Ex-Mexico Governor Sued for Funneling Cash Into Miami Homes

(Bloomberg) -- The Mexican state of Veracruz is looking to recoup money it says was stolen by its imprisoned former governor and invested in real estate around Miami-Dade County.

Veracruz sued in Florida state court last month saying the ill-gotten funds from former politician Javier Duarte were invested in properties including a Mediterranean-style mansion in Coral Gables that last sold in 2014 for $7.7 million. That was an outlier: the other 40 properties in Miami-Dade had significantly lower sales prices. The state is seeking more than $25 million in damages.

Duarte is one of at least eight former governors in Mexico from the ruling party who’ve been arrested or investigated during the administration of Enrique Pena Nieto, several of them on money laundering charges. Duarte was caught hiding in Guatemala and extradited to Mexico last year after federal audits found his administration faked the return of at least 4.8 billion pesos ($258 million) of allegedly misdirected funds to his state treasury.

Government Funds

The allegations against Duarte are among the most egregious for this batch of fugitive ex governors. According to news reports, he and his associates allegedly pocketed government funds for social programs through sham shell companies, and current Veracruz Governor Miguel Angel Yunes accused Duarte’s administration of treating child cancer patients with distilled water in place of chemotherapy.

Human rights groups have implicated him in the deaths of journalists in his state, more than a dozen of whom were killed during his term. Duarte, who’s in prison facing charges, denies any wrongdoing. He’s said some local journalists are linked to criminal groups targeted by rival gangs.

Veracruz is suing Duarte as well as the companies and managers that allegedly conspired with him. Duarte’s co-defendants include Ace Realty Holdings LLC, Nexxos Realty LLC and Vulcan Dynamic Realty Fund LP, plus Inaki Negrete and Ana Maria Velasquez. Velasquez was “managing member” of Nexxos, while Negrete was listed in a 2012 press release as Vulcan’s chief executive officer. Vulcan and Ace are listed in local records as the owners of the properties in question.

A 2016 report by Mexico’s Animal Politico detailed evidence from a Mexican federal inquiry about 19 Miami real estate acquisitions by Duarte, but they appear to have been separate from those mentioned in the lawsuit. The Coral Gables mansion would have been the boldest of all those purchases.

The legal filing was first reported by South Florida Business Journal.

Marco del Toro Carazo, a lawyer representing Duarte in some matters, said the case is politically motivated. He suggested it’s part of an effort by the current governor of Veracruz to help his son become his successor. Federal auditors haven’t brought an accusation against the former governor, according to Del Toro.

"A government doesn’t use private lawyers for this type of legal efforts when there are bilateral agreements," he said.

He also denied the accusation about treating cancer patients with distilled water, saying it had been investigated in Mexico and proven false.

Veracruz “fails to attach a single piece of evidence and fails to state a single factual occurrence connecting my clients to the alleged claims,” Rafael Recalde, a lawyer for Vulcan and Negrete, said in an emailed statement. “My client will not dignify this frivolous and politically motivated filing with a comment.”

It wasn’t immediately possible to reach Ace or Nexxos.

The case is Veracruz v. Ace Realty Holdings LLC, 68149881, Circuit Court of the 11th Judicial District, Miami-Dade County, Florida.

--With assistance from Mc Nelly Torres and Andrea Navarro

To contact the reporters on this story: Jonathan Levin in Miami at jlevin20@bloomberg.net, Nacha Cattan in Mexico City at ncattan@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Vivianne Rodrigues at vrodrigues3@bloomberg.net, Elizabeth Wollman, Peter Blumberg

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