Mexico telecom regulator signs contracts to friends

Reuters News
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Posted: Dec 19, 2011 5:11 AM
Mexico telecom regulator signs contracts to friends

By Patrick Rucker and Elinor Comlay

MEXICO CITY (Reuters) - The president of Mexico's phone and television regulator approved two contracts worth roughly $200,000 for businesses run by two friends, including one who works as a lobbyist for telecom companies.

The contracts were for public relations and legal work for Mexico's telecom regulator Cofetel and were signed by the agency's head, Mony de Swaan.

There is no evidence that de Swaan received a financial benefit from the contracts and he denies any wrongdoing.

But they are raising questions about his judgment as he tries to enforce fair play and more competition in industries dominated by the world's richest man, Carlos Slim, and companies representing a quarter of Mexico's stock exchange.

Mexico's public servants' law says officials should recuse themselves from matters in which they might have a personal interest, but it is vague on what constitutes a "personal interest".

"In light of these contracts, any decision by the regulator could be questioned," said Shannon O'Neil, a scholar at the Council on Foreign Relations in New York and an expert on Latin America who has previously written about Slim and the telecommunications industry.

De Swaan is adamant that he has always acted within the rules. "Mine is an irreproachable track record over 14 years as a public servant," he told Reuters.

In Mexico, any carelessness by regulators can have heavy consequences. Earlier this year, de Swaan's peer at Mexico's competition watchdog made offhand comments that raised charges of bias against Slim and he has since been blocked from voting on an appeal against a record $1 billion fine levied against one of Slim's companies.

De Swaan, appointed 18 months ago, has had success in cutting back phone fees but his decisions have been challenged in court by companies including Slim's fixed-line phone giant Telmex, while media mogul Ricardo Salinas' cellphone company Iusacell has also complained.

"Behind every legal attack, there's an interest that I've hurt," he said. "In every instance I will and I have defended myself ... Have no doubt of that."

He said he has never accepted gifts and once returned a bicycle given to him by an executive from Mexico's biggest television network, Televisa. A Televisa spokesman said there was no record of any gift to de Swaan.

De Swaan was appointed by President Felipe Calderon, who has repeatedly called for more competition in key industries, including telecommunications. The government declined to comment on Cofetel's decision to give the contracts to de Swaan's friends.

CLOSE FRIENDS

At issue are two contracts, which have been reviewed by Reuters, that de Swaan, a London School of Economics-trained technocrat, signed in August for work from a lobbying and public relations firm as well as legal counsel. An outline of the contracts is also available on Cofetel's website.

One went to outside counsel Pablo Hector Ojeda, who received roughly $90,000 for four weeks of work, and the other to Total Strategy, a PR firm founded by attorney Peter Bauer, which was paid about $120,000 for about four months' work.

Bauer and Ojeda are partners in a separate law firm and de Swaan calls them both close friends.

De Swaan has been using Bauer's weekend retreat at upmarket Valle de Bravo outside of Mexico City since mid-September, a few weeks after Total Strategy got its Cofetel contract, both men said.

De Swaan said he pays one-third of his monthly income to Bauer for the house. According to a declaration of income and assets dated May 2011, he earns 2.1 million pesos ($152,000) a year.

Both men declined to provide payment documents but Bauer said the arrangement is proper and defended their ties.

"(Ours is a) friendship based on mutual respect, trust and particularly on our common belief in honesty and ethical standards in our work and towards our country," Bauer said.

Ojeda declined to comment for the story.

Bauer also advises TV Azteca. As a lawyer, Bauer lobbied for the telephone industry early this year and tried to pitch for more work in the sector while Total Strategy had its Cofetel contract, according to Bauer and a memo reviewed by Reuters.

Three individuals in the industry said that de Swaan has in the last twelve months pushed them to hire Bauer. De Swaan denied that, saying he only responded to a request from business-to-business phone company Alestra, which was looking for an adviser in Supreme Court matters.

"There are times when regulated companies come to me and ask 'Do you know someone who could be good for this work?'" he said.

Bauer and de Swaan said they believe Cofetel's relationship with Total Strategy and that company's clients was proper since their interests were aligned. De Swaan says there have been no conflicts of interest because neither Bauer nor Ojeda have brought any official business to Cofetel's full board.

($1 = 13.80 pesos)

(Reporting by Patrick Rucker and Elinor Comlay; Editing by Krista Hughes, Kieran Murray and Alix Freedman)