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Sempra’s lawyers pleaded their case to the investigators, who were accompanied by officials from the Securities and Exchange Commission and the Department of Justice. The company’s activities in Mexico, Sempra lawyers said, should be of no concern to the feds.
Then Sempra attorneys dropped the name of someone they believed
should be on authorities’ radar. They asked the FBI to investigate José Susumo Azano Matsura, a wealthy Mexican businessman who lived in a mansion in Coronado. Sempra’s attorneys told agents that Azano had arranged and paid for an armed police raid on the company’s Baja California plant less than a week earlier, according to an FBI summary of the meeting. Sempra believed Azano was trying to extort the company out of hundreds of millions of dollars.
“We wanted to make sure the FBI knew he was involved,” said Bob Brewer, then an attorney representing Sempra who was at the meeting.
This plea to the feds was just one flashpoint in a long-burning feud between Azano and Sempra.
At the time of the 2011 meeting, it looked like Azano was winning. Sempra faced intense federal scrutiny and the Baja California plant, its biggest investment in Mexico, was under threat. And while federal agents
had been watching Azano for years, they’d never charged him with any crime. Instead, the heir to a Mexican development fortune was busy building a high-level surveillance empire to new heights.
Soon after the meeting, everything changed.
Over the next four months, the FBI shuttered its Sempra investigation and began to pursue Azano with renewed vigor.
For Azano, the FBI attention would become a vise, slowly squeezing him until he succumbed to his own mistakes. Along the way, his dispute with Sempra attracted the attention of the American and Mexican embassies. It might have even derailed the career of a decorated Mexican army general.
With the FBI’s grip tightening, Azano became distressed. In late 2011, he began seeking out high-profile San Diego politicians, and lobbied at least one of them to turn the feds’ attention back to Sempra. It didn’t work, and Azano finally cracked. He
was arrested last February, accused of illegally donating more than a half-million dollars to San Diego political campaigns. If convicted, Azano could spend years in federal prison.
At first, Sempra’s request that the feds go after Azano fell on deaf ears. After the February 2011 meeting, the FBI still had questions about the company’s dealings in Mexico. Agents soon focused on a bribery allegation that Sempra hadn’t been able to explain away.
Before building its liquefied natural gas plant in Baja California, Sempra created a $7 million charitable trust to fund civic projects in the nearby city of Ensenada. The city’s mayor, who had suggested Sempra give the city money, had a prominent role in doling out the cash.
Federal agents believed the $7 million was a bribe to speed up approval of the company’s permits from the Ensenada government. The FBI opened a full-blown investigation.
“There are ample facts and indicators which reflect that Sempra and its business executives may have engaged in criminal activity,” FBI agents
wrote in a March 2011 memo.
Then federal authorities
asked Sempra to investigate the bribery allegations itself. The company had an outside law firm look into the accusations, and the firm found no wrongdoing. Sempra hadn’t received quicker permits from the city of Ensenada, Sempra’s lawyers told the FBI, and no government officials or their relatives had received any money from the charity.
That satisfied the feds. In June 2011, San Diego’s U.S. Attorney Laura Duffy
told Sempra that the case was closed.
But the matter was hardly as clear-cut as Sempra’s self-investigation made it seem.
According to an
FBI summary of the case, federal agents relied almost exclusively on Sempra’s own investigation. There’s no evidence in the summary that authorities did anything other than review the documents and speak with the company employees that Sempra’s lawyers had brought to the meetings. A law professor and expert in foreign corruption law told the Washington Post he was surprised the feds didn’t take action against Sempra because information in the FBI documents showed signs of a violation.
It also doesn’t appear that investigators looked at all the corruption accusations against Sempra in Mexico.
The FBI summary of the case doesn’t mention any investigation of
Sempra’s financial ties to a Baja California governor who had spiked a competing company’s liquefied natural gas proposal. Nor does the summary show the feds got to the bottom of claims that Sempra stole the land of a Mexican rancher tied to Azano.
The Department of Justice, SEC and Sempra have all insisted the investigation into the company was thorough and independent. The gaggle of agencies simply found the company hadn’t broken the law.
Less than two months after the FBI opened a full investigation into the company, Sempra lawyers already appeared emboldened by their progress. In an April 2011 meeting with the FBI, Sempra attorneys pushed the agency to target Azano for the second time.
an FBI account of the meeting, Sempra lawyers told federal agents they believed Azano was associated with drug dealers and had Ensenada’s mayor in his pocket. They said they also had heard that Azano had told a third party he could take down Sempra for $2 billion. The company was so concerned about Azano it was considering going to U.S. politicians and senior law enforcement officials to press the case against him.
Azano was, Sempra’s attorneys said, “a very dangerous man.”
Shortly after Mexican President Enrique Peña Nieto took office in December 2012, his new cabinet members reportedly received a document written by U.S. authorities. It was a plan from the U.S. Department of Homeland Security to take down Azano.
obtained by the Mexican news outlet 24 Horas, detailed Azano’s alleged connections to drug cartels and the extreme measures Azano took to conceal his business activities.
Homeland Security’s strategy: Raise Azano’s profile to a level that would make his associates in the secretive spy industry uncomfortable. The department believed the stress would force Azano to back off his attacks against Sempra.
“The end goal is to taint him enough that his connections and contacts want to disassociate with him and pressure him to leave Sempra alone,”
the document says.
Like many things in this story, proof that the U.S. government orchestrated a plot against Azano is hard to pin down. A Department of Homeland Security spokesman refused to confirm or deny the authenticity of the Azano dossier.
But both U.S. and Mexican officials at the highest levels knew about Azano’s fight with Sempra. And other evidence of a scheme to cripple him exists. Secret information damaging to Azano was leaked publicly, and, according to
the New York Times, American authorities urged the Mexican government to blunt the career of one of Azano’s most prominent political allies.
While Peña Nieto was preparing for his inauguration in late 2012, his advisers asked American diplomats to rank the biggest threats to the two countries’ relationship, according to
a column in the Mexico City newspaper El Universal. Third on the list, the Americans told them, was the drug war. Second was the high price of Mexican tomatoes. First was Azano. He was such a threat, the column said, because of his access to state-of-the-art spy technology and connections with high-level officials in the administration of Peña Nieto’s predecessor, Felipe Calderón.
Arturo Sarukhán, the Mexican ambassador to the United States under Calderón, said his American counterparts never ranked Azano as the biggest threat. But Sarukhán confirmed that his office and the U.S. embassy dealt with the feud between Azano and Sempra.
“It was certainly a relevant issue, but in no way was it at the top of the bilateral agenda between the United States and Mexico,” Sarukhán said.
Still, American pressure against Azano might have had real implications within Mexico’s government.
In July 2012, someone leaked to
the Mexican press a series of secret contracts awarded to Azano’s company to provide $355 million worth of advanced surveillance equipment to the Mexican defense department. The revelation sparked an outcry. Mexican citizens had no idea their government was getting involved in such high-level spy craft and at such an expense – let alone that one of their countrymen was the supplier.
On the government side of Azano’s deals was a high-ranking Mexican army general named Moisés García Ochoa. The general also happened to be at the top of the short list to be Peña Nieto’s defense secretary.
But days before Peña Nieto’s inauguration, U.S. Ambassador Anthony Wayne met with the incoming president’s senior advisers to warn against elevating the general,
the New York Times reported.
Among other concerns, U.S. officials believed García Ochoa skimmed money from contracts, including the Azano surveillance deal.
Peña Nieto ultimately passed over García Ochoa for the job.
Meanwhile, in the United States, the vise continued to tighten on Azano. The FBI followed up on Sempra’s request to investigate Azano. Agents
found evidence to back up the company’s extortion claims against him.
In 2012, a separate task force of the Department of Homeland Security, Internal Revenue Service and San Diego Police Department
began probing alleged irregularities in Azano’s tax returns. According to Azano, federal authorities got a judge to authorize a “sneak and peak” search warrant – a tactic used in terrorism investigations – to rifle through his offices in the U.S. without him knowing.
Around this time,
Azano claims federal agents were harassing the pilot of his private jet to dig up dirt on him. He said the U.S. Border Patrol was subjecting his family to lengthy searches, even patting down his young child. He sent a letter to the Department of Homeland Security to complain about his treatment.
Azano needed some allies. He turned to San Diego politicians.
It began in late 2011
with District Attorney Bonnie Dumanis. She was running for San Diego mayor and Azano invited her to one of his Coronado homes for lunch. Dumanis would only be the first.
A few months later, Azano met with Dumanis and San Diego
Sheriff Bill Gore in Gore’s downtown office. That summer Azano hosted a lunch for then-mayoral candidate Bob Filner. In September, he dined at a downtown restaurant with then-congressional candidate Juan Vargas.
If Azano wanted someone to listen to his case against Sempra, the politicians he targeted made a lot of sense.
Azano had an in with Dumanis. Azano’s private security guard Ernesto Encinas had been friends with her for decades dating back to Encinas’ time as a San Diego police officer. Before becoming sheriff, Gore had been an
assistant director of the FBI and had overseen the bureau’s San Diego office. For years while he was a congressman, Filner had mercilessly attacked Sempra and was familiar with the corruption allegations against the company in Mexico. And Azano believed Vargas, who was in line to take Filner’s seat in Congress, could talk to the feds on his behalf as well.
Sempra was the sole topic of discussion at their dinner meeting,
Vargas said recently. Vargas said Azano was frustrated Sempra hadn’t been charged in the United States after all the corruption accusations in Mexico. He asked for Vargas’ help. Vargas told him to speak with federal prosecutors.
Meetings were one way Azano made his case. Money was another.
Prosecutors say Azano gave more than $600,000 to campaigns backing Dumanis, Vargas and Filner between December 2011 and November 2012. (Federal authorities have said Azano’s motive was
to develop along downtown San Diego’s bay, but have only provided scant evidence of that claim.)
Prosecutors argue Azano used a system of straw donors and off-the-books contributions to evade detection. None of the politicians have been implicated in the probe.
In court papers, Azano said his co-conspirators funneled his cash to campaigns without his knowledge. Except in one case.
One day during the 2012 mayoral campaign,
Azano said in a court filing, Azano told Encinas he wanted to make a $100,000 donation to support the widows of police officers. Encinas said he had a better idea. Encinas said Azano should help the campaign of his friend Dumanis, who, as district attorney, could support police widows better than any charity could.
No matter the truth of that story,
a public disclosure form shows a $100,000 donation on May 9, 2012 from one of Azano’s U.S.-based businesses to a political action committee backing Dumanis.
That was stupid. It is illegal for foreigners to donate to American political campaigns.
In court filings, Azano hasn’t disputed he gave that money to Dumanis. Instead, he’s argued that Encinas manipulated him into doing it.
In the end, it wasn’t the investigations into drug trafficking or money laundering that took Azano down. And it wasn’t the claims of bribery or extortion or tax evasion. After six years of warfare with one of San Diego’s most powerful companies, Azano was arrested and charged with making a campaign contribution that was publicly disclosed and available for
anyone in the world to see.
Since the campaign finance scandal broke open, Azano’s empire has dwindled.
A few years ago, Azano bought a bunch of properties in the United States in a $13 million spending spree. He’s now squeezing cash out of them.
Last year, Azano sold two office properties in Otay Mesa and a gas station in Chula Vista all at a loss. He used one of his homes in Coronado as collateral to pay his $5 million bail. Azano’s other Coronado home is on the market. He’s hoping to get $2.8 million for it, though he’s already slashed the asking price a few times.
On a summer afternoon months before Azano sold his gas station, rows of refrigerators and freezers inside were nearly empty, and there was no Pepsi in the soda fountain. A clerk said the station would soon close for good.
A handwritten sign outside the door announced that the pumps were out of gas.
Sempra is now one of the largest private energy companies in Mexico. Soon, it could get much larger.
Sempra executives told financial analysts they expect there will be billions of dollars in new energy projects in the country in the next few years. They expect to win a lot of them. Company president Mark Snell said Sempra has a track record of getting big things done in Mexico.
“We’re really the hometown incumbent there,” Snell said.
Disclosure: A member of Voice of San Diego’s board of directors serves as vice president for SDG&E and SoCalGas, two Sempra subsidiaries. Tijuanapress.com ’s Vicente Calderón contributed to this story. Ari Bloomekatz, Matthew Hose, Michelle Monroy and Gwyneth Shoecraft also contributed.
This article relates to:
Campaign Finance Scandal, Government