By DAVID LUHNOW
The Wall Street Journal
MONTERREY, Mexico—Last August, President Felipe Calderón, dressed in black, visited the charred remains of a casino where members of a drug cartel set a fire that killed 52 victims, including a pregnant woman. The president vowed that justice would be done.
But six months after the fire, relatives of the victims and members of Mr. Calderón’s own National Action Party say his government has engaged in a coverup to try to hide links between casinos and corrupt politicians.
This week, the mayor of Monterrey, whose brother was caught on video receiving wads of cash from a local casino, was placed on the party’s special shortlist of candidates for proportional representation to Mexico’s lower house in July’s presidential elections.
The move virtually guarantees Fernando Larrazabal a congressional seat, and with it immunity from prosecution. Raúl Gracia, another politician closely linked to Mr. Larrazabal, is also on the party list for the senate.
Family members of the victims reacted angrily to the news, saying that Mr. Larrazabal should have been forced out of the party long ago.
“The fact he is being rewarded for his corruption is tragic,” says Samara Pérez, who survived the fire at the casino that day, but her 18-year-old son Brad died in the flames. Ms. Pérez said Mr. Calderon’s promises of justice were empty talk.
Mr. Calderón’s office had no comment on the case. Mr. Larrazabal has repeatedly said he is innocent of any wrongdoing in the case.
“My government has taken forceful action against illegal casinos,” Mr. Larrazabal said in a December interview. “I am the only mayor who has fought them and closed them down.” Mr. Larrazabal says the case against his brother Jonás was a “smoke screen” to take attention away from the attack on the Casino Royale.
The move also sparked a mini-rebellion within the PAN. Alejandro Páez, a former PAN mayor of a wealthy Monterrey suburb, quit the party this week in protest over the inclusion of Messrs. Larrazabal and Gracia on the representation lists.
“I am quitting because you, as the head of the party, and the national executive committee decided to protect, condone and reward the actions of corrupt politicians like Larrazabal and Gracia,” Mr. Páez wrote in an open letter to PAN President Gustavo Madero.
Mr. Madero responded that the decision was taken in a democratic fashion.
Another PAN senator, Rogelio Sada, on Thursday also threatened to quit the party unless it reversed the move. Even the PAN’s high-profile mayoral candidate for Mexico City, anticrime crusader Isabel Miranda, said it was a “disgrace” for the party. “I think Larrazabal is an embarrassment to the party, I’ll say it openly,” she told reporters.
Six months after the deadly fire, the only people in jail are 16 presumed members of the Zetas drug cartel, who are charged with torching the building in order to pressure the owners to pay more extortion money.
But the casino owners have so far escaped prosecution, despite the fact that most of the victims died because the casino flouted fire regulations, including having fire exits that were locked, according to survivors and officials who have investigated the case.
The fire exposed a deep rot in Mexico’s casino industry. In the weeks after, it emerged that many of the country’s casinos operate illegally, paying off corrupt local and federal officials to look the other way. Many casinos are also believed to launder money for drug cartels, say U.S. officials.
The scandal has dented the reputation of the conservative PAN, a button-down party known for its Catholic roots which took power in 2000 promising to end the culture of corruptionthat had flourished during the seven decade rule of the Institutional Revolutionary Party.
Days after the fire, one local casino owner leaked a video that showed Jonás Larrazabal, the mayor’s brother, receiving wads of cash at the casino. The casino owner said local officials were extorting the casinos for money in exchange for not shutting them down.
The owner of the Casino Royale, where the fire took place, told investigators that he paid out $140,000 a month in extortion money, although he didn’t say whom he paid out of fear of his safety.
In September, the Interior Ministry filed criminal charges against two former top officials at the ministry for allegedly giving out illegal casino licenses. Both men’s whereabouts remain unknown.
The casinos scandal has been a black eye for the Calderón administration. During his term, more than 50,000 people have died in violence between drug cartels. But even as the president has sent in the army to fight the gangs, his administration let illegal casinos flourish, say industry players and U.S. officials.
Polls show that the PRI presidential candidate Enrique Peña is leading the PAN’s standard-bearer Josefina Vásquez ahead of the July 5 election.
Gambling has been illegal in Mexico since 1947—a law that remains on the books. In 2004, the former government of President Vicente Fox issued regulations that basically ignored the anti-gambling law. Since then, the industry has grown from a few dozen bingo halls and sports books to more than 850 gambling venues offering everything from blackjack to poker.
“The PAN use these casinos as a black box for campaign financing,” says Lizbeth Garcia, a congresswoman from the leftist Party of the Democratic Revolution who chairs a congressional committee on gaming.
Juan José Rojas, a prominent casino owner in Monterrey, financed the political campaigns of several PAN politicians, including former Monterrey mayor Adalberto Madero, according to a U.S. diplomatic cable made public by WikiLeaks.
Mr. Rojas, who survived a 2007 assassination attempt believed to have been carried out by a local drug cartel, in 2008 donated a helicopter to a local PAN mayor, Zeferino Salgado, who was forced by the ensuing outcry to give it back. Mr. Salgado, Mr. Gracia and Mr. Larrazabal are allies and have been mockingly dubbed “the holy trinity” by old guard Panistas.
Some PAN party members say “the holy trinity” are being protected by the federal government because they can deliver votes in July’s elections.
“They have an extraordinary political machine,” says Fernando Canales, son of a former PAN governor. Mr. Canales and the party’s old-guard in Monterrey say Mr. Larrazabal used casino money to effectively take over the party apparatus in the city—allegations that Mr. Larrazabal denies.
Just weeks before the casino fire last year, Mr. Larrazabal organized a mass meeting to support former finance minister Ernesto Cordero’s bid to be the PAN’s presidential candidate. More than 3,000 people—many of them municipal employees—attended, and Mr. Larrazabal handed Mr. Cordero a list with 7,000 names of supporters. Mr. Cordero eventually lost his bid to rival Josefina Vásquez, but he carried Monterrey in the party primary.