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Top Mexican Brokers Indicted On Fraud Charges

February 19, 1989

MEXICO CITY (AP) _ Four top officers from two of Mexico’s biggest brokerage firms were indicted Saturday on charges of illegal trading and criminal fraud stemming from an inquiry into the 1987 stock market crash.

Treasury Secretary Pedro Aspe said earlier in the week that the violations included insider trading in stocks and foreign currencies, the sale of nonexistent Treasury certificates, and trading in securities without clients’ consent.

Indicted were Eduardo Legorreta Chauvet, board chairman and of Operadora de Bolsa, one of the Mexico’s two leading trading firms; and Jaime Ceballos Cervantes, the company’s director of investment promotions. Also indicted were Juan Carlos Fernandez Cueto and Jose Francisco Rodriguez Dupont of Mexicana de Valores e Inversiones, the other major brokerage firm.

The four men face jail terms of from two to 10 years for violating the national securites law and from three to 12 years for violating the federal penal code, officials said.

The indictments were announced during a Saturday news conference in Mexico’s Eastern Penitentiary, where the men are being held.

The investigation followed complaints filed by at least 200 investors against all but one of Mexico’s 24 registered brokerage firms after stockholders incurred losses estimated at $7 million or more in the October 1987 crash.

Treasury Department officials said they began receiving complaints of fraud after the stock market index plunged 74 percent in 28 trading days.

Officials have not said how much money was involved. But Gustavo Diaz, president of a group of investors who say they were defrauded, has estimated the brokerage firms netted $43.5 million in profits from alleged illegal trading.

The stock market investigation is part of an overall crackdown on labor and white-collar corruption in Mexico by President Carlos Salinas de Gortari, a Harvard-educated economist who took office last Dec. 1.

In January, Joaquin Hernandez Galicia, de facto leader of the powerful Oil Workers Union, was arrested on weapons charges in a massive crackdown on labor leaders.

Hernandez Galicia, known as ″La Quina,″ and 45 others were indicted on charges of illegal possession of firearms, extortion, embezzlement and corruption.

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