Mexico may sell seized group's banks

September 07, 1994|By Bloomberg Business News

MEXICO CITY -- The government may sell the two banking units of Mexico's fifth-largest finance company, Grupo Financiero Union SA, after seizing it for an alleged loan fraud scheme.

"That is what we most likely will do," Pedro Aspe, minister of finance, said in an interview broadcast over the radio station Radio Red. He said the sale of the Banco Union and Banca Cremi units would come after the government completes its investigation.

Government regulators seized Grupo Union Monday after a month-long investigation uncovered more than $200 million in improper insider loans to companies controlled by board Chairman Carlos Cabal Peniche.

The government investigation could yield improper loans totaling as much as $700 million, said Guillermo Ortiz, under minister of finance.

Mr. Cabal Peniche, 41, who recently agreed to purchase San Francisco-based Del Monte Corp. for $277 million, allegedly misled his board of directors and government regulators as he authorized loans for companies which couldn't meet the capital requirements mandated by Mexican law.

"The loans were granted with the sole purpose of making resources available to Mr. Cabal Peniche," the Finance Ministry said in a statement after announcing the seizure.

An arrest warrant has been issued for Mr. Cabal Peniche, who built his agribusiness and financial services empire from a chain of family-owned supermarkets in the southeast state of Tabasco. He allegedly used some of the illegal insider loans to buy Del Monte Corp., Mr. Ortiz said.

Two years ago, Mr. Cabal bought Fresh Del Monte Products for about $550 million. The company is based in Coral Gables, Fla.

Del Monte, which last week filed with the U.S. Securities and Exchange Commission for permission to sell $150 million in bonds to pay for the sale, did not respond to reporters' questions about its pending sale to Mr. Cabal or the seizure of his finance banking company.

Government officials said the seizure of Grupo Financiero Union SA should reassure investors and the public that corruption in the financial system will not be tolerated.

"This is a clear signal to everyone involved that when we detect irregularities" in the banking system, "we will act on them," Mr. Ortiz said.

In addition, the government might sell Grupo Union's subsidiaries, which include Banco Union, Banca Cremi, leasing company Arrendadora Union SA; factoring firms Factoraje Union SA, and Factoraje Cremi SA; foreign exchange houses Casa de Cambio Union SA, Casa de Cambio Cellini and Casa de Cambio Majapara, Mr. Aspe, the finance minister, said in his radio interview.

The Mexican government also seized the leasing company Pragma SA and the surety firm Afianzadora Mexicana SA. Arrest warrants have also been issued for Mauricio Madero O'Brien, Pragma's chairman.

Grupo Financiero Union, which is based in Mexico City, said in early July that it planned to merge Banco Union and Banca Cremi, creating the country's sixth-largest bank.

Of the 12 arrest warrants issued by Mexico's attorney general, nine or 10 people had been arrested, according to Mr. Aspe. Mr. Cabal Peniche's whereabouts were unknown yesterday, Mr. Ortiz said.

This is not the first time Mr. Cabal Peniche has been under investigation. The Manhattan district attorney earlier this year looked into Mr. Cabal Peniche's transactions with the failed investment firm Eastbrook Inc., but later dropped the probe.

Eastbrook was owned by Saudi Arabian banker Khalid bin Mahfourz, a director of the Bank of Credit and Commerce International.

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