The Mexican Connection

The taxi comes to a halt on a two-lane paved road bisecting Villa Juarez, a bustling, peasant farming town in the heart of one of Mexico's most fertile farming valleys.

A herd of cattle blocks the road, paralyzing traffic on this busy farm highway about 25 miles south of Culiacan, the capital of the state of Sinaloa.

A couple of horse-mounted cowboys wearing wide-brimmed hats prod at 30 or so longhorned cattle. The animals prove reluctant; traffic quickly backs up.

Several flatbed trucks idle roughly. The backs of the trucks are jammed with young men and teenagers pressed against wooden slats. The convoy is ferrying the field workers to nearby farms owned by a few fabulously wealthy Mexican families.

Semi-tractor trailers pump diesel fumes into the afternoon air. The trucks are coming and going from packing plants, where they collect produce for shipment 600 miles north to Nogales, Arizona, and into U.S. supermarkets.

But no one is going anywhere until the cattle move.
With a series of sharp whistles, the cowboys steer the last few stray cattle off the main highway. The taxi drives south a few more miles and then turns west, down a narrow dirt road that passes campesino settlements, where farmworkers live in tin sheds and household water is gathered from pesticide-laced irrigation canals.

On the horizon, several dozen long greenhouses dot the landscape. But obtaining a close-up view of the greenhouses is almost impossible. The greenhouses are surrounded by a chain-link fence with three strands of barbed wire across the top. Sheets of plastic are attached to the fence. A guard refuses to let visitors enter.

Farmworkers say melons are grown and harvested in the greenhouses. Then they are sent to a nearby packing shed, where some are shipped to Japan. The planting season is in the spring, with harvest in fall.

The greenhouses mark the home of Melones Internacional SA de CV, a joint venture between one of Mexico's wealthiest men, Alejandro Canelos, and someone named J. Fife Symington.

The question is: Which Fife Symington?

May 20, 1996. Skeptical attorneys are grilling the wife of Arizona Governor J. Fife Symington III. The governor has filed bankruptcy. The attorneys don't believe he's as destitute as he has claimed and are questioning his wife under oath, looking for hidden assets.

"Are you an investor in any partnerships currently?" Phoenix lawyer Jeffrey Goulder asks Ann P. Symington.

"I have an investment in Melones Internacional," the governor's wife replies.

"What is Melones?" Goulder asks.
"It is a fruit-growing concern in Sinaloa," Mrs. Symington replies.
The business, she testifies, is operated by her stepson, J. Fife Symington IV. Mrs. Symington tells Goulder she invested $25,000 in the partnership, which her son was syndicating. The investment was made in November 1995, two months after her husband filed bankruptcy, claiming he had $26 million in debts and a mere $62,000 in assets.

During the deposition, however, Goulder did not learn several important facts about Melones Internacional. He didn't learn that it is part of one of the largest farming operations in the world. He didn't learn that Melones Internacional is more than a simple agricultural partnership. He didn't learn that Melones Internacional's president, Alejandro Canelos, is one of the wealthiest and most powerful agriculturalists in Mexico.

And Goulder didn't discover that one of Mrs. Symington's close family members is on the board of directors of Melones Internacional. A family member by the name of "J. Fife Symington," according to incorporation records New Times obtained in Mexico.

Those records do not specify whether this Melones Internacional director is Arizona's governor, J. Fife Symington III, or his son, J. Fife Symington IV (or, for that matter, J. Fife Symington Jr., the governor's father).

Using the name "J. Fife Symington" in business documents without generational designation is a departure for the Arizona Symingtons. Here, the two men have been careful to separate their business interests. Arizona Corporation Commission records show the governor affixes "III" and his son "IV" to their names in corporation filings.

The records obtained by New Times for Melones Internacional do not include a signature for J. Fife Symington. The Culiacan attorney who prepared the papers, Juan Jose Ruiz, said corporate directors are not required to provide signatures for incorporation filings. He said he prepared the incorporation papers at the request of attorneys who work for the Caneloses. He also said he was unaware that there was more than one J. Fife Symington.

The governor's attorneys have repeatedly denied that Governor Symington has financial interests in Mexican businesses. The governor and his son declined to return calls seeking explanation for the Symington entry in Melones Internacional incorporation documents.

Symington's bankruptcy attorney, Robert Shull, said last Friday the Symington listed as a director of Melones Internacional is the governor's son, J. Fife Symington IV.

"I am telling you that that person who is a director is J. Fife Symington IV," Shull says.

Shull says the governor "has no interest in this organization whatsoever." He says the younger Symington is both a director and an investor in Melones Internacional.

Shull offered no documentation to support his statements. He said he had a conversation with the governor about the matter. "Mr. Symington III states unequivocally it is not him, it is his son," Shull said.

Shull subsequently held an impromptu press conference, telling reporters for other news organizations that New Times was preparing a story about Melones Internacional, and repeating his assertion the governor was not involved with the firm.

While Shull downplayed the importance of paperwork connected to Melones Internacional, his opponent in bankruptcy court, union pension fund attorney Michael Manning, called New Times' discovery of a "J. Fife Symington" in Mexican corporation records a major breakthrough in the governor's bankruptcy case.

"This is one of the most significant investigatory developments in this Mexico line of inquiry," Manning said.

Manning represents a consortium of union pension funds seeking to block Symington's effort to erase $26 million in debts in U.S. Bankruptcy Court. The governor owes the pension funds $12 million stemming from his failure to repay a loan for the Mercado development in downtown Phoenix.

Last summer, Manning raised concerns in court pleadings that Symington may have hidden business interests in Mexico and asked the court to require Symington to provide his state telephone records. Bankruptcy Court Judge George Nielsen declined, saying that Manning should seek the documents under the state public records law. Symington has refused repeated requests from media outlets to provide copies of his telephone records, saying the records are exempt from the public records law.

There are clear business connections between two scions of the Symington and Canelos families, J. Fife Symington IV and Alejandro N. Canelos. The sons, each in his mid-20s, have been business partners since March 1994, when they formed Symington & Canelos Industries, Inc., in Arizona. The company is registered to manufacture, distribute and sell lumber products. Produce-industry sources say the company sells crates that are used to transport fruit and vegetables. The two younger men joined forces again in December 1995 on the board of directors of Fruit Stand, Inc., a company that sells fruits and nuts in shopping malls.

Neither enterprise, however, appears to be on the same level of sophistication as Melones Internacional.

Mexican government records reveal that Melones is chartered as more than just a melon-growing concern. The company's charter also allows it to conduct commercial and residential real estate activities. And, since its stock is controlled by Mexican nationals, the company gives its directors, including J. Fife Symington, access to real estate along coastal areas and international borders that foreigners otherwise are forbidden to own.

Certain coastal areas of Mexico are expected to undergo significant development in coming years, especially if the Mexican Congress approves legalization of casino gambling, as has been recently discussed. A number of resort towns frequented by the governor, including San Carlos and Puerto Penasco in the state of Sonora, are included in the list of cities that could receive casino permits. In fact, Governor Symington has been active in promoting resort development in Sonora, through the Arizona-Mexico Commission, a group of gubernatorial appointees that works to promote cross-border trade and cultural ties.

Mexican incorporation records also reveal a tight relationship between the senior Canelos and the "J. Fife Symington" involved in Melones Internacional.

J. Fife Symington IV has Arizona business ties with the younger Canelos, who is listed as secretary of Melones Internacional. Incorporation records for Melones Internacional, however, specifically link the elder Canelos and "J. Fife Symington," granting them the power to obtain credit from Mexican and foreign institutions and to open and operate checking accounts. The incorporation papers do not grant the younger Canelos the same powers.

At a minimum, the corporate records for Melones Internacional show the Symington family has a significant financial connection to one of the wealthiest families in Mexico. And if the J. Fife Symington listed in those records is the governor, he could face criminal or civil penalties. Federal law requires him to disclose his business interests to the bankruptcy court, and state law mandates that he file his corporate affiliations each year with the secretary of state.

The governor has not listed Melones Internacional as a business holding in either forum.

Although it remains unclear which Symington is a director in Melones Internacional, state records reveal that Governor Symington has used his office to further the Canelos family business--an enterprise in which the Symington family has a direct financial interest--by intervening at high levels of the U.S. and Mexican governments.

And the Symington family's role in Melones Internacional is just one of several intriguing connections among Arizona's first family and Mexican business enterprises. Many of those connections, government documents reveal, have been facilitated by what appears to be the governor's misuse of state resources.

Records obtained by New Times show that Governor Symington has used a jet airplane owned by the state in a number of seemingly inappropriate ways.

Sometimes, the apparent abuse has been small-scale. For example, this summer the governor's family was flown at state expense to and from a vacation in Guaymas, Mexico, that seems to have had little, if any, public purpose.

But state records also reveal that the governor has used the state's nine-seat turboprop King Air for more important, and more clearly improper, purposes.

Those records show that the governor has used the state plane and other state resources to further the business interests of his son and one of his strongest financial supporters, Tucson business magnate Don Diamond, by bringing them into contact with influential figures in Mexico--including the Canelos family, the governor of Sonora, Manlio Beltrones, and the Mexican president, Ernesto Zedillo.

Governor Symington's most intriguing Mexican connection is based in Culiacan, a violence-plagued city located in the Mexican state of Sinaloa and reputedly controlled by powerful Mexican drug cartels.

Gangland-style murders kill more than 600 people a year in Culiacan. Victims have included the former Sinaloan attorney general. The city is well-known as a staging and shipping area for narcotics grown locally, as well as those coming from Central and South America.

The governor and his son, Fife Symington IV, have become very close to one of the most powerful figures in Culiacan's legitimate business sector, Alejandro Canelos. Canelos and his brother Constantino control one of Mexico's largest and wealthiest farming conglomerates.

For at least several decades, the Canelos family has operated one of the largest produce farming operations in Mexico, if not the world. In 1986, the New York Times described the Canelos family as one of the world's largest growers of tomatoes, bell peppers, cucumbers and melons.

The family controls huge irrigated farms near Culiacan and Los Mochis, an agricultural center 100 miles northwest of Culiacan. The Caneloses also are developing new farms near El Fuerte in northern Sinaloa, a region where the government is completing a massive dam and irrigation project along the Fuerte River. The family also controls a large grape plantation near Hermosillo, the capital of Sonora. And the Canelos operation extends across the Sea of Cortez to a large farming center in Northern Baja California near the town of San Quintin, about 150 miles south of Tijuana.

These far-flung farms allow the family to grow produce on nearly a year-round basis. The family ships the produce to North America through San Diego and Nogales, where it is distributed through a family-owned company, GAC Produce, under the ABC marketing label.

The Canelos family is secretive and shuns the press. Securities records and news reports suggest the family's businesses are privately held. Most competitors and trade associations contacted by New Times were unwilling to discuss the Canelos businesses.

In a brief interview last summer, Alejandro N. Canelos refused to answer questions concerning Melones Internacional and its relationship with Governor Symington.

"We don't tell anybody anything about it, because we don't want our competition to know what we are doing," Alejandro N. Canelos said then.

Company officials refused to return calls to its GAC distribution warehouse in Nogales, Arizona, and to the senior Alejandro Canelos at his farming headquarters in Culiacan.

There are bits and pieces of information about the family scattered in news reports. In 1986, the Canelos farms were the focus of an unflattering Los Angeles Times news story that described the harsh living conditions Mixtec Indian farmworkers endured in Canelos-owned work camps in San Quintin.

"We were put there like goats," one Mixtec farmworker said then.
Many of the children were stricken with dysentery and other digestive-tract ills. Childhood deaths were common. Working conditions for adults, who earned about $3 a day, were also dangerous.

The story told of a Canelos-owned truck that overturned on a highway, killing 21 farmworkers who were riding in the back. Company officials later admitted that the brakes were faulty, according to the Times. The Caneloses paid the family of each victim the equivalent of $2,800.

The Caneloses are well-known among U.S. produce growers, particularly Florida growers, who view the Mexican farmers as economic threats to the Florida vegetable industry. Last spring, Florida growers filed a complaint with the International Trade Commission and the U.S. Department of Commerce, accusing Mexican growers, including Canelos, of selling tomatoes in the United States below the cost of production in Mexico.

U.S. investigators determined that Mexican tomatoes were being sold to American wholesalers at a price averaging 18 percent below the cost of production.

Last spring, the Fresh Produce Association of the Americas, a trade group made up of Mexican growers and their Arizona distributors, asked Governor Symington for help in fighting the Florida farmers. Symington took up their case and vigorously pressed the Clinton administration and Congress to allow Mexican farmers unfettered access to U.S. markets. At the time, it was not generally known that the Symington family had a financial interest in the Canelos farming operations.

In October, the U.S. Commerce Department and Mexican growers reached an agreement that sets a minimum price of $5.17 a box for tomatoes entering the United States--a price about twice as high as what Mexican tomatoes were selling for a year ago.

The price floor is expected to be a boon to the major Mexican tomato exporters, such as the Canelos family. Consumers will see higher prices, but better quality, says Michael Shrader, controller for Al Harrison Company in Nogales.

Shrader expects the large Mexican producers to benefit from the price floor because they will be able to continue to ship into the U.S. most, if not all, of the tomatoes they produce--and then sell them at much higher prices than they have been receiving. Smaller Mexican growers and the less well-connected distributors will likely suffer, because the price floor will probably reduce demand for Mexican tomatoes, shutting some of these growers out of the market.

Governor Symington reiterated his strong support for Mexican tomato exporters last month during a meeting of the Arizona-Mexico Commission in Scottsdale. "I'm so partial to Mexican tomatoes," Symington said. "Compare Florida tomatoes to Mexican tomatoes, and Mexican tomatoes always win in my book. Don't you agree?"

Governor Symington did not decide to take up for Canelos and the other Mexican growers on a whim. The governor and the Canelos family were well-acquainted, thanks to the taxpayers of the state of Arizona.

The Department of Public Safety owns a $1.7 million King Air twin-engine, turboprop aircraft that is stored at Sky Harbor Airport when not in official use. At 3 p.m. on October 9, 1995, Governor Symington welcomed two state officials--Dorothy Bigg of the Commerce Department and Agriculture Department Director Keith Kelly--aboard the plane. A couple of the governor's favorite private citizens--Fife Symington IV and his partner, Alejandro N. Canelos--also boarded.

The entourage was on its way to Culiacan for a two-day trade mission and official state visit sponsored by the Arizona-Mexico Commission.

The governor's son and the younger Canelos flew free of charge, even though, DPS reports, it costs $1,140 to operate the nine-passenger state airplane each way between Phoenix and Culiacan.

A dozen or so less favored Arizona business leaders paid $350 to $400 for commercial round-trip tickets to Culiacan for the trade mission.

After the two-and-a-half-hour flight, the governor and his son were transported to one of Culiacan's few five-star accommodations, the Hotel San Luis Linda Vista. The hotel, sitting atop a hill next to a magnificent Catholic church, provides a panoramic view of the city of 600,000, spread out at the base of the Sierra Madre Occidental.

That evening, state records show, Governor Symington had a private meeting with Sinaloa's governor, Renato Vega, and then attended a dinner sponsored by Mexican government officials and business leaders. The next morning, Symington got down to business--personal business.

State records suggest the governor and his son split off from the rest of the state delegation to have a private breakfast with Alejandro Canelos at the Canelos family home on the outskirts of Culiacan. The governor's agenda indicates the Symingtons and Caneloses were to meet for more than two hours.

Records obtained by New Times do not reveal the topic of conversation. But the meeting came less than two months after a "J. Fife Symington" joined the two Caneloses on the board of directors of Melones Internacional, according to Mexican corporate records.

Governor Symington has taken great efforts to promote the business interests of the elder Canelos, at the same time he has strongly supported Mexico in the public arena.

In addition to lobbying in support of Mexican tomato growers, Symington vigorously pressed the Clinton administration and Congress to support Mexico with $40 billion in loan guarantees during the Mexican financial crisis that came in the wake of a 1994 devaluation of the peso. Symington also urged the Clinton administration this year to certify that Mexico has pursued a strong drug interdiction policy--a certification that Republican presidential nominee Bob Dole strongly opposed.

These two actions earned Symington high marks with Mexican President Zedillo and opened the door for extensive communications. Arizona public records indicate those communications were not limited strictly to state business.

On March 3, 1996, President Zedillo sent Symington a letter thanking him for his continued support of the North American Free Trade Agreement. Before inviting Symington to a luncheon "with a group of good friends," Zedillo updated the governor on the business prospects for the Symington family's Mexican partner, Alejandro Canelos.

"I have asked our Secretary of Agriculture, Mr. Francisco Labastida, to have a meeting with Mr. Canelos regarding the ethanol project," Zedillo states in his letter to Symington.

Public documents do not reveal what role Canelos or Symington have in the "ethanol project," or what that project entails.

After the breakfast meeting at the Canelos home in Culiacan, the governor rejoined the trade mission, which included meetings with Mexican government and business leaders. The governor returned to Arizona later that afternoon.

But just as Fife Symington IV didn't pay for his air flight to Culiacan, he also didn't pick up his hotel bill. The state of Arizona did.

The governor's top Mexican policy adviser, Arizona-Mexico Commission executive director Margie Emmermann, paid the younger Symington's $78 hotel bill by credit card, state records show.

Her expense report sought a $659 state reimbursement for hotel, restaurant and bar expenses for the governor, Reuben Alvarez of the Arizona-Mexico Commission and herself. These expenses were legitimate. But records reveal she also included the hotel bill of Fife Symington IV in her request for reimbursement, without identifying that expense.

Emmermann declined to return repeated phone calls seeking comment.

Governor Symington's interest in promoting Arizona businesses in Mexico doesn't stop with his family. The governor also has demonstrated strong personal support for the Mexican business activities of Tucson business magnate and real estate developer Don Diamond.

A former owner of the Phoenix Suns, Diamond has numerous Mexican business interests, including a $3 million juice production plant in Caborca, Sonora, and extensive real estate holdings in Puerto Penasco, a Sonoran resort at the northern tip of the Sea of Cortez.

Diamond is also among the top Arizona contributors to state and national politicians, including Symington. And he has helped Symington in other ways, donating $10,000 to Symington's legal defense fund sometime between May 1 and July 31 of this year, according to state records. The fund was set up to help the governor pay legal bills stemming from a 23-count federal indictment accusing him of bank fraud, perjury and extortion.

Diamond's was the largest single contribution to the fund as of July, records show.

Diamond's clout with the Symington administration is well-known. In June 1995, one of the magnate's firms, Diamond Management Inc., sent a letter to Margie Emmermann, executive director of the Arizona-Mexico Commission, seeking the commission's assistance in obtaining information on Mexican strawberry growers who could supply Diamond's Caborca juice plant with raw materials.

Emmermann immediately forwarded the company's request to her Mexican counterparts on the commission with a terse warning: "I can't stress enough the importance of Diamond Management Inc. as a major player in the Arizona market."

And Symington has shown an interest in Diamond's Mexican business activities--an interest that has extended all the way to the office of President Ernesto Zedillo. On May 14, on the heels of a grueling deposition in his bankruptcy case, Symington flew to Mexico City to meet with Zedillo. Accompanying the governor on the trip were two Arizona-Mexico Commission officials, Emmermann and commission president Carol Columbo.

But the governor also brought two Arizona businessmen to the meeting with Zedillo--Fife Symington IV and Don Diamond. State records indicate Symington also invited the senior and junior Caneloses to meet with the president. But the Caneloses did not attend the meeting, Columbo says.

Diamond was to explain to President Zedillo the problems American businessmen face in Mexico, particularly the inability of foreign and Mexican banks to place liens on personal and business property pledged as collateral for loans, Columbo says.

After the meeting, Governor Symington had a private lunch with President Zedillo and Mexico's minister of foreign affairs, Angel Gurria. The men reportedly discussed U.S.-Mexico relations, particularly those involving the states of Arizona and Sonora.

Diamond apparently was delighted with his opportunity to meet President Zedillo. The governor also was pleased that Diamond attended the meeting.

"I feel our private meeting with the President was fruitful for all involved," Symington said in a handwritten note to Diamond.

The governor seemed particularly pleased that he and Diamond had time to discuss other matters.

"I really enjoyed our extensive chats," Symington wrote.

Over the past few years, and especially in the past few months, Governor Symington and Sonoran Governor Manlio Beltrones have promoted efforts to bring major developments to Puerto Penasco and other coastal cities in Sonora, particularly San Carlos, a resort community north of Guaymas built around a beautiful natural harbor.

The Sonoran government and private developers are seeking to build a $500 million resort town 15 kilometers south of Puerto Penasco called La Pinta. But that effort has been stalled; local landowners claim the state improperly took their land.

Another, even larger project is in the works just north of Puerto Penasco. Governors Symington and Beltrones were briefed last month during a private breakfast meeting with select members of the Arizona-Mexico Commission about plans for a $1 billion megaresort. The Laguna del Mar project will be built by Grupo KL and is to include hotels, golf courses, housing and a marina over 3,500 acres.

Details of the Laguna del Mar project are sketchy. The principals of Grupo KL are Phoenix architect Peter Lendrum, Phoenix developer Michael Lafferty and Mexican developers Francisco and Juan Kladt. The project claims to have $90 million for the first phase of construction. Interviews with contractors for the Laguna del Mar project indicate work is set to begin in March.

The Mexican federal, state and municipal governments are expected to contribute millions of dollars in infrastructure improvements in Puerto Penasco to facilitate Laguna del Mar and other developments now on the drawing board.

Diamond's businesses have been involved in Puerto Penasco for years and recently have been acquiring beachfront real estate here, according to published reports and interviews with real estate agents in the community, located 60 miles south of the Arizona-Mexico border crossing at Lukeville.

Diamond, who did not return several phone calls seeking comment, reportedly is part owner of a vast strip of land called Sandy Beach that stretches between Cholla Bay and the town of Puerto Penasco. That land lies near the proposed Laguna del Mar megaresort and would likely increase in value if the resort is built. Diamond was quoted recently in the Puerto Penasco Journal saying he supports Mexican efforts to bring resort development and casino gambling to beachfront resorts.

"It would be a phenomenal deal," Diamond is quoted as saying in the Journal. "The Sea of Cortez is a gold mine, a marvelous opportunity for all of us."

Business deals aren't the only attraction Mexico offers to Governor Symington. He also enjoys scuba diving and fishing trips in the Sea of Cortez.

So when an offer came from Sonoran Governor Manlio Beltrones to spend a few days at his beachfront house on Miramar Beach in Guaymas, it was something Symington did not pass up. The governor, his wife and their three young children--Richard, Tommy and Whitney--all hopped aboard the state airplane. It was noon on Thursday, July 11.

The family, along with a DPS security guard, arrived in Guaymas 90 minutes later. The entourage headed to Beltrones' beautiful, modern home in an exclusive enclave along Miramar Beach. There, the palm-tree-lined beach curves gently around a wide bay. Cactus-covered buttes stand in sharp contrast to the blue water, making this an idyllic spot for a getaway.

The governor had no official business in Mexico the day he arrived. And none the next day, a Friday. According to his daily calendar, he met with Governor Beltrones for 30 minutes on Saturday morning over coffee. Saturday evening called for a casual dinner at the house with Juan Alberto Gutierrez, Beltrones' chief of staff, and Gutierrez's wife.

Meanwhile, the Symington family enjoyed all the amenities of beachfront living, thanks to Governor Beltrones and the people of Sonora.

Symington and his family remained over Saturday night, heading back to Phoenix at 2:30 p.m. on Sunday aboard the state aircraft. Other than the coffee and the dinner, state records make no mention of official business being conducted during the governor's stay. Symington reported that no state expenses had been incurred during the trip.

DPS records show the state plane made at least two round trips between Phoenix and Guaymas while shuttling Arizona's first family on its Mexican minivacation.

The cost to taxpayers: $3,016.

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