Complaint: Ex-Chihuahua governor, associates helped themselves to over $100 million in public funds

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In this Oct. 5, 2012 file photo, governor of the northern Mexican border state of Chihuahua Cesar Duarte attends the 30th annual Border Governors’ Conference in Albuquerque, N.M. Mexican prosecutors said the government had sought the former Gov. Duarte’s extradition from the United States last year and was informed Wednesday, July 8, 2020, by the U.S. Justice Department that U.S. Marshals had detained Duarte in Miami. (AP Photo/Susan Montoya Bryan, File)

EL PASO, Texas (Border Report) — A former Mexican governor used the power of his office to funnel tens of millions in public funds to business partners, employees and the children of childhood friends, a federal complaint alleges.

Much of that money — disguised as government contracts, purchases and fiscal incentives — ended up in the governor’s personal businesses and in a trust held by him and his wife, according to the complaint filed against Cesar Duarte Jaquez on April 24 in U.S. District Court in New Mexico.

The complaint led U.S. Magistrate Judge John F. Robbenhaar to issue an arrest warrant for Duarte for the purpose of extraditing him to Mexico. Duarte, the former governor of Chihuahua, was arrested on Wednesday outside a car shop near Miami International Airport, law-enforcement sources confirmed.

“In the next 72 hours, he will appear before a U.S. magistrate judge in Florida who will inform him of the extradition request, of his right to counsel and bail and his right to respond to the (extradition) request,” Chihuahua Attorney General Augusto Peniche said.

Peniche said he doesn’t know how long it will take for the extradition request to be resolved, but “experience has shown us these proceedings can be lengthy.”

A spokesman for the Department of Justice late Thursday said Duarte remains in the custody of the U.S. Marshals Service. Duarte was scheduled to make his initial appearance in federal court in Florida on Friday afternoon.

The federal complaint, however, outlines in detail the alleged scheme by the former governor to help himself to his state’s treasury. It’s based on charges of aggravated embezzlement and aggravated conspiracy leveled at him in Mexico and on an “Expert Report” that traced public funds to his businesses and family.

A poster with political propaganda of Chihuahua State Governor candidate, Cesar Duarte from the Institutional Revolutionary Party (PRI) on July 2, 2010, in Ciudad Juarez, Mexico. (Jesus Alcazar/AFP via Getty Images)

The first illicit transaction originated in June 2011, the federal complaint alleges. Duarte was governor of Chihuahua — which borders both Texas and New Mexico — from 2010 to 2016.
Beginning in June of 2011, state officials transferred $6.5 million in public funds to two companies, Union Ganadera and SOFOM Financiera, for which Duarte was majority shareholder and, at times, chairman of the board. “Numerous witnesses told authorities the payments were fraudulent, the process of allocation irregular and that the money wasn’t used for any public purpose,” the complaint alleges.

The witnesses told authorities the payments were made for sham contracts executed upon instructions from Duarte and state Treasury official Carlos Gerardo Hermosillo Arteaga, the son of Duarte’s childhood friend. Hermosillo also served as officer and shareholder of Financiera and was a legal representative of Union Ganadera, the complaint states.

The funds were allegedly disbursed without following procedures required by Mexican law and without oversight for their use. The funds were sometimes withdrawn from the state’s emergency fund quickly and without documentation, the complaint states.

The Expert Report traced the money to bank accounts, property and companies held by Duarte or his associates.

In addition to the $6.5 million, the State of Chihuahua on Oct. 4, 2011, paid Financiera $12 million from the emergency fund to distribute subsidies to cattle growers in the state for the purchase of heifers. The Expert Report states that $10 million of that money ended up in a trust held by Duarte and his wife, and $2 million went to Finca Ingenieria Integral, a company owned by one of Duarte’s business partners in Financiera.

On Nov. 14, 2011, the State of Chihuahua lent $5 million to Union Ganadera to distribute to meat producers. The Expert Report states that $3 million of that was paid to Nueces La Esperanza, Duarte’s family company, and $1 million was deposited in Union Ganadera’s savings account. No evidence exists that the loan was ever paid back, the complaint alleges.

Further, between January and March 2012, the State of Chihuahua paid Union Ganadera $36 million to distribute to cattle growers so they could transport their animals to slaughterhouses. The Expert Report stated there’s no proof the company used the money as intended.

“Mexican authorities determined that 45 of the alleged beneficiaries were, in fact, deceased when funds were allegedly disbursed to them. Six individuals listed as beneficiaries told authorities they never received (subsidies), indicating that their signatures on the list of beneficiaries had been forged,” the complaint alleges.

The Expert Report alleges the money was used to pay for the purchase of a ranch on behalf of Duarte, to Hermosillo’s account at Financiera, to the trust held by Duarte and his wife and to various associates.

The state on April 25, 2012, provided an additional $2.69 million to Union Ganadera for a project to artificially inseminate the livestock of Chihuahua cattle growers. There’s no documentation on how the money was used, but the Expert Report traced it to a Duarte personal employee and to business associates, the complaint states.

The state again on July 12, 2012, gave Union Ganadera $10 million to subsidize cattle growers’ feed costs, but no detailed signed list of beneficiaries was produced. The complaint alleges at least some of the money was used by Hermosillo to purchase property.

Another $8 million in state funds was given to Financiera on Sept. 25, 2012, for the purchase of a building on behalf of the state. The property, however, was never legally transferred to the state and the Expert Report alleges the money ended up in one of Financiera’s accounts, and later transferred to the trust owned by Duarte and his wife.

On Oct. 20, 2013, the state paid $4.6 million to Union Ganadera to conduct a statewide cattle repopulation program. The money was allegedly placed in a Union Ganadera account and a portion of it was used to install a scale at the company’s slaughterhouse.

And on Nov. 28, 2014, the State of Chihuahua paid Union Ganadera another $5.5 million to manage subsidies for feed purchases for farmers. The money was later transferred to a Financiera account held by Duarte, the complaint alleges. Duarte allegedly used $3.1 million of that to pay his taxes.

According to the complaint, Duarte in June 2016 told some of his closest collaborators that he was concerned that the governor-elect would discover the irregularities. He allegedly instructed them to “take all actions necessary to conceal the irregularities” in the release of public funds during his administration. Weekly meetings allegedly were held afterward to monitor progress in creating a retroactive justification for the funds.

On March 31, 2020, a confidential informant told authorities Duarte might be found at a ranch in Estancia, N.M., hence justifying the jurisdiction of the New Mexico District Court to take the case.

The new governor of Chihuahua, Javier Corral, initiated an investigation that led to state warrants and, eventually, federal warrants against his predecessor.

“He amassed a multimillion-dollar fortune. He bought expensive houses, ranches, businesses and exotic animals. All of this well beyond his means,” Corral said.

The new governor said Duarte’s arrest was a triumph for the people of Chihuahua and the rule of law in Mexico. He said he would ask the Mexican government to sue for properties Duarte bought in the United States, sell them and give the money back to the people of Chihuahua.

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