Geopolitics

Mexico, A Republic Of Corruption

Mexicans have become as used to politicians' promises to end corruption as they are used to knowing it won't happen.

The center of Mexico City
The center of Mexico City
Fernando Chávez

-OpEd-

MEXICO CITY - For ordinary people in Mexico, reports of corruption in the public administration are barely worth raising an eyebrow. In the collective conscience and popular imagination of Mexicans, cases of corruption are merely seen as unpunishable crimes and the corrupted as unredeemable public officials. Citizens have grown resigned that shady deals exist everywhere, and at all levels of government.

At the same time, it is no surprise that corruption has become a major theme of the next presidential elections, whose campaign kicks off next month. The three main candidates have already raised the issue repeatedly. The leftist Andrés Manuel López Obrador, AMLO, has made it central to his discourse and the conservative Ricardo Anaya has threatened to send the outgoing President Enrique Peña Nieto to jail should he uncover corruption in his government. The ruling PRI party of Peña Nieto can't avoid the issue, though its candidate José Antonio Meade has downplayed corruption in his platform.

Will we witness history?

Are we really about to start a new phase in Mexico's social and political life? Will the winner of these elections lay out the bases to take us closer to an advanced democracy, where the administration acts in line with the rule of law? Are we going to witness a historic event: the disappearance of kleptocratic abuse and some big white-collar thieves sent to prison?

There is every reason to be skeptical. Remember that we already have public institutions meant to fight this problem, including the Superior Auditing Law (Ley de la fiscalización superior de la Federación, LFSF) acting through the Federation's Higher Auditing Office (ASF), and the SFP or Civil Service ministry, directly dependent on the executive branch of the federal administration.

Last month, the front pages of Mexico's main newspapers reported that from 2012 to 2016, some 6,879,000,000 pesos (more than $300 million) were suspected to have been "diverted" using a mechanism that allows transactions between government bodies while skirting around the Law on Public Sector Acquisitions. This allowed public monies to be paid to non-supervised, private firms involved in the transactions. How was this swindle — or "diversion" to use the auditor's language — possible?

Enrique Peña Nieto , President of Mexico — Photo: kremlin.ru

It was simple: The mechanism allowed certain government ministries, public universities or state and municipal governments to pay for "consultancies' or similar services, many of which are not documented or did not take place. One name has emerged from this bundle of charges and pointed fingers: the head of the Agricultural and Territorial Development Secretariat (Sedatu), Rosario Robles, and ASF's suspicion of "diversion" of some two billion pesos in that ministry. But ultimately it was just another, disgraceful public spectacle for nothing, since legislators from the PRI, the Green party PVEM, and centrist PANAL, all voted to scupper any effective accountability. The matter has fizzled out and slunk away.

Nothing happened then, and nothing will. No suspect in these dealings has been removed from his or her position, while our parliament — and its dubious reputation — smothered the affair under endless procedural actions, formalities, and legalities. The media finally lost interest and moved on. And that is standard procedure for Mexican political life, where everything and nothing changes all the time.

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Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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