-corruption enforcement and compliance.[2]  The treaty imposes a broad range of obligations on the signatory countries, including an affirmative duty to enforce or enact legislation in support of specific anti-corruption measures.  It addresses both the payment and receipt of bribes and underscores the importance of international cooperation among anti-corruption law enforcement agencies.  Although these obligations are not binding until the treaty is fully ratified and specific legislation is passed to implement the anti-corruption provisions, the agreement represents a potentially meaningful commitment to cooperate in pursuing anti-corruption efforts.

II.  AMLO’s Government

A. A Platform of Enforcement

Combating corruption figured prominently in the campaign platform of Mexico’s current president.  During the campaign, for example, now-President López Obrador proposed establishing stricter penalties for conflicts of interest and corruption violations and promoting greater transparency in government contracting.  In doing so, he called for “pull[ing] this corrupt regime out by its roots”[3] and “clean[ing] out corruption in government from top to bottom, like you clean the stairs.”[4]  He also vowed to amend an article in the Mexican constitution that prevents Mexican presidents from being tried for corruption.[5]  Other campaign promises included cutting government spending, selling the presidential plane, slashing presidential pensions and reducing his own salary, and driving to work in his Volkswagen Jetta.[6] 

During his first months in office, President López Obrador’s track record on implementing his campaign promises has been mixed.  The new administration has worked with Congress to alter the Mexican Constitution to make corruption, fuel theft, and electoral fraud more serious felonies.[7]  Additionally, the President implemented some of his more populist promises, such as opening the presidential complex to the public and selling the presidential airplane.[8]  He also reduced significantly the salaries for some of the highest-paid public employees and raised salaries for lower-earning employees.[9]  

Other campaign promises remain unfulfilled, though the new President admittedly is only about six months into his six-year term.  As an example, despite purported efforts to improve transparency in government contracting, over seventy percent of the contracts awarded in the first three months of López Obrador’s presidency have taken place without competitive bids.[10]  Just before taking office, the President canceled the construction of a new and partially-built airport in Texcoco, a municipality near Mexico City.  He then announced, after assuming the presidency, the construction under the military’s oversight of a different commercial airport in Santa Lucía, another area on the outskirts of Mexico City.[11]  Since the beginning of June 2019, several non-governmental organizations have obtained injunctions ordering the López Obrador administration to suspend the Santa Lucía project and preserve the Texcoco partially-built airport.

B. Willingness to Scrutinize Past Misconduct

Questions persist about President López Obrador’s commitment to investigating corruption and holding culpable individuals to account.  Although the President has opined steadfastly that corruption is an enormous problem for the country, he has vacillated between whether his enforcement approach would be backward or forward looking.  Upon taking office, he declared an end to the cycle of prosecuting previous administrations once out of power and announced that his administration would focus on prosecuting future corrupt acts:  “I propose to the people of Mexico that we draw a final line under this horrible history and make a new start:  In other words, that there be no prosecution of former officials.”[12] 

However, recent statements by the President’s chief legal advisor, Julio Scherer Ibarra, suggest the President may be softening that stance.[13]  On June 6, 2019, at the Latin Lawyer – GIR Live Anti-Corruption and Investigations Conference Mexico (“Mexico Conference”), Scherer Ibarra clarified in a keynote address that “[w]hatever investigations were already ongoing under the Attorney General’s office prior to the new government will be pursued with all the strength of the Mexican state.” 

The arrest warrant recently issued for the former head of Pemex, as detailed below, likewise evidences such a potential shift.  In discussing this particular prosecution, the government has distanced itself somewhat, emphasizing the Attorney General’s independence in making such decisions.  More broadly, based on Scherer Ibarra’s comments, it appears that – aside from independent prosecutions arguably already in progress to some degree – the administration wishes to focus prospectively its anti-corruption enforcement efforts.

III. Recent Steps Towards Implementing the Anti-Corruption Framework

A. The National Anti-Corruption System

Following the passage and entry into force of Mexico’s new National Anti-Corruption System, there was only limited progress in its implementation, undoubtedly challenged in part by entrenched norms regarding corruption in the public and private sectors.  Important governmental posts remained vacant.  And enforcement had not materialized in a substantial way, though multinational and local companies began registering the increasing need to address corruption risk.

Since taking office, President López Obrador has filled a number of important posts.  In particular, he nominated three individuals for the newly independent position of Attorney General, one of whom, Alejandro Gertz Manero, the Senate then selected.  Gertz Manero then appointed a Special Anti-Corruption Prosecutor, María de la Luz Mijangos Borja, who is tasked specifically with investigating and prosecuting corruption-related misconduct in Mexico.[14]

Beyond efforts of the government, the Citizen’s Participation Committee (“CPC”), currently led by José Octavio López Presa, plays a vital role in Mexico’s National Anti-Corruption System.  At the Mexico Conference, López Presa explained in a special address how the CPC has taken concrete steps towards eliminating corruption in Mexico.  This includes advocating for whistleblower protections from the government, opining on appointments to key government posts, and seeking greater autonomy for institutions involved in monitoring and identifying potential misconduct. 

As López Presa explained, the CPC also has launched two notable initiatives aimed at changing the culture and mindset of how business is conducted in Mexico:

• First, the CPC developed an app called “Ética CPC.” It will ask lawyers and compliance professionals to pledge to abide by a shared ethical standard in conducting business.  Although there are no formal consequences for non-compliance, the app seeks to encourage mutual accountability within the legal and compliance community, with the objective of then having a broader cultural impact.[15]
• Second, the CPC is developing an index for rating the independence of various institutions at the federal level, which will score each from 0 to 10 based on twelve key indicators of autonomy.

The CPC intends these efforts to help counter cultural acceptance of corruption-related misconduct and hold public officials and institutions, as well as private Mexican businesses, accountable for corrupt acts.

B. Enforcement Efforts

On May 28, 2019, the Fiscalía General de la República Mexicana issued an arrest warrant for Emilio Lozoya, the former director of Pemex.[16]  The arrest was based on Lozoya’s alleged receipt of improper payments “facilitated by” Odebrecht, a Brazilian construction firm involved in Operation Lava Jato.[17]  More specifically, the arrest warrant charged Lozoya with offenses including bribery, fraud, and money laundering, relating to Pemex’s purchase in 2014 of Agronitrogenados, a fertilizer plant, from Altos Hornos de Mexico (“AHMSA”).  Pemex paid $475 million for the plant, which the Mexican government now claims was worth less than $50 million.[18]  Mexican investigators also identified a series of transfers connected with the purchase, including a $3.6 million payment to AHMSA, later transferred to a Swiss shell company connected to Lozoya.[19] 

On May 28, 2019, Alonso Ancira Elizondo, the owner of AHMSA, was arrested in Mallorca, Spain in connection with these charges.[20]  The Mexican Financial Intelligence Unit has investigated Ancira Elizondo for bank transfers to an Odebrecht affiliate that allegedly were destined for Lozoya.[21]

Notwithstanding the flurry of attention following issuance of Lozoya’s arrest warrant, subsequent events suggest that the government may face an uphill battle in pursuing this prosecution.  A week later, on June 5, 2019, a judge in Mexico City suspended the warrant, concluding that at least three of the criminal charges – involving fraud, money laundering, and bribery – do not justify pretrial detention.[22]  Following this ruling, Lozoya stated on Twitter that he would not appear in court as required, and he in fact failed to appear for the next hearing.  On June 17, 2019, the judge revoked the prior order, finding that Lozoya had violated the terms of his arrest warrant’s suspension.[23]  

Thus far, the government has been unable to locate and arrest Lozoya, despite President López Obrador’s apparent insistence that Lozoya be in custody within 30 days.[24]  Compounding this difficulty, Lozoya’s attorney, Javier Coello Trejo, stated publicly that the authorities would be unable to find and arrest Lozoya, even though he is supposedly in Mexico City.[25]  Such actions and statements by Lozoya and his counsel make an already challenging enforcement environment even more difficult to navigate.

IV. Conclusion

As recounted above, there has been recent progress in implementing Mexico’s National Anti-Corruption System, though challenges remain.  For example, the position of the Special Anti-Corruption Prosecutor is now filled.  However, that prosecutor has a relatively small staff and therefore must be extremely selective in the cases she pursues, absent an allocation of additional resources.  Likewise, the Pemex-related developments suggest that the Mexican government is willing to investigate and prosecute at least some past conduct that it views as corrupt.  But the attendant delays and complications foreshadow that the road ahead may be a difficult one, particularly because nothing motivates compliance quite like enforcement.

In the coming months, we may get a better sense of how actively the administration of President López Obrador will remain committed to his core campaign promise of fighting corruption.  Relatedly, only time will tell whether recent anti-corruption developments in Mexico represent a watershed moment or outliers unlikely to be replicated.  Of course, regardless of how aggressively the Mexican authorities enforce their own anti-corruption laws, there remains the looming threat of U.S. or other foreign enforcement involving misconduct in Mexico, as the recent Walmart resolution demonstrates.

Footnotes

[1] Sean Hecker, Andrew M. Levine, & Eileen Zelek, “Mexico Adopts New Anti-Corruption Legislation,” FCPA Update, Vol. 8, No. 2 (Sept. 2016).

[2] Kara Brockmeyer, Andrew M. Levine, Marisa R. Taney, & Victoria L. Recalde, “NAFTA Replacement Adds Anti-Corruption Provisions,” FCPA Update, Vol. 10, No. 4 (Nov. 2018).

[3] Jon Lee Anderson, “A New Revolution in Mexico,” The New Yorker (June 18, 2018).

[4] Jude Webber, “López Obrador vows to clean out corruption ‘from top to bottom,’” The Financial Times (Nov. 20, 2019).

[5] Anderson, n. 3, supra.

[6] David Agren, “Mexican president Amlo reveals $23,000 in savings – and no credit card,” The Guardian (Jan. 4, 2019).

[7] Id.; see also Emily Casswell, “Mexico to tackle corruption with ‘all the strength’ of the state,” Global Investigations Review (June 7, 2019).

[8] Azam Ahmed & Kirk Semple, “A New Revolution? Mexico Still Waiting as López Obrador Nears Half-Year Mark,” New York Times (May 10, 2019).

[9] Id.; see also Casswell, n. 7, supra.

[10] See Ahmed & Semple, n. 8, supra.

[11] Sharay Angulo, “Mexican President Says New Airport Construction to Start Next Week,” Reuters (Apr. 24, 2019).

[12] Luis Pérez de Acha, “Por qué AMLO no puede poner ‘punto final’ a la historia de corrupción,” New York Times (Dec. 10, 2018).

[13] See Casswell, n. 7, supra.

[14] Elías Camhaji, “Alejandro Gertz Manero: el fiscal que supo esperar,” El País (Jan. 19, 2019); Juan Arvizu, “Nombran a los fiscales electoral y anticorrupción,” El Universal (Feb. 9, 2019). 

[15] Ética CPC was launched on June 20, 2019 at the Instituto de Investigaciones Jurídicas of the Universidad Nacional Autónoma de México.

[16] El País, “La policía desmiente haber detenido al ex CEO de Pemex Emilio Lozoya,” (May 29, 2019). 

[17] Anthony Harrup & Juan Montes, “Mexican Investigators File Corruption Charges Against Pemex Ex-CEO,’ Wall Street Journal (May 27, 2019).

[18] David Luhnow & J uan Montes, “Steel Executive Seized in Spain in Mexican Corruption Case Tied to Pemex,” Wall Street Journal (May 28, 2019).

[19] Kirk Semple & Azam Ahmed, “Mexico Charges Former Oil Official With bribery in Anticorruption Drive,” New York Times (May 28, 2019). 

[20] “Comunicado FGR 258/19, La Fiscalía General de la República Informa de la detención de Alonso ‘N’ en España” (May 28, 2019).

[21] Luhnow & Montes, n. 18, supra.

[22] Diana Lastri, “Emilio Lozoya, former Pemex director, won’t be arrested,” El Universal (June 6, 2019); Mexico News Daily, “Judge issues injunction, halts move to arrest former Pemex CEO,” (June 5, 2019).

[23] Diana Lastri, “Quitan suspensión a Emilio Lozoya; ya podrá ser detenido por lavado,” El Universal (June 17, 2019).

[24] El Universal, “30 days to find Emilio Lozoya” (June 20, 2019).

[25] Mexico News Daily, “Ex-Pemex chief loses protection from arrest but he won’t be found: lawyer” (June 18, 2019).

Andrew M. Levine is a partner in the New York office, Kara Brockmeyer is a partner in the Washington, D.C. office, and Marisa R. Taney is an associate in the New York office of Debevoise & Plimpton LLP.  Summer associates Magali Duque and Andreas Pavlou assisted in the preparation of this article.

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