draining development.pdf - Khazar University

394 Draining Development?Case 2. Upon the election of his brother as president of Mexico, RaulSalinas was appointed to several positions, one of which was to manageConasupo, a store set up to sell basic goods to the underprivileged atsubsidized prices. Raul Salinas used this position to create disguisedprofits that he diverted to himself, often by reporting prices for Conasupo’spurchases that were higher than the sums actually paid or by sellingsubsidized products at market rates. In one case, at an extremely lowprice, Conasupo imported 39,000 tons of powdered milk contaminatedat Chernobyl and then sold the milk to the poor at a profit. In anothercase, corn provided by the United States for distribution to the poor wassold by Conasupo at market rates; the corn was made into tortillas andsold back to the United States. The hidden profits were then transferredto personal accounts in Mexican banks.Raul may also have profited by financing winning bids during privatization.An example of this was the government sale of Azteca Televisionto Ricardo Salinas Pliego through Salinas Associates. Profits fromAzteca were used to make payments to Raul, which Pliego claimed wererepayments on a loan Raul had made to him to finance the acquisition.The loan was provided at a suspiciously low interest rate.To show that there had been a loan and that the payments were notkickbacks, Raul made payments from his account to finance the loan, ineffect showing he was only an intermediary. Raul would deposit thefunds into Mexican banks. Then his wife, Paulina, acting under the aliasof Patricia Rios, would withdraw the funds and transport them to aMexican branch of Citibank. This money would be transferred into amass concentration account used by Citibank to transmit internal funds.A vice-president at the Mexican Division of Citibank would then extractthese funds from the concentration account and transfer them to Londonand Switzerland to Citibank accounts of Trocca, a shell corporationformed by Cititrust in Cayman Islands and controlled by Raul throughnominees.Raul Salinas may have used his influence over two banking groups,Grupo Financiero Probursa and Grupo Finaciero Serfin, both purchasedfrom the Salinas government during privatization, to convince them notto apply extended (or indeed any) due diligence to accounts controlledby him and his confederates. In any event, under current rules thatrequire identification only of foreign and not domestic PEPs, he would