Mexican Investigators File Corruption Charges Against Pemex Ex-CEO -- Update

By Anthony Harrup and Juan Montes MEXICO CITY -- Mexican investigators have filed charges with federal prosecutors against the former head of state-run oil company Petróleos Mexicanos in connection with a corruption probe, officials said on Monday. The case stems from the first high-profile anticorruption investigation launched by the new administration of President Andrés Manuel López Obrador.

Mr. López Obrador campaigned to end the rampant corruption that he has said plagued previous governments. The Finance Ministry has frozen the bank accounts of former Pemex Chief Executive Emilio Lozoya and of steelmaker Altos Hornos de México, or Ahmsa, said Santiago Nieto, head of the finance ministry's financial-intelligence unit, in an interview. Ahmsa, one of the country's largest steelmakers, is under investigation, Mr. Nieto said.

The actions relate to what investigators say was the payment of bribes -- facilitated by Brazilian construction giant Odebrecht SA -- in Ahmsa's 2014 sale of a fertilizer plant to Pemex, Mr. Nieto said.

In addition to the corruption charges, Mr. Lozoya faces tax-evasion and bribery charges, Mr. Nieto said.

A lawyer for Mr. Lozoya couldn't immediately be reached for comment. Mr. Lozoya, who led Pemex from 2012 to 2016, has in the past defended Pemex's decision to purchase the fertilizer plant.

Ahmsa said it denies any responsibility for wrongful acts that the government appeared to be attributing to the company. Based in the northern city of Monclova, the company said in a statement that the government action was "unprecedented, arbitrary and a violation" of its rights. Odebrecht representatives couldn't be reached for comment at the company's Mexico City offices.

In a statement, the ministry's financial-intelligence unit said that it detected multiple operations in Mexico's financial system and abroad that were

carried out with funds believed to originate from illegal activities. Ahmsa allegedly transferred funds to a shell company set up by Odebrecht, which authorities suspect was used to funnel bribes to Mr. Lozoya related to Pemex's purchase of the fertilizer plant, Mr. Nieto said. Pemex paid $475 million for the plant. Mexico's government says the plant was worth about $50 million. Last week, the government banned Mr. Lozoya from holding public office for 10 years. The government said he omitted information in his declaration of assets.

Ahmsa said the freezing of its accounts impedes the company's operations and puts at risk its shareholders, its suppliers, its 20,000 workers and the economic stability of the state of Coahuila. In its statement, the Finance Ministry said that there was no intention to hurt Ahmsa's workers, shareholders or suppliers and that workers' accounts would be unfrozen Tuesday. The dispute comes days after Ahmsa said it had secured financing for $575 million from Cargill Financial Services International Inc. to pay creditors following a court-approved restructuring. Twenty years ago, the steelmaker defaulted on about $1.8 billion of debt. Odebrecht admitted in 2016 to having paid more than $800 million in bribes across Latin America and elsewhere.

Several former Odebrecht officials have told Brazilian prosecutors under oath that, to secure Mexican government contracts for their firm, they paid $10 million in bribes to Mr. Lozoya while he was a top aide of former President Enrique Peña Nieto. They said in testimony, transcripts of which The Wall Street Journal has reviewed, that about $4 million of that sum was handed over in 2012, the year Mr. Peña Nieto was elected president.

Mr. Lozoya has denied those allegations. There had been no cases linked to Odebrecht brought against high-level officials in Mexico. Peru, Colombia, Panama and Brazil have brought charges against senior officials, including former and current presidents. "In principle, it's a positive sign that shows the new government is coordinating the intelligence unit and the tax agency (to go against graft)," said Eduardo Bohórquez, the head of Transparencia Mexicana, a nonprofit.

But it is too early to tell how effective the efforts will be, he added.