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Mexico Pharma Scandal Sparks Probe, Suspensions
email this pageprint this pageemail usMark Stevenson - Associated Press
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November 13, 2010

Mexico City - An audio recording of pharmaceutical company executives purportedly negotiating how much to offer as a kickback for a government contract has sparked investigations and the suspension of several businesspeople and a Mexican official, authorities said Friday.

The tone and content of the recording suggest government corruption remains rife in Mexico despite years of reforms, as does collusion between big companies - a common problem in the highly monopolized economy. The government announced it was referring the matter to the anti-monopoly commission as well as other agencies.

On the tape, two men representing two big pharmaceutical firms discuss how much should be paid to an unidentified person to obtain an 80 million peso ($6.5 million) contract.

After discussing dinner plans, one voice says: "You and I will reach an agreement on the issue of, I don't know, how much."

"We have to talk about 3, between 3 and 4 percent, no?" he continues.

"At least that much," the other man responds. "I would say 5 ... if not, it won't work out."

Ultimately they settle on "at least 5 percent" and later mention the name of a government health official - though nothing in the recording explicitly links that official to a possible bribe. The recording was made public earlier this week by the Televisa television network.

Mexico's Stendhal Laboratories said Thursday that one of the voices was its president, Carlos Abelleyra, and that he and another employee had been "temporarily separated from the company."

"Our company stresses that the business activities mentioned and carried out by telephone by Mr. Abelleyra were done in his own name. We categorically state that they had no commercial or business relation to our laboratory," Stendhal said in a statement.

Abelleyra told local media the discussion was not about kickbacks, but rather transportation costs.

The other company reported to be involved, the local division of Swiss-based pharmaceuticals giant Novartis, would not confirm whether the second voice on the recording belonged to one of its executives.

But Novartis expressed "surprise and concern" about the allegations and said in a statement that the company is investigating.

Earlier, the Federal Public Administration Department, the oversight agency in charge of public servants, announced a probe.

Meanwhile the Mexican Social Security Institute purchasing coordinator whose name was mentioned on the recording was also suspended.

No charges have been filed against anyone.

Many in Mexico hoped the country's long tradition of rampant corruption would fade after historic 2000 presidential election that ended 71 years of single-party rule.

A decade later, a number of reforms have been implemented - for example, the current president does not control an official discretionary fund containing millions of dollars, as his predecessors did.

But most Mexicans believe large sectors of the economy and especially public contracts are often still decided by influence, personal ties or bribery.

Last month, Transparency International released a Global Corruption Perceptions Index that draws on surveys of experts and businesses. On a scale of 1 to 10, with 10 being the least corrupt, Mexico got a score of 3.1, below countries like Burkina Faso, Liberia and Albania.

Recent corruption scandals appear to confirm those fears.

In October, a California company and two of its executives were indicted in a U.S. court on conspiracy charges for allegedly bribing officials at Mexico's state-owned utility for lucrative contracts.

Federal prosecutors say the company paid more than $5 million to an intermediary that was used to buy a Mexican official a $1.8 million yacht called the "Dream Seeker" and a $300,000 Ferrari.

The official named in the case recently resigned, and Mexico's federal Attorney General's Office has opened an investigation. The agency also located and confiscated the yacht.

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