Global Policy Forum

By Sam Dillon

If opposition politicians had long surmised that Mexico's ruling party was using its dominant position to channel tax-payer money illegally to its party operations, no evidence was ever assembled to prove those suspicions. But that changed after Fernando Canales Clariond took over as governor of this northern state of Nuevo León in October 1997, the first opposition candidate to be elected here in seven decades. He ordered an investigation, which has taken two years, and now prosecutors say they have collected overwhelming evidence that leaders of Mexico's governing Institutional Revolutionary Party engaged in schemes to divert millions of dollars through dummy bank accounts, including three set up under the names of two maids and a gardener of a top party official.

The former leader of the governing party here acknowledged in recent court testimony that he personally accepted $136,000 a month in public money, using it to finance the payrolls of the party, known as the PRI, authorities said. "We've suspected during my entire generation that the PRI financed its operations from public funds, but we couldn't prove it until now," Governor Canales, of the center-right National Action Party, said in an interview. "This has been like a psychiatric case where you probe the unknown and come face to face with dramatic realities that demand drastic change."

The investigation has thrown the Nuevo León PRI into turmoil, and it has taken on special significance because the scandal is unfolding four months before Mexico's most competitive presidential elections since the revolution. Prosecutors say they have documented some $8 million in secret transfers from the Nuevo León treasury to the bogus accounts. From those accounts, they say, funds were disbursed in cash to meet party expenses throughout 1997, the last year the Institutional Revolutionary Party controlled the state.

They have jailed the former Nuevo León state treasurer, Xavier Doria González, on embezzlement charges and have informed seven other Institutional Revolutionary Party officials, including a national leader, that they are targets of the felony investigation, authorities said. The investigation is forcing party leaders to choose between defending members in public disgrace or blaming them for illegal practices that prosecutors say appear to have been established party procedures. "I defend any member of our party as long as there's no proof of wrongdoing, but as simple mortals we can commit errors," Ricardo Canavati, the PRI's current president in Nuevo León, said in an interview in a Monterrey hotel. "But we won't defend the indefensible. If there was illegal conduct, then the law should be enforced, for the good of our party."

Javier Treviño, a senior official based at the party's Mexico City headquarters, said: "The national committee of the PRI has not, and will not tolerate wrongdoing by individual party members. We fully respect the rule of law and will act accordingly." Two opposition parties have filed charges against the PRI with Nuevo León electoral authorities, urging them to bar it from taking part in state elections in July. Opposition leaders said they would also lodge charges On the national level, opposition leaders have expressed concerns that aides to President Ernesto Zedillo -- despite the president's protestations to the contrary -- could carry out a similar scheme and use government funds to help the PRI retain the presidency. Vicente Fox Quesada, the leading opposition candidate for president, has referred to the illegal payments in lambasting the Institutional Revolutionary Party during virtually every recent campaign rally.

Gen. Plutarco Elias Calles founded the PRI in 1929, using it to unite Mexico's fractious regional warlords after two decades of revolutionary violence. The government at first financed the party openly, but within months after its birth the Supreme Court ruled the funding unconstitutional, said Lorenzo Meyer, a historian at the Colegio de México in Mexico City. But it has been widely believed that the 13 consecutive PRI presidents who have controlled Mexico and the party since have used subterranean channels to finance the party, Mr. Meyer said. These channels have included, at various times, assigning public officials -- at tax-payer expense -- to coordinate party election campaigns, loaning government cars and trucks to move supporters to rallies and polling places, and other methods, he said.

For decades, the government's generosity to the PRI put Mexico's tiny opposition parties at a tremendous disadvantage, he said. Mr. Canales was overwhelmed in his first bid for governor in 1985 by a juggernaut of PRI spending during the campaign and by vote theft on election day, he recalled in an interview at the governor's palace in Monterrey, the state capital. Recent legislation has greatly leveled Mexico's political playing field, providing for state financing to all legally registered parties. At the same time, penalties have been strengthened for parties that cheat by taking government resources that are not part of their legal quota.

In the investigation in Neuvo León, prosecutors discovered in scrutinizing bank records that Mr. Doria, the former state treasurer, had set up accounts in the names of two of his maids and a gardener, the state attorney general, José González Suárez, said in an interview. Mr. Doria had secretly transferred federal and state funds into the accounts, later disbursing some to officials of the Nuevo León PRI, the attorney general said. During Mr. Doria's 16-month tenure, which ended in 1997, some $22 million passed through the accounts set up in the names of his servants, of which at least $8 million was disbursed to the party, the attorney general said. He said Mr. Doria apparently pocketed the other $14 million.

Mr. Doria was arrested last July and is on trial for embezzlement. He has refused to testify, citing his constitutional right not to incriminate himself, said his lawyer, Javier Flores Saldivar. But Horacio del Bosque, the former president of the Institutional Revolutionary Party in Nuevo León, took a different posture when it was his turn to testify. Prosecutors discovered documents signed by Mr. del Bosque, showing that he received $136,000 every month during his 1997 tenure, drawn from Mr. Doria's clandestine accounts, which he used to pay the salaries of the PRI's Nuevo León staff, the attorney general said.

Faced with that evidence and then a subpoena, Mr. del Bosque acknowledged in the investigative proceedings that the PRI had received the monthly disbursements of state funds, the attorney general said. Under Mexican court rules, the testimony itself was not public, but Mr. del Bosque published a lengthy statement on March 1 in Monterrey newspapers, titled, "I Show My Face Before Justice and My Community," which the attorney general said repeated much of his testimony. "The PRI received economic support from the state treasury throughout my presidency to support party operations, following an established procedure," Mr. del Bosque said in the statement. He called the procedures "historical practice, rooted in the traditions of our country for many years."