MEXICO CITY—In 2017, Israeli private investigation company Black Cube secretly recorded senior officials at Mexico’s Petróleos Mexicanos describing widespread bribery and corruption at the state-run oil company.
The audio recordings are part of the evidence in a lawsuit filed last year against the Mexican government by a Mexican oil-field drilling company called Oro Negro. The company claims that Pemex, as the state oil company is known, helped drive Oro Negro into bankruptcy because the driller refused to pay bribes.
The recordings, reviewed by The Wall Street Journal, offer a rare window into endemic corruption at Mexico’s largest state enterprise. Over the course of three months in 2017, Black Cube, at the behest of Oro Negro, secretly made dozens of hours of recordings of former and then-current Pemex officials describing an elaborate pay-to-play system at the state oil company, where bribes were accepted in return for contracts. Oro Negro’s top executives, in turn, face charges in Mexico for allegedly misappropriating funds.
The evidence from the Oro Negro lawsuit forms part of a broad-ranging investigation into corruption at Pemex by the U.S. Department of Justice and the Securities and Exchange Commission, according to people familiar with the matter.
Pemex didn’t respond to requests for comment about Oro Negro’s claims, about the evidence produced in the recordings, or details about other investigations. The state-controlled entity, whose chief executive is appointed by the president and which has three government ministers on its board of directors, frequently refers questions to the president’s office for comment.
The U.S. investigation and the Oro Negro lawsuit come at a delicate time for Pemex, which is struggling to cope with falling production and a roughly $100 billion debt pile, the largest in the oil industry globally. Any financial hit from corruption cases would stretch the company’s finances further at a time when ratings firms are considering downgrading its debt to junk status, a move that would raise borrowing costs and add to the strain.
Mexican President Andrés Manuel López Obrador has vowed to end government corruption, including at Pemex. PHOTO: SASHENKA GUTIERREZEPA//SHUTTERSTOCK
The stakes are also high for Mexican President Andrés Manuel López Obrador, who has vowed to end government corruption and has put the company at the center of his economic strategy.
A spokesman for Mr. López Obrador didn’t respond to requests for comment, but last week, in response to a question about the Oro Negro claims, he said the government was working to address corruption at Pemex. “We are cleaning things up,” he said.
The Oro Negro tapes, filed in a lawsuit seeking $700 million in damages from the Mexican government, were submitted to an arbitration panel with the North American Free Trade Agreement. They show how daunting a task curbing corruption at Pemex will be.
“Corruption has been a problem embedded in Pemex’s culture for 40 years now,” said David Shields, an energy analyst based in Mexico City. But now, he said, “Pemex is up against the wall and cannot afford to misspend.”
Over dinner at the Sir Winston Churchill’s restaurant in Mexico City in October 2017, two Black Cube agents met with José Carlos Pacheco, then vice president of Pemex’s drilling and services division. The agents posed as intermediaries for a wealthy investor from the United Arab Emirates who was interested in buying Oro Negro.
Five of Oro Negro’s drilling rigs have been seized by bondholders. A 2014 photo of an Oro Negro rig in the Ku-Maloob-Zaap oil field off the coast of Mexico. PHOTO: SUSANA GONZALEZ/BLOOMBERG NEWS
The agents sought assurances that Oro Negro would get better contract terms from Pemex if the fictitious U.A.E. company they represented paid a bribe to Pemex officials, and they asked how this was done, according to the tapes. Mr. Pacheco is heard indicating this would be no problem.
“Normally it’s done as a ‘success fee,’ because no one is willing to run the risk that amounts start appearing that are, let’s say, a percentage with respect to a contract,” Mr. Pacheco said.
Mr. Pacheco explained in the recording that many Pemex officials accept payments through family members, known as “operators” or “allies,” or through sham consultancies set up to launder money.
“There are deputy directors, for example, that his son is the one responsible” for accepting money, Mr. Pacheco said. “A lot of times everyone knows it.”
The conversation then turned to why Oro Negro ran into problems with Pemex, which canceled the company’s drilling contracts after it filed for bankruptcy protection in late 2017.
“I think that really, more than about pride, it was an economic issue,” Mr. Pacheco said, according to the taped conversation.
“They lost the company because they didn’t pay bribes?” a Black Cube agent asks.
“They didn’t have money,” Mr. Pacheco replies. “That is the main problem.”
Mr. Pacheco, who left Pemex in 2018, declined to respond to a list of emailed questions about his comments on the recordings. In a telephone conservation, he acknowledged meeting with people he believed to be investors interested in purchasing Oro Negro, but he denied that he discussed bribery. “I worked for Pemex for more than 25 years, and I never had anything to do with that sort of thing, that sort of corruption,” he said.
As part of the government’s anticorruption efforts, Mexico’s attorney general’s office has charged Emilio Lozoya, a former chief executive of Pemex, with corruption, bribery and tax evasion. Mr. Lozoya, a Harvard-educated former investment banker, has been in hiding since he became the focus of two separate inquiries, one linked to Brazilian construction company Odebrecht SA and the other related to Pemex’s 2013 purchase of a Mexican fertilizer company. Mr. Lozoya has denied any wrongdoing while CEO at Pemex and has said he is innocent of the current charges against him.
Mexican authorities also are preparing to file more criminal charges against Mr. Lozoya for allegedly taking some $2.8 million in bribes linked to the purchase of a different fertilizer company, called Fertinal, according to a person with knowledge of the investigation. Mr. Lozoya couldn’t be reached for comment, and the former head of Fertinal has denied wrongdoing in the transaction.
The flurry of corruption cases surrounding Pemex has caught the attention of investigators in the U.S., where Pemex bonds trade. U.S. officials are investigating the Fertinal purchase for possible corruption, according to people familiar with the matter and law enforcement communications viewed by the Journal. And in May, the SEC launched a fraud inquiry into possible accounting irregularities at Pemex, according to U.S. government documents reviewed by the Journal.
Those lines of inquiry appear to have been put together in one large probe, according to the people familiar with the matter. The U.S. investigation is being handled by lawyers in the Justice Department’s criminal unit that focuses on the Foreign Corrupt Practices Act, along with prosecutors from the Eastern District of New York, in Brooklyn. The Federal Bureau of Investigation in Houston and the Securities and Exchange Commission in Miami are also involved, according to correspondence reviewed by the Journal and the people familiar with the matter.
Emilio Lozoya, former CEO of Pemex, has been charged with corruption, bribery and tax evasion. He has denied wrongdoing. PHOTO: HENRY ROMERO/REUTERS
The Black Cube recordings made in the Oro Negro case are part of a bitter conflict between Oro Negro, its bondholders and Pemex. The drilling company was founded in 2012 by Gonzalo Gil, a Stanford-educated former banker and son of a former finance minister. He paid more than $1 billion to buy five drilling rigs and transport them from Singapore to the Gulf of Mexico, where Pemex paid hundreds of thousands of dollars a day to use them to drill for oil.
After oil prices declined sharply starting in 2014, Pemex cut the day rates it paid to all of its drilling contractors, including Oro Negro, sharply reducing the company’s profits. By the summer of 2017, Mr. Gil was worried Oro Negro would have to file for bankruptcy protection to stave off bond investors.
Pemex cut Oro Negro’s fees more deeply than those of its competitors, according to court documents in Mexico, and Mr. Gil has argued in court that Pemex conspired with rival driller Seamex, which is owned by several investors who own Oro Negro’s bonds, to put the company out of business so they could seize his rigs.
“We had built this company from scratch. We were very proud of what we’d accomplished,” Mr. Gil said in an interview. “Suddenly, Pemex seemed to be bent on destroying the company.” Pemex didn’t respond to requests for comment.
Over the past two years, Oro Negro has defaulted on its debt and its five rigs were seized by bondholders, who intend to auction them off in the next few months. Oro Negro filed for Chapter 15 bankruptcy protection in New York last year, and in July, a Mexican judge issued an arrest warrant for Mr. Gil on charges of misappropriation of funds. Mr. Gil, who is living in Miami, denies the charges.
Mr. Gil and his lawyers at Los Angeles law firm Quinn Emanuel Urquhart & Sullivan LLP hired Black Cube, which was founded by ex-spies from Israel’s Mossad intelligence service, in September 2017.
The Oro Negro bondholders and Seamex say there was no collusion with Pemex to put Oro Negro out of business, and they argue that the hiring of Black Cube to investigate the matter was troubling and unethical. According to an engagement letter filed in court in Mexico, the original targets of Black Cube’s investigation included not only Pemex officials, but also Oro Negro’s bondholders and their friends and family.
“This was essentially financial terrorism,” said Paul Leand, an investment banker who heads Oro Negro’s bondholder committee. “This was the goal from the outset.”
Mr. Gil’s lawyers at Quinn Emanuel say that despite the original target list, the only people surveilled were Pemex officials. They say the goal was to find out why Oro Negro’s contracts had been terminated and why the cuts to their day rates had been steeper than those of other contractors.
Leave a Reply