COMPANY EXTORTION BY THE MEXICAN SOCIAL SECURITY INSTITUTE

The fact that corruption has hampered the quality and reliability of health services offered by the Mexican Social Security Institute (IMSS), making it an organism in dire need of reform and improvement, is an undeniable and documented issue. The IMSS, however, is also currently functioning as a kind of extortion weapon, particularly against U.S. enterprises. The Mexican institution is auditing companies on their social security contributions to employees through labor information it has administered for years.

In May of 2019, for instance, its director Germán Martínez resigned due to what he referred to as corruption and harmful interference in the IMSS by the Mexican Office for the Treasury and Public Credit (SHCP). This move follows the governmental changes introduced by the new Mexican president Andres Manuel Lopez Obrador and his cabinet, especially after it allowed the SHCP to assign official delegates state-by-state to reform public health service institutions corresponding to the IMSS. It is during this process that some auditors working through the IMSS are participating in extortion.

In previous years, employers provided tax-deductible bonds to relieve employees from necessities such as the primary food pantry, but recently it has attempted to collect taxes from these and other dynamics: ultimately, it means that companies have to pay higher taxes, based on wages that employees do not earn. Employers are facing retroactive charges; auditors claim that the new fees apply for previous years of unregulated social security contributions. The retroactive interest rates demanded by officials are often disproportionate and, in some cases, companies receive offers for a “discount” or bribe, an unlawful “negotiation” about their supposed employee non-payments to the SHCP through the IMSS.

The situation has escalated to violence, as shown by the case of a David Mendoza García, an IMSS auditor murdered outside his home in the city of Tijuana, in the northern state of Baja California. Days later, fellow IMSS auditor Carlos Ignacio Franco Salgado received a floral arrangement with a death threat in his office in the capital city of the state, Mexicali. Franco Salgado opted to flee to the U.S. in hopes of avoiding an attack and has not been heard of since. It is very probable that these two individuals participated in extorting companies involved with drug trafficking on supposed fiscal irregularities. The strategic violence they suffered is known to characterize the modus operandi of organized crime groups.

Though it involves a complex web of actors and legal as well as illegal institutions, this case highlights how the corruption issue plaguing the IMSS is currently escalating. It is an institution not just immersed in a shortage of equipment, supplies, and reliability of services —many of its health service patients actually die in the process of awaiting treatment or after receiving incorrect or insufficient medicine— but recently also serving as a platform for the illegal profit of corrupt auditors preying on corporations through private employee information.

As a U.S. company doing business in Mexico, it would be wise to avoid falling into the IMSS audit scam, especially considering that the Foreign Corrupt Practices Act is unknown in Mexico. As a result of that, corrupt Mexican officials that receive these bribes —like the auditors currently acting through the Mexican Social Security Institute— are depositing that money in U.S. banks under their names or their spouse’s names. A minor inquiry by U.S. authorities or financial institutions could determine which individuals have stored money obtained illegally in U.S. banks because the names and salary of the IMSS employees is a matter of public records.