The Battle Between A Mexican Businessman And Sempra Energy
February 11, 2015 1:11 p.m.
In-Depth Look At Battle Between José Susumo Azano Matsura And Sempra Energy
Liam Dillon, senior reporter and assistant editor, Voice of San Diego
Our top story on KPBS Mid-Day edition, the arrest of Mexican businessman Jose Azano last year shook San Diego political world. Jose Azano was accused of illegally donating more than a half billion dollars of more than a handful of standing or politicians. The reasons why a Mexican national would break the law and contribute to local political campaigns was never made completely clear by federal prosecutors. Now an exhaustive investigative report by Voice of San Diego implies links between the prosecution and the legal battle with San Diego-based Sempra Energy. Joined me as Liam Dillon who is senior reporter for Voice of San Diego. Welcome to the program. Remind us why San Diego's know the name Jose Azano.
Last February he was arrested and charged with allegedly illegally donating about $500,000, $600,000 to various high-profile San Diego politicians and their commands -- campaigns. Former mayor, congressional candidate, and so the biggest names in San Diego politics were attached to a legend funding from the sky and this is not allowed. If you are a foreigner you're not allowed to donate money to American politics. At the time of the arrest he was this mystery man who was -- the big question was why would he care so much about getting involved in San Diego.
A point of clarification none of the politicians were involved. It was just -- it came down on where the contributions came from. And the prosecutor say they came from Jose Azano, usually described as a Mexican businessman but what does he do?
He does a lot. He is probably best known and the source of his money is from two things. First he is the son of a industrial developer in Guadalajara, Mexico's second-largest city. A development compare. His dad has built plants in Mexico for AT&T and the sun and so major companies and a lot of money in that area. He has made his own money selling high-level advanced surveillance equipment. In 2011 he began selling to the Mexican Defense Department about 300 and $50 million worth of this stuff. Made in Israel and the kind of thing where you can -- if you get into someone's computer using it you can turn on their camera, turn on the microphone, read e-mails, read someone's calendar, all without that person knowing. It is very advanced stuff. One of the experts I spoke with said it is one level below about -- below the controversial programs at the NSA.
A high living multimillionaire?
Absolutely. He has a couple multimillion dollar homes in Coronado, he drives Bugatti's. And Lamborghinis. He was caught website TMC partying in Las Vegas with his son and rapper Jermaine Dupree buying a $90,000 bottle of champagne and so certainly living the high life.
Before we go on to the story behind the story what is the status of his prosecution now?
He has pleaded not guilty to the campaign finance charges against him and he is currently awaiting trial and so there is been a long hearing process, a long discovery process for him and his alleged co-conspirators.
The crux of your investigative pieces that his alleged interest in San Diego politics can be traced back to his legal battle with Sempra Energy in Mexico. How does that work?
It is strange how he got involved with Sempra Energy. Sempra Energy built a $1 billion natural gas project outside of Ensenada. This was built in the mid- to thousands and it was the result of a furious fight not only with some proper as a Fortune 500 company but multiple other Fortune 500 companies were trying to build this first plant. This would allow companies to perhaps corner the natural gas market on the West Coast. As part of that, there've been a number of corruption allegations at semper has faced as part of that plant. A rancher accused semper of stealing his land. Getting a fake deed to certain property that the rancher claims he is the rightful owner next to Sempra plant. Sempra use the deed that they had to get a Mexican court order to kick this rancher of the property in 2006. A couple years later the rancher runs into Jose Azano and they decide to sign a contract with the rancher, Jose Azano would finance, he is a wealthy guy, he would finance the fight with Sempra to try to get the land back and other damages and in exchange Jose Azano would get a picture of any winnings that would result from this case. That sets a direct financial interest that Jose Azano would have been battling Sempra Energy over this piece of property.
Sempra owns us and the liquefied natural gas plant in Baja is one of the interest Sempra Energy has a Mexico. What did you find out about his other interest there?
The natural gas plant really given that it was able to use that and defeat lots of other companies that wanted to build this and they were able to do it first really gave Sempra a foothold in Mexico. One of the largest private energy companies in Mexico, numerous large natural gas pipelines they are currently building and they stand to benefit tremendously with the opening of Mexican energy market. Which is coming very soon. To allow more private companies to be involved in Sempra executives believe there are billions of dollars of projects on the table and they think they can win a lot of them. It sprung from the fact that they were able to get this foothold in the country by winning this natural gas race.
We asked a representative of Sempra to join us but the company declined. They also did not send us a statement about the Voice of San Diego investigative report. You write in this three-part report that the FBI brought Sempra in. There are a lot of things that are controversial about Sempra going into Mexico and it's various pipelines and so forth and you go into that in depth in this report but one of the things that remains on the storyline so to speak is that the FBI wanted to talk about alleged bribes to set up that natural gas plant in Ensenada that you described as the foothold for the company. But somehow the interview got turned around to focus on Jose Azano. Tell us about that.
Let's back up and talk about -- I referenced corruption allegations against the company related to building of this plant. The one allegation which we discussed related to Jose Azano in the rancher and also a couple of others. One related to the former Governor of Baja California who was in charge at the time of this natural gas race. We have some documentation that shows that he was a financial interest was some of Sempra's business partners in Mexico and previous natural gas deals in the country and made a big decision to condemn the land unexpectedly of the biggest rival and me -- there is a lot of controversy surrounding that deal and another is the one that became the center of this FBI investigation, which is whether Sempra bribed politicians from Ensenada, the City of Ensenada to get liquor permits for -- to be able to build their plans. A memo the FBI had which we obtained and published as part of our story in 2005 an internal memo from the Sempra executive which FBI agents initially believed, laid out what would have been a quid pro quo. We give you this money and as a result you will give us quicker permits to allowed us to build.
It seems like some praise and high water when they go to have this conference with the FBI but as you reported, it doesn't actually turn out that way.
The FBI documents in this case came out a few years ago as part of a piece the Washington post it on this issue and the FBI documents are fascinating. They go on a show that Sempra's lawyers and other executives meet with the FBI to talk about their own activities in Mexico spent a lot of time try to get the FBI tooling -- investigate Jose Azano. Two cases we have documented where the lawyers say we are not the ones were corrupt, the real corrupt guy is Jose Azano, he is the one causing trouble for us in Mexico and he is the one the FBI should focus on.
Did anything ever come of the investigation into that $7 million Sempra gave to Ensenada?
The SEC and other government agencies tend to do when there are large companies that they are investigating as asked the company to investigate the allegations themselves that's what happened. Sempra hired an outside law firm to look into this bribery allegation, the law firm found no wrongdoing, there was an explanation that the law firm provided to investigators and the investigator said it was okay. Within three or four months this investigation in Mexico ended without any charges. And also, from that summary of the investigation it's unclear or there doesn't appear to any evidence that investigators overlooked at the other bribery allegations or the other corruption allegations. Related to the rancher and then also related to the former governor.
Once the FBI started looking at Jose Azano, you say in the report Jose Azano started looking to build his political base of support somewhere and he looked here. And that's what was the motive behind the alleged illegal donations. Is that the connection?
Sure. The FBI actually and other federal agencies have been investigating Jose Azano on an offer was two decades. Those back to the mid- 90s when he first came to the Tijuana area and was investigated back them for drug trafficking. And the may investigation continued throat but they were on hold by the time that Sempra was in -- was hauled in for a meeting with the FBI. Once that meeting happened Sempra alleges that is on no is behind an armed police raid on his plant in Ensenada into thousand 11 and that was the main allegations to Sempra raised by two the FBI once the Sempra investigation ended the FBI turned themselves to take a much harder look at is on all. The extortion allegations related to the raid on Sempra plant. They found credibility and they later investigated his finances, tax issues and things like that, and you can see in some of the court filings in the case that Jose Azano was starting to feel all this heat and pressure. He alleges that he was getting patted down at the border unnecessarily, his child was getting patted down at the border, Inc. the border, private jet pilot was being harassed by federal agents and by the end of 2011 he begins to have these meetings was San Diego politicians and started with [ Indiscernible ], he had her over for lunch and spread to the Sheriff and then Bob Filner and the evidence we have been able to find and Vargas has said himself the subject of his conversation was trying to redirect federal attention from Jose Azano back to Sempra.
In any of the court filings and any of what the prosecutors have said about this particular prosecution against Jose Azano for the illegal political contributions. Do they reference the cell?
Not really. There's really no discussion. It is unclear to me why they won't bring this up. They give an offhanded reference in open court right as the case started that a Mac is interested in developing properties in downtown San Diego and that was his motive that the offhand mention in court, they haven't said anything about that or given any evidence of that. A much better explanation for his interest is the Sempra issue.
In reading this and talk to me about this for a minute, the implication in this report is that somehow the FBI decided not to fully and fairly investigate Sempra's activities in building and energy empire in Mexico and instead took Sempra side and investigate a man who is suing Sempra. Is that we believe happened?
Certainly in the conversations I've had was Sempra officials there are a number of questions related to their activities. They really haven't been able to answer notably we spend a lot of time looking into the relationship with the ex- governor and Sempra's explanation in order to believe that you have to believe that Sempra did not know the owners of the company they were doing business with Mexico. A lot of unanswered questions that it does impair the FBI looked into. As far as Jose Azano goes, we spoke with a former high-ranking Mexican government official who told us that there was a Mexican investigation into this Ensenada raid and that Jose Azano was involved in that. It doesn't mean that there are no heroes here, it seems that there are a lot of allegations against both sides here but clearly after the FBI investigation into Sempra completed there was a huge turn take a much closer look at Jose Azano and those string of investigations led to his prosecution.
APU heard from either Jose Azano or Sempra about this investigative report?
I haven't heard anything from either side. In some ways a lot of these allegations have been out there for a while. Fits and starts. What we are able to do with the stories pull everything together and make a compelling case for this interest which is the big question of why Jose Azano would care about San Diego politics. We think we found the answer to that.
Your third investigative report, the end of it ends in a very interesting way because you basically pose the question why is there -- I'm going to completely paraphrase here and you can do about it than I, why is this big investigation into a political contribution that somebody made that was technically illegal but was disclosed?
That's the thing. You can see this by script coming down on Jose Azano in this big stupid mistake that he made. There is a publicly disclosed campaign contribution of $100,000 to a political action committee from one of his businesses. He does not deny he made that. That is illegal for foreigners to donate to American politics. After seven years of warfare with one of San Diego's most powerful companies, bribery and extortion and all these high-level things, get caught on a $100,000 campaign finance violation is really something.
What got you interested in looking into the roots of this?
I think we were troubled when we first started last summer that no one had answered why this guy cared. And this was a guy who was meeting with some of the most prominent politicians in town so we really wanted to get an answer to that question, and that spiraled into trying to find all this out and spending a lot of time here and spending a lot of time in Mexico trying to pull together everything.
Reporter Liam Dillon three-part investigative report can be found on Voice of San Diego .com. Thank you so much.