United States: Mexico Enacts A Sweeping New Anti-Corruption Regime, Accompanied By A Public Apology From President Peña Nieto And Increased Attention On Mexico's Energy Sector By U.S. Regulators

After an aggressive grassroots campaign, Mexican President Enrique Peña Nieto recently announced the enactment of sweeping changes to Mexico's anti-corruption regime. The new law is a significant step toward transparency in a country that consistently ranks among the most corrupt in the region and the world. Almost as noteworthy, President Peña Nieto publicly apologized for his own involvement in a conflict-of-interest scandal that has plagued his administration for years.

The New Legislation in Mexico

The new legislation was originally proposed in early 2016 to the Mexican legislature through a unique citizen petition process primarily aimed at increasing transparency of public sector officials. More commonly known as the "three of three" proposal, this original legislation would have required three separate stakeholder groups—public officials, close relatives of public officials, and any individual or entity that is the beneficiary of a government contract—to publicly disclose three pieces of personal information: (1) an accounting of their personal assets, (2) certain tax information, and (3) an accounting of their economic and beneficial interests. Ultimately, the Mexican government stopped short of adopting the "three of three" proposal in full. Specifically, the new law does not require recipients of government contracts to disclose personal assets, tax information or economic interests. It also allows public officials to withhold information "whose publication may affect privacy or personal data protected by the Constitution."

While some of the transparency provisions of the legislation were pared back, the new law goes beyond transparency to enhance the Mexican anti-corruption regime more broadly. For the first time, the new law creates an independent anti-corruption prosecutor. It also creates whistleblower protections for individuals and implements methods to enhance cooperation across federal, state, and municipal enforcement authorities as well as with the U.S. government and other international regulators.

The regulations, which will come into effect on July 19, 2017, also provide for significant criminal and administrative sanctions for private parties and legal entities that are found to have engaged in bribery, collusion in public bid procedures, influence peddling, wrongful use of public resources, or wrongful recruitment of ex public servants, among other acts. Individuals face sanctions of up to twice the amount of the acquired benefits (or if no tangible benefit, around $600,000 USD), temporary ineligibility to participate in procurement, leases, services or state-owned projects for a period ranging from three months to eight years, and compensatory and/or punitive damages. Legal entities face similar sanctions—up to twice the amount of the benefit (and up to $6 million USD if no monetary benefit)—and could be deemed ineligible to participate in procurement, leases, services or state-owned projects for up to 10 years. Entities could also be subject to suspension of activities for a period ranging from three months to three years, partnership dissolution, and compensatory and/or punitive damages. Along with the new penalties, the new regulations provide for some partial defenses for entities and persons charged with violating the law. For example, legal authorities will give credit for the existence of a current compliance or integrity program that includes effective reporting and whistleblower protection tools. Entities may also receive credit for self-reporting misconduct and collaborating with government investigations, and a person who has committed a serious administrative offense can confess and fully and continuously cooperate with authorities in exchange for a reduction of 50-70% of the total amount of his or her sanction.

President Peña Nieto's Public Apology

In an unprecedented step, Peña Nieto issued a public apology, during the press conference announcing the legal reforms, for the distraction of an ongoing conflict-of-interest scandal that has plagued his administration for nearly two years. Beginning in November 2014, Mexican media outlets started reporting that a major government contractor had sold a luxurious, seven-bedroom home valued at $7 million to Peña Nieto's wife, first lady Angélica Rivera. The contractor who designed and sold the home to Rivera, Grupo Higa, had been part of a consortium of companies who won a multibillion-dollar infrastructure contract during Peña Nieto's presidency. What is more, one of the contractor's chief executives was a close friend of Peña Nieto. Rivera and Peña Nieto maintained that the purchase of the home was legitimate, and a government-sponsored investigation found no evidence of wrongdoing on the part of either member of the first family. However, during his press conference, Peña Nieto apologized for the effect the controversy had on public perception of his administration, though he maintains that he had not broken any laws and that combatting corruption would continue to be a principal goal of his administration.

As evidenced by the promulgated legislation and Peña Nieto's own words during the signing of these regulations, corruption is a key area of focus both for the Peña Nieto administration and the government watchdogs that were responsible for the grassroots effort to mobilize the Mexican legislature.

Continued U.S. Enforcement of Conduct in Mexico: Key Energy Settlement

The changes to Mexico's anti-corruption enforcement regime occur at the same time that regulators in the U.S. have again demonstrated that corruption in Mexico remains an enforcement priority. On August 11, 2016, the U.S. Securities and Exchange Commission announced that Key Energy Services, Inc., a Houston-based energy company, would pay $5 million USD in disgorgement for violations of the internal controls and books-and-records provisions of the Foreign Corrupt Practices Act. The Commission explained that its investigation yielded evidence that Key Energy's Mexican subsidiary had made payments to an employee at Pemex, Mexico's state-owned oil company, in order to induce the employee to provide information that would benefit Key Energy while negotiating contracts with Pemex. Key Energy paid the Pemex employee through a third-party consulting firm and recorded the payments as legitimate business expenses in the records of the Mexican subsidiary.

The Key Energy settlement and recent changes in Mexican law prove that the "state of play" regarding interactions with government officials in Mexico is shifting, becoming increasingly fraught with risk. Given this reality, companies should consider how their past or future conduct may make its way into the public sphere and monitor the practical application of these new laws on the day-to-day operations of their businesses. For example, companies doing business in Mexico can protect themselves by ensuring they perform comprehensive, risk-based due diligence on engaged and prospective third parties, training and educating their employees on the risks associated with doing business in Mexico, and examining the company's internal controls to ensure that the company has properly accounted for its funds, its presence in the country, and any interactions with government officials.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.