By KELIN DILLON

While the multi-billion-peso “Master Fraud” only recently held the title of  Mexico’s most high-profile government embezzlement scandal, recent developments in the controversial 15 billion peso-plus embezzlement case against the federal agency Mexican Food Security (Segalmex) and its accessories have not only eclipsed the Master Fraud in notoriety, but also  in the sheer amount of funds supposedly stolen from the Mexican public.

Segalmex was originally founded as a state company back in January 2019 as a part of the Secretariat of Agriculture and Rural Development (Sedar) by decree of Mexican President Andrés Manuel López Obrador (AMLO), merging the administration of public food, milk and grain distribution companies Diconsa and Liconsa underneath the Segalmex umbrella. 

To helm the newly created Segalmex, AMLO tapped former director of the controversial and now-defunct National Company for Subsidies for the Population (Conasupo) Ignacio Ovalle as the new agency’s leadership.

While founded with the positive intention of supplying low-income Mexican families with affordable food resources purchasable from Diconsa and Liconsa stores, Segalmex soon became embroiled in scandal after it was reported that the company was using its contracts with suppliers to embezzle funds out of the company, including allegedly embezzling 13.1 million pesos from a 73.4 million peso agreement deal with the government that was made just days after the agency’s creation for the provision of chicken, beef and pork, a differential that subsequently impacted the Mexican treasury by billions of pesos.

Of the 60.3 million-peso worth of the contracted 73.4 million-peso meats that were actually delivered by suppliers to stores, only 11 percent of the products purportedly made it to its intended destinations in decent condition. Further reports show that Diconsa stores also only managed to sell 8.6 million worth of products over the four years that it had been operating under Segalmex, a far cry from the 60.3 million pesos worth of products delivered and even farther from the 73.4 million pesos worth of products actually ordered, as the stores supposedly stocked products that were “not requested by the communities” serviced by the community stores.

Despite the failure of multiple suppliers to deliver on contracted orders, Segalmex continued to order tens of millions of pesos worth of products from these same companies  – including hundreds of millions of pesos worth of shredded meat from Empacadora La Merced, which does not advertise shredded meat as one of its products on its website.

Upon further investigation just one year into Segalmex’s operations, the Superior Audit of the Federation (ASF) found that the newly created company had exceeded its allocated budget for 2019, failed to accredit more than 3.02 billion pesos in transfers and spent more than a billion pesos – or 14.2 present of its annual budget – on administrative expenses.

“The Administration and Finance Unit signed legal receipts, which implied that the contracted supplies were recorded as delivered and that invoice to suppliers could be paid, but the merchandise was only partially delivered physically to the Diconsa stores,” said the ASF audit.

The ASF found additional issues in its review of Segalmex’s spending during the 2020 fiscal year, reportedly discovering 5.64 billion pesos in irregular transactions as well as levying accusations against Segalmex Administration and Finance Unit Director René Gavira of embezzling 950 million pesos from Segalmex and Liconsa to make illegal stock market investments.

During his time as Segalmex Administration and Finance Unit Director, Gavira reportedly ordered that all of Segalmex, Liconsa and Diconsa’s contracts went directly through him, and supposedly used order formats and contractual clauses that made it difficult to return defective merchandise to Segalmex’s suppliers and hard to keep track of non-delivered merchandise. 

As a result of Gavira’s actions, millions of pesos worth of meat that went unsold in the Diconsa stores was forced to be destroyed, given its contractual inability to be returned to the suppliers. Gavira is currently wanted by the Attorney General of the Republic (FGR) for his role in the Segalmex scheme.

But at the crux of Segalmex’s current chaos is its purchase of 7.8 tons of sugar at the cost of 142.4 million pesos from the company Servicios Integrales Carregin, which only delivered one-third of the ordered sugar despite receiving all of the money. 

Further investigation has alleged Servicios Integrales Carregin to be a so-called “front” company for embezzlement, with Servicios Integrales Carregin reportedly transferring out 82 percent of the 142.4 million pesos it received from Segalmex to 18 individuals within two months of the deal.

Servicios Integrales Carregin has also allegedly repeated payments from the Mexico City government, with the Tax Administration Service (SAT) locating 19.6 million pesos worth of transfers from the capital government to the supposed front company.

Former Capital Auxiliary Police Provident Fund Director Fernando Hiram Zurita Jiménez, who is alleged to be the head of Servicios Integrales Carregin and is currently imprisoned in Mexico’s Altiplano prison after his recent arrest over the Segalmex case, was also shown to be the recipient of a 5.9 million peso from supposed front company within this same two-month window after the sugar deal.

For his part as the head of Segalmex during its most controversial years, Ovalle has at least 22 complaints of embezzlement and corruption filed against him with the FGR, and has been accused of siphoning 8.63 billion pesos from Segalmex just during 2020 alone. 

But though Ovalle left his post as Segalmex director mid-2022 after the embezzlement scandal broke, the official soon received a cushy new position as coordinator of the National Institute for Federalism and Municipal Development (Inafed) from his friend and former employee López Obrador, who defended Ovalle as a “good person” and having been “corrupted” by opposition conservative party the Institutional Revolutionary Party (PRI).

Now, with the FGR having already released 22 arrest warrants and made nine arrests in the case as of mid-March 2023, AMLO seems to be changing his tune on his former boss; during his daily morning press conference on Monday, April 3, López Obrador spoke on Ovalle’s purported guilt in the Segalmex scandal, saying “if he also turns out to be culpable, he has to assume responsibility.”

Despite the dozens of complaints against him, the FGR has yet to issue an arrest warrant against Ovalle.

While developments in Segalmex’s sugar case are expected to continue unfolding in the weeks to come, this may just be the beginning of the Mexican federal agency’s 15 billion-peso reckoning.