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Cablegate: Mexico 2007 Report On Investment Disputes And

VZCZCXRO5002
OO RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #3307/05 1761332
ZNR UUUUU ZZH
O 251332Z JUN 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7648
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE

UNCLAS SECTION 05 OF 06 QXICO 003307

SIPDIS

SIPDIS

STATE FOR EB/IFD/OIA HEATHER GOETHERT AND JOHN FINN
STATE FOR L/CID SAM MCDONALD
STATE FOR WHA/MEX AND WHA/EPSC
TREASURY FOR IA MEXICO DESK ALICE FAIBISHENKO

E.O. 12958: N/A
TAGS: EINV ETRD KIDE CASC OPIC PGOV MX
SUBJECT: MEXICO 2007 REPORT ON INVESTMENT DISPUTES AND
EXPROPRIATION CLAIMS - PART 2

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MEXICO 06253307 005 OF 006


California entered the plant and placed closure seals on the
equipment. In November 2005 the firm obtained a court
injunction voiding the state's closure action, but later the
same day the City of Mexicali revoked its municipal
environmental permit. In March 2006, officials from the
Department of Ecology for the State of Baja California,
accompanied by three truckloads of armed police officers,
entered the facility and placed closure seals on plant
equipment for a second time.

The U.S. owner of the firm reported that in an April
2006 meeting, the Cabinet Secretary for the state Department
of Ecology claimed that the company had not complied with his
department's regulatory requirements and that it has various
omissions in its (2001 and 2003) permit applications to his
department but he refused to specify the nature of the
alleged omissions and compliance failures. (He also alleged
that the company was in violation of local zoning ordinances,
but this issue lies outside the jurisdiction of his agency,
according to the firm's legal counsel). The Embassy has
raised the issue with the Secretariat of Foreign Relations
and the Mexican Customs Agency.

Mexican authorities at various levels remain
intransigent on this issue, and have rebuffed or ignored
Consular efforts to use our good offices.Q; U.S. EPA
Administrator Steve Johnson will tour the conveyor belt
facility and meet with Baja California Gov. Elorduy on 28
June 2007.Q; Embassy EST representative and Tijuana Consul
General are not participating in the tour given the
governor's unwillingness to work towards resolving the case.
The Consulate General in Tijuana is following the issue
closely.

18. a. Claimant Q

b. 2002

c. According to the Claimant,Q;in 2002 Rodolfo
Arciniega NietoQ;executed a fraudulent power-of-attorney that
turned over a number of the Claimant's registered trademarks
to himself. The Claimant never authorized this transfer, and
the notary public who supposedly granted the
power-of-attorney has stated he never did so. Mr. Arciniega
subsequently sold these trademarks to other Mexican
businessmen, one of whom registered them with the Mexican
Institute of Industrial Property, the federal government
agency responsible for registering trademarks and patents. A
number of business owners have since used the Claimant's
trademarks without the Claimant's authorization, claiming
that they are entitled to their use via the fraudulently
transferred and registered rights. The Claimant has
initiated a number of civil, administrative, and criminal
legal actions against those involved in the unauthorized
transfer and use of its trademarks but has been frustrated by
the long delays in bringing these cases to a final judgement.
The Embassy will continue to monitor the case as it develops.


19. a. Claimant R

b. 2006

c. The Claimant, funded by the Overseas Private
Investment Corporation (OPIC) signed a contract with the
Junta Central de Agua y Saneamiento de Chihuahua (JCAS), and
Junta Municipal de Agua y Saneamiento de Cuauhtemoc (JMAS) on
July 20, 2004 for the construction of a water treatment plant
in Cuauhtemoc, Chihuahua. The contract had a term of 20 years
at a price of $5,103,000. A change of Governors in October
2004, adversely affected the project. The State of Chihuahua
stopped making payments and the contract was deemed invalid
by the State of Chihuahua comptroller's office. In order to
resolve the conflict, Lemna, OPIC, and JCAS agreed to modify
the previous contract to meet the terms of Mexican federal
and state law and convert it to a build and transfer
(turnkey) contract.

After extensive negotiations, on April 20, 2007
Lemna and JCAS/JMAS signed a new, extensive contract
validating the previously disputQ contract signed July 2004,
which formally finalized the sale of the water treatment
plant in CuauhtQmoc Chihuahua for 67,038,862 Mexican Pesos.
The first installment was received by Lemna on May 25, 2007.
This first payment constitutes approximately 90 percent of


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